Document:

Exhibit 10.4

 

EXECUTION COPY

 

SECURITY
AGREEMENT

 

THIS SECURITY AGREEMENT dated as of November 22,
2005, among ACCELLENT MERGER SUB INC., a Maryland corporation (“Merger Sub”),
a wholly owned subsidiary of ACCELLENT ACQUISITION CORP., a Delaware corporation
(“Holdings”) which shall merge (the “Merger”) with and into
ACCELLENT INC., a Maryland corporation (“Target” and immediately upon
consummation of the Merger with Target as the surviving entity and its assumption
of the obligations of Merger Sub by operation of law, the “Borrower”), Holdings,
the Borrower, each of the subsidiaries
of the Borrower listed on Annex A hereto (each such undersigned subsidiary
being a “Subsidiary Grantor” and, collectively, the “Subsidiary Grantors”; the Subsidiary Grantors, Holdings
and the Borrower are referred to collectively as the “Grantors”), and JPMORGAN CHASE BANK, N.A., as administrative agent (in
such capacity, the “Administrative Agent”) for the lenders (“Lenders”)
from time to time party to the Credit Agreement dated as of the date hereof (as
the same may be amended, supplemented or otherwise modified from time to time,
the “Credit Agreement”), among the Borrower, Merger Sub, Holdings, the
Subsidiary Grantors, the Lenders, the Administrative Agent, J.P. MORGAN SECURITIES
INC., as joint lead arranger and joint bookrunner (in such capacities, the “Joint
Lead Arranger” and “Joint Bookrunner”), CREDIT SUISSE, as joint lead
arranger, joint bookrunner, and syndication agent (in such capacities, the “Joint
Lead Arranger” and “Joint Bookrunner” and “Syndication Agent”)
and LEHMAN COMMERCIAL PAPER INC., as documentation agent (in such capacity, the
“Documentation Agent”).

 

W I  T  N  E
S  S  E  T  H:

 

WHEREAS, (a) pursuant
to the Credit Agreement, the Lenders have severally agreed to make Loans to the
Borrower and the Letter of Credit Issuers have agreed to issue Letters of
Credit for the account of the Borrower (collectively, the “Extensions of
Credit”) upon the terms and subject to the conditions set forth therein and
(b) one or more Lenders or affiliates of Lenders may from time to time
enter into Hedge Agreements with the Borrower;

 

WHEREAS,
pursuant to the Guarantee (the “Guarantee”) dated as of the date hereof,
Holdings and each Subsidiary Grantor party thereto has unconditionally and
irrevocably guaranteed, as primary obligor and not merely as surety, to the
Administrative Agent, for the benefit of the Secured Parties the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations;

 

WHEREAS, each
Subsidiary Grantor is a Domestic Subsidiary of the Borrower;

 

WHEREAS, the
proceeds of the Extensions of Credit will be used in part to enable the Borrower
to make valuable transfers to the Subsidiary Grantors in connection with the
operation of their respective businesses;

 

WHEREAS, each
Grantor acknowledges that it will derive substantial direct and indirect
benefit from the making of the Extensions of Credit; and

 

 

WHEREAS, it is
a condition precedent to the obligation of the Lenders and the Letter of Credit
Issuers to make their respective Extensions of Credit to the Borrower under the
Credit Agreement that the Grantors shall have executed and delivered this
Security Agreement to the Administrative Agent for the benefit of the Secured
Parties;

 

NOW,
THEREFORE, in consideration of the premises and to induce the Administrative
Agent, the Syndication Agent, the Documentation Agent, the Lenders and the
Letter of Credit Issuers to enter into the Credit Agreement and to induce the
Lenders and the Letter of Credit Issuers to make their respective Extensions of
Credit to the Borrower under the Credit Agreement and to induce one or more
Lenders or affiliates of Lenders to enter into Hedge Agreements with the Borrower,
the Grantors hereby agree with the Administrative Agent, for the benefit of the
Secured Parties, as follows:

 

1.                                       Defined
Terms.

 

(a)                                  Unless
otherwise defined herein, terms defined in the Credit Agreement and used herein
shall have the meanings given to them in the Credit Agreement and all terms defined
in the Uniform Commercial Code from time to time in effect in the State of New
York (the “NY UCC”) and not defined herein shall have the meanings
specified therein.

 

(b)                                 The
following terms shall have the following meanings:

 

“Administrative Agent” shall have the meaning assigned to
such term in the preamble hereto.

 

“Chattel
Paper” shall mean all “chattel paper” as such term is defined in Article 9
of the NY UCC.

 

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

 

“Collateral Account” shall mean any collateral account
established by the Administrative Agent as provided in subsection 5.1.

 

“Copyright
License” means any written agreement, now or hereafter in effect, granting
any right to any third party under any copyright now or hereafter owned by any
Grantor (including all Copyrights) or that any Grantor otherwise has the right
to license, or granting any right to any Grantor under any copyright now or
hereafter owned by any third party, and all rights of any Grantor under any
such agreement, including those listed on Schedule 1.

 

“copyrights”
means, with respect to any Person, all of the following now owned or hereafter
acquired by such Person:  (i) all
copyright rights in any work subject to the copyright laws of the United States
or any other country, whether as author, assignee, transferee or otherwise, and
(ii) all registrations and applications for registration of any such
copyright in the United States or any other country, including registrations,
recordings, supplemental registrations and pending applications for
registration in the United States Copyright Office.

 

“Copyrights”
means all copyrights now owned or hereafter acquired by any Grantor, including
those listed on Schedule 2.

 

2

 

“Documents”
shall mean all “documents,” as such term is defined in Article 9 of the NY
UCC.

 

“Equipment” shall mean all “equipment,” as such term is defined in Article 9
of the NY UCC, now or hereafter owned by any Grantor or to which any Grantor
has rights and, in any event, shall include all machinery, equipment,
furnishings, movable trade fixtures and vehicles now or hereafter owned by any
Grantor or to which any Grantor has rights and any and all additions,
substitutions and replacements of any of the foregoing, wherever located,
together with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto; but excluding Equipment to the extent it
is subject to a Permitted Lien and the terms of the Indebtedness securing such
Permitted Lien prohibit assignment of, or granting of a security interest in,
such Grantor’s rights and interests therein (other than to the extent that any
such prohibition would be rendered ineffective pursuant to Sections 9-406, 9-407,
9-408 or 9-409 of the Uniform Commercial Code (or any successor provision or
provisions) of any relevant jurisdiction or any other applicable law), provided,
that immediately upon the repayment of all Indebtedness secured by such
Permitted Lien, such Grantor shall be deemed to have granted a Security
Interest in all the rights and interests with respect to such Equipment.

 

“General Intangibles” shall mean all “general intangibles”
as such term is defined in Article 9 of the NY UCC and, in any event,
including with respect to any Grantor, all contracts, agreements, instruments
and indentures in any form, and portions thereof, to which such Grantor is a
party or under which such Grantor has any right, title or interest or to which
such Grantor or any property of such Grantor is subject, as the same may from
time to time be amended, supplemented or otherwise modified, including (a) all
rights of such Grantor to receive moneys due and to become due to it thereunder
or in connection therewith, (b) all rights of such Grantor to receive
proceeds of any insurance, indemnity, warranty or guarantee with respect
thereto, (c) all claims of such Grantor for damages arising out of any
breach of or default under thereunder and (d) all rights of such Grantor
to terminate, amend, supplement, modify or exercise rights or options
thereunder, to perform thereunder and to compel performance and otherwise
exercise all remedies thereunder, in each case to the extent the grant by such
Grantor of a Security Interest pursuant to this Security Agreement in its
right, title and interest in any such contract, agreement, instrument or
indenture is not prohibited by such contract, agreement, instrument or
indenture without the consent of any other party thereto, would not give any
other party to any such contract, agreement, instrument or indenture the right
to terminate its obligations thereunder or is permitted with consent if all
necessary consents to such grant of a Security Interest have been obtained from
the other parties thereto (other than to the extent that any such prohibition
would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409
of the Uniform Commercial Code (or any successor provision or provisions) of
any relevant jurisdiction or any other applicable law) (it being understood
that the foregoing shall not be deemed to obligate such Grantor to obtain such
consents), provided, that the foregoing limitation shall not affect,
limit, restrict or impair the grant by such Grantor of a Security Interest
pursuant to this Security Agreement in any Account or any money or other
amounts due or to become due under any such contract, agreement, instrument or
indenture.

 

“Guarantors” shall mean each Grantor other than the Borrower.

 

“Grantor” shall have the meaning assigned to such term in the preamble
hereto.

 

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“Instruments”
shall mean all “instruments,” as such term is defined in Article 9 of the
NY UCC.

 

“Intellectual Property” shall mean all rights, priorities
and privileges relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise now owned or hereafter
acquired, including (a) all information used or useful arising from the business
including all goodwill, trade secrets, trade secret rights, know-how, customer
lists, processes of production, ideas, confidential business information,
techniques, processes, formulas and all other proprietary information, and (b) the
Copyrights, the Patents, the Trademarks and the Licenses and all rights to sue
at law or in equity for any infringement or other impairment thereof, including
the right to receive all proceeds and damages therefrom, in each case to the
extent the grant by such Grantor of a Security Interest pursuant to this
Security Agreement in any such rights, priorities and privileges relating to
intellectual property is not prohibited by any contract, agreement or other
instrument governing such rights, priorities and privileges without the consent
of any other party thereto, would not give any other party to any such
contract, agreement or other instrument the right to terminate its obligations
thereunder or is permitted with consent if all necessary consents to such grant
of a Security Interest have been obtained from the relevant parties (other than
to the extent that any such prohibition would be rendered ineffective pursuant
to Sections 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code (or any
successor provision or provisions) of any relevant jurisdiction or any other
applicable law) (it being understood that the foregoing shall not be deemed to
obligate such Grantor to obtain such consents).

 

“Investment Property” shall mean all Securities (whether
certificated or uncertificated), Security Entitlements, Securities Accounts, Commodity
Contracts and Commodity Accounts of any Grantor, whether now or hereafter
acquired by any Grantor, in each case to the extent the grant by a Grantor of a
Security Interest therein pursuant to this Security Agreement in its right,
title and interest in any such Investment Property is not prohibited by any
contract, agreement, instrument or indenture governing such Investment Property
without the consent of any other party thereto, would not give any other party
to any such contract, agreement, instrument or indenture the right to terminate
its obligations thereunder or is permitted with consent if all necessary
consents to such grant of a Security Interest have been obtained from the other
parties thereto (other than to the extent that any such prohibition would be
rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the
Uniform Commercial Code (or any successor provision or provisions) of any
relevant jurisdiction or any other applicable law) (it being understood that
the foregoing shall not be deemed to obligate such Grantor to obtain such consents).

 

“License” shall mean any Patent License, Trademark License, Copyright
License or other license or sublicense to which any Grantor is a party.

 

“NY UCC”
has the meaning assigned to such term in Section 1(a).

 

“Obligations”
shall mean the collective reference to (i) the due and punctual payment of
(x) the principal of and premium, if any, and interest at the applicable rate
provided in the Credit Agreement (including interest accruing during the
pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in

 

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such proceeding)
on the Loans, when and as due, whether at maturity, by acceleration, upon one
or more dates set for prepayment or otherwise, (y) each payment required to be
made by the Borrower under the Credit Agreement in respect of any Letter of
Credit, when and as due, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide cash collateral, and
(z) all other monetary obligations, including fees, costs, expenses and
indemnities, whether primary, secondary, direct, contingent, fixed or otherwise
(including monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), of the Borrower or any other Credit
Party to any of the Secured Parties under the Credit Agreement and the other
Credit Documents, (ii) the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Borrower under or pursuant to
the Credit Agreement and the other Credit Documents, (iii) the due and
punctual payment and performance of all the covenants, agreements, obligations
and liabilities of each other Credit Party under or pursuant to this Security
Agreement or the other Credit Documents, (iv) the due and punctual payment
and performance of all obligations of each Credit Party under each Hedge
Agreement that (x) is in effect on the Closing Date with a counterparty that is
a Lender or an affiliate of a Lender as of the Closing Date or (y) is entered
into after the Closing Date with any counterparty that is a Lender or an
affiliate of a Lender at the time such Hedge Agreement is entered into and (v) the
due and punctual payment and performance of all obligations in respect of
overdrafts and related liabilities owed to the Administrative Agent or its
affiliates arising from or in connection with treasury, depositary or cash
management services or in connection with any automated clearinghouse transfer
of funds.

 

“Patent
License” means any written agreement, now or hereafter in effect, granting
to any third party any right to make, use or sell any invention on which a
patent, now or hereafter owned by any Grantor (including all Patents) or that
any Grantor otherwise has the right to license, is in existence, or granting to
any Grantor any right to make, use or sell any invention on which a patent, now
or hereafter owned by any third party, is in existence, and all rights of any
Grantor under any such agreement, including those listed on Schedule 3.

 

“patents”
means, with respect to any Person, all of the following now owned or hereafter
acquired by such Person:  (a) all
letters patent of the United States or the equivalent thereof in any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States or the equivalent thereof in any other
country, including registrations, recordings and pending applications in the
United States Patent and Trademark Office or any similar offices in any other
country, and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.

 

“Patents”
means all patents now owned or hereafter acquired by any Grantor, including
those listed on Schedule 4.

 

“Proceeds” shall mean all “proceeds” as such term is defined in Article 9
of the NY UCC and, in any event, shall include with respect to any Grantor, any
consideration received from the sale, exchange, license, lease or other
disposition of any asset or property that constitutes Collateral, any value
received as a consequence of the possession of any Collateral and any payment
received from any insurer or other person or entity as a result of the
destruction, loss,

 

5

 

theft, damage
or other involuntary conversion of whatever nature of any asset or property
that constitutes Collateral, and shall include (a) all cash and negotiable
instruments received by or held on behalf of the Administrative Agent, (b) any
claim of any Grantor against any third party for (and the right to sue and
recover for and the rights to damages or profits due or accrued arising out of
or in connection with) (i) past, present or future infringement of any
Patent now or hereafter owned by any Grantor, or licensed under a Patent
License, (ii) past, present or future infringement or dilution of any
Trademark now or hereafter owned by  any
Grantor or licensed under a Trademark License or injury to the goodwill
associated with or symbolized by any Trademark now or hereafter owned by any
Grantor, (iii) past, present or future breach of any License and (iv) past,
present or future infringement of any Copyright now or hereafter owned by any
Grantor or licensed under a Copyright License and (c) any and all other
amounts from time to time paid or payable under or in connection with any of
the Collateral.

 

“Secured
Parties” shall mean (i) the Lenders, (ii) the Letter of Credit
Issuer, (iii) the Swingline Lender, (iv) the Administrative Agent, (v) the
Syndication Agent, (vi) the Documentation Agent, (vii) each
counterparty to a Hedge Agreement the obligations under which constitute
Obligations, (viii) the beneficiaries of each indemnification obligation
undertaken by any Credit Party under any Credit Document and (ix) any
successors, indorsees, transferees and assigns of each of the foregoing.

 

“Security Agreement” shall mean this Security Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.

 

“Security Interest” shall have the meaning assigned to
such term in Section 2.

 

“Trademark
License” means any written agreement, now or hereafter in effect, granting
to any third party any right to use any trademark now or hereafter owned by any
Grantor (including any Trademark) or that any Grantor otherwise has the right
to license, or granting to any Grantor any right to use any trademark now or
hereafter owned by any third party, and all rights of any Grantor under any
such agreement, including those listed on Schedule 5.

 

“trademarks”
means, with respect to any Person, all of the following now owned or hereafter
acquired by such Person:  (i) all
trademarks, service marks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, trade dress, logos,
other source or business identifiers, designs and general intangibles of like
nature, now existing or hereafter adopted or acquired, all registrations and
recordings thereof (if any), and all registration and recording applications
filed in connection therewith, including registrations and registration
applications in the United States Patent and Trademark Office or any similar
offices in any State of the United States or any other country or any political
subdivision thereof, and all extensions or renewals thereof, (ii) all
goodwill associated therewith or symbolized thereby and (iii) all other
assets, rights and interests that uniquely reflect or embody such goodwill.

 

“Trademarks”
means all trademarks now owned or hereafter acquired by any Grantor, including
those listed on Schedule 6 hereto.

 

6

 

(c)                                  References
to “Lenders” in this Security Agreement shall be deemed to include affiliates
of Lenders that may from time to time enter into Hedge Agreements with the
Borrower.

 

(d)                                 The
words “hereof”, “herein”, “hereto” and “hereunder” and words of similar import
when used in this Security Agreement shall refer to this Security Agreement as
a whole and not to any particular provision of this Security Agreement, and
Section, subsection and Schedule references are to this Security
Agreement unless otherwise specified. 
The words “include”, “includes” and “including” shall be deemed to be
followed by the phrase “without limitation”.

 

(e)                                  The
meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.

 

(f)                                    Where
the context requires, terms relating to the Collateral or any part thereof,
when used in relation to a Grantor, shall refer to such Grantor’s Collateral or
the relevant part thereof.

 

2.                                       Grant
of Security Interest.

 

(a)                                  Each
Grantor hereby bargains, sells, conveys, assigns, sets over, mortgages,
pledges, hypothecates and transfers to the Administrative Agent, for the benefit
of the Secured Parties, and hereby grants to the Administrative Agent, for the benefit
of the Secured Parties, a security interest (the “Security Interest”)
in all of the following property now owned or hereafter acquired by such
Grantor or in which such Grantor now has or at any time in future may acquire
any right, title or interest (collectively, the “Collateral”),
as collateral security for the prompt and complete payment and performance when
due (whether at the stated maturity, by acceleration or otherwise) of the
Obligations:

 

(i)                                     all Accounts;

 

(ii)                                  all Chattel Paper;

 

(iii)                               all Documents;

 

(iv)                              all Equipment;

 

(v)                                 all General
Intangibles;

 

(vi)                              all Instruments;

 

(vii)                           all Intellectual Property;

 

(viii)                        all Inventory;

 

(ix)                                all Investment
Property;

 

(x)                                   all books and
records pertaining to the Collateral;

 

7

 

(xi)                                all Letters of Credit
and Letter of Credit Rights;

 

(xii)                             all Supporting
Obligations; and

 

(xiii)                          to the extent not otherwise
included, all Proceeds and products of any and all of the foregoing.

 

For the avoidance
of doubt, this Security Agreement shall not be deemed, or construed or
interpreted to include, a pledge of any Pledged Shares or Pledge Debt (each as
defined in the Pledge Agreement).

