Document:

Security Agreement

    Exhibit
      10.2

    

      SECURITY
        AGREEMENT

       

      

       

      THIS
        SECURITY AGREEMENT (this
“Agreement”) is made as of the 20th day of June, 2007, by
        SEAWRIGHT HODLINGS, INC., a Delaware corporation, having a
        mailing address at 600 Cameron Street, Alexandria, VA 22314, (the
“Company”) and JOEL PATRICK SENS, a Virginia
        resident, having a mailing address of 600 Cameron Street, Alexandria, VA
        22314,
        (“Sens”) (together with the Company, individually and collectively, the
“Debtors”), for the benefit and security of DUTCHESS
        PRIVATE EQUITIES FUND, LTD., having a mailing address at 50
        Commonwealth Avenue, Suite 2, Boston, Massachusetts 02116 (the “Secured
        Party”). 

       

      WHEREAS,
        the Company has executed and delivered to Secured Party a
        note or instruments, including, without limitation, (i) that certain note
        dated
        June 20, 2007 from the Company in favor of the Secured Party (the
“Note”) pursuant to which the Secured Party has agreed to make
        certain loans and other financial accommodations to the Company; 

       

      WHEREAS,
        each of the other Debtors has executed and delivered a
        guaranty (as amended or otherwise modified from time to time, the
        "Guaranty") of certain obligations of the Company, including
        all obligations of the Company under the Note; and 

       

      WHEREAS,
        the obligations of the Company under the Note and the
        obligations of each other Debtor under the Guaranty are to be secured pursuant
        to this Agreement; 

       

      NOW,
        THEREFORE, for and in consideration of any loan, advance or
        other financial accommodation heretofore or hereafter made to or for the
        benefit
        of any Debtor under or in connection with the Note of any other Finance
        Documents (as defined below), and for other good and valuable consideration,
        the
        receipt and sufficiency of which are hereby acknowledged, the parties hereto
        agree as follows: 

       

      ARTICLE
        I 

      CONSTRUCTION
        AND DEFINED TERMS 

       

      1.01
Article
        and Section Headings. Article
        and Section headings and captions in this Agreement are for convenience only
        and
        shall not affect the construction or interpretation of this Agreement. Unless
        otherwise expressly stated in this Agreement, references in this Agreement
        to
        Sections shall be read as Sections of this Agreement. 

       

      1.02
Schedules
        and Exhibits. The
        references in this Agreement to specific Schedules and Exhibits shall be
        read as
        references to such specific Schedules or Exhibits attached, or intended to
        be
        attached, to this Agreement and any counterpart of this Agreement and regardless
        of whether they are in fact attached to this Agreement, and including any
        amendments, supplements and replacements to such Schedules and Exhibits from
        time to time. 

       

      1.03
Defined
        Terms. Unless otherwise
        expressly stated in this Agreement, (a) capitalized terms which are not
        otherwise defined herein shall have the respective meanings

         assigned
          thereto in the UCC (as defined below); and (b) the
          following terms used in this Agreement shall have the following meanings:
          

      

       

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

       

       

      “Collateral”
means,
        with respect to any Debtor,
        all property and rights of such Debtor in which a security interest is granted
        hereunder. 

       

      “Computer
        Hardware and Software” means, with
        respect to any Debtor, all of such Debtor's rights (including rights as licensee
        and lessee) with respect to (i) computer and other electronic data processing
        hardware, including all integrated computer systems, central processing units,
        memory units, display terminals, printers, computer elements, card readers,
        tape
        drives, hard and soft disk drives, cables, electrical supply hardware,
        generators, power equalizers, accessories, peripheral devices and other related
        computer hardware; (ii) all software programs designed for use on the computers
        and electronic data processing hardware described in clause (i) above,
        including all operating system software, utilities and application programs
        in
        whatsoever form (source code and object code in magnetic tape, disk or hard
        copy
        format or any other listings whatsoever); (iii) any firmware associated with
        any
        of the foregoing; and (iv) any documentation for hardware, software and firmware
        described in clauses (i), (ii) and (iii) above, including
        flow charts, logic diagrams, manuals, specifications, training materials,
        charts
        and pseudo codes. 

       

      “Equity
        Interest” With respect to any Person, any
        ownership interest in such Person, including shares, partnership interests,
        joint venture interests, membership interests, limited liability company
        interests, unit interests and any other equity or ownership interests of
        any
        kind, and any subscriptions, options, warrants, commitments, purchase rights,
        preemptive rights or agreements of any kind (including any stockholders’ or
        voting trust agreements) for the issuance, sale, registration or voting of,
        or
        for securities convertible into, any shares, partnership interests, joint
        venture interests, membership interests, limited liability company interests,
        and any other equity or ownership interests in such Person. 

       

      “Finance
        Documents” mean, collectively, the
        Debenture, the Guaranty, and any other documents or agreements executed in
        connection therewith or herewith and pertaining to the Secured Obligations.
        