 

(b)                                 Each
Grantor hereby irrevocably authorizes the Administrative Agent at any time and
from time to time to file in any relevant jurisdiction any initial financing statements
with respect to the Collateral or any part thereof and amendments thereto that
contain the information required by Article 9 of the Uniform Commercial
Code of each applicable jurisdiction for the filing of any financing statement
or amendment, including whether such Grantor is an organization, the type of
organization and any organizational identification number issued to such
Grantor.  Such financing statements may
describe the Collateral in the same manner as described herein or may contain
an indication or description of collateral that describes such property in any
other manner such as “all assets” or “all personal property, whether now owned
or hereafter acquired.”  Each Grantor
agrees to provide such information to the Administrative Agent promptly upon
request.

 

Each Grantor
also ratifies its authorization for the Administrative Agent to file in any
relevant jurisdiction any initial financing statements or amendments thereto if
filed prior to the date hereof.

 

The
Administrative Agent is further authorized to file with the United States Patent
and Trademark Office or United States Copyright Office (or any successor office
or any similar office in any other country) such documents as may be necessary
or advisable for the purpose of perfecting, confirming, continuing, enforcing
or protecting the Security Interest granted by each Grantor, without the
signature of any Grantor, and naming any Grantor or the Grantors as debtors and
the Administrative Agent as secured party.

 

The Security
Interests are granted as security only and shall not subject the Administrative
Agent or any other Secured Party to, or in any way alter or modify, any
obligation or liability of any Grantor with respect to or arising out of the
Collateral.

 

3.                                       Representations
And Warranties.

 

Each Grantor
hereby represents and warrants to the Administrative Agent and each Secured
Party that:

 

3.1.                              Title;
No Other Liens.  Except for the
Security Interest granted to the Administrative Agent for the benefit of the
Secured Parties pursuant to this Security Agreement, the Liens permitted by the
Credit Agreement and any Liens securing Indebtedness which is no longer
outstanding or any Liens with respect to commitments to lend which have been
terminated, such Grantor owns each item of the Collateral free and clear of any
and all Liens or claims

 

8

 

of others.  No security agreement, financing statement or
other public notice with respect to all or any part of the Collateral that
evidences a Lien securing any material Indebtedness is on file or of record in
any public office, except such as have been filed in favor of the
Administrative Agent, for the benefit of the Secured Parties, pursuant to this
Security Agreement or are permitted by the Credit Agreement.

 

3.2.                              Perfected
First Priority Liens.  (a)  Subject
to the limitations set forth in clause (b) of this subsection 3.2,
the Security Interests granted pursuant to this Security Agreement (i) will
constitute valid perfected Security Interests in the Collateral (as to which
perfection may be obtained by the filings or other actions described in
clauses (A) or (B) or (C) below) in favor of the
Administrative Agent, for the benefit of the Secured Parties, as collateral
security for the Obligations, upon (A) the filing of all financing
statements naming each Grantor as “debtor” and the Administrative Agent as “secured
party” and describing the Collateral in the applicable filing offices, (B) delivery
of all Instruments, Chattel Paper and certificated Securities, and (C) completion
of the filing, registration and recording of a fully executed agreement in the
form hereof (or a supplement hereto) and containing a description of all
Collateral constituting Intellectual Property in the United Stated Patent and
Trademark Office within the three-month period (commencing as of the date
hereof) or, in the case of Collateral constituting Intellectual Property
acquired after the date hereof, thereafter pursuant to 35 USC § 261 and 15
USC § 1060 and the regulations thereunder with respect to United States
Patents and United States registered Trademarks and in the United States Copyright
Office within the one-month period (commencing as of the date hereof) or, in
the case of Collateral constituting Intellectual Property acquired after the
date hereof, thereafter with respect to United States registered Copyrights
pursuant to 17 USC § 205 and the regulations thereunder and otherwise as
may be required pursuant to the laws of any other necessary jurisdiction to the
extent that a security interest may be perfected by such filings, registrations
and recordings, and (ii) are prior to all other Liens on the Collateral
other than Liens permitted pursuant to Section 10.2 of the Credit
Agreement.

 

(b)                                 Notwithstanding
anything to the contrary herein, no Grantor shall be required to perfect the
Security Interests granted by this Security Agreement (including Security
Interests in cash, cash accounts and Investment Property) by any means other
than by (i) filings pursuant to the Uniform Commercial Codes of the
relevant State(s), (ii) filings approved by United States government
offices with respect to Intellectual Property or (iii) in the case of
Collateral that constitutes Tangible Chattel Paper, Instruments or Negotiable
Documents in excess of $1,000,000 or any Certificated Securities, possession by
the Administrative Agent in the United States. 
No Grantor shall be required to complete any filings or other action
with respect to the perfection of Security Interests in any jurisdiction
outside the United States.

 

(c)                                  It
is understood and agreed that the Security Interests in cash and Permitted
Investments created hereunder shall not prevent the Grantors from using such assets
in the ordinary course of their respective businesses.

 

4.                                       Covenants.

 

Each Grantor
hereby covenants and agrees with the Administrative Agent and the Secured
Parties that, from and after the date of this Security Agreement until the
Obligations under

 

9

 

the Credit
Documents are paid in full, the Commitments are terminated and no Letter of
Credit remains outstanding:

 

4.1.                              Maintenance
of Perfected Security Interest; Further Documentation.(a)  Such
Grantor shall maintain the Security Interest created by this Security Agreement
as a perfected Security Interest having at least the priority described in subsection 3.1
and shall defend such Security Interest against the claims and demands of all
Persons whomsoever, in each case subject to subsection 3.1(b).

 

(b)                                 Such
Grantor will furnish to the Administrative Agent and the Lenders from time to
time statements and schedules further identifying and describing the assets and
property of such Grantor and such other reports in connection therewith as the
Administrative Agent may reasonably request. 
In addition, within 30 days after the end of each calendar quarter, such
Grantor will deliver to the Administrative Agent (i) copies of all such
certificates of title issued during such calendar quarter with the notation
thereon of the Administrative Agent’s Security Interest created hereunder in
the items of Equipment covered hereby and (ii) a written supplement hereto
substantially in the form of Annex 2 hereto with respect to any additional
Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks and
Trademark Licenses acquired by such Grantor after the date hereof, all in
reasonable detail.

 

(c)                                  Subject
to clause (d) below and subsection 3.2(b), each Grantor agrees that
at any time and from time to time, at the expense of such Grantor, it will
execute any and all further documents, financing statements, agreements and
instruments, and take all such further actions (including the filing and
recording of financing statements, fixture filings, mortgages, deeds of trust
and other documents), which may be required under any applicable law, or which
the Administrative Agent or the Required Lenders may reasonably request, in
order (x) to grant, preserve, protect and perfect the validity and
priority of the Security Interests created or intended to be created hereby or
(y) to enable the Administrative Agent to exercise and enforce its rights
and remedies hereunder with respect to any Collateral, including the filing of
any financing or continuation statements under the Uniform Commercial Code in
effect in any jurisdiction with respect to the Security Interests created
hereby, all at the expense of such Grantor.

 

(d)                                 Notwithstanding
anything in this subsection 4.1 to the contrary, (i) with respect to
any assets acquired by such Grantor after the date hereof that are required by
the Credit Agreement to be subject to the Lien created hereby or (ii) with
respect to any Person that, subsequent to the date hereof, becomes a Subsidiary
of the Borrower that is required by the Credit Agreement to become a party
hereto, the relevant Grantor after the acquisition or creation thereof shall
promptly take all actions required by the Credit Agreement or this subsection 4.1.

 

4.2.                              Changes
in Locations, Name, etc.  Each
Grantor will furnish to the Administrative Agent prompt written notice of any
change (i) in its legal name, (ii) in its jurisdiction of incorporation
or organization, (iii) in its identity or type of organization or
corporate structure, (iv) in the case of any Grantor that is not a Registered
Organization, in its chief executive office or principal place of business or (v) in
its Federal Taxpayer Identification Number or organizational identification
number.  Each Grantor agrees promptly to
provide the Administrative Agent with certified organizational documents
reflecting any of the changes described in the first sentence of this paragraph.  Each Grantor agrees not to effect or permit
any change referred

 

10

 

to in the first sentence of this
paragraph unless all filings have been made under the Uniform Commercial Code
or otherwise that are required in order for the Administrative Agent to
continue at all times following such change to have a valid, legal and
perfected security interest in all the Collateral having at least the priority
described in subsection 3.2.  Each
Grantor also agrees promptly to notify the Administrative Agent if any material
portion of the Collateral is damaged or destroyed.

 

4.3.                              Notices.  Each Grantor will advise the Administrative
Agent and the Lenders promptly, in reasonable detail, of any Lien of which it
has knowledge (other than the Security Interests created hereby or Liens
permitted under the Credit Agreement) on any of the Collateral which would
adversely affect, in any material respect, the ability of the Administrative
Agent to exercise any of its remedies hereunder.

 

4.4.                              Special
Covenants with Respect to Equipment. 
(a)  Each Grantor shall, promptly after the acquisition by such
Grantor of any item of Equipment that is covered by a certificate of title
under a statute of any jurisdiction under the law of which indication of a
Security Interest on such certificate is required as a condition of perfection
thereof, execute and file with the registrar of motor vehicles or other
appropriate authority in such jurisdiction an application or other document
requesting the notation or other indication of the Security Interest created
hereunder on such certificate of title.

 

(b)                                 Upon
the occurrence and during the continuation of any Event of Default, all
insurance payments in respect of such Equipment shall be paid to and applied by
Administrative Agent as specified in subsection 5.4 hereof.

 

(c)                                  At
the Administrative Agent’s request at any time after the occurrence and during
the continuance of an Event of Default, each Grantor shall deliver to the
Administrative Agent the certificates of title covering each item of Equipment
the perfection of which is governed by the notation on the certificate of title
of the Administrative Agent’s Security Interest created hereunder.

 

5.                                       Remedial
Provisions.

 

5.1.                              Certain
Matters Relating to Accounts.  (a) 
At any time after the occurrence and during the continuance of an Event of
Default and after giving reasonable notice to the Borrower and any other
relevant Grantor, the Administrative Agent shall have the right to make test
verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and each Grantor shall furnish all such
assistance and information as the Administrative Agent may require in
connection with such test verifications. 
The Administrative Agent shall have the absolute right to share any
information it gains from such inspection or verification with any Secured
Party.

 

(b)                                 The
Administrative Agent hereby authorizes each Grantor to collect such Grantor’s
Accounts and the Administrative Agent may curtail or terminate said authority
at any time after the occurrence and during the continuance of an Event of
Default. If required in writing by the Administrative Agent at any time after
the occurrence and during the continuance of an Event of Default, any payments
of Accounts, when collected by any Grantor, (i) shall be

 

11

 

forthwith (and, in any event,
within two Business Days) deposited by such Grantor in the exact form received,
duly endorsed by such Grantor to the Administrative Agent if required, in a
Collateral Account maintained under the sole dominion and control of and on terms
and conditions reasonably satisfactory to the Administrative Agent, subject to
withdrawal by the Administrative Agent for the account of the Secured Parties
only as provided in subsection 5.5, and (ii) until so turned over,
shall be held by such Grantor in trust for the Administrative Agent and the
Secured Parties, segregated from other funds of such Grantor.  Each such deposit of Proceeds of Accounts
shall be accompanied by a report identifying in reasonable detail the nature
and source of the payments included in the deposit.

 

(c)                                  At
the Administrative Agent’s request at any time after the occurrence and during
the continuance of an Event of Default, each Grantor shall deliver to the
Administrative Agent all original and other documents evidencing, and relating
to, the agreements and transactions which gave rise to the Accounts, including
all original orders, invoices and shipping receipts.

 

(d)                                 Upon
the occurrence and during the continuance of an Event of Default, a Grantor
shall not grant any extension of the time of payment of any of the Accounts,
compromise, compound or settle the same for less than the full amount thereof,
release, wholly or partly, any person liable for the payment thereof, or allow
any credit or discount whatsoever thereon if the Administrative Agent shall
have instructed the Grantors not to grant or make any such extension, credit,
discount, compromise, or settlement under any circumstances during the continuance
of such Event of Default.

 

5.2.                              Communications
with Obligors; Grantors Remain Liable. 
(a)  The Administrative Agent in its own name or in the name of
others may at any time after the occurrence and during the continuance of an
Event of Default, after giving reasonable notice to the relevant Grantor of its
intent to do so, communicate with obligors under the Accounts to verify with
them to the Administrative Agent’s satisfaction the existence, amount and terms
of any Accounts.  The Administrative
Agent shall have the absolute right to share any information it gains from such
inspection or verification with any Secured Party.

 

(b)                                 Upon
the written request of the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, each Grantor
shall notify obligors on the Accounts that the Accounts have been assigned to
the Administrative Agent for the benefit of the Secured Parties and that
payments in respect thereof shall be made directly to the Administrative Agent.

 

(c)                                  Anything
herein to the contrary notwithstanding, each Grantor shall remain liable under
each of the Accounts to observe and perform all the conditions and obligations
to be observed and performed by it thereunder, all in accordance with the terms
of any agreement giving rise thereto. 
Neither the Administrative Agent nor any Secured Party shall have any
obligation or liability under any Account (or any agreement giving rise
thereto) by reason of or arising out of this Security Agreement or the receipt
by the Administrative Agent or any Secured Party of any payment relating thereto,
nor shall the Administrative Agent or any Secured Party be obligated in any
manner to perform any of the obligations of any Grantor under or pursuant to
any Account (or any agreement giving rise thereto), to make any payment, to
make any inquiry

 

12

 

as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party thereunder, 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 it or to which it may be entitled at any time
or times.

 

5.3.                              Proceeds
to be Turned Over To Administrative Agent. 
In addition to the rights of the Administrative Agent and the Secured
Parties specified in subsection 5.1 with respect to payments of Accounts,
if an Event of Default shall occur and be continuing and the Administrative
Agent so requires by notice in writing to the relevant Grantor (it being
understood that the exercise of remedies by the Secured Parties in connection
with an Event of Default under Section 11.5 of the Credit Agreement shall
be deemed to constitute a request by the Administrative Agent for the purposes
of this sentence and in such circumstances, no such written notice shall be
required), all Proceeds received by any Grantor consisting of cash, checks and
other near-cash items shall be held by such Grantor in trust for the
Administrative Agent and the Secured Parties, segregated from other funds of
such Grantor, and shall, forthwith upon receipt by such Grantor, be turned over
to the Administrative Agent in the exact form received by such Grantor (duly
endorsed by such Grantor to the Administrative Agent, if required).  All Proceeds received by the Administrative
Agent hereunder shall be held by the Administrative Agent in a Collateral Account
maintained under its sole dominion and control and on terms and conditions
reasonably satisfactory to the Administrative Agent.  All Proceeds while held by the Administrative
Agent in a Collateral Account (or by such Grantor in trust for the
Administrative Agent and the Secured Parties) shall continue to be held as
collateral security for all the Obligations and shall not constitute payment
thereof until applied as provided in subsection 5.4.

 

5.4.                              Application
of Proceeds.  The Administrative
Agent shall apply the proceeds of any collection or sale of the Collateral as
well as any Collateral consisting of cash, at any time after receipt as
follows:

 

(i)                                     first, to the payment
of all reasonable and documented costs and expenses incurred by the
Administrative Agent in connection with such collection or sale or otherwise in
connection with this Security Agreement, the other Credit Documents or any of
the Obligations, including all court costs and the reasonable fees and expenses
of its agents and legal counsel, the repayment of all advances made by the
Administrative Agent hereunder or under any other Credit Document on behalf of
any Grantor and any other reasonable and documented costs or expenses incurred
in connection with the exercise of any right or remedy hereunder or under any
other Credit Document;

 

(ii)                                  second, to the
Secured Parties, an amount equal to all Obligations owing to them on the date
of any distribution, and, if such moneys shall be insufficient to pay such
amounts in full, then ratably (without priority of any one over any other) to
such Secured Parties in proportion to the unpaid amounts thereof; and

 

(iii)                               third, any surplus then
remaining shall be paid to the Grantors or their successors or assigns or to
whomsoever may be lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.

 

13

 

Upon any sale
of the Collateral by the Administrative Agent (including pursuant to a power of
sale granted by statute or under a judicial proceeding), the receipt of the
Administrative Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Administrative Agent or such
officer or be answerable in any way for the misapplication thereof.

 

5.5.                              Code
and Other Remedies.  If an Event of
Default shall occur and be continuing, the Administrative Agent may exercise in
respect of the Collateral, in addition to all other rights and remedies
provided for herein or otherwise available to it, all the rights and remedies
of a secured party upon default under the NY UCC or any other applicable law
and also may without notice except as specified below, sell the Collateral or
any part thereof in one or more parcels at public or private sale, at any
exchange broker’s board or at any of the Administrative Agent’s offices or
elsewhere, for cash, on credit or for future delivery, at such price or prices
and upon such other terms as are commercially reasonable irrespective of the
impact of any such sales on the market price of the Collateral.  The Administrative Agent shall be authorized
at any such sale (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers of Collateral to Persons who will represent and
agree that they are purchasing the Collateral for their own account for
investment and not with a view to the distribution or sale thereof, and, upon
consummation of any such sale, the Administrative Agent shall have the right to
assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold.  Each purchaser at
any such sale shall hold the property sold absolutely free from any claim or
right on the part of any Grantor, and each Grantor hereby waives (to the extent
permitted by law) all rights of redemption, stay and/or appraisal that it now
has or may at any time in the future have under any rule of law or statute
now existing or hereafter enacted.  The
Administrative Agent or any Secured Party shall have the right upon any such
public sale, and, to the extent permitted by law, upon any such private sale,
to purchase the whole or any part of the Collateral so sold, and the
Administrative Agent or such Secured Party may subject pay the purchase price
by crediting the amount thereof against the Obligations.  Each Grantor agrees that, to the extent
notice of sale shall be required by law, at least ten days’ notice to such
Grantor of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification.  The Administrative Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given.  The Administrative Agent may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.  To the extent permitted by law, each Grantor
hereby waives any claim against the Administrative Agent arising by reason of
the fact that the price at which any Collateral may have been sold at such a
private sale was less than the price that might have been obtained at a public
sale, even if the Administrative Agent accepts the first offer received and
does not offer such Collateral to more than one offeree.  Each Grantor further agrees, at the
Administrative Agent’s request, to assemble the Collateral and make it
available to the Administrative Agent at places which the Administrative Agent
shall reasonably select, whether at such Grantor’s premises or elsewhere.  The Administrative Agent shall apply the net
proceeds of any action taken by it pursuant to this subsection 5.5 in accordance
with the provisions of subsection 5.4.

 

5.6.                              Deficiency.  Each Grantor shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to pay its Obligations

 

14

 

and the fees and disbursements
of any attorneys employed by the Administrative Agent or any Secured Party to
collect such deficiency.

 

5.7.                              Amendments,
etc. with Respect to the Obligations; Waiver of Rights.  Each Grantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against any Grantor and
without notice to or further assent by any Grantor, (a) any demand for
payment of any of the Obligations made by the Administrative Agent or any other
Secured Party may be rescinded by such party and any of the Obligations
continued, (b) the Obligations, or the liability of any other party upon
or for any part thereof, or any collateral security or guarantee therefor or
right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised,
waived, surrendered or released by the Administrative Agent or any other
Secured Party, (c) the Credit Agreement, the other Credit Documents, the
Letters of Credit and any other documents executed and delivered in connection
therewith and the Hedge Agreements and any other documents executed and
delivered in connection therewith and any documents entered into with the
Administrative Agent or any of its affiliates in connection with treasury,
depositary or cash management services or in connection with any automated clearinghouse
transfer of funds may be amended, modified, supplemented or terminated, in
whole or in part, as the Administrative Agent (or the Required Lenders, as the
case may be, or, in the case of any Hedge Agreement or documents entered into
with the Administrative Agent or any of its affiliates in connection with
treasury, depositary or cash management services or in connection with any
automated clearinghouse transfer of funds, the party thereto) may deem
advisable from time to time, and (d) any collateral security, guarantee or
right of offset at any time held by the Administrative Agent or any other
Secured Party for the payment of the Obligations may be sold, exchanged,
waived, surrendered or released.  Neither
the Administrative Agent nor any other Secured Party shall have any obligation
to protect, secure, perfect or insure any Lien at any time held by it as
security for the Obligations or for this Security Agreement or any property
subject thereto.  When making any demand
hereunder against any Grantor, the Administrative Agent or any other Secured
Party may, but shall be under no obligation to, make a similar demand on the
Borrower or any Grantor or grantor, and any failure by the Administrative Agent
or any other Secured Party to make any such demand or to collect any payments
from the Borrower or any Grantor or grantor or any release of the Borrower or
any Grantor or grantor shall not relieve any Grantor in respect of which a
demand or collection is not made or any Grantor not so released of its several
obligations or liabilities hereunder, and shall not impair or affect the rights
and remedies, express or implied, or as a matter of law, of the Administrative
Agent or any other Secured Party against any Grantor.  For the purposes hereof “demand” shall
include the commencement and continuance of any legal proceedings.

 

6.                                       The
Administrative Agent.

 

6.1.                              Administrative
Agent’s Appointment as Attorney-in-Fact, etc.  (a)  Each Grantor hereby appoints, which
appointment is irrevocable and coupled with an interest, effective upon and
during occurrence of an Event of Default, the Administrative Agent 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 such Grantor and in the name of such Grantor or otherwise, for the
purpose of carrying out the terms of this Security Agreement, to take any and
all appropriate action and to execute any and all documents and instruments
which may be necessary or desirable to accomplish the purposes of this Security
Agreement,

 

15

 

and, without limiting the
generality of the foregoing, each Grantor hereby gives the Administrative Agent
the power and right, on behalf of such Grantor, either in the Administrative
Agent’s name or in the name of such Grantor or otherwise, without assent by
such Grantor, to do any or all of the following, in each case after and during
the occurrence of an Event of Default and after written notice by the
Administrative Agent of its intent to do so:

 

(i)                                     take possession of
and endorse and collect any checks, drafts, notes, acceptances or other
instruments for the payment of moneys due under any Account or with respect to
any other Collateral and file any claim or take any other action or proceeding
in any court of law or equity or otherwise deemed appropriate by the
Administrative Agent for the purpose of collecting any and all such moneys due
under any Account or with respect to any other Collateral whenever payable;

 

(ii)                                  in the case of any
Intellectual Property, execute and deliver, and have recorded, any and all
agreements, instruments, documents and papers as the Administrative Agent may
request to evidence the Administrative Agent’s and the Secured Parties’
Security Interest in such Intellectual Property and the goodwill and general
intangibles of such Grantor relating thereto or represented thereby;

 

(iii)                               pay or discharge taxes
and Liens levied or placed on or threatened against the Collateral;

 

(iv)                              execute, in connection
with any sale provided for in subsection 5.5, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Collateral;

 

(v)                                 obtain and adjust
insurance required to be maintained by such Grantor or paid to the
Administrative Agent pursuant to subsection 4.4;

 

(vi)                              direct any party liable
for any payment under any of the Collateral to make payment of any and all
moneys due or to become due thereunder directly to the Administrative Agent or
as the Administrative Agent shall direct;

 

(vii)                           ask or demand for, collect
and receive payment of and receipt for, any and all moneys, claims and other
amounts due or to become due at any time in respect of or arising out of any
Collateral;

 

(viii)                        sign and endorse any invoices,
freight or express bills, bills of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications, notices and other documents
in connection with any of the Collateral;

 

(ix)                                commence and prosecute any
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any portion thereof and to enforce
any other right in respect of any Collateral;

 

(x)                                   defend any suit,
action or proceeding brought against such Grantor with respect to any
Collateral (with such Grantor’s consent to the extent such action or its 

 

16

 

resolution could materially affect such Grantor or any of its Affiliates
in any manner other than with respect to its continuing rights in such
Collateral);

 

(xi)                                settle, compromise or
adjust any such suit, action or proceeding and, in connection therewith, give
such discharges or releases as the Administrative Agent may deem appropriate
(with such Grantor’s consent to the extent such action or its resolution could
materially affect such Grantor or any of its Affiliates in any manner other
than with respect to its continuing rights in such Collateral);

 

(xii)                             assign any Copyright,
Patent or Trademark (along with the goodwill of the business to which any such
Copyright, Patent or Trademark pertains), throughout the world for such term or
terms, on such conditions, and in such manner, as the Administrative Agent
shall in its sole discretion determine; and

 

(xiii)                          generally, sell, transfer,
pledge and make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Administrative Agent were the
absolute owner thereof for all purposes, and do, at the Administrative Agent’s
option and such Grantor’s expense, at any time, or from time to time, all acts
and things that the Administrative Agent deems necessary to protect, preserve
or realize upon the Collateral and the Administrative Agent’s and the Secured
Parties’ Security Interests therein and to effect the intent of this Security
Agreement, all as fully and effectively as such Grantor might do.

 

Anything in
this subsection 6.l(a) to the contrary notwithstanding, the Administrative
Agent agrees that it will not exercise any rights under the power of attorney
provided for in this subsection 6.1(a) unless an Event of Default
shall have occurred and be continuing.

 

(b)                                 If
any Grantor fails to perform or comply with any of its agreements contained
herein, the Administrative Agent, at its option, but without any obligation so
to do, may perform or comply, or otherwise cause performance or compliance,
with such agreement.

 

(c)                                  The
expenses of the Administrative Agent incurred in connection with actions
undertaken as provided in this subsection 6.1, together with interest
thereon at a rate per annum equal to the highest rate per annum at which
interest would then be payable on any category of past due ABR Loans under the
Credit Agreement, from the date of payment by the Administrative Agent to the
date reimbursed by the relevant Grantor, shall be payable by such Grantor to
the Administrative Agent on demand.

 

(d)                                 Each
Grantor hereby ratifies all that said attorneys shall lawfully do or cause to
be done by virtue hereof.  All powers,
authorizations and agencies contained in this Security Agreement are coupled
with an interest and are irrevocable until this Security Agreement is terminated
and the Security Interests created hereby are released.

 

6.2.                              Duty
of Administrative Agent.  The
Administrative Agent’s sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the NY UCC or otherwise, shall be to deal with it in the same manner as the Administrative
Agent deals with similar property for its own account.  The Administrative Agent shall be deemed to
have exercised reasonable care in the custody and preservation of any

 

17

 

Collateral in its possession if
such Collateral is accorded treatment substantially equal to that which the
Administrative Agent accords its own property. 
Neither the Administrative Agent, any Secured Party nor any of their
respective officers, directors, employees or agents shall be liable for failure
to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of any Grantor or any other Person or to take any
other action whatsoever with regard to the Collateral or any part thereof.  The powers conferred on the Administrative
Agent and the Secured Parties hereunder are solely to protect the
Administrative Agent’s and the Secured Parties’ interests in the Collateral and
shall not impose any duty upon the Administrative Agent or any Secured Party to
exercise any such powers.  The
Administrative Agent and the Secured Parties shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers,
and neither they nor any of their officers, directors, employees or agents
shall be responsible to any Grantor for any act or failure to act hereunder,
except for their own gross negligence or willful misconduct.

 

6.3.                              Authority
of Administrative Agent.  Each
Grantor acknowledges that the rights and responsibilities of the Administrative
Agent under this Security Agreement with respect to any action taken by the
Administrative Agent or the exercise or non-exercise by the Administrative
Agent of any option, voting right, request, judgment or other right or remedy
provided for herein or resulting or arising out of this Security Agreement
shall, as between the Administrative Agent and the Secured Parties, be governed
by the Credit Agreement and by such other agreements with respect thereto as
may exist from time to time among them, but, as between the Administrative
Agent and the Grantors, the Administrative Agent shall be conclusively presumed
to be acting as agent for the Secured Parties with full and valid authority so
to act or refrain from acting, and no Grantor shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.

 

6.4.                              Security
Interest Absolute.  All rights of the
Administrative Agent hereunder, the security interest and all obligations of
the Grantors hereunder shall be absolute and unconditional.

 

6.5.                              Continuing
Security Interest; Assignments Under the Credit Agreement; Release.  (a)  This Security Agreement shall
remain in full force and effect and be binding in accordance with and to the
extent of its terms upon each Grantor and the successors and assigns thereof
and shall inure to the benefit of the Administrative Agent and the other
Secured Parties and their respective successors, indorsees, transferees and
assigns until all Obligations under the Credit Documents and the obligations of
each Grantor under this Security Agreement shall have been satisfied by payment
in full, the Commitments shall be terminated and no Letters of Credit shall be
outstanding (other than any Letters of Credit that shall have been cash
collateralized or otherwise provided for in a manner satisfactory to the Letter
of Credit Issuer in respect thereof), notwithstanding that from time to time
during the term of the Credit Agreement and any Hedge Agreement the Credit
Parties may be free from any Obligations.

 

(b)                                 A
Subsidiary Grantor shall automatically be released from its obligations
hereunder and the Security Interest in the Collateral of such Subsidiary
Grantor shall be automatically released upon the consummation of any
transaction permitted by the Credit Agreement as a result of which such
Subsidiary Grantor ceases to be a Domestic Subsidiary of the Borrower.

 

18

 

(c)                                  Upon
any sale or other transfer by any Grantor of any Collateral that is permitted
under the Credit Agreement, or upon the effectiveness of any written consent to
the release of the security interest granted hereby in any Collateral pursuant
to Section 13.1 of the Credit Agreement, the Security Interest in such
Collateral shall be automatically released and such Collateral sold free and
clear of the Lien and Security Interests created hereby.

 

(d)                                 In
connection with any termination or release pursuant to foregoing paragraph (a),
(b) or (c), the Administrative Agent shall execute and deliver to any
Grantor, at such Grantor’s expense, all documents that such Grantor shall
reasonably request to evidence such termination or release.  Any execution and delivery of documents
pursuant to this subsection 6.5 shall be without recourse to or warranty
by the Administrative Agent.

 

6.6.                              Reinstatement.  This Security Agreement shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any other Secured Party
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
the Borrower or any other Credit Party, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Borrower or any other Credit Party or any substantial part of
its property, or otherwise, all as though such payments had not been made.

 

7.                                       Administrative
Agent As Agent.

 

(a)                                  JPMorgan
Chase Bank has been appointed to act as Administrative Agent under the Credit
Agreement by the Lenders and, by their acceptance of the benefits hereof, the
other Secured Parties.  The
Administrative Agent shall be obligated, and shall have the right hereunder, to
make demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking any action (including the release or
substitution of Collateral), solely in accordance with this Security Agreement
and the Credit Agreement, provided that the Administrative Agent shall
exercise, or refrain from exercising, any remedies provided for in Section 5
in accordance with the instructions of Required Lenders.  In furtherance of the foregoing provisions of
this subsection 7(a), each Secured Party, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to realize
upon any of the Collateral hereunder, it being understood and agreed by such
Secured Party that all rights and remedies hereunder may be exercised solely by
the Administrative Agent for the benefit of the Lenders and Secured Parties in
accordance with the terms of this subsection 7(a).

 

(b)                                 The
Administrative Agent shall at all times be the same Person that is the
Administrative Agent under the Credit Agreement. Written notice of resignation
by the Administrative Agent pursuant to subsection 12.9 of the Credit
Agreement shall also constitute notice of resignation as Administrative Agent
under this Security Agreement; removal of the Administrative Agent shall also
constitute removal as Administrative Agent under this Security Agreement; and
appointment of a successor Administrative Agent pursuant to subsection 12.9
of the Credit Agreement shall also constitute appointment of a successor
Administrative Agent under this Security Agreement.  Upon the acceptance of any appointment as
Administrative Agent under subsection 12.9 of the Credit Agreement by a
successor Administrative Agent, that successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers,

 

19

 

privileges and duties of the
retiring or removed Administrative Agent under this Security Agreement, and the
retiring or removed Administrative Agent under this Security Agreement shall
promptly (i) transfer to such successor Administrative Agent all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Administrative Agent under this
Security Agreement, and (ii) execute and deliver to such successor
Administrative Agent or otherwise authorize the filing of such amendments to
financing statements and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Administrative
Agent of the Security Interests created hereunder, whereupon such retiring or
removed Administrative Agent shall be discharged from its duties and
obligations under this Security Agreement. 
After any retiring or removed Administrative Agent’s resignation or
removal hereunder as Administrative Agent, the provisions of this Security
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Security Agreement while it was Administrative Agent
hereunder.

 

(c)                                  The
Administrative Agent shall not be deemed to have any duty whatsoever with
respect to any Secured Party that is a counterparty to a Hedge Agreement the
obligations under which constitute Obligations, until it shall have received
written notice in form and substance satisfactory to the Administrative Agent
from a Grantor or any such Secured Party as to the existence and terms of the
applicable Hedge Agreement.

 

8.                                       Miscellaneous.

 

8.1.                              Amendments
in Writing.  None of the terms or
provisions of this Security Agreement may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by the affected
Grantor and the Administrative Agent in accordance with Section 13.1 of
the Credit Agreement.

 

8.2.                              Notices.  All notices, requests and demands pursuant
hereto shall be made in accordance with Section 13.2 of the Credit
Agreement.  All communications and
notices hereunder to any Subsidiary Grantor shall be given to it in care of the
Borrower at the Borrower’s address set forth in Section 13.2 of the Credit
Agreement.

 

8.3.                              No
Waiver by Course of Conduct; Cumulative Remedies.  Neither the Administrative Agent nor any
Secured Party shall by any act (except by a written instrument pursuant to subsection 8.1
hereof), delay, indulgence, omission or otherwise be deemed to have waived any
right or remedy hereunder or to have acquiesced in any Default or Event of
Default or in any breach of any of the terms and conditions hereof.  No failure to exercise, nor any delay in exercising,
on the part of the Administrative Agent or any other Secured Party, any right,
power or privilege hereunder shall operate as a waiver thereof.  No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.  A waiver by the Administrative Agent or any
other Secured Party of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy that the Administrative Agent
or such other Secured Party would otherwise have on any future occasion.  The rights, remedies, powers and privileges
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any other rights or remedies provided by law.

 

20

 

8.4.                              Enforcement
Expenses; Indemnification.  (a) 
Each Grantor agrees to pay any and all expenses (including all reasonable fees
and disbursements of counsel) that may be paid or incurred by any Secured Party
in enforcing, or obtaining advice of counsel in respect of, any rights with
respect to, or collecting, any or all of the Obligations and/or enforcing any
rights with respect to, or collecting against, such Grantor under this Security
Agreement.

 

(b)                                 Each
Grantor agrees to pay, and to save the Administrative Agent and the Secured
Parties harmless from, any and all liabilities with respect to, or resulting
from any delay in paying, any and all stamp, excise, sales or other taxes which
may be payable or determined to be payable with respect to any of the Collateral
or in connection with any of the transactions contemplated by this Security
Agreement.

 

(c)                                  Each
Grantor agrees to pay, and to save the Administrative Agent and the Secured
Parties harmless from, any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Security Agreement to the extent either
of the Borrower would be required to do so pursuant to subsection 12.7 of
the Credit Agreement.

 

(d)                                 The
agreements in this subsection 8.4 shall survive repayment of the
Obligations and all other amounts payable under the Credit Agreement and the
other Credit Documents.

 

8.5.                              Successors
and Assigns.  The provisions of this
Security Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns permitted hereby,
except that no Grantor may assign, transfer or delegate any of its rights or
obligations under this Security Agreement without the prior written consent of
the Administrative Agent except pursuant to a transaction permitted by the
Credit Agreement.

 

8.6.                              Counterparts.  This Security Agreement may be executed by
one or more of the parties to this Security Agreement on any number of separate
counterparts (including by facsimile or other electronic transmission), and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument.  A set of the copies of
this Security Agreement signed by all the parties shall be lodged with the
Administrative Agent and the Borrower.

 

8.7.                              Severability.  Any provision of this Security Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.  The parties hereto shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.

 

8.8.                              Section Headings.  The Section headings used in this
Security Agreement are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the interpretation
hereof.

 

21

 

8.9.                              Integration.  This Security Agreement represents the
agreement of each of the Grantors with respect to the subject matter hereof and
there are no promises, undertakings, representations or warranties by the
Administrative Agent or any other Secured Party relative to the subject matter
hereof not expressly set forth or referred to herein or in the other Credit Documents.

 

8.10.                        GOVERNING LAW.  THIS SECURITY AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

8.11.                        Submission
To Jurisdiction Waivers.  Each
Grantor hereby irrevocably and unconditionally:

 

(a)                                  submits for itself
and its property in any legal action or proceeding relating to this Security
Agreement and the other Credit Documents to which it is a party, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the State of New York, the
courts of the United States of America for the Southern District of New York,
and appellate courts from any thereof;

 

(b)                                 consents that any such
action or proceeding may be brought in such courts and waives any objection
that it may now or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;

 

(c)                                  agrees that service
of process in any such action or proceeding may be effected by mailing a copy
thereof by registered or certified mail (or any substantially similar form of
mail), postage prepaid, to such Grantor at its address referred to in subsection 8.2
or at such other address of which the Administrative Agent shall have been
notified pursuant thereto;

 

(d)                                 agrees that nothing
herein shall affect the right of the Administrative Agent or any other Secured
Party to effect service of process in any other manner permitted by law or
shall limit the right of the Administrative Agent or any Secured Party to sue
in any other jurisdiction; and

 

(e)                                  waives, to the
maximum extent not prohibited by law, any right it may have to claim or recover
in any legal action or proceeding referred to in this subsection 8.11 any
special, exemplary, punitive or consequential damages.