       

      “Lien”
Any
        security interest (including security
        interest within the definition of “security interest” in the UCC), encumbrance,
        lien (including any judgment lien, any contract lien, any lien arising or
        resulting from nonpayment of any tax, assessment, charge or other imposition,
        and any lien arising or resulting from nonpayment for labor, materials, or
        supplies), security agreement (including any agreement that creates or provides
        for a security interest), deed of trust, mortgage, grant, pledge, assignment,
        hypothecation, title retention contract, or other arrangement for security
        purposes, and any agricultural lien (including any agricultural lien within
        the
        definition of “agricultural lien” in the UCC), and including any of the
        foregoing arising by operation of statute or other law or the application
        of
        equitable principles, whether perfected or unperfected, avoidable or
        unavoidable, consensual or nonconsensual, and any financing statement or
        other
        similar notice document, whether or not filed, and any agreement to give
        a
        financing statement or other similar notice document. 

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       

      “Lien
        Proceeding” Any action taken (including
        self help) or proceeding (judicial or otherwise) commenced by any Person
        other
        than Secured Party for the purpose of enforcing or protecting any actual
        or
        alleged Lien upon any of the Collateral, and including any foreclosure,
        repossession, attachment, execution or other process regarding any of the
        Collateral. 

       

      “Permitted
        Lien” means those Liens described on
Schedule 3.07. 

       

      “Person”
Any
        natural person, corporation, limited
        liability company, partnership, joint venture, entity, association, joint-stock
        company, trust or unincorporated organization and any Governmental Authority,
        including any receiver, debtor-in-possession, trustee, custodian, conservator,
        or liquidator. 

       

      “Secured
        Obligations” All indebtedness,
        liabilities and obligations which are now or may at any time hereafter be
        due,
        owing or incurred in any manner whatsoever to Secured Party by any Debtor,
        whether under this Agreement, any Debenture, the Guaranty or any other Finance
        Document, in each case howsoever created, arising or evidenced, whether direct
        or indirect, absolute or contingent, whether at stated maturity, by acceleration
        or otherwise (including, without limitation, the payment of interest and
        other
        amounts which would accrue and become due but for the filing of a petition
        in
        bankruptcy or the operation of the automatic stay under Section 362(a) of
        the
        Bankruptcy Code, 11 U.S.C. § 362(a)), including, without limitation, all
        charges, fees, expenses, commissions, reimbursements, premiums, indemnities
        and
        other payments related to or in respect of such obligations.

       

      “UCC”
means
        the Uniform Commercial Code as in
        effect in the Commonwealth of Massachusetts on the date of this Agreement,
        as
        may be amended or modified from time to time after the date hereof;
provided that, "UCC" shall also mean the Uniform Commercial Code
        as in effect from time to time in any applicable jurisdiction. 

       

      ARTICLE
        II 
SECURITY
        INTEREST; PERFECTION 

       

      2.01
Security
        Interest. To secure the full
        and timely payment, performance and satisfaction of the Secured Obligations,
        each Debtor hereby collaterally assigns to Secured Party, and grants Secured
        Party a security interest in, all of such Debtor’s property, whether now owned
        or hereafter existing or acquired, regardless of where located including,
        without limitation, all of such Debtor's:

      

        (a)
           Accounts;
          

         

        (b)
           Chattel
          Paper, including Electronic Chattel Paper; 

         

        (c)
           Computer
          Hardware and Software and all rights with respect thereto, including,
          any and all licenses, options, warranties, service contracts, program services,
          test rights, maintenance rights, support rights, improvement rights, renewal
          rights and indemnifications, and any substitutions, replacements, additions
          or
          model conversions of any of the foregoing 

      

      
(d)
        Commercial
        Tort Claims now or hereafter identified on Schedule 2.01(d) to this
        Agreement; 

       

      (e)
        Deposit Accounts;

       

      (f)
        Documents; 

       

      (g)
        Financial Assets;

       

      (h)
        General
        Intangibles; 

       

      (i)
        Goods (including
        all of its Equipment, Fixtures and Inventory), and all embedded software,
        accessions, additions, attachments, improvements, substitutions and replacements
        thereto and therefor); 

       

      (j)
        Instruments;

       

      (k)
        Intellectual
        Property and all Real Estate; 

       

      (l)
        Investment
        Property; 

       

      (m)
        Letter of Credit
        Rights; 

       

      (n)
        money (of every
        jurisdiction whatsoever); 

       

      (o)
        Security
        Entitlements; 

       

      (p)
        Supporting
        Obligations 

       

      (q)
        with respect to
        each Person (as hereinafter defined) listed in Schedule 2.01(q) hereto
        and each other corporation hereafter acquired or formed by such Debtor, the
        Equity Interests from time to time issued and outstanding, including the
        certificates, if any, representing the Equity Interests and any interest
        of such
        Debtor in the entries on the books of the issuer thereof or any financial
        intermediary pertaining to the Equity Interests, together with all dividends,
        cash, options, warrants, rights, instruments, distributions, returns of capital
        or principal, income, interest, profits and other property, interests (debt
        or
        equity) or proceeds as a result of a split, revision, reclassification,
        consolidation, merger or other like change of the Equity Interests or any
        issuer
        thereof, from time to time received, receivable or otherwise distributed
        to such
        Debtor in respect of or in exchange for any or all of the Equity Interests;
        

       

      (r)
        all promissory
        notes or intercompany notes and and all certificates or instruments evidencing
        such promissory notes or intercompany notes; and 

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      
 

      to
        the extent not included in the foregoing, other personal
        property of any kind or description, together with all books, records, writings,
        data bases, information and other property relating to, used or useful in
        connection with, or evidencing, embodying, incorporating or referring to
        any of
        the foregoing, and all Proceeds, products, rents, issues, profits and returns
        of
        and from any of the foregoing; provided that to the extent that the
        provisions of any lease or license of Computer Hardware and Software or
        Intellectual Property expressly prohibit (which prohibition is enforceable
        under
        applicable law) the assignment thereof, and the grant of a security interest
        therein, the Secured Party will not enforce its security interest (other
        than in
        respect of the Proceeds thereof) for so long as such prohibition continues,
        it being understood that upon request of the Secured Party, such Debtor
        will in good faith use reasonable efforts to obtain consent for the creation
        of
        a security interest in favor of the Secured Party (and to Secured Party’s
        enforcement of such security interest) in such Debtor's rights under such
        lease
        or license. 