 

8.12.                        Acknowledgments.  Each Grantor hereby acknowledges that:

 

(a)                                  it has been advised
by counsel in the negotiation, execution and delivery of this Security
Agreement and the other Credit Documents to which it is a party;

 

(b)                                 neither the
Administrative Agent nor any other Secured Party has any fiduciary relationship
with or duty to any Grantor arising out of or in connection with this Security
Agreement or any of the other Credit Documents, and the relationship between

 

22

 

the Grantors, on the one hand, and the
Administrative Agent and the other Secured Parties, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor; and

 

(c)                                  no joint venture is
created hereby or by the other Credit Documents or otherwise exists by virtue
of the transactions contemplated hereby among the Lenders and any other Secured
Party or among the Grantors and the Lenders and any other Secured Party.

 

8.13.                        Additional
Grantors.  Each Subsidiary of the
Borrower that is required to become a party to this Security Agreement pursuant
to Section 9.11 of the Credit Agreement shall become a Grantor, with the same
force and effect as if originally named as a Grantor herein, for all purposes
of this Agreement upon execution and delivery by such Subsidiary of a
Supplement substantially in the form of Annex 1 hereto. The execution and
delivery of any instrument adding an additional Grantor as a party to this
Security Agreement shall not require the consent of any other Grantor
hereunder.  The rights and obligations of
each Grantor hereunder shall remain in full force and effect notwithstanding
the addition of any new Grantor as a party to this Security Agreement.

 

8.14.                        WAIVER OF JURY TRIAL.  EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS SECURITY AGREEMENT, ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.

 

23

 

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

 

	
   

  	
  ACCELLENT
  MERGER SUB INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James C.
  Momtazee

  	
   

  
	
   

  	
   

  	
  Name:

  	
  James C.
  Momtazee

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President, Treasurer and

  
	
   

  	
   

  	
  Assistant
  Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ACCELLENT
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stewart
  A. Fisher

  	
   

  
	
   

  	
   

  	
  Name:
  Stewart A. Fisher

  
	
   

  	
   

  	
  Title: Chief
  Financial Officer, Executive Vice

  President, Treasurer and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  ACCELLENT
  ACQUISITION CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James C.
  Momtazee

  	
   

  
	
   

  	
   

  	
  Name:

  	
  James C.
  Momtazee

  
	
   

  	
   

  	
  Title:

  	
  Treasurer
  and Assistant Secretary

  
					

 

24

 

	
   

  	
  SIGNATURE PAGE
  TO THE SECURITY AGREEMENT

  DATED AS OF NOVEMBER 22, 2005, AMONG ACCELLENT

  ACQUISITION CORP., ACCELLENT MERGER SUB INC.,

  ACCELLENT INC. (THE “BORROWER”), THE

  SUBSIDIARIES OF THE BORROWER LISTED ON ANNEX A

  HERETO AND JPMORGAN CHASE BANK, N.A., AS

  ADMINISTRATIVE AGENT FOR THE LENDERS FROM

  TIME TO TIME PARTIES TO THE CREDIT AGREEMENT

  REFERRED TO THEREIN.

  
	
   

  
	
   

  
	
   

  	
  ACCELLENT
  CORP.

  
	
   

  	
  AMERICAN
  TECHNICAL MOLDING, INC.

  
	
   

  	
  BRIMFIELD
  ACQUISITION CORP.

  
	
   

  	
  BRIMFIELD
  PRECISION, LLC

  
	
   

  	
  CE
  HUNTSVILLE HOLDINGS CORP.

  
	
   

  	
  CYCAM, INC.

  
	
   

  	
  ELX, INC.

  
	
   

  	
  G&D,
  INC. d/b/a STAR GUIDE CORPORATION

  
	
   

  	
  HAYDEN
  PRECISION INDUSTRIES, LLC

  
	
   

  	
  KELCO
  ACQUISITION LLC

  
	
   

  	
  MACHINING
  TECHNOLOGY GROUP, LLC

  
	
   

  	
  MEDSOURCE
  TECHNOLOGIES, INC.

  
	
   

  	
  MEDSOURCE
  TECHNOLOGIES, LLC

  
	
   

  	
  MEDSOURCE
  TECHNOLOGIES, NEWTON INC.

  
	
   

  	
  MEDSOURCE
  TECHNOLOGIES PITTSBURGH, INC.

  
	
   

  	
  MEDSOURCE
  TRENTON, INC.

  
	
   

  	
  MICRO-GUIDE,
  INC.

  
	
   

  	
  NATIONAL
  WIRE & STAMPING, INC.

  
	
   

  	
  NOBLE-MET,
  LTD.

  
	
   

  	
  PORTLYN, LLC

  
	
   

  	
  SPECTRUM
  MANUFACTURING, INC.

  
	
   

  	
  TENAX, LLC

  
	
   

  	
  TEXCEL, INC.

  
	
   

  	
  THERMAT
  ACQUISITION CORP.

  
	
   

  	
  UTI
  CORPORATION

  
	
   

  	
  UTI HOLDING
  COMPANY

  
	
   

  	
  VENUSA, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stewart
  A. Fisher

  	
   

  
	
   

  	
  Name:
  Stewart A. Fisher

  
	
   

  	
  Title: Chief
  Financial Officer, Vice President,

  Treasurer and Secretary

  
					

 

25

 

	
   

  	
  SIGNATURE
  PAGE TO THE SECURITY AGREEMENT

  DATED AS OF NOVEMBER 22, 2005, AMONG ACCELLENT

  ACQUISITION CORP., ACCELLENT MERGER SUB INC.,

  ACCELLENT INC. (THE “BORROWER”), THE

  SUBSIDIARIES OF THE BORROWER LISTED ON ANNEX A

  HERETO AND JPMORGAN CHASE BANK, N.A., AS

  ADMINISTRATIVE AGENT FOR THE LENDERS FROM

  TIME TO TIME PARTIES TO THE CREDIT AGREEMENT

  REFERRED TO THEREIN.

  
	
   

  
	
   

  
	
   

  	
  JPMORGAN
  CHASE BANK, N.A., as

  Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bruce Borden

  	
   

  
	
   

  	
  Name:  Bruce Borden

  
	
   

  	
  Title:  Vice President

  
					

 

26

 

ANNEX A TO THE

SECURITY AGREEMENT

 

SUBSIDIARY GRANTORS

 

Subsidiary Grantors

 

 

 

 

SCHEDULE 1 TO THE

SECURITY AGREEMENT

 

COPYRIGHT
LICENSES

 

 

SCHEDULE 2 TO THE

SECURITY AGREEMENT

 

COPYRIGHTS

 

	
  Registered Owner/Grantor

  	
   

  	
  Title

  	
   

  	
  Registration Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

SCHEDULE 3 TO THE

SECURITY AGREEMENT

 

PATENT
LICENSES

 

 

SCHEDULE 4 TO THE

SECURITY AGREEMENT

 

PATENTS

 

 

SCHEDULE 5 TO THE

SECURITY AGREEMENT

 

TRADEMARK
LICENSES

 

 

SCHEDULE 6 TO THE

SECURITY AGREEMENT

 

TRADEMARKS

 

Domestic Trademarks

 

	
  Registered Owner/Grantor

  	
   

  	
  Trademark

  	
   

  	
  Registration No.

  	
   

  	
  Application No.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Foreign Trademarks

 

	
  Registered Owner/Grantor

  	
   

  	
  Trademark

  	
   

  	
  Registration No.

  	
   

  	
  Application No.

  	
   

  	
  Country

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

2

 

ANNEX 1 TO THE

SECURITY AGREEMENT

 

SUPPLEMENT NO. [  ] dated as of
[             ],
to the Security Agreement dated as of November 22, 2005, among ACCELLENT
MERGER SUB INC., a Maryland corporation (“Merger Sub”), a wholly owned
subsidiary of ACCELLENT ACQUISITION CORP., a Delaware corporation (“Holdings”)
which shall merge (the “Merger”) with and into ACCELLENT INC., a
Maryland corporation (“Target” and immediately upon consummation of the
Merger with Target as the surviving entity and its assumption of the
obligations of Merger Sub by operation of law, the “Borrower”),
Holdings, the Borrower, each of the subsidiaries
of the Borrower listed on Annex A thereto (each such subsidiary individually a “Subsidiary Grantor” and, collectively, the “Subsidiary Grantors”;
the Subsidiary Grantors, Holdings and the Borrower are referred to collectively
herein as the “Grantors”), JPMORGAN CHASE BANK, N.A., as
administrative agent (in such capacity, the “Administrative Agent”)
for the lenders (the “Lenders”) from time to time parties to the Credit
Agreement referred to below.

 

A.            Reference is made to (a) the
Credit Agreement dated as of November 22, 2005 (as amended, supplemented
or otherwise modified from time to time, the “Credit Agreement”), among Merger
Sub, the Borrower, Holdings, the Lenders, the Administrative Agent, J.P. Morgan
Securities Inc., as joint lead arranger and joint bookrunner (in such
capacities, the “Joint Lead Arranger” and “Joint Bookrunner”), Credit
Suisse, as joint lead arranger and joint bookrunner and syndication agent (in
such capacities, the “Joint Lead Arranger” and “Joint Bookrunner”
and “Syndication Agent”) and Lehman Commercial Paper Inc., as documentation
agent (in such capacity, “Documentation Agent”), and (b) the
Guarantee dated as of November 22, 2005 (as amended, supplemented or
otherwise modified from time to time, the “Guarantee”), among Holdings,
the Subsidiary Guarantors party thereto and the Administrative Agent.

 

B.            Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned to such terms in
the Security Agreement.

 

C.            The Grantors have entered into the
Security Agreement in order to induce Administrative Agent, the Syndication
Agent, the Lenders and the Letter of Credit Issuers to enter into the Credit
Agreement and to induce the Lenders and the Letter of Credit Issuers to make
their respective Extensions of Credit to the Borrower under the Credit
Agreement and to induce one or more Lenders or affiliates of Lenders to enter
into Hedge Agreements with the Borrower.

 

D.            Section 9.11 of the Credit
Agreement and Section 8.13 of the Security Agreement provide that each
Subsidiary of the Borrower that is required to become a party to the Security
Agreement pursuant to Section 9.11 of the Credit Agreement shall become a
Grantor,

 

 

with the same
force and effect as if originally named as a Grantor therein, for all purposes
of the Security Agreement upon execution and delivery by such Subsidiary of an
instrument in the form of this Supplement. 
Each undersigned Subsidiary (each a “New Grantor”) is executing
this Supplement in accordance with the requirements of the Security Agreement
to become a Subsidiary Grantor under the Security Agreement in order to induce
the Lenders and the Letter of Credit Issuers to make additional Extensions of
Credit and as consideration for Extensions of Credit previously made.

 

Accordingly,
the Administrative Agent and the New Grantors agree as follows:

 

SECTION 1.           In accordance with subsection 8.13
of the Security Agreement, each New Grantor by its signature below becomes a
Grantor under the Security Agreement with the same force and effect as if
originally named therein as a Grantor and each New Grantor hereby (a) agrees
to all the terms and provisions of the Security Agreement applicable to it as a
Grantor thereunder and (b) represents and warrants that the
representations and warranties made by it as a Grantor thereunder are true and
correct on and as of the date hereof.  In
furtherance of the foregoing, each New Grantor, as security for the payment and
performance in full of the Obligations, does hereby bargain, sell, convey,
assign, set over, mortgage, pledge, hypothecate and transfer to the
Administrative Agent, for the benefit of the Secured Parties, and hereby grants
to the Administrative Agent, for the benefit of the Secured Parties, a Security
Interest in all of the Collateral of such New Grantor, in each case whether now
or hereafter existing or in which now has or hereafter acquires an
interest.  Each reference to a “Grantor”
in the Security Agreement shall be deemed to include each New Grantor.  The Security Agreement is hereby incorporated
herein by reference.

 

SECTION 2.           Each New Grantor represents and
warrants to the Administrative Agent and the other Secured Parties that this
Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.

 

SECTION 3.           This Supplement may be executed by
one or more of the parties to this Supplement on any number of separate
counterparts (including by facsimile or other electronic transmission), and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument.  A set of the copies of
this Supplement signed by all the parties shall be lodged with the Administrative
Agent and the Borrower.  This Supplement
shall become effective as to each New Grantor when the Administrative Agent
shall have received counterparts of this Supplement that, when taken together,
bear the signatures of such New Grantor and the Administrative Agent.

 

SECTION 4.           Each New Grantor hereby represents
and warrants that (a) set forth on Schedule I attached hereto is a
true and correct schedule of the location of any and all Collateral of
such New Grantor, (b) set forth under its signature hereto is (i) the
legal name of such New Grantor, (ii) the jurisdiction of incorporation or
organization of such New Grantor, (iii) the true and correct location of
the chief executive office and principal place of business and any office in
which it maintains books or records relating to Collateral owned by it, (iv) the
identity or type of organization or corporate structure of such New Grantor and
(v) the Federal Taxpayer Identification Number and organizational number
of such New Grantor and (c) as of the date

 

2

 

hereof (i) Schedule II
hereto sets forth all of each New Grantor’s Copyright Licenses, (ii) Schedule III
hereto sets forth, in proper form for filing with the United States Copyright
Office, all of each New Grantor’s Copyrights (and all applications therefor), (iii) Schedule IV
hereto sets forth all of each New Grantor’s Patent Licenses, (iv) Schedule V
hereto sets forth, in proper form for filing with the United States Patent and
Trademark Office, all of each New Grantor’s Patents (and all applications
therefor), (v) Schedule VI hereto sets forth all of each New Grantor’s
Trademark Licenses and (vi) Schedule VII hereto sets forth, in proper
form for filing with the United States Patent and Trademark Office, all of each
New Grantor’s Trademarks (and all applications therefor).

 

SECTION 5.           Except as expressly supplemented
hereby, the Security Agreement shall remain in full force and effect.

 

SECTION 6.         THIS SUPPLEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 7.           Any provision of this Supplement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof and in the Security
Agreement, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.  The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

 

SECTION 8.           All notices, requests and demands
pursuant hereto shall be made in accordance with Section 13.2 of the
Credit Agreement.  All communications and
notices hereunder to each New Grantor shall be given to it in care of the
Borrower at the Borrower’s address set forth in Section 13.2 of the Credit
Agreement.

 

SECTION 9.           Each New Grantor agrees to reimburse
the Administrative Agent for its reasonable out-of-pocket expenses in connection
with this Supplement, including the reasonable fees, other charges and
disbursements of counsel for the Administrative Agent.

 

3

 

IN WITNESS
WHEREOF, each New Grantor and the Administrative Agent have duly executed this
Supplement to the Security Agreement as of the day and year first above written.

 

	
   

  	
  [NAME OF NEW
  GRANTOR]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JPMORGAN
  CHASE BANK, N.A., as Administrative

  Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

4

 

SCHEDULE I

TO SUPPLEMENT NO.        TO THE

SECURITY AGREEMENT

 

COLLATERAL

 

	
  Legal Name

  	
   

  	
  Jurisdiction of

  Incorporation or

  Organization

  	
   

  	
  Location of Chief

  Executive Office

  and Principal

  Place of Business

  	
   

  	
  Type of Organization

  or Corporate Structure

  	
   

  	
  Federal Taxpayer

  Identification

  Number and

  Organizational

  Identification

  Number

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

SCHEDULE II

TO SUPPLEMENT NO.        TO THE

SECURITY AGREEMENT

 

COPYRIGHT
LICENSES

 

 

SCHEDULE III

TO SUPPLEMENT NO.         TO THE

SECURITY AGREEMENT

 

COPYRIGHTS

 

	
  Registered Owner/Grantor

  	
   

  	
  Title

  	
   

  	
  Registration

  Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

SCHEDULE IV

TO SUPPLEMENT NO.       TO THE

SECURITY AGREEMENT

 

PATENT
LICENSES

 

2

 

SCHEDULE V

TO SUPPLEMENT NO.       TO THE

SECURITY AGREEMENT

 

PATENTS

 

 

SCHEDULE VI

TO SUPPLEMENT NO.        TO THE

SECURITY AGREEMENT

 

TRADEMARK
LICENSES

 

 

SCHEDULE VII

TO SUPPLEMENT NO.        TO THE

SECURITY AGREEMENT

 

TRADEMARKS

 

Domestic Trademarks

 

	
  Registered Owner/Grantor

  	
   

  	
  Trademark

  	
   

  	
  Registration No.

  	
   

  	
  Application No.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Foreign Trademarks

 

	
  Registered Owner/Grantor

  	
   

  	
  Trademark

  	
   

  	
  Registration No.

  	
   

  	
  Application No.

  	
   

  	
  Country

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

ANNEX 2 TO THE

SECURITY AGREEMENT

 

SUPPLEMENT NO. [  ] dated as of
[             ],
to the Security Agreement dated as of November 22, 2005, among ACCELLENT
MERGER SUB INC., a Maryland corporation (“Merger Sub”), a wholly owned
subsidiary of ACCELLENT ACQUISITION CORP., a Delaware corporation (“Holdings”)
which shall merge (the “Merger”) with and into ACCELLENT INC., a
Maryland corporation (“Target” and immediately upon consummation of the
Merger with Target as the surviving entity and its assumption of the
obligations of Merger Sub hereunder by operation of law, the “Borrower”),
Holdings, the Borrower, each of the
subsidiaries of the Borrower listed on Annex A thereto (each such
subsidiary individually a “Subsidiary
Grantor” and,
collectively, the “SubsidiaryGrantors”; the Subsidiary Grantors, Holdings
and the Borrower are referred to collectively herein as the “Grantors”), JPMORGAN CHASE BANK, N.A., as administrative agent (in such
capacity, the “Administrative Agent”) for the lenders (the “Lenders”)
from time to time parties to the Credit Agreement referred to below.