      

        2.02
           Intentionally
          Omitted. 

         

        2.03
           Perfection
          by Filing.
          

         

        (a)
           Each
          Debtor authorizes Secured Party to file any financing statement and agrees
          to
          execute, in recordable form, and deliver to Secured Party any other document
          or
          instrument, and to cause any third party to execute and deliver to Secured
          Party
          any other document (including financing statement termination statements),
          requested by Secured Party to perfect the security interests created under
          this
          Agreement and to establish, maintain, and continue the first priority of
          the
          security interests created under this Agreement. 

      

       

      (b)
        Each Debtor hereby
        appoints Secured Party as such Debtor’s attorney-in-fact, with power of
        substitution, which appointment is irrevocable and coupled with an interest,
        to
        execute in the name of Debtor, and to transmit to, or file, record, or register
        with, any Person, and at any time, any document or instrument that Secured
        Party
        may deem necessary or advisable for the purpose of creating, enforcing,
        defending, protecting, perfecting, continuing, or maintaining any security
        interest, or the perfection or priority of any security interest, created
        under
        this Agreement. 

       

      (c)
        Secured Party
        shall not be required to obtain Debtor’s consent or authorization for Secured
        Party to file, and Secured Party shall be entitled to file, with or without
        execution by Debtor (or by Secured Party as Debtor’s attorney-in-fact), any
        financing statement, amendment, or other record that Secured Party may be
        authorized to file in accordance with the terms of the UCC with respect to
        the
        security interests created under this Agreement. 

       

      (d)
        Any financing
        statement or other document filed to perfect the security interests evidenced
        by
        this Agreement may, at Secured Party’s option, describe or indicate the
        Collateral in the manner that the Collateral is described in this Agreement,
        or
        as all assets of Debtor, or as all personal property of Debtor, or by any
        other
        description or indication of the Collateral that may be sufficient for a
        financing statement under the UCC. 

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      

      (e)
        If prior to Debtor’s execution of this Agreement, Secured
        Party shall have filed in any jurisdiction, or with any governmental authority,
        any financing statement, amendment, or other document describing or indicating
        the Collateral, or containing a description or indication of all assets of
        Debtor or all personal property of Debtor comprising the Collateral, or
        containing any other description or indication of the Collateral, Debtor,
        by
        executing this Agreement, irrevocably (i) authorizes, ratifies, confirms,
        and
        adopts (A) each such previously filed financing statement, amendment or other
        document, and (B) the filing of each such previously filed financing statement,
        amendment, or other document, and (ii) agrees that each such previously filed
        financing statement, amendment, or other document is valid and effective
        as
        though it had been authorized by Debtor and filed with Debtor’s authorization.

       

      2.04
Perfection
        by Possession. If
        Collateral is of a type as to which it is necessary, desirable, or advisable,
        as
        determined by Secured Party, for Secured Party to take possession of such
        Collateral in order to protect, perfect, or maintain the first priority of
        Secured Party’s security interest or other Lien (subject only to Permitted
        Security) in such (or any other) Collateral, then, promptly upon Secured
        Party’s
        request, Debtor shall deliver such Collateral to Secured Party. 

       

      ARTICLE
        III 

       

      REPRESENTATIONS
        AND WARRANTIES 

       

      Debtor
        makes the following representations and warranties to
        Secured Party, which shall each be continuing and in effect at all times,
        and
        Secured Party shall be entitled to rely upon the truth, accuracy, and
        completeness of the following representations and warranties without regard
        to
        any other information that may be now or hereafter known by or disclosed
        to
        Secured Party or any of Secured Party’s directors, officers, employees, agents,
        attorneys or other advisors: 

       

      3.01
Debtor’s
        Name and Identification
        Number. The name of each Debtor set forth on the first page and the
        signature page of this Agreement is Debtor’s correct and complete legal name.
        The street address for Debtor in this Agreement is Debtor’s mailing address.
        Such Debtor's chief executive office and principal place of business are
        as set
        forth on Schedule 3.01 hereto (and such Debtor has not maintained its
        chief executive office and principal place of business at any other location
        during the five (5) years preceding the date hereof, and each other location
        where such Debtor maintains a place of business is also set forth on Schedule
        3.01 hereto 

       

      3.02
Permitted
        Liens; Collateral. (a) No
        financing statement (other than Permitted Liens) covering any of such Debtor’s
        rights in the Collateral is on file in any public office; (b) Secured Party’s
        security interest in the Collateral is a first priority perfected security
        interest, subject to no Liens other than Permitted Liens; (c) such Debtor
        is and
        will be the lawful owner of all Collateral, free of all liens, claims, security
        interests and encumbrances whatsoever, other than the security interest
        hereunder and Permitted Liens, with full power and authority to execute this
        Agreement and perform such Debtor's obligations hereunder, and to subject
        the
        Collateral to the security interest hereunder and (d) all information with
        respect to the Collateral set forth in any schedule, certificate or other
        writing at any time heretofore or hereafter furnished by such Debtor to the
        Secured Party is and will be true and correct in all material respects as
        of the
        date furnished. 