 

A.            Reference is made to (a) the
Credit Agreement dated as of November 22, 2005 (as amended, supplemented
or otherwise modified from time to time, the “Credit Agreement”), among Merger
Sub, the Borrower, Holdings, the Lenders, the Administrative Agent, J.P. Morgan
Securities Inc., as joint lead arranger and joint bookrunner (in such
capacities, the “Joint Lead Arranger” and “Joint Bookrunner”),
Credit Suisse, as joint lead arranger and joint bookrunner and syndication
agent (in such capacities, the “Joint Lead Arranger” and “Joint
Bookrunner” and “Syndication Agent”) and Lehman Commercial Paper
Inc., as documentation agent (in such capacity, “Documentation Agent”),
and (b) the Guarantee dated as of November 22, 2005 (as amended,
supplemented or otherwise modified from time to time, the “Guarantee”),
among Holdings, the Subsidiary Guarantors party thereto and the Administrative
Agent.

 

B.            Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned to such terms in
the Security Agreement.

 

C.            The Grantors have entered into the
Security Agreement in order to induce Administrative Agent, the Syndication
Agent, the Documentation Agent, the Lenders and the Letter of Credit Issuers to
enter into the Credit Agreement and to induce the Lenders and the Letter of
Credit Issuers to make their respective Extensions of Credit to the Borrower
under the Credit Agreement and to induce one or more Lenders or affiliates of
Lenders to enter into Hedge Agreements with the Borrower.  Pursuant to Section 4.1(b) of the
Security Agreement, within 30 days after the end of each calendar quarter, each
Grantor has agreed to deliver to the Administrative Agent a written supplement
substantially in the form of Annex 2 thereto with respect to any additional Copyrights,
Copyright Licenses, Patents, Patent Licenses, Trademarks and Trademark

 

 

Licenses
acquired by such Grantor after the date of the Credit Agreement.  The Grantors have identified the additional
Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks and
Trademark Licenses acquired by such Grantors after the date of the Credit
Agreement set forth on Schedule I, II, III, IV, V and VI
hereto.  The undersigned Grantors are
executing this Supplement in order to facilitate supplemental filings to be
made by the Collateral Agent with the United States Copyright Office and the
United States Patent and Trademark Office.

 

Accordingly,
the Administrative Agent and the Grantors agree as follows:

 

SECTION 1.           (a)  Schedule 1 of the
Security Agreement is hereby supplemented, as applicable, by the information
set forth in the Schedule I hereto, (b) Schedule 2 of the
Security Agreement is hereby supplemented, as applicable, by the information
set forth in the Schedule II hereto, (c) Schedule 3 of the
Security Agreement  is hereby
supplemented, as applicable, by the information set forth in the Schedule III
hereto, (d) Schedule 4 of the Security Agreement is hereby supplemented,
as applicable, by the information set forth in the Schedule IV hereto, (e) Schedule 5
of the Security Agreement is hereby supplemented, as applicable, by the
information set forth in the Schedule V hereto and (f) Schedule 6
of the Security Agreement is hereby supplemented, as applicable, by the
information set forth in the Schedule VI hereto.

 

SECTION 2.           Each Grantor hereby represents and
warrants that the information set forth on Schedules I, II, III, IV,
V and VI hereto is true and correct.

 

SECTION 3.           This Supplement may be executed by
one or more of the parties to this Supplement on any number of separate
counterparts (including by facsimile or other electronic transmission), and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument.  A set of the copies of
this Supplement signed by all the parties shall be lodged with the
Administrative Agent and the Borrower. 
This Supplement shall become effective as to each Grantor when the
Administrative Agent shall have received counterparts of this Supplement that,
when taken together, bear the signatures of such Grantor and the Administrative
Agent.

 

SECTION 4.           Except as expressly supplemented
hereby, the Security Agreement shall remain in full force and effect.

 

SECTION 5.         THIS SUPPLEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

SECTION 6.           Any provision of this Supplement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof and in the Security
Agreement, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.  The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

 

2

 

SECTION 7.           All notices, requests and demands
pursuant hereto shall be made in accordance with Section 13.2 of the
Credit Agreement.  All communications and
notices hereunder to each Grantor shall be given to it in care of the Borrower
at the Borrower’s address set forth in Section 13.2 of the Credit
Agreement.

 

SECTION 8.           Each Grantor agrees to reimburse the
Administrative Agent for its reasonable out-of-pocket expenses in connection
with this Supplement, including the reasonable fees, other charges and
disbursements of counsel for the Administrative Agent.

 

3

 

IN WITNESS
WHEREOF, each Grantor and the Administrative Agent have duly executed this
Supplement to the Security Agreement as of the day and year first above
written.

 

	
   

  	
  [GRANTOR]

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK, N.A., as Administrative

  Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

4

 

SCHEDULE I

TO SUPPLEMENT NO.        TO THE

SECURITY AGREEMENT

 

COPYRIGHT
LICENSES

 

 

SCHEDULE II

TO SUPPLEMENT NO.        TO THE

SECURITY AGREEMENT

 

COPYRIGHTS 

 

	
  Registered Owner/Grantor

  	
   

  	
  Title

  	
   

  	
  Registration

  Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

SCHEDULE III

TO SUPPLEMENT NO.        TO THE

SECURITY AGREEMENT

 

PATENT
LICENSES

 

 

SCHEDULE IV

TO SUPPLEMENT NO.        TO THE

SECURITY AGREEMENT

 

PATENTS

 

 

SCHEDULE V

TO SUPPLEMENT NO.      TO THE

SECURITY AGREEMENT

 

TRADEMARK
LICENSES

 

 

SCHEDULE VI

TO SUPPLEMENT NO.      TO THE

SECURITY AGREEMENT

 

TRADEMARKS

 

Domestic Trademarks

 

	
  Registered Owner/Grantor

  	
   

  	
  Trademark

  	
   

  	
  Registration No.

  	
   

  	
  Application No.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Foreign Trademarks

 

	
  Registered Owner/Grantor

  	
   

  	
  Trademark

  	
   

  	
  Registration No.

  	
   

  	
  Application No.

  	
   

  	
  CountryExhibit 4.2I

 

 

MORTGAGE

 

NEW JERSEY NATURAL GAS COMPANY

 

To

 

BNY MIDWEST TRUST COMPANY,

As Trustee

 

 

THIRTY-FIRST SUPPLEMENTAL INDENTURE

 

Dated as of October 1, 2005

 

 

Supplemental to Indenture of Mortgage
and

Deed of Trust Dated April 1, 1952

 

 

	
  Prepared by:

  	
   

  	
  William M. Libit

  
	
   

  	
   

  	
  Chapman and
  Cutler LLP

  
	
   

  	
   

  	
  111 West Monroe
  Street

  
	
   

  	
   

  	
  Chicago,
  Illinois 60603

  

 

 

MORTGAGE

 

THIRTY-FIRST SUPPLEMENTAL INDENTURE, dated as of October 1,
2005, between NEW JERSEY NATURAL GAS COMPANY, a corporation organized and existing
under the laws of the State of New Jersey (hereinafter called the “Company”), having its principal office at 1415 Wyckoff
Road, Wall, New Jersey, party of the first part, and BNY MIDWEST TRUST COMPANY,
a trust company organized and existing under the laws of the State of Illinois
(hereinafter called the “Trustee”),
having its principal office at 2 North LaSalle Street, Chicago, Illinois,
as Trustee under the Indenture of Mortgage and Deed of Trust hereinafter
mentioned, party of the second part.

 

WHEREAS, the Company has heretofore executed and
delivered to the Trustee its Indenture of Mortgage and Deed of Trust dated April 1,
1952 (hereinafter sometimes called the “Original Indenture”)
to secure the payment of the principal of and the interest and premium (if any)
on all Bonds at any time issued and outstanding thereunder, and to declare the
terms and conditions upon which Bonds are to be issued thereunder; and

 

WHEREAS, the Company thereafter executed and delivered
to the Trustee its First Supplemental Indenture dated February 1, 1958,
its Second Supplemental Indenture dated December 1, 1960, its Third
Supplemental Indenture dated July 1, 1962, its Fourth Supplemental
Indenture dated September 1, 1962, its Fifth Supplemental Indenture dated December 1,
1963, its Sixth Supplemental Indenture dated June 1, 1966, its Seventh
Supplemental Indenture dated October 1, 1970, its Eighth Supplemental
Indenture dated May 1, 1975, its Ninth Supplemental Indenture dated February 1,
1977, its Tenth Supplemental Indenture dated as of September 1, 1980, its
Eleventh Supplemental Indenture dated as of September 1, 1983, its Twelfth
Supplemental Indenture dated as of August 1, 1984, its Thirteenth
Supplemental Indenture dated as of September 1, 1985, its Fourteenth
Supplemental Indenture dated as of May 1, 1986, its Fifteenth Supplemental
Indenture dated as of March 1, 1987, its Sixteenth Supplemental Indenture
dated as of December 1, 1987, its Seventeenth Supplemental Indenture dated
as of June 1, 1988, its Eighteenth Supplemental Indenture dated as of June 1,
1989, its Nineteenth Supplemental Indenture dated as of March 1, 1991, its
Twentieth Supplemental Indenture dated as of December 1, 1992, its
Twenty-First Supplemental Indenture dated as of August 1, 1993, its Twenty-Second
Supplemental Indenture dated as of October 1, 1993, its Twenty-Third
Supplemental Indenture dated as of August 15, 1994, its Twenty-Fourth
Supplemental Indenture dated as of October 1, 1994, its Twenty-Fifth
Supplemental Indenture dated as of July 15, 1995, its Twenty-Sixth
Supplemental Indenture dated as of October 1, 1995, its Twenty-Seventh
Supplemental Indenture dated as of September 1, 1997, its Twenty-Eighth
Supplemental Indenture dated as of January 1, 1998, its Twenty-Ninth
Supplemental Indenture dated as of April 1, 1998 and its Thirtieth
Supplemental Indenture dated as of December 1, 2003, supplementing and
amending the Original Indenture; and

 

WHEREAS, Bonds in the aggregate principal amount of
Twelve Million Five Hundred Thousand Dollars ($12,500,000) were issued under
and in accordance with the terms of the Original Indenture, as an initial
series designated “First Mortgage Bonds, 4-1/4% Series A due 1977,” herein
sometimes called “1977 Series A Bonds,” which
1977 Series A Bonds have since been paid and redeemed by the Company; and

 

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Two Million Two Hundred Fifty Thousand Dollars ($2,250,000) were
issued under and in accordance with the terms of the Original Indenture, as supplemented
and amended by the First Supplemental Indenture, as a second series designated “First
Mortgage Bonds, 5% Series B due 1983”, herein sometimes called “1983 Series B Bonds”, which 1983 Series B Bonds
have since been paid and redeemed by the Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Four Million Dollars ($4,000,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First Supplemental Indenture and the Second Supplemental Indenture, as a third
series designated “First Mortgage Bonds, 5-1/8% Series C due 1985,” herein
sometimes called “1985 Series C Bonds,” which
1985 Series C Bonds have since been paid and redeemed by the Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Five Million Dollars ($5,000,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Fourth Supplemental Indentures, inclusive, as a fourth series
designated “First Mortgage Bonds, 4-7/8% Series D due 1987,” herein
sometimes called “1987 Series D Bonds,” which
1987 Series D Bonds have since been paid and redeemed by the Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal amount
of Four Million Five Hundred Thousand Dollars ($4,500,000) were issued under
and in accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Fifth Supplemental Indentures, inclusive, as a
fifth series designated “First Mortgage Bonds, 4-3/4% Series E due 1988,”
herein sometimes called “1988 Series E Bonds,”
which 1988 Series E Bonds have since been paid and redeemed by the
Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Fifteen Million Dollars ($15,000,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Seventh Supplemental Indentures, inclusive, as
a sixth series designated “First Mortgage Bonds, 9-1/4% Series F due 1995,”
herein sometimes called “1995 Series F Bonds,”
which 1995 Series F Bonds have since been paid and redeemed by the
Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Ten Million Dollars ($10,000,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Eighth Supplemental Indentures, inclusive as a seventh series
designated “First Mortgage Bonds, 10% Series G due 1987,” herein sometimes
called “1987 Series G Bonds,” which 1987 Series G
Bonds have since been paid and redeemed by the Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Ten Million Dollars ($10,000,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Ninth Supplemental Indentures, inclusive, as an eighth series
designated “First Mortgage Bonds, 9% Series H due 1992,” herein sometimes

 

2

 

called “1992 Series H Bonds,” which
1992 Series H Bonds have since been paid and redeemed by the Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Nine Million Five Hundred Forty-Five Thousand Dollars ($9,545,000)
were issued under and in accordance with the terms of the Original Indenture,
as supplemented and amended by the First through the Tenth Supplemental
Indentures, inclusive, as a ninth series designated “First Mortgage Bonds, 9-1/8%
Series J due 2000,” herein sometimes called “2000 Series J
Bonds,” which 2000 Series J Bonds have since been paid and
redeemed by the Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Ten Million Three Hundred Thousand Dollars ($10,300,000) were issued
under and in accordance with the terms of the Original Indenture, as
supplemented and amended by the First through the Eleventh Supplemental
Indentures, inclusive, as a tenth series designated “First Mortgage Bonds, 10-3/8%
Series K due 2013,” herein sometimes called “2013 Series K
Bonds,” which 2013 Series K Bonds have since been paid and
redeemed by the Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Ten Million Five Hundred Thousand Dollars ($10,500,000) were issued
under and in accordance with the terms of the Original Indenture, as
supplemented and amended by the First through the Twelfth Supplemental
Indentures, inclusive, as an eleventh series designated “First Mortgage Bonds,
10-l/2% Series L due 2014,” herein sometimes called “2014 Series L
Bonds,” which 2014 Series L Bonds have since been paid and
redeemed by the Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Twelve Million Dollars ($12,000,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Thirteenth Supplemental Indentures, inclusive, as a twelfth
series designated “First Mortgage Bonds, 10.85% Series M due 2000,” herein
sometimes called “2000 Series M Bonds,” which
2000 Series M Bonds have since been paid and redeemed by the Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Ten Million Dollars ($10,000,000) were issued under and in accordance
with the terms of the Original Indenture as supplemented and amended by the
First through the Fourteenth Supplemental Indentures, inclusive, as a
thirteenth series designated “First Mortgage Bonds, 10% Series N due 2001,”
herein sometimes called “2001 Series N Bonds,”
which 2001 Series N Bonds have since been paid and redeemed by the
Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Fifteen Million Dollars ($15,000,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Fifteenth Supplemental Indentures, inclusive,
as a fourteenth series designated “First Mortgage Bonds, 8.50% Series P
due 2002,” herein sometimes called “2002 Series P Bonds,”
which 2002 Series P Bonds have since been paid and redeemed by the
Company; and

 

3

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Thirteen Million Five Hundred Thousand Dollars ($13,500,000) were
issued under and in accordance with the terms of the Original Indenture, as
supplemented and amended by the First through the Sixteenth Supplemental
Indentures, inclusive, as a fifteenth series designated “First Mortgage Bonds,
9% Series Q due 2017,” herein sometimes called “2017 Series Q
Bonds,” which 2017 Series Q Bonds have since been paid and
redeemed by the Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Twenty-Five Million Dollars ($25,000,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Seventeenth Supplemental Indentures,
inclusive, as a sixteenth series designated “First Mortgage Bonds, 8.50% Series R
due 2018,” herein sometimes called “2018 Series R Bonds,”
which 2018 Series R Bonds have since been paid and redeemed by the
Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Twenty Million Dollars ($20,000,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Eighteenth Supplemental Indentures, inclusive,
as a seventeenth series designated “First Mortgage Bonds, 10.10% Series S
due 2009,” herein sometimes called “2009 Series S Bonds,”
which 2009 Series S Bonds have since been paid and redeemed by the
Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Nine Million Five Hundred Forty-Five Thousand Dollars ($9,545,000)
were issued under and in accordance with the terms of the Original Indenture,
as supplemented and amended by the First through the Nineteenth Supplemental
Indentures, inclusive, as an eighteenth series designated “First Mortgage
Bonds, 7.05% Series T due 2016,” herein sometimes called “2016 Series T Bonds,” which 2016 Series T Bonds
have since been paid and redeemed by the Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Fifteen Million Dollars ($15,000,000) were authorized, of which
Fifteen Million Dollars ($15,000,000) have been issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Nineteenth Supplemental Indentures, inclusive, as a
nineteenth series designated “First Mortgage Bonds, 7.25% Series U due
2021,” herein sometimes called “2021 Series U Bonds,”
which 2021 Series U Bonds have since been paid and redeemed by the
Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Twenty-Five Million Dollars ($25,000,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Twentieth Supplemental Indentures, inclusive,
as a twentieth series designated “First Mortgage Bonds, 7.50% Series V due
2002,” herein sometimes called “2002 Series V Bonds,”
which 2002 Series V Bonds have since been paid and redeemed by the
Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Ten Million Three Hundred Thousand Dollars ($10,300,000) were issued
under and in accordance with the terms of the Original Indenture, as
supplemented and amended by the First through the Twenty-First

 

4

 

Supplemental Indentures, inclusive, as a twenty-first series designated
“First Mortgage Bonds, 5-3/8% Series W due 2023,” herein sometimes called “2023 Series W Bonds,” of which Ten Million Three
Hundred Thousand Dollars ($10,300,000) in principal amount are outstanding at
the date hereof; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Thirty Million Dollars ($30,000,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Twenty-Second Supplemental Indentures,
inclusive, as a twenty-second series designated “First Mortgage Bonds, 6.27% Series X
due 2008,” herein sometimes called “2008 Series X Bonds,”
of which Thirty Million Dollars ($30,000,000) in principal amount are
outstanding at the date hereof; and

 

WHEREAS, thereafter Bonds in the aggregate principal amount
of Ten Million Five Hundred Thousand Dollars ($10,500,000) were issued under
and in accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Twenty-Third Supplemental Indentures,
inclusive, as a twenty-third series designated “First Mortgage Bonds, 6.25% Series Y
due 2024,” herein sometimes called “2024 Series Y Bonds,”
of which Ten Million Five Hundred Thousand Dollars ($10,500,000) in principal
amount are outstanding at the date hereof; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Twenty-Five Million Dollars ($25,000,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Twenty-Fourth Supplemental Indentures,
inclusive, as a twenty-fourth series designated “First Mortgage Bonds, 8.25% Series Z
due 2004,” herein sometimes called “2004 Series Z Bonds,”
which 2004 Series Z Bonds have since been paid and redeemed by the
Company; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Twenty-Five Million Dollars ($25,000,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Twenty-Fifth Supplemental Indentures, inclusive,
as a twenty-fifth series designated “First Mortgage Bonds, Adjustable Rate Series AA
due 2030,” herein sometimes called “2030 Series AA
Bonds,” of which Twenty-Five Million Dollars ($25,000,000) in
principal amount are outstanding at the date hereof; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Sixteen Million Dollars ($16,000,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Twenty-Fifth Supplemental Indentures,
inclusive, as a twenty-sixth series designated “First Mortgage Bonds,
Adjustable Rate Series BB due 2030,” herein sometimes called “2030 Series BB Bonds,” of which Sixteen Million
Dollars ($16,000,000) in principal amount are outstanding at the date hereof;
and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Twenty Million Dollars ($20,000,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Twenty-Sixth Supplemental Indentures,
inclusive, as a twenty-seventh series designated “First Mortgage Bonds, 6-7/8 Series CC
due