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

       

      3.03
Authorization
        and No Conflicts. (a)
        Each Debtor is a corporation duly organized, validly existing and in good
        standing under the laws of its state of incorporation as listed on the first
        page of this Agreement; (b) the execution and delivery of this Agreement
        and the
        performance by such Debtor of its obligations hereunder are within such Debtor's
        corporate powers, have been duly authorized by all necessary corporate action,
        have received all necessary governmental approval (if any shall be required),
        and do not and will not contravene or conflict with any provision of law
        or of
        the articles of incorporation or by-laws of such Debtor or of any material
        agreement, indenture, instrument or other document, or any material judgment,
        order or decree, which is binding upon such Debtor; and (c) this Agreement
        is a
        legal, valid and binding obligation of such Debtor, enforceable in accordance
        with its terms, except that the enforceability of this Agreement may be limited
        by bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer,
        reorganization, moratorium or other similar laws now or hereafter in effect
        relating to creditors' rights generally and by general principles of equity
        (regardless of whether enforcement is sought in a proceeding in equity or
        at
        law). 

       

      3.04
Tangible
        Collateral. Schedule
        3.04 hereto contains a complete listing of such Debtor’s tangible Collateral
        located with any bailee, warehousemen or other third parties and all of such
        Debtor’s Collateral which is subject to certificate of title statutes. 

       

      3.05
Deposit
        Accounts. Except as listed on
Schedule 2.02, Debtor has no Deposit Accounts and is not a party
        to or
        otherwise bound by any Deposit Account Agreement. 

       

      3.06
Leases.
        Except as listed on
Schedule 3.06 (which schedule contains a true, accurate and complete list
        and description of all leases to which Debtor is a lessor, lessee, or other
        party or otherwise bound), Debtor is not a lessor or lessee under, or a party
        to, or otherwise bound by the terms of, any lease. 

       

      3.07
Commercial
        Tort Claims. Except as
        listed on Schedule 2.01(d), Debtor has no Commercial Tort Claims. 

       

      3.08
Subsidiaries.
Schedule
        3.08
        lists all of the subsidiaries of Debtors. 

       

      ARTICLE
        IV 

       

      AFFIRMATIVE
        COVENANTS 

       

      Debtor
        covenants and agrees to the following: 

       

      4.01
Account
        Debtors. The Secured Party
        may, at any time that an Event of Default exists, whether before or after
        any
        revocation of such power and authority or the maturity of any of the Secured
        Obligations, notify an Account Debtor or other Person obligated on Collateral
        to
        make payment or otherwise render performance to or for the benefit of the
        Secured Party and 

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

       

      enforce,
        by suit or otherwise the obligations of an Account Debtor
        or other Person obligated on Collateral and exercise the rights of such Debtor
        with respect to the obligation of the Account Debtor or other Person obligated
        on Collateral to make payment or otherwise render performance to such Debtor,
        and with respect to any property that secures the obligations of the Account
        Debtor or other Person obligated on the Collateral. In connection with exercise
        of such rights and remedies, the Secured Party may surrender, release or
        exchange all or any part thereof, or compromise or extend or renew for any
        period (whether or not longer than the original period) any indebtedness
        thereunder or evidenced thereby. Upon the request of the Secured Party during
        the existence of an Event of Default, each Debtor will, at its own expense,
        notify any or all parties obligated on any of the Collateral to make payment
        to
        the Secured Party of any amounts due or to become due thereunder. Upon request
        by the Secured Party during the existence of an Event of Default, each Debtor
        will forthwith, upon receipt, transmit and deliver to the Secured Party,
        in the
        form received, all cash, checks, drafts and other instruments or writings
        for
        the payment of money (properly endorsed, where required, so that such items
        may
        be collected by the Secured Party) which may be received by such Debtor at
        any
        time in full or partial payment or otherwise as proceeds of any of the
        Collateral. Except as the Secured Party may otherwise consent in writing,
        any
        such items which may be so received by any Debtor will not be commingled
        with
        any other of its funds or property, but will be held separate and apart from
        its
        own funds or property and upon express trust for the Secured Party until
        delivery is made to the Secured Party. Each Debtor will comply with the terms
        and conditions of any consent given by the Secured Party pursuant to the
        foregoing sentence. 

       

      4.02
Additional
        Covenants. Each Debtor:

       

      (a)
        will, at the
        Secured Party’s request, at any time and from time to time, execute and deliver
        to the Secured Party such financing statements, amendments and other documents
        and do such acts as the Secured Party deems necessary in order to establish
        and
        maintain valid, attached and perfected first priority security interests
        in the
        Collateral in favor of the Secured Party, free and clear of all Liens and
        claims
        and rights of third parties whatsoever except Permitted Liens; each Debtor
        hereby irrevocably authorizes the Secured Party at any time, and from time
        to
        time, to file in any jurisdiction any initial financing statements and
        amendments thereto that (i) indicate the Collateral (x) as all assets of
        such
        Debtor or words of similar effect, regardless of whether any particular asset
        comprised in the Collateral falls within the scope of Article 9 of the UCC
        of
        the jurisdiction wherein such financing statement or amendment is filed,
        or (y)
        as being of an equal or lesser scope or with greater detail; 