 

5

 

2010,” herein sometimes called “2010 Series CC
Bonds,” of which Twenty Million Dollars ($20,000,000) in principal
amount are outstanding at the date hereof; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Thirteen Million Five Hundred Thousand Dollars ($13,500,000) were
issued under and in accordance with the terms of the Original Indenture, as
supplemented and amended by the First through the Twenty-Seventh Supplemental
Indentures, inclusive, as a twenty-eighth series designated “First Mortgage
Bonds, Adjustable Rate Series DD due 2027,” herein sometimes called “2027 Series DD Bonds,” of which Thirteen Million Five
Hundred Thousand Dollars ($13,500,000) in principal amount are outstanding at
the date hereof; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Nine Million Five Hundred Forty-Five Thousand Dollars ($9,545,000)
were issued under and in accordance with the terms of the Original Indenture,
as supplemented and amended by the First through the Twenty-Eighth Supplemental
Indentures, inclusive, as a twenty-ninth series designated “First Mortgage
Bonds, Adjustable Rate Series EE due 2028,” herein sometimes called “2028 Series EE Bonds,” of which Nine Million Five
Hundred Forty-Five Thousand Dollars ($9,545,000) in principal amount are
outstanding at the date hereof; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Fifteen Million Dollars ($15,000,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Twenty-Eighth Supplemental Indentures,
inclusive, as a thirtieth series designated “First Mortgage Bonds, Adjustable
Rate Series FF due 2028,” herein sometimes called “2028 Series FF
Bonds,” of which Fifteen Million Dollars ($15,000,000) in principal
amount are outstanding at the date hereof; and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Eighteen Million Dollars ($18,000,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Twenty-Ninth Supplemental Indentures,
inclusive, as a thirty-first series designated “First Mortgage Bonds,
Adjustable Rate Series GG due 2033,” herein sometimes called “2033 Series GG Bonds,” of which Eighteen Million
Dollars ($18,000,000) in principal amount are outstanding at the date hereof;
and

 

WHEREAS, thereafter Bonds in the aggregate principal
amount of Twelve Million Dollars ($12,000,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and
amended by the First through the Thirtieth Supplemental Indentures, inclusive,
as a thirty-second series designated “First Mortgage Bonds, Series HH due
2038,” herein sometimes called “2038 Series HH
Bonds,” of which Twelve Million Dollars ($12,000,000) in principal
amount are outstanding at the date hereof; and

 

WHEREAS, that on May 17, 2000 BNY Midwest Trust
Company, as transferee of the corporate trust business of Harris Trust and
Savings Bank, Trustee under the Original Indenture, became successor Trustee
under the Original Indenture; and

 

WHEREAS, the Original Indenture provides that, subject
to certain exceptions not presently relevant, such changes in or additions to
the provisions of the Indenture (the term

 

6

 

“Indenture” and other terms used
herein having the meanings assigned thereto in the Original Indenture except as
herein expressly modified) may be made to add to the covenants and agreements
of the Company in the Indenture contained other covenants and agreements
thereafter to be observed by the Company; and to provide for the creation of
any series of Bonds, designating the series to be created and specifying the
form and provisions of the Bonds of such series as in the Indenture provided or
permitted; and

 

WHEREAS, the Indenture further provides that the
Company and the Trustee may enter into indentures supplemental to the Indenture
to convey, transfer and assign unto the Trustee and to subject to the lien of
the Indenture additional properties acquired by the Company; and

 

WHEREAS, the Company has entered into a Loan Agreement
dated as of October 1, 2005 (the “Loan Agreement”)
with the New Jersey Economic Development Authority (herein sometimes called the
“EDA”), a public body corporate and
politic of the State of New Jersey, pursuant to which (i) the proceeds of
the issuance by the EDA of Ten Million Three Hundred Thousand Dollars
($10,300,000) in aggregate principal amount of its Natural Gas Facilities
Refunding Revenue Bonds, Series 2005A (New Jersey Natural Gas Company Project)
(the “2005A EDA Bonds”) are to be loaned to
the Company to provide for the refinancing of certain natural gas and
functionally related and subordinate facilities (consisting of the refunding of
$10,300,000 in aggregate principal amount of the EDA’s Natural Gas Facilities
Refunding Revenue Bonds, Series 1993A (New Jersey Natural Gas Company
Project)), (ii) the proceeds of the issuance by the EDA of Ten Million
Five Hundred Thousand Dollars ($10,500,000) in aggregate principal amount of
its Natural Gas Facilities Refunding Revenue Bonds, Series 2005B (New
Jersey Natural Gas Company Project) (the “2005B EDA Bonds”)
are to be loaned to the Company to provide for the refinancing of certain
natural gas and functionally related and subordinate facilities (consisting of
the refunding of $10,500,000 in aggregate principal amount of the EDA’s Natural
Gas Facilities Refunding Revenue Bonds, Series 1994A (New Jersey Natural
Gas Company Project)) and (iii) the proceeds of the issuance by the EDA of
Fifteen Million Dollars ($15,000,000) in aggregate principal amount of its
Natural Gas Facilities Revenue Bonds, Series 2005C (New Jersey Natural Gas
Company Project) (the “2005C EDA Bonds”)
are to be loaned from time to time to the Company to finance a portion of the
cost of the construction of natural gas pipelines and auxiliary equipment
throughout the franchise portion of Morris County, New Jersey, which 2005A EDA
Bonds, 2005B EDA Bonds and 2005C EDA Bonds (herein collectively referred to as
the “2005 Series EDA Bonds”) are being
issued pursuant to the EDA Bond Indenture (as defined below); and

 

WHEREAS, the Company has duly determined to create a
thirty-third series of Bonds, to be known as “First Mortgage Bonds, Series II
due 2023,” herein sometimes called “2023 Series II
Bonds,” a thirty-fourth series of Bonds, to be known as “First
Mortgage Bonds, Series JJ due 2024,” herein sometimes called “2024 Series JJ Bonds,” and a thirty-fifth series of
Bonds, to be known as “First Mortgage Bonds, Series KK due 2040,” herein
sometimes called “2040 Series KK Bonds,” each
to be issued and delivered (in conjunction with the assignment by the EDA of
certain of its rights under the Loan Agreement) to JPMorgan Chase Bank,
National Association, as trustee (the “EDA Loan Trustee”)
pursuant to an indenture of trust dated as of October 1, 2005 (the “EDA Bond Indenture”) between the EDA and the EDA Loan
Trustee for the benefit and security of the holders of the 2005 Series EDA
Bonds, all as herein provided, and to add to

 

7

 

the covenants and agreements contained in the Indenture the covenants
and agreements hereinafter set forth; and

 

WHEREAS, the Company, in the exercise of the powers
and authority conferred upon and reserved to it under the provisions of the
Indenture and pursuant to appropriate resolutions of its Board of Directors,
has duly resolved and determined to make, execute and deliver to the Trustee a
Thirty-First Supplemental Indenture in the form hereof for the purposes herein
provided; and

 

WHEREAS, all conditions and requirements necessary to
make this Thirty-First Supplemental Indenture a valid, binding and legal
instrument have been done, performed and fulfilled and the execution and
delivery hereof have been in all respects duly authorized.

 

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

 

That NEW JERSEY NATURAL GAS COMPANY, by way of further
assurance and in consideration of the premises and of the acceptance by the
Trustee of the trusts hereby created and of One Dollar to it duly paid by the
Trustee at or before the ensealing and delivery of these presents, the receipt
whereof is hereby acknowledged, and in order to secure the payment of principal
of and any premium which may be due and payable on and the interest on all
Bonds at any time issued and outstanding under the Indenture according to their
tenor and effect, and the performance and observance by the Company of all the
covenants and conditions herein and therein contained, has granted, bargained,
sold, warranted, aliened, remised, released, conveyed, assigned, transferred,
mortgaged, pledged, set over and confirmed, and by these presents does grant,
bargain, sell, warrant, alien, remise, release, convey, assign, transfer,
mortgage, pledge, set over and confirm, unto the party of the second part, and
to its successors in the trust, and to it and its assigns forever, and has
granted and does hereby grant thereunto a security interest in, all of the
property, real, personal and mixed, now owned by the Company and situated in the
Counties of Burlington, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset
and Sussex in the State of New Jersey, or wherever situate (except property
specifically excepted from the lien of the Indenture by the terms of the
Indenture) and also all of the property, real, personal and mixed, hereafter
acquired by the Company wherever situate (except property specifically excepted
from the lien of the Indenture by the terms of the Indenture), including both
as to property now owned and property hereafter acquired, without in anywise
limiting or impairing the enumeration of the same, the scope and intent of the
foregoing or of any general or specific description contained in the Indenture,
the following:

 

I.  FRANCHISES

 

All and singular, the franchises, grants, permits,
immunities, privileges and rights of the Company owned and held by it at the
date of the execution hereof or hereafter acquired for the construction,
maintenance, and operation of the gas plants and systems now or hereafter
subject to the lien hereof, as well as all certificates, franchises, grants,
permits, immunities, privileges, and rights of the Company used or useful in
the operation of the property now or hereafter mortgaged hereunder, including
all and singular the franchises, grants, permits, immunities, privileges, and
rights of the Company granted by the governing authorities of any
municipalities

 

8

 

or other political subdivisions and all renewals, extensions and
modifications of said certificates, franchises, grants, permits, privileges,
and rights or any of them.

 

II.  GAS DISTRIBUTION SYSTEMS AND RELATED PROPERTY

 

All gas generating plants, gas storage plants and gas
manufacturing plants of the Company, all the buildings, erections, structures,
generating and purifying apparatus, holders, engines, boilers, benches,
retorts, tanks, instruments, appliances, apparatus, facilities, machinery,
fixtures, and all other property used or provided for use in the generation,
manufacturing and purifying of gas, together with the land on which the same
are situated, and all other lands and easements, rights-of-way, permits,
privileges, and sites forming a part of such plants or any of them or occupied,
enjoyed or used in connection therewith.

 

All gas distribution or gas transmission systems of
the Company, all buildings, erections, structures, generating and purifying
apparatus, holders, engines, boilers, benches, retorts, tanks, pipe lines,
connections, service pipes, meters, conduits, tools, instruments, appliances,
apparatus, facilities, machinery, fixtures, and all other property used or
provided for use in the construction, maintenance, repair or operations of such
distribution or transmission systems, together with all the certificates, rights,
privileges, rights-of-way, franchises, licenses, easements, grants, liberties,
immunities, permits of the Company, howsoever conferred or acquired, under,
over, or upon any private property or any public streets or highways within as
well as without the corporate limits of any municipal corporation.  Without limiting the generality of the
foregoing, there are expressly included the gas distribution or gas
transmission systems located in the Counties of Burlington, Middlesex,
Monmouth, Morris, Ocean, Passaic, Somerset and Sussex in the State of New
Jersey, and in the following municipalities in said State and Counties:
Aberdeen Township (formerly Matawan Township), Allenhurst Borough, City of
Asbury Park, Atlantic Highlands Borough, Avon Borough, Barnegat Light Borough,
Barnegat Township (formerly named Union Township), Bay Head Borough, Beach
Haven Borough, Beachwood Borough, Belmar Borough, Berkeley Township, Boonton
Town, Boonton Township, Bradley Beach Borough, Brick Township, Brielle Borough,
Colts Neck Township, Deal Borough, Denville Township, Dover Town, Dover
Township, Eagleswood Township, East Brunswick Township, Eatontown Borough,
Englishtown Borough, Fair Haven Borough, Farmingdale Borough, Franklin Township
in Somerset County, Freehold Borough, Freehold Township, Hanover Township,
Harvey Cedars Borough, Hazlet Township, Highlands Borough, Holmdel Township,
Hopatcong Borough, Howell Township, Interlaken Borough, Island Heights Borough,
Jackson Township, Jefferson Township, Keansburg Borough, Keyport Borough, Lacey
Township, Lakehurst Borough, Lakewood Township, Lavallette Borough, Lincoln
Park Borough, Little Egg Harbor Township, Little Silver Borough, Loch Arbour
Village, Long Beach Township, Long Branch City, Manalapan Township, Manasquan
Borough, Manchester Township, Mantoloking Borough, Marlboro Township, Matawan
Borough, Middletown Township, Milltown Borough, Mine Hill Township, Monmouth
Beach Borough, Monroe Township, Montville Township, Morris Plains Borough,
Mount Arlington Borough, Mount Olive Township, Mountain Lakes Borough, Neptune
City Borough, Neptune Township, Netcong Borough, New Brunswick City, North
Brunswick Township, Ocean Township in Monmouth County, Ocean Township in Ocean
County, Ocean Gate Borough, Oceanport Borough, Old Bridge Township (formerly
named Madison Township), Parsippany-Troy Hills Township, Pine Beach Borough,
Point Pleasant

 

9

 

Borough, Point Pleasant Beach Borough, Randolph Township, Red Bank
Borough, Rockaway Borough, Rockaway Township, Roxbury Township, Rumson Borough,
Sayreville Borough, Sea Bright Borough, Sea Girt Borough, Seaside Heights
Borough, Seaside Park Borough, Ship Bottom Borough, Shrewsbury Borough,
Shrewsbury Township, South Belmar Borough, South Brunswick Township, South
River Borough, South Toms River Borough, Spring Lake Borough, Spring Lake
Heights Borough, Stafford Township, Surf City Borough, Tinton Falls Borough
(formerly named New Shrewsbury Borough), Tuckerton Borough, Union Beach
Borough, Union Township, Victory Gardens Borough, Wall Township, Washington
Township in Burlington County, Washington Township in Morris County, West Long
Branch Borough, West Milford Township and Wharton Borough.

 

III.  CONTRACTS

 

All of the Company’s right, title and interest in and
under all contracts, licenses or leases for the purchase of gas, either in
effect at the date of execution hereof or hereafter made and any extension or
renewal thereof.

 

TOGETHER WITH ALL AND SINGULAR the tenements,
hereditaments and appurtenances belonging or in anywise appertaining to the
Trust Estate, or any part thereof, with the reversion or reversions, remainder
and remainders, rents, issues, income and profits thereof, and all the right,
title, interest and claim whatsoever, at law or in equity, which the Company
now has or which it may hereafter acquire in and to the Trust Estate and every
part and parcel thereof.

 

TO HAVE AND TO HOLD the Trust Estate and all and
singular the lands, properties, estates, rights, franchises, privileges and
appurtenances hereby mortgaged, conveyed, pledged or assigned, or intended so
to be, together with all the appurtenances thereto appertaining, unto the
Trustee and its successors and assigns forever;

 

SUBJECT, HOWEVER, as to property hereby conveyed, to
Permitted Encumbrances;

 

BUT IN TRUST, NEVERTHELESS, under and subject to the
terms and conditions hereafter set forth, for the equal and proportionate use,
benefit, security and protection of each and every person and corporation who
may be or become the holders of the Bonds and coupons hereby secured, if any,
without preference, priority or distinction as to the lien or otherwise of one
Bond or coupon over or from the others by reason of priority in the issue or
negotiation thereof, or by reason of the date of maturity thereof, or otherwise
(except as any sinking, amortization, improvement, renewal or other analogous
fund, established in accordance with the provisions of the Indenture, may
afford additional security for the Bonds of any particular series and except as
provided in § 9.02 of the Indenture), and for securing the observance and
performance of all the terms, provisions and conditions of the Indenture.

 

THIS INDENTURE FURTHER WITNESSETH, that the Company
has agreed and covenanted, and hereby does agree and covenant, with the Trustee
and its successors and assigns and with the respective holders from time to
time of the Bonds and coupons, or any thereof, as follows:

 

10

 

ARTICLE I

 

CERTAIN
AMENDMENTS OF INDENTURE

 

§ 1.1.         The Original
Indenture, as heretofore amended, be and it hereby is further amended in the
following respects, the section numbers specified below being the sections
of the Indenture in which such amendments occur:

 

§ 1.01.       The following
definition be and it hereby is added immediately after the thirtieth sentence
of § 1.01B:

 

“‘THIRTY-FIRST
SUPPLEMENTAL INDENTURE’ shall mean the Supplemental Indenture dated as of October 1,
2005, supplemental to the Indenture.”

 

§ 1.01.       The following definitions
be and they hereby are added immediately after the thirty-second sentence of § 1.01F:

 

“‘2023 SERIES II BOND’
shall mean one of the First Mortgage Bonds, Series II due 2023, issued
hereunder.

 

‘2024 SERIES JJ BOND’
shall mean one of the First Mortgage Bonds, Series JJ due 2024, issued
hereunder.

 

‘2040 SERIES KK BOND’
shall mean one of the First Mortgage Bonds, Series KK due 2040, issued
hereunder.”

 

§ 2.11.       The following be and it
hereby is added at the end of § 2.11:

 

“No charge except for taxes
or governmental charges shall be made against any holder of any 2023 Series II
Bond, 2024 Series JJ Bond or 2040 Series KK Bond for the exchange,
transfer or registration of transfer thereof.”

 

§ 8.08.       The period at the end
of the first paragraph of § 8.08 be and it hereby is deleted and the
following words and figures be and they hereby are added thereto:

 

“, and the 2023 Series II
Bonds, the 2024 Series JJ Bonds and the 2040 Series KK Bonds shall be
redeemed at the redemption price specified in § 10.81, § 10.83 and § 10.85,
respectively.”

 

ARTICLE II

 

2023
SERIES II BONDS

 

§ 2.1.         There shall be a
thirty-third series of Bonds, known as and entitled “First Mortgage Bonds, Series II
due 2023” or “First Mortgage Bonds, Series II” (herein and in the

 

11

 

Indenture referred to as the “2023 Series II Bonds”),
and the form thereof shall contain suitable provisions with respect to the
matters hereinafter in this Section specified and shall in other respects
be substantially as set forth in the preambles to the Original Indenture.

 

The aggregate principal amount of 2023 Series II
Bonds which may be authenticated and delivered and outstanding under the
Indenture is Ten Million Three Hundred Thousand Dollars ($10,300,000).

 

The 2023 Series II Bonds shall be payable to the
EDA Loan Trustee, and shall be nontransferable except to a successor of the EDA
Loan Trustee.

 

The 2023 Series II Bonds shall bear interest at
the minimum rate per annum necessary to yield interest in amounts sufficient,
when taken together with other amounts available therefor under the EDA Bond
Indenture, to pay the interest from time to time payable on the 2005A EDA
Bonds, computed on the same basis as the 2005A EDA Bonds (interest on overdue
principal and premium, if any, and, to the extent legally enforceable,
interest, being at the rate of six percent (6%) per annum), but in no event
shall the interest rate on the 2023 Series II Bonds exceed ten percent
(10%) per annum; and the 2023 Series II Bonds shall mature on August 1,
2023, subject to prior redemption as described herein.  The amount of “annual interest charges” on
the 2023 Series II Bonds, within the meaning of any provision of the
Indenture requiring a determination of said amount as a condition to the
issuance of any Bonds thereunder (including, without limitation, the 2023 Series II
Bonds), shall mean the amount calculated by applying to the 2023 Series II
Bonds the interest rate of ten percent (10%) per annum; provided,
however, that if the rate of interest on the 2005A EDA Bonds shall
have become fixed and determined at a per annum rate lower than ten percent
(10%) for a period not less than the remaining maturity of said 2005A EDA Bonds
(whether said 2005A EDA Bonds shall mature at their stated maturity, by earlier
redemption or otherwise), then said lower rate shall be used to determine the
amount of the “annual interest charges” on the 2023 Series II Bonds.

 

The 2023 Series II Bonds shall be in the form of
registered Bonds without coupons of denominations of Five Thousand Dollars
($5,000) and any integral multiple thereof which may be authorized by the
Company, the issue of a registered Bond without coupons in any such
denomination to be conclusive evidence of such authorization.  The 2023 Series II Bonds shall be dated
as provided in § 2.05 of the Indenture. 
All 2023 Series II Bonds shall bear interest from their respective
dates, such interest to be payable, upon the terms of and otherwise in
accordance with the 2023 Series II Bonds, on the first business day
preceding each date on which interest shall from time to time be payable on the
2005A EDA Bonds; provided, that the obligation of
the Company to make payments with respect to the principal of, premium, if any,
and interest on the 2023 Series II Bonds shall be fully or partially, as
the case may be, satisfied and discharged to the extent that at the time any
such payment shall be due, the then due principal of, premium, if any, and
interest on any of the 2005A EDA Bonds shall have been fully or partially paid
from payments made by the Company under the Loan Agreement or from other moneys
expressly available therefor in the principal and interest account for the
2005A EDA Bonds under the EDA Bond Indenture or, as far as principal is concerned,
reduced by the principal amount of any of the 2005A EDA Bonds deemed paid
pursuant to Article X of the EDA Bond Indenture.  The principal of and the premium, if any, and
interest on the 2023 Series II Bonds shall be payable at

 

12

 

the principal office of the Trustee, in the City of Chicago, Illinois,
or, at the option of the Company, at the “Principal Office” (as that term is
defined in the EDA Bond Indenture) of the EDA Loan Trustee, in any coin or currency
of the United States of America which at the time of payment shall be legal
tender for the payment of public and private debts.

 

Notwithstanding any other provision of the Indenture
or of the 2023 Series II Bonds, payments of the principal of and the
premium, if any, and interest on any 2023 Series II Bond may be made
directly to the registered holder thereof without presentation or surrender
thereof or the making of any notation thereon if there shall be filed with the
Trustee a Certificate of the Company to the effect that such registered holder
(or the person for whom such registered holder is a nominee) and the Company
have entered into a written agreement that payment shall be so made; provided, however, that before such registered holder
transfers or otherwise disposes of any 2023 Series II Bond, such
registered holder will, at its election, either endorse thereon (or on a paper
annexed thereto) the principal amount thereof redeemed and the last date to
which interest has been paid thereon or make such Bond available to the Company
at the principal office of the Trustee for the purpose of making such
endorsement thereon.

 

The 2023 Series II Bonds shall be subject to
redemption at the option of the Company or otherwise, in the manner provided in
the applicable provisions of Article Ten of the Indenture, as amended by Article V
of this Supplemental Indenture.

 

The 2023 Series II Bonds shall be excluded from
the benefits of, and shall not be subject to redemption through the operation
of, a Mandatory Sinking Fund pursuant to § 11.02 of the Indenture and
shall also be excluded from the benefits of the covenants of § 9.08 and § 11.01
of the Indenture.

 

Notwithstanding the provisions of § 10.04 or any
other provision of the Indenture, the selection of 2023 Series II Bonds to
be redeemed shall, in case fewer than all of the outstanding 2023 Series II
Bonds are to be redeemed, be made by the Trustee pro rata (to the nearest
multiple of Five Thousand Dollars ($5,000)) among the registered holders of the
2023 Series II Bonds in proportion, as nearly as practicable, to the
respective unpaid principal amounts of 2023 Series II Bonds registered in
the names of such holders, with adjustments, to the extent practicable, to
compensate for any prior redemption not made exactly in such proportion (or
otherwise as may be specified by a written order signed by the registered
holders of all outstanding 2023 Series II Bonds).

 

The definitive 2023 Series II Bonds may be issued
in the form of engraved Bonds or Bonds printed or lithographed on steel
engraved borders or Bonds in typed form on normal bond paper.  Subject to the foregoing provisions of this Section and
the provisions of § 2.11 of the Indenture, all definitive 2023 Series II
Bonds shall be fully exchangeable for other Bonds of the same series, of like
aggregate principal amounts, and, upon surrender to the Trustee at its
principal office, shall be exchangeable for other Bonds of the same series of a
different authorized denomination or denominations, as requested by the holder
surrendering the same.  The Company will
execute, and the Trustee shall authenticate and deliver, registered Bonds
without coupons, whenever the same shall be required for any such exchange.

 

13

 

§ 2.2.        2023 Series II Bonds in the
aggregate principal amount of Ten Million Three Hundred Thousand Dollars
($10,300,000) may forthwith upon the execution and delivery of this
Supplemental Indenture, or from time to time thereafter, be executed by the
Company and delivered to the Trustee, and shall thereupon be authenticated and
delivered by the Trustee upon compliance by the Company with the provisions of
Articles Four, Five or Six of the Indenture, without awaiting the filing or
recording of this Supplemental Indenture. 
No additional 2023 Series II Bonds shall be issued under Article Four,
Five or Six of the Indenture without the consent in writing of the holders of
all the outstanding 2023 Series II Bonds.

 

§ 2.3.        As provided in Section 1002 of the
EDA Bond Indenture, from and after the Release Date (as defined in the EDA Bond
Indenture), the obligations of the Company with respect to the 2023 Series II
Bonds shall be deemed to be satisfied and discharged, the 2023 Series II
Bonds shall cease to secure in any manner any 2005A EDA Bonds outstanding under
the EDA Bond Indenture, and, pursuant to Section 1002 of the EDA Bond
Indenture, the EDA Loan Trustee shall forthwith deliver the 2023 Series II
Bonds to the Company for cancellation.

 

ARTICLE III

 

2024
SERIES JJ BONDS

 

§ 3.1.        There shall be a
thirty-fourth series of Bonds, known as and entitled “First Mortgage Bonds, Series JJ
due 2024” or “First Mortgage Bonds, Series JJ” (herein and in the
Indenture referred to as the “2024 Series JJ Bonds”),
and the form thereof shall contain suitable provisions with respect to the
matters hereinafter in this Section specified and shall in other respects
be substantially as set forth in the preambles to the Original Indenture.

 

The aggregate principal amount of 2024 Series JJ
Bonds which may be authenticated and delivered and outstanding under the
Indenture is Ten Million Five Hundred Thousand Dollars ($10,500,000).

 

The 2024 Series JJ Bonds shall be payable to the
EDA Loan Trustee, and shall be nontransferable except to a successor of the EDA
Loan Trustee.

 

The 2024 Series JJ Bonds shall bear interest at
the minimum rate per annum necessary to yield interest in amounts sufficient,
when taken together with other amounts available therefor under the EDA Bond
Indenture, to pay the interest from time to time payable on the 2005B EDA
Bonds, computed on the same basis as the 2005B EDA Bonds (interest on overdue
principal and premium, if any, and, to the extent legally enforceable,
interest, being at the rate of six percent (6%) per annum), but in no event
shall the interest rate on the 2024 Series JJ Bonds exceed ten percent
(10%) per annum; and the 2024 Series JJ Bonds shall mature on August 1,
2024, subject to prior redemption as described herein.  The amount of “annual interest charges” on
the 2024 Series JJ Bonds, within the meaning of any provision of the
Indenture requiring a determination of said amount as a condition to the
issuance of any Bonds thereunder (including, without limitation, the 2024 Series JJ
Bonds), shall mean the amount calculated by applying to the 2024 Series JJ
Bonds the interest rate of ten percent (10%) per annum; provided,
however, that if the

 

14

 

rate of interest on the 2005B EDA Bonds shall have become fixed and
determined at a per annum rate lower than ten percent (10%) for a period not
less than the remaining maturity of said 2005B EDA Bonds (whether said 2005B
EDA Bonds shall mature at their stated maturity, by earlier redemption or
otherwise), then said lower rate shall be used to determine the amount of the “annual
interest charges” on the 2024 Series JJ Bonds.

 

The 2024 Series JJ Bonds shall be in the form of
registered Bonds without coupons of denominations of Five Thousand Dollars
($5,000) and any integral multiple thereof which may be authorized by the
Company, the issue of a registered Bond without coupons in any such
denomination to be conclusive evidence of such authorization.  The 2024 Series JJ Bonds shall be dated
as provided in § 2.05 of the Indenture. 
All 2024 Series JJ Bonds shall bear interest from their respective
dates, such interest to be payable, upon the terms of and otherwise in
accordance with the 2024 Series JJ Bonds, on the first business day
preceding each date on which interest shall from time to time be payable on the
2005B EDA Bonds; provided, that the obligation of
the Company to make payments with respect to the principal of, premium, if any,
and interest on the 2024 Series JJ Bonds shall be fully or partially, as
the case may be, satisfied and discharged to the extent that at the time any
such payment shall be due, the then due principal of, premium, if any, and
interest on any of the 2005B EDA Bonds shall have been fully or partially paid
from payments made by the Company under the Loan Agreement or from other moneys
expressly available therefor in the principal and interest account for the
2005B EDA Bonds under the EDA Bond Indenture or, as far as principal is
concerned, reduced by the principal amount of any of the 2005B EDA Bonds deemed
paid pursuant to Article X of the EDA Bond Indenture.  The principal of and the premium, if any, and
interest on the 2024 Series JJ Bonds shall be payable at the principal
office of the Trustee, in the City of Chicago, Illinois, or, at the option of
the Company, at the “Principal Office” (as that term is defined in the EDA Bond
Indenture) of the EDA Loan Trustee, in any coin or currency of the United
States of America which at the time of payment shall be legal tender for the
payment of public and private debts.

 

Notwithstanding any other provision of the Indenture
or of the 2024 Series JJ Bonds, payments of the principal of and the
premium, if any, and interest on any 2024 Series JJ Bond may be made
directly to the registered holder thereof without presentation or surrender
thereof or the making of any notation thereon if there shall be filed with the
Trustee a Certificate of the Company to the effect that such registered holder
(or the person for whom such registered holder is a nominee) and the Company
have entered into a written agreement that payment shall be so made; provided, however, that before such registered holder
transfers or otherwise disposes of any 2024 Series JJ Bond, such
registered holder will, at its election, either endorse thereon (or on a paper
annexed thereto) the principal amount thereof redeemed and the last date to
which interest has been paid thereon or make such Bond available to the Company
at the principal office of the Trustee for the purpose of making such endorsement
thereon.

 

The 2024 Series JJ Bonds shall be subject to
redemption at the option of the Company or otherwise, in the manner provided in
the applicable provisions of Article Ten of the Indenture, as amended by Article VI
of this Supplemental Indenture.

 

The 2024 Series JJ Bonds shall be excluded from
the benefits of, and shall not be subject to redemption through the operation
of, a Mandatory Sinking Fund pursuant to § 11.02 of the

 

15

 

Indenture and shall also be excluded from the benefits of the covenants
of § 9.08 and § 11.01 of the Indenture.

 

Notwithstanding the provisions of § 10.04 or any
other provision of the Indenture, the selection of 2024 Series JJ Bonds to
be redeemed shall, in case fewer than all of the outstanding 2024 Series JJ
Bonds are to be redeemed, be made by the Trustee pro rata (to the nearest
multiple of Five Thousand Dollars ($5,000)) among the registered holders of the
2024 Series JJ Bonds in proportion, as nearly as practicable, to the
respective unpaid principal amounts of 2024 Series JJ Bonds registered in
the names of such holders, with adjustments, to the extent practicable, to
compensate for any prior redemption not made exactly in such proportion (or
otherwise as may be specified by a written order signed by the registered
holders of all outstanding 2024 Series JJ Bonds).

 

The definitive 2024 Series JJ Bonds may be issued
in the form of engraved Bonds or Bonds printed or lithographed on steel
engraved borders or Bonds in typed form on normal bond paper.  Subject to the foregoing provisions of this Section and
the provisions of § 2.11 of the Indenture, all definitive 2024 Series JJ
Bonds shall be fully exchangeable for other Bonds of the same series, of like
aggregate principal amounts, and, upon surrender to the Trustee at its
principal office, shall be exchangeable for other Bonds of the same series of a
different authorized denomination or denominations, as requested by the holder
surrendering the same.  The Company will
execute, and the Trustee shall authenticate and deliver, registered Bonds
without coupons, whenever the same shall be required for any such exchange.

 

§ 3.2.        2024 Series JJ Bonds in the
aggregate principal amount of Ten Million Five Hundred Thousand Dollars ($10,500,000)
may forthwith upon the execution and delivery of this Supplemental Indenture,
or from time to time thereafter, be executed by the Company and delivered to
the Trustee, and shall thereupon be authenticated and delivered by the Trustee
upon compliance by the Company with the provisions of Articles Four, Five or
Six of the Indenture, without awaiting the filing or recording of this
Supplemental Indenture.  No additional
2024 Series JJ Bonds shall be issued under Article Four, Five or Six
of the Indenture without the consent in writing of the holders of all the
outstanding 2024 Series JJ Bonds.

 

§ 3.3.        As provided in Section 1002 of the
EDA Bond Indenture, from and after the Release Date (as defined in the EDA Bond
Indenture), the obligations of the Company with respect to the 2024 Series JJ
Bonds shall be deemed to be satisfied and discharged, the 2024 Series JJ
Bonds shall cease to secure in any manner any 2005B EDA Bonds outstanding under
the EDA Bond Indenture, and, pursuant to Section 1002 of the EDA Bond
Indenture, the EDA Loan Trustee shall forthwith deliver the 2024 Series JJ
Bonds to the Company for cancellation.

 

ARTICLE IV

 

2040
SERIES KK BONDS

 

§ 4.1.        There shall be a
thirty-fifth series of Bonds, known as and entitled “First Mortgage Bonds, Series KK
due 2040” or “First Mortgage Bonds, Series KK” (herein and in the

 

16

 

Indenture referred to as the “2040 Series KK Bonds”),
and the form thereof shall contain suitable provisions with respect to the
matters hereinafter in this Section specified and shall in other respects
be substantially as set forth in the preambles to the Original Indenture.

 

The aggregate principal amount of 2040 Series KK
Bonds which may be authenticated and delivered and outstanding under the
Indenture is Fifteen Million Dollars ($15,000,000).

 

The 2040 Series KK Bonds shall be payable to the
EDA Loan Trustee, and shall be nontransferable except to a successor of the EDA
Loan Trustee.

 

The 2040 Series KK Bonds shall bear interest at
the minimum rate per annum necessary to yield interest in amounts sufficient,
when taken together with other amounts available therefor under the EDA Bond
Indenture, to pay the interest from time to time payable on the 2005C EDA
Bonds, computed on the same basis as the 2005C EDA Bonds (interest on overdue
principal and premium, if any, and, to the extent legally enforceable,
interest, being at the rate of six percent (6%) per annum), but in no event
shall the interest rate on the 2040 Series KK Bonds exceed ten percent
(10%) per annum; and the 2040 Series KK Bonds shall mature on October 1,
2040, subject to prior redemption as described herein.  The amount of “annual interest charges” on
the 2040 Series KK Bonds, within the meaning of any provision of the
Indenture requiring a determination of said amount as a condition to the
issuance of any Bonds thereunder (including, without limitation, the 2040 Series KK
Bonds), shall mean the amount calculated by applying to the 2040 Series KK
Bonds the interest rate of ten percent (10%) per annum; provided,
however, that if the rate of interest on the 2005C EDA Bonds shall
have become fixed and determined at a per annum rate lower than ten percent
(10%) for a period not less than the remaining maturity of said 2005C EDA Bonds
(whether said 2005C EDA Bonds shall mature at their stated maturity, by earlier
redemption or otherwise), then said lower rate shall be used to determine the
amount of the “annual interest charges” on the 2040 Series KK Bonds.

 

The 2040 Series KK Bonds shall be in the form of
registered Bonds without coupons of denominations of Five Thousand Dollars
($5,000) and any integral multiple thereof which may be authorized by the
Company, the issue of a registered Bond without coupons in any such denomination
to be conclusive evidence of such authorization.  The 2040 Series KK Bonds shall be dated
as provided in § 2.05 of the Indenture. 
All 2040 Series KK Bonds shall bear interest from their respective
dates, such interest to be payable, upon the terms of and otherwise in
accordance with the 2040 Series KK Bonds, on the first business day
preceding each date on which interest shall from time to time be payable on the
2005C EDA Bonds; provided, that the obligation of
the Company to make payments with respect to the principal of, premium, if any,
and interest on the 2040 Series KK Bonds shall be fully or partially, as
the case may be, satisfied and discharged to the extent that at the time any
such payment shall be due, the then due principal of, premium, if any, and
interest on any of the 2005C EDA Bonds shall have been fully or partially paid
from payments made by the Company under the Loan Agreement or from other moneys
expressly available therefor in the principal and interest account for the
2005C EDA Bonds under the EDA Bond Indenture or, as far as principal is
concerned, reduced by the principal amount of any of the 2005C EDA Bonds deemed
paid pursuant to Article X of the EDA Bond Indenture.  The principal of and the premium, if any, and
interest on the 2040 Series KK Bonds shall be payable at the principal
office of the Trustee, in the City of Chicago, Illinois, or,

 

17

 

at the option of the Company, at the “Principal Office” (as that term
is defined in the EDA Bond Indenture) of the EDA Loan Trustee, in any coin or
currency of the United States of America which at the time of payment shall be
legal tender for the payment of public and private debts.