       

      (b)
        will keep all its
        Inventory at, and will not maintain any place of business at any location
        other
        than, its address(es) shown on Schedule 3.01 hereto or at such other
        addresses of which such Debtor shall have given the Secured Party not less
        than
        30 days' prior written notice; 

       

      (c)
        will keep its
        records concerning the Collateral in such a manner as will enable the Secured
        Party or its designees to determine at any time the status of the Collateral;
        

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      
 

      (d)
        will furnish the
        Secured Party such information concerning such Debtor, the Collateral and
        the
        Account Debtors as the Secured Party may from time to time reasonably request;
        

       

      (e)
        will permit the
        Secured Party and its designees, from time to time, on reasonable notice
        and at
        reasonable times and intervals during normal business hours (or at any time
        without notice during the existence of an Event of Default) to inspect such
        Debtor's Inventory and other Goods, and to inspect, audit and make copies
        of and
        extracts from all records and other papers in the possession of such Debtor
        pertaining to the Collateral and the Account Debtors, and will, upon request
        of
        the Secured Party during the existence of an Event of Default, deliver to
        the
        Secured Party all of such records and papers; 

       

      (f)
        will, upon request
        of the Secured Party, stamp on its records concerning the Collateral, and
        add on
        all Chattel Paper and Instruments constituting a portion of the Collateral,
        a
        notation, in form satisfactory to the Secured Party, of the security interest
        of
        the Secured Party hereunder; 

       

      (g)
        except for the
        sale or lease of Inventory in the ordinary course of its business and sales
        of
        Equipment which is no longer useful in its business or which is being replaced
        by similar Equipment, will not sell, lease, assign or create or permit to
        exist
        any Lien on any Collateral other than Permitted Liens; 

       

      (h)
        will at all times
        keep all of its Inventory and other Goods insured under policies maintained
        with
        reputable, financially sound insurance companies against loss, damage, theft
        and
        other risks to such extent as is customarily maintained by companies similarly
        situated, and cause all such policies to provide that loss thereunder shall
        be
        payable to the Secured Party as its interest may appear (it being understood
        that (A) so long as no Event of Default shall be existing, the Secured Party
        shall deliver any proceeds of such insurance which may be received by it
        to such
        Debtor and (B) whenever an Event of Default shall be existing, the Secured
        Party
        may apply any proceeds of such insurance which may be received by it toward
        payment of the Secured Obligations, whether or not due, in such order of
        application as the Secured Party may determine), and such policies or
        certificates thereof shall, if the Secured Party so requests, be deposited
        with
        or furnished to the Secured Party; 

       

      (i)
        will take such
        actions as are reasonably necessary to keep its Goods in good repair and
        condition; 

       

      (j)
        will take such
        actions as are reasonably necessary to keep its Equipment in good repair
        and
        condition and in good working order, ordinary wear and tear excepted; 

       

      (k)
        will promptly pay
        when due all license fees, registration fees, taxes, assessments and other
        charges which may be levied upon or assessed against the ownership, operation,
        possession, maintenance or use of its Equipment and other Goods; 

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      
(l)
        will take all
        steps reasonably necessary to protect, preserve and maintain all of its rights
        in the Collateral and will keep all of the tangible Collateral in the United
        States; 

       

      (m)
        will promptly
        notify the Secured Party in writing upon acquiring or otherwise obtaining
        any
        Collateral after the date hereof consisting of Deposit Accounts, Investment
        Property, Letter-of-Credit Rights or Electronic Chattel Paper and, upon the
        request of the Secured Party, will promptly execute such other documents,
        and do
        such other acts or things deemed appropriate by the Secured Party to confer
        upon
        the Secured Party control (as defined in the UCC) with respect to such
        Collateral; 

       

      (o)
        promptly notify
        the Secured Party in writing upon acquiring or otherwise obtaining any
        Collateral after the date hereof consisting of Documents or Instruments and,
        upon the request of the Secured Party, will promptly execute such other
        documents, and do such other acts or things deemed appropriate by the Secured
        Party to deliver to the Secured Party possession of such Documents which
        are
        negotiable and Instruments, and, with respect to nonnegotiable Documents,
        to
        have such nonnegotiable Documents issued in the name of the Secured Party;
        

       

      (p)
        promptly notify
        the Secured Party in writing upon incurring or otherwise obtaining a Commercial
        Tort Claim after the date hereof against any third party, and, upon the request
        of the Secured Party, will promptly enter into an amendment to this Agreement,
        and do such other acts or things deemed appropriate by the Secured Party
        to give
        the Secured Party a security interest in such Commercial Tort Claim; and

       

      (q)
        further agrees to
        take other action reasonably requested by the Secured Party to insure the
        attachment, perfection and first priority of, and the ability of the Secured
        Party to enforce, the security interests in any and all of the Collateral
        including, without limitation, (i) executing, delivering and, where appropriate,
        filing financing statements and amendments relating thereto under the UCC,
        to
        the extent, if any, that the Debtor’s signature thereon is required therefor,
        (ii) complying with any provision of any statute, regulation or treaty of
        the
        United States as to any Collateral if compliance with such provision is a
        condition to attachment, perfection or priority of, or ability of the Secured
        Party to enforce, the security interests in such Collateral, (iii) obtaining
        governmental and other third party consents and approvals, including without
        limitation any consent of any licensor, lessor or other Person obligated
        on
        Collateral, (iv) obtaining waivers from mortgagees and landlords in form
        and
        substance satisfactory to the Secured Party, and (v) taking all actions required
        by the UCC in effect from time to time or by other law, as applicable in
        any
        relevant UCC jurisdiction, or by other law as applicable in any foreign
        jurisdiction. 

      

      4.03
Taxes,
        Assessments, Charges, and Other
        Impositions. Debtor shall pay and discharge promptly, on or before
        the date due, all taxes, assessments, charges, and other impositions imposed
        by
        any governmental authority on Debtor, or on the Collateral, relating to the
        ownership or use of the Collateral, or relating to any sale, lease, license
        or
        other disposition of the Collateral; provided, however, Debtor shall not
        be
        required to pay or discharge, or to cause to be paid or discharged, any such
        tax, assessment, charge, or other imposition so long as (a) the validity
        of such
        tax, assessment, charge or other imposition is being contested in good faith
        by
        Debtor by appropriate proceedings. 

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

       

      4.04
Notice
        of Lien Proceeding. Debtor
        shall give Secured Party immediate written notice of the threat by any Person
        to
        commence any proceedings on a material portion of the Collateral or any other
        Lien Proceeding. 

       

      4.05
Delivery
        of Certificated Equity
        Interests. All certificates, agreements or instruments representing
        or evidencing the pledged Equity Interests, to the extent not previously
        delivered to the Secured Party, shall promptly upon receipt thereof by any
        Debtor be delivered to and held by the Secured Party pursuant hereto. All
        such
        certificated Collateral shall be in suitable form for transfer by delivery
        or
        shall be accompanied by duly executed instruments of transfer or assignment
        in
        blank, all in form and substance reasonably satisfactory to the Secured Party.
        Security Party shall have the right, at any time after the occurrence and
        during
        the continuance of any Event of Default, to exchange certificates representing
        or evidencing such pledged Equity Interests for certificates of smaller or
        larger denominations. If any issuer of pledged Equity Interests is organized
        in
        a jurisdiction which does not permit the use of certificates to evidence
        equity
        ownership, or if any of such pledged Equity Interests are at any time not
        evidenced by certificates of ownership, then each applicable Debtor shall,
        to
        the extent permitted by applicable law, record such pledge on the equityholder
        register or the books of the issuer, execute any customary pledge forms or
        other
        documents necessary or appropriate to complete the pledge and give the Secured
        Party the right to transfer such pledged Equity Interests. 

       

      4.06
Voting
        Rights: Distributions: etc. So
        long as no Event of Default shall have occurred and be continuing, (i) each
        Debtor shall be entitled to exercise any and all voting and other consensual
        rights pertaining to the pledged Equity Interests or any part thereof for
        any
        purpose not inconsistent with the terms or purposes of this Agreement;
provided, however, that no Debtor shall in any event exercise such
        rights in any manner which may have an adverse effect on the security intended
        to be provided by this Agreement and (ii) each Debtor shall be entitled to
        receive and retain any and all distributions with respect to such pledged
        Equity
        Interests. Upon the occurrence and during the continuance of any Event of
        Default, upon written notice from the Secured Party, all rights of each Debtor
        to exercise such voting and other consensual rights it would otherwise be
        entitled to exercise hereunder and all rights of such Debtor to receive
        distributions otherwise permitted hereunder shall cease, and all such rights
        shall thereupon become vested in the Secured Party. Any distributions which
        are
        received by any Debtor in violation of the provisions of this Agreement shall
        be
        received in trust for the benefit of the Secured Party, shall be segregated
        from
        other funds of such Debtor and shall immediately be paid over to the Secured
        Party as Collateral in the same form as so received (with any necessary
        endorsement). 

       

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

       

      ARTICLE
        V 

      NEGATIVE
        COVENANTS 

       

      Debtor
        covenants and agrees to the following: 

       

      5.01
Identity.
        Debtor shall not change
        Debtor’s name or corporate structure. If Debtor is organized solely under the
        law of a single state or the United States and as to which the state or the
        United States must maintain a public record showing the organization to have
        been organized, Debtor shall not organize under the laws of another
        jurisdiction. 

       

      5.02
Deposit
        Accounts. Debtor shall not
        open or close any Deposit Account or modify, terminate, or supplement any
        Deposit Account Control Agreement, or waive any material rights under any
        Deposit Account Control Agreement, without prior written notice to the Secured
        Party. 

       

      5.03
Liens.
        Debtor shall not create,
        incur, assume or suffer to exist any Liens upon any Collateral of Debtor
        other
        than Permitted Liens. 

       

      ARTICLE
        VI 

      EVENT
        OF DEFAULT; ENFORCEMENT OF SECURITY INTEREST

       

      6.01
        Any one or more of the following events (regardless of the
        reason therefor) shall constitute an "Event of Default"
        hereunder: 

       

      (a)
        Any default or
        event of default shall occur under any of the Debenture or any other Finance
        Documents. 

       

      (b)
        Any Debtor shall
        fail or neglect to perform, keep or observe any provision of this Agreement
        or
        any other Finance Document and the same shall remain unremedied for a period
        of
        ten (10) days after notice is given to such Debtor by the Secured Party.