 

Notwithstanding any other provision of the Indenture or
of the 2040 Series KK Bonds, payments of the principal of and the premium,
if any, and interest on any 2040 Series KK Bond may be made directly to
the registered holder thereof without presentation or surrender thereof or the
making of any notation thereon if there shall be filed with the Trustee a
Certificate of the Company to the effect that such registered holder (or the
person for whom such registered holder is a nominee) and the Company have
entered into a written agreement that payment shall be so made; provided, however, that before such registered holder
transfers or otherwise disposes of any 2040 Series KK Bond, such
registered holder will, at its election, either endorse thereon (or on a paper
annexed thereto) the principal amount thereof redeemed and the last date to
which interest has been paid thereon or make such Bond available to the Company
at the principal office of the Trustee for the purpose of making such
endorsement thereon.

 

The 2040 Series KK Bonds shall be subject to
redemption at the option of the Company or otherwise, in the manner provided in
the applicable provisions of Article Ten of the Indenture, as amended by Article VII
of this Supplemental Indenture.

 

The 2040 Series KK Bonds shall be excluded from
the benefits of, and shall not be subject to redemption through the operation
of, a Mandatory Sinking Fund pursuant to § 11.02 of the Indenture and
shall also be excluded from the benefits of the covenants of § 9.08 and § 11.01
of the Indenture.

 

Notwithstanding the provisions of § 10.04 or any
other provision of the Indenture, the selection of 2040 Series KK Bonds to
be redeemed shall, in case fewer than all of the outstanding 2040 Series KK
Bonds are to be redeemed, be made by the Trustee pro rata (to the nearest
multiple of Five Thousand Dollars ($5,000)) among the registered holders of the
2040 Series KK Bonds in proportion, as nearly as practicable, to the
respective unpaid principal amounts of 2040 Series KK Bonds registered in
the names of such holders, with adjustments, to the extent practicable, to
compensate for any prior redemption not made exactly in such proportion (or
otherwise as may be specified by a written order signed by the registered
holders of all outstanding 2040 Series KK Bonds).

 

The definitive 2040 Series KK Bonds may be issued
in the form of engraved Bonds or Bonds printed or lithographed on steel
engraved borders or Bonds in typed form on normal bond paper.  Subject to the foregoing provisions of this Section and
the provisions of § 2.11 of the Indenture, all definitive 2040 Series KK
Bonds shall be fully exchangeable for other Bonds of the same series, of like
aggregate principal amounts, and, upon surrender to the Trustee at its
principal office, shall be exchangeable for other Bonds of the same series of a
different authorized denomination or denominations, as requested by the holder
surrendering the same.  The Company will
execute, and the Trustee shall authenticate and deliver, registered Bonds
without coupons, whenever the same shall be required for any such exchange.

 

18

 

§ 4.2.        2040 Series KK Bonds in the
aggregate principal amount of Fifteen Million Dollars ($15,000,000) may
forthwith upon the execution and delivery of this Supplemental Indenture, or
from time to time thereafter, be executed by the Company and delivered to the
Trustee, and shall thereupon be authenticated and delivered by the Trustee upon
compliance by the Company with the provisions of Articles Four, Five or Six of
the Indenture, without awaiting the filing or recording of this Supplemental
Indenture.  No additional 2040 Series KK
Bonds shall be issued under Article Four, Five or Six of the Indenture
without the consent in writing of the holders of all the outstanding 2040 Series KK
Bonds.

 

§ 4.3.        As provided in Section 1002 of the
EDA Bond Indenture, from and after the Release Date (as defined in the EDA Bond
Indenture), the obligations of the Company with respect to the 2040 Series KK
Bonds shall be deemed to be satisfied and discharged, the 2040 Series KK
Bonds shall cease to secure in any manner any 2005C EDA Bonds outstanding under
the EDA Bond Indenture, and, pursuant to Section 1002 of the EDA Bond
Indenture, the EDA Loan Trustee shall forthwith deliver the 2040 Series KK
Bonds to the Company for cancellation.

 

ARTICLE V

 

REDEMPTION
OF THE 2023 SERIES II BONDS

 

§ 5.1.        The following § 10.81 and § 10.82
be and they hereby are added to Article Ten of the Indenture:

 

“§ 10.81.     The 2023 Series II
Bonds shall be subject to mandatory redemption as follows:  payments of principal of and premium on the
2023 Series II Bonds shall be made to the EDA Loan Trustee to redeem 2023 Series II
Bonds in such amounts as shall be necessary, in accordance with the provisions
of the Loan Agreement, to provide funds under the Loan Agreement to (a) make,
when due, payment at maturity (including, without limitation, maturity upon
acceleration of the 2005A EDA Bonds) and (b) make, when due, any
prepayment required by the Loan Agreement in connection with any mandatory,
special mandatory, optional or extraordinary optional redemption of 2005A EDA
Bonds; provided, however, that the obligation
of the Company to make any redemption payments under this Section shall be
fully or partially, as the case may be, satisfied and discharged to the extent
that at any time such payment shall be due, the then due payment at maturity or
redemption payment on any of the 2005A EDA Bonds shall have been fully or
partially made from payments made by the Company under the Loan Agreement or
from other moneys expressly available therefor in a redemption account or
subaccount for the 2005A EDA Bonds under the EDA Bond Indenture or, as far as
principal is concerned, reduced by the principal amount of any 2005A EDA Bonds
deemed paid pursuant to Article X of the EDA Bond Indenture.  Terms used and not defined in this Section shall
have the respective meanings given to them in the Thirty-First Supplemental
Indenture dated as of October 1, 2005.”

 

“§ 10.82.     In the case of the redemption of 2023 Series II
Bonds out of moneys deposited with the Trustee pursuant to § 8.08, such
2023 Series II Bonds shall, upon compliance with provisions of § 10.04,
and subject to the provisions of § 2.1 of the Thirty-First Supplemental

 

19

 

Indenture, be redeemable at the principal amounts thereof, together
with interest accrued thereon to the date fixed for redemption, without
premium.”

 

ARTICLE VI

 

REDEMPTION
OF THE 2024 SERIES JJ BONDS

 

§ 6.1.        The following § 10.83 and § 10.84
be and they hereby are added to Article Ten of the Indenture:

 

“§ 10.83.     The 2024 Series JJ
Bonds shall be subject to mandatory redemption as follows:  payments of principal of and premium on the
2024 Series JJ Bonds shall be made to the EDA Loan Trustee to redeem 2024 Series JJ
Bonds in such amounts as shall be necessary, in accordance with the provisions
of the Loan Agreement, to provide funds under the Loan Agreement to (a) make,
when due, payment at maturity (including, without limitation, maturity upon
acceleration of the 2005B EDA Bonds) and (b) make, when due, any
prepayment required by the Loan Agreement in connection with any mandatory or
optional redemption of 2005B EDA Bonds; provided, however,
that the obligation of the Company to make any redemption payments under this Section shall
be fully or partially, as the case may be, satisfied and discharged to the
extent that at any time such payment shall be due, the then due payment at
maturity or redemption payment on any of the 2005B EDA Bonds shall have been
fully or partially made from payments made by the Company under the Loan
Agreement or from other moneys expressly available therefor in a redemption
account or subaccount for the 2005B EDA Bonds under the EDA Bond Indenture or,
as far as principal is concerned, reduced by the principal amount of any 2005B
EDA Bonds deemed paid pursuant to Article X of the EDA Bond
Indenture.  Terms used and not defined in
this Section shall have the respective meanings given to them in the
Thirty-First Supplemental Indenture dated as of October 1, 2005.”

 

“§ 10.84.     In the case of the redemption of 2024 Series JJ
Bonds out of moneys deposited with the Trustee pursuant to § 8.08, such
2024 Series JJ Bonds shall, upon compliance with provisions of § 10.04,
and subject to the provisions of § 3.1 of the Thirty-First Supplemental
Indenture, be redeemable at the principal amounts thereof, together with
interest accrued thereon to the date fixed for redemption, without premium.”

 

ARTICLE VII

 

REDEMPTION
OF THE 2040 SERIES KK BONDS

 

§ 7.1.        The following § 10.85 and § 10.86
be and they hereby are added to Article Ten of the Indenture:

 

“§ 10.85.     The 2040 Series KK
Bonds shall be subject to mandatory redemption as follows:  payments of principal of and premium on the 2040
Series KK Bonds shall be made to the EDA Loan Trustee to redeem 2040 Series KK
Bonds in such amounts as shall be necessary, in accordance with the provisions
of the Loan Agreement, to provide funds under the Loan

 

20

 

Agreement to (a) make, when due, payment at maturity (including,
without limitation, maturity upon acceleration of the 2005C EDA Bonds) and (b) make,
when due, any prepayment required by the Loan Agreement in connection with any
mandatory or optional redemption of 2005C EDA Bonds; provided,
however, that the obligation of the Company to make any redemption
payments under this Section shall be fully or partially, as the case may
be, satisfied and discharged to the extent that at any time such payment shall
be due, the then due payment at maturity or redemption payment on any of the
2005C EDA Bonds shall have been fully or partially made from payments made by
the Company under the Loan Agreement or from other moneys expressly available
therefor in a redemption account or subaccount for the 2005C EDA Bonds under
the EDA Bond Indenture or, as far as principal is concerned, reduced by the
principal amount of any 2005C EDA Bonds deemed paid pursuant to Article X
of the EDA Bond Indenture.  Terms used
and not defined in this Section shall have the respective meanings given
to them in the Thirty-First Supplemental Indenture dated as of October 1,
2005.”

 

“§ 10.86.     In the case of the redemption of 2040 Series KK
Bonds out of moneys deposited with the Trustee pursuant to § 8.08, such
2040 Series KK Bonds shall, upon compliance with provisions of § 10.04,
and subject to the provisions of § 4.1 of the Thirty-First Supplemental
Indenture, be redeemable at the principal amounts thereof, together with
interest accrued thereon to the date fixed for redemption, without premium.”

 

ARTICLE VIII

 

MISCELLANEOUS

 

§ 8.1.        The Company is lawfully seized and
possessed of all the real estate, franchises and other property described or
referred to in the Indenture (except properties released from the lien of the
Indenture pursuant to the provisions thereof) as presently mortgaged, subject
to the exceptions stated therein, such real estate, franchises and other
property are free and clear of any lien prior to the lien of the Indenture
except as set forth in the Granting Clauses of the Indenture and the Company
has good right and lawful authority to mortgage the same as provided in and by
the Indenture.

 

§ 8.2.        The Trustee assumes no duties,
responsibilities or liabilities by reason of this Supplemental Indenture other
than as set forth in the Indenture, and this Supplemental Indenture is executed
and accepted by the Trustee subject to all the terms and conditions of its
acceptance of the trust under the Indenture, as fully as if said terms and
conditions were herein set forth at length.

 

§ 8.3.        The terms used in this Supplemental
Indenture shall have the meanings assigned thereto in the Indenture.  Reference by number in this Supplemental
Indenture to Articles or Sections shall be construed as referring to Articles
or Sections contained in the Indenture, unless otherwise stated.

 

21

 

§ 8.4.        As amended and modified by this
Supplemental Indenture, the Indenture is in all respects ratified and confirmed
and the Indenture and this Supplemental Indenture shall be read, taken and
construed as one and the same instrument.

 

§ 8.5.        Neither the approval by the Board of
Public Utilities of the State of New Jersey of the execution and delivery of
this Supplemental Indenture nor the approval by said Board of the issue of any
Bonds under the Indenture shall in any way be construed as the approval by said
Board of any other act, matter or thing which requires approval of said Board
under the laws of the State of New Jersey; nor shall approval by said Board of
the issue of any Bonds under the Indenture bind said Board or any other public
body or authority of the State of New Jersey having jurisdiction in the
premises in any future application for the issue of Bonds under the Indenture
or otherwise.

 

§ 8.6.        This Supplemental Indenture may be
executed in any number of counterparts and all said counterparts executed and
delivered each as an original shall constitute but one and the same instrument.

 

22

 

NEW JERSEY NATURAL GAS COMPANY HEREBY DECLARES THAT IT
HAS READ THIS THIRTY-FIRST SUPPLEMENTAL INDENTURE, HAS RECEIVED A COMPLETELY
FILLED-IN TRUE COPY OF IT WITHOUT CHARGE AND HAS SIGNED THIS
THIRTY-FIRST SUPPLEMENTAL INDENTURE ON THE DATE CONTAINED IN ITS ACKNOWLEDGMENT
HEREOF.

 

IN WITNESS WHEREOF, NEW JERSEY NATURAL GAS COMPANY,
party of the first part, has caused these presents to be signed in its
corporate name by its President or a Vice President and its corporate seal to
be hereunto affixed and attested by its Secretary or an Assistant Secretary,
and BNY MIDWEST TRUST COMPANY, party of the second part, in evidence of its
acceptance of the trust hereby created, has caused these presents to be signed
in its corporate name by one of its Vice Presidents and its corporate seal to
be hereunto affixed and attested by its Secretary or one of its Assistant
Secretaries.

 

 

	
   

  	
  NEW JERSEY NATURAL GAS
  COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Timothy C.
  Hearne, Jr.

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Timothy C. Hearne, Jr.

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President
  and

  Treasurer

  
	
   

  	
   

  	
   

  
	
  [Corporate Seal]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Oleta J. Harden

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Oleta J. Harden

  	
   

  	
   

  
	
  Title:

  	
  Senior Vice
  President and Secretary

  	
   

  	
   

  
							

 

23

 

	
  Signed, sealed
  and delivered by NEW JERSEY

  	
   

  
	
  NATURAL GAS
  COMPANY in the presence of:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Sandra R. Pennett

  	
   

  	
   

  
	
  Name: Sandra R.
  Pennett

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Kathleen M. Iannuzzi

  	
   

  	
   

  
	
  Name: Kathleen
  M. Iannuzzi

  	
   

  
	
   

  	
   

  
	
   

  	
  BNY MIDWEST TRUST
  COMPANY, as Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Mary Callahan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Mary Callahan

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
  [Corporate Seal]

  	
   

  
	
   

  	
   

  
	
  ATTEST:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ D.G. Donovan

  	
   

  	
   

  
	
  Name: D.G.
  Donovan

  	
   

  
	
  Title:   Assistant Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signed, sealed
  and delivered by BNY MIDWEST

  	
   

  
	
  TRUST COMPANY in
  the presence of:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ L. Garcia

  	
   

  	
   

  
	
  Name: L. Garcia

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Roxane Ellwanger

  	
   

  	
   

  
	
  Name: Roxane
  Ellwanger

  	
   

  
						

 

24

 

	
  STATE OF NEW
  JERSEY

  	
  )

  	
   

  
	
   

  	
  )

  	
  SS:

  
	
  COUNTY OF
  MONMOUTH

  	
  )

  	
   

  

 

BE IT REMEMBERED that on this 11th day of October,
2005, before me, the subscriber, an Attorney-at-Law of the State of New Jersey,
and I hereby certify that I am such an Attorney-at-Law as witness my hand,
personally appeared Oleta J. Harden to me known who, being by me duly sworn
according to law, on her oath, does depose and make proof to my satisfaction
that she is the Senior Vice President and Secretary of NEW JERSEY NATURAL GAS
COMPANY, the grantor or mortgagor in the foregoing Supplemental Indenture
named; that she well knows the seal of said corporation; that the seal affixed
to said Supplemental Indenture is the corporate seal of said corporation, and
that it was so affixed in pursuance of resolutions of the Board of Directors of
said corporation; that Timothy C. Hearne, Jr. is a Senior Vice President
and Treasurer of said corporation; that she saw said Timothy C. Hearne, Jr.,
as such Senior Vice President and Treasurer, affix said seal thereto, sign and
deliver said Supplemental Indenture, and heard him declare that he signed,
sealed and delivered the same as the voluntary act and deed of said
corporation, in pursuance of said resolutions, and that this deponent signed
her name thereto, at the same time, as attesting witness.

 

	
   

  	
   

  	
  /s/ Oleta J.
  Harden

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Oleta J. Harden

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President
  and

  Secretary

  
	
   

  	
   

  	
   

  
	
  Subscribed and
  sworn to before me,

  	
   

  	
   

  
	
  an
  Attorney-at-Law of the State of

  	
   

  	
   

  
	
  New Jersey, at
  Wall, New Jersey,

  	
   

  	
   

  
	
  the day and year
  aforesaid.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Joseph C. Weiss

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Joseph C.
  Weiss, Esq.

  	
   

  	
   

  
	
   

  	
  Attorney-at-Law
  of the

  	
   

  	
   

  
	
   

  	
  State of New
  Jersey

  	
   

  	
   

  
							

 

 

	
  STATE OF
  ILLINOIS

  	
  )

  	
   

  
	
   

  	
  )

  	
  SS:

  
	
  COUNTY OF COOK

  	
  )

  	
   

  

 

BE IT REMEMBERED that on this 13th day of October,
2005, before me, the subscriber, a Notary Public of the State of Illinois,
personally appeared D.G. Donovan to me known who, being by me duly sworn
according to law, on his oath, does depose and make proof to my satisfaction
that he is an Assistant Secretary of BNY MIDWEST TRUST COMPANY, the grantee or
mortgagee and trustee in the foregoing Supplemental Indenture named; that he
well knows the seal of said corporation; that the seal affixed to said
Supplemental Indenture is the corporate seal of said corporation, and that it
was so affixed in pursuance of a resolution of the Board of Directors of said
corporation; that Mary Callahan is a Vice President of said corporation; that
he saw said Mary Callahan as such Vice President affix said seal thereto, sign
and deliver said Supplemental Indenture, and heard said Mary Callahan declare
that she signed, sealed and delivered the same as the voluntary act and deed of
said corporation, in pursuance of said resolution, and that this deponent
signed her name thereto, at the same time, as attesting witness.

 

	
   

  	
  /s/ D.G. Donovan

  	
   

  
	
   

  	
  Name: D.G. Donovan

  
	
   

  	
  Title: Assistant
  Secretary

  
	
   

  	
   

  
	
  Subscribed and
  sworn to before

  	
   

  
	
  me a Notary
  Public of the State

  	
   

  
	
  of Illinois at
  Chicago, the day

  	
   

  
	
  and year
  aforesaid.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ A. Hernandez

  	
   

  	
   

  
	
  Notary Public of
  the State of Illinois

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

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