       

      (c)
        The Secured Party
        shall fail to have an enforceable first priority lien on and security interest
        in the Collateral. 

       

      (d)
        Any Debtor files a
        bankruptcy petition, a bankruptcy petition is filed against any Debtor which
        remains undismissed or unstayed for 30 consecutive days, or any Debtor makes
        a
        general assignment for the benefit of creditors. 

      

      6.02
Right
        to Enforce Claim; Secured Party in
        Possession or Control. 

       

      (a)
        Upon the occurrence of an Event of Default and during the
        continuance thereof, and in addition to such other rights and remedies as
        Secured Party may have under other provisions of this Agreement or any other
        Finance Document, or under common or statutory law, Secured Party may reduce
        a
        claim to judgment, foreclose, or otherwise enforce the claim, security interest,
        or agricultural lien by any available judicial procedure, and if the Collateral
        is Documents, Secured Party may proceed either as to the Documents or as
        to the
        Goods the Documents cover. 

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

       

      (b)
        If Secured Party
        has possession of Collateral, (i) reasonable expenses, including the cost
        of
        insurance and payment of taxes or other charges, incurred in the custody,
        preservation, use, or operation of the Collateral are chargeable to Debtor
        and
        are secured by the Collateral, (ii) the risk of accidental loss or damage
        is
        upon Debtor to the extent of a deficiency in any effective insurance coverage,
        (iii) Secured Party shall keep the Collateral identifiable, but fungible
        Collateral may be commingled, and (iv) Secured Party may use or operate the
        Collateral (A) for the purpose of preserving the Collateral or its value,
        or (B)
        as permitted by an order of a court having competent jurisdiction, or (C)
        for
        the purpose of transporting the Collateral, or (D) for the purposes of
        demonstrating the use or operation of the Collateral. 

       

      (c)
        If Secured Party
        has possession of Collateral or control of Collateral that is Deposit Accounts,
        Electronic Chattel Paper, Investment Property, or Letter-of-credit rights,
        then
        Secured Party (i) may hold as additional security any Proceeds, except money
        or
        funds, received from the Collateral, (ii) shall apply money or funds received
        from the Collateral to reduce the Secured Obligations unless remitted to
        Debtor,
        and (iii) may create a security interest in the Collateral. 

       

      (d)
        If Secured Party
        has possession of Collateral that is Chattel Paper or an Instrument, then
        as to
        any such Chattel Paper or Instrument, Secured Party shall not be obligated
        to
        take any necessary steps to preserve rights against prior parties. 

      

      6.03
Collection
        and Enforcement. After the
        occurrence of an Event of Default and during the continuance thereof (in
        accordance with the Facilities Agreement), Secured Party may: 

       

      (a)
        notify any Account
        Debtor or other Person obligated on Collateral to make payment or otherwise
        render performance to or for the benefit of Secured Party; 

       

      (b)
        take any Proceeds
        to which Secured Party is entitled under Section 9-315 of Article 9 of the
        UCC;

       

      (c)
        enforce the
        obligations of any Debtor or other Person obligated on Collateral and exercise
        the rights of Debtor with respect to the obligations of the Debtor or other
        Person obligated on Collateral to make payment or otherwise render performance
        to Debtor, and with respect to any property that secures the obligations
        of the
        Debtor or other Person obligated on the Collateral; 

       

      (d)
        if Secured Party
        is a Bank and holds a security interest in a Deposit Account maintained with
        Secured Party, apply the balance of the Deposit Account to the obligation
        secured by the Deposit Account; and 

       

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      
 

      (e)
        if Secured Party holds a security interest in a Deposit
        Account perfected by control pursuant to an agreement among Debtor, Secured
        Party and the Bank with which the Deposit Account is maintained, or if Secured
        Party becomes the Bank’s customer with respect to the Deposit Account, instruct
        the Bank with which the Deposit Account is maintained to pay the balance
        of the
        Deposit Account to or for the benefit of Secured Party. 

       

      6.04
Possession
        of Collateral. 

       

      (a)
        After the
        occurrence of an Event of Default and during the continuance thereof, Secured
        Party may require Debtor to assemble the Collateral and make the Collateral
        available to Secured Party at a place designated by Secured Party which is
        reasonably convenient to Secured Party and Debtor. If Secured Party requires
        Debtor to assemble the Collateral and make the Collateral available to Secured
        Party, as described in the preceding sentence, Debtor shall do so promptly,
        and
        in any event within ten (10) days after Secured Party gives Debtor a notice
        requesting Debtor to assemble the Collateral and make the Collateral available
        to Secured Party at the place designated by Secured Party. Without limiting
        Secured Party’s right to designate any place which is reasonably convenient to
        Debtor for making Collateral available to Secured Party, Debtor agrees that
        any
        place designated by Secured Party and located within one hundred (100) miles
        of
        any place where Debtor stores, uses, sells, leases, licenses, or maintains
        Collateral in the ordinary course of Debtor’s business shall be conclusively
        deemed to be a place reasonably convenient to Debtor for making the Collateral
        available to Secured Party. 

       

      (b)
        After the
        occurrence of an Event of Default and during the continuance thereof, Secured
        Party may, pursuant to judicial process, or without judicial process if Secured
        Party proceeds without breach of peace, (1) take possession of the Collateral
        and, (2) without removal, render Equipment unusable and dispose of Collateral
        on
        Debtor’s premises. 

      

      6.05
Disposition
        of Collateral. 

       

      (a)
        After the
        occurrence of an Event of Default and during the continuance thereof, Secured
        Party may sell, lease, license, or otherwise dispose of any or all of the
        Collateral in its present condition or following any commercially reasonable
        preparation or processing. 

       

      (b)
        Secured Party may
        dispose of Collateral by public or private proceedings, by one or more
        contracts, as a unit or in parcels, and at any time and place and on any
        terms.

       

      (c)
        Secured Party may
        purchase Collateral (1) at a public disposition or (2) if the Collateral
        is of a
        kind that is customarily sold on a recognized market or the subject of widely
        distributed standard price quotations, at a private disposition. 

       

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

      
(d)
        A contract for
        sale, lease, license, or other disposition includes the warranties relating
        to
        title, possession, quiet enjoyment, and the like which by operation of law
        accompany a voluntary disposition of property of the kind subject to the
        contract; provided, however, Secured Party may disclaim or modify such
        warranties (1) in a manner that would be effective to disclaim or modify
        the
        warranties in a voluntary disposition of property of the kind subject to
        the
        contract of disposition, or (2) by communicating to the purchaser a Record
        evidencing the contract for disposition and including an express disclaimer
        or
        modification of the warranties, and provided further that a Record is sufficient
        to disclaim such warranties if such Record indicates “There is no warranty
        relating to title, possession, quiet enjoyment, or the like in this disposition”
or uses words of similar import. 

       

      (e)
        Prior to a
        disposition of Collateral, Secured Party shall give Debtor, and any other
        parties required to receive notice under Article 9 of the UCC, notification
        as
        required under Article 9 of the UCC before a sale, lease, license, or other
        disposition of Collateral. 

      

      6.06
Additional
        Provisions Regarding Sales and Other
        Dispositions. In the event that Secured Party shall sell or
        otherwise dispose of the Collateral, or any part thereof in accordance with
        this
        Agreement, the following additional provisions shall be applicable to such
        sale
        or other disposition: 

       

      (a)
        Such sale or other disposition may be at public or private
        sale (or at any broker’s board or on any securities exchange) for cash, upon
        credit or for future delivery as Secured Party shall deem appropriate. Secured
        Party shall be authorized at any such sale (if Secured Party deems it advisable
        to do so with regard to any type or item of Collateral) to restrict the
        prospective bidders or purchasers to Persons who will represent and agree
        that
        they are purchasing the Collateral for their own use (or for their own account
        for investment, as applicable) and not with a view to the distribution or
        sale
        thereof, and upon consummation of any such sale, Secured Party shall have
        the
        right to assign, transfer and deliver to the purchaser or purchasers thereof
        the
        Collateral so sold. Each such purchaser at any such sale shall hold the property
        sold absolutely, free from any claim or right on the part of Debtor, and
        Debtor
        hereby waives (to the extent permitted by law) all rights of redemption,
        stay
        and appraisal which Debtor now has or may at any time in the future have
        under
        any rule of law or statute now existing or hereafter enacted. Secured Party
        shall give Debtor at least ten (10) days’ written notice (which Debtor agrees is
        reasonable notice) of Secured Party’s intention to make any sale of Collateral
        owned by Debtor. Such notice, in the case of a public sale, shall state the
        time
        and place for such sale and, in the case of a sale at a broker’s board or on a
        securities exchange, shall state the board or exchange at which such sale
        is to
        be made and the day on which the Collateral, or portion thereof, will first
        be
        offered for sale at such board or exchange. Any such public sale shall be
        held
        at such time or times within ordinary business hours and at such place or
        places
        as Secured Party may fix and state in the notice of such sale, and Secured
        Party
        shall not be obligated to make any sale of any Collateral if Secured Party
        shall
        determine not to do so, regardless of the fact that notice of sale of such
        Collateral shall have been given, and Secured Party may, without notice or
        publication, adjourn any public or private sale or cause the same to be
        adjourned from time to time by announcement at the time and place fixed for
        sale, and such sale may, without further notice to Debtor or anyone else,
        be
        made at the time and place to which the same was so adjourned. 

       

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

       

      (b)
        In case any sale
        of all or any part of the Collateral is made on credit or for future delivery,
        the Collateral so sold may be retained by Secured Party until the sale price
        is
        paid by the purchaser or purchasers thereof, but Secured Party shall not
        incur
        any liability in case any such purchaser or purchasers shall fail to take
        up and
        pay for Collateral so sold and, in case of any such failure, such of the
        Collateral may be sold again upon notice to Debtor as set forth in this Section.
        

       

      (c)
        At any public
        sale, Secured Party may bid for or purchase, free (to the extent permitted
        by
        law) from any right of redemption, stay or appraisal on the part of Debtor
        (all
        said rights being also hereby waived and released to the extent permitted
        by
        law), the Collateral or any part thereof offered for sale and may make payment
        on account thereof by using any claim then due and payable to Secured Party
        from
        Debtor as a credit against the purchase price, and Secured Party may, upon
        compliance with the terms of sale, hold, retain and dispose of such property
        without further accountability to Debtor therefor. 

       

      (d)
        For purposes of
        any sale of Collateral in accordance with this Agreement, a written agreement
        to
        purchase the Collateral or any portion thereof shall be treated as a sale
        thereof. Secured Party shall be free to carry out such sale pursuant to such
        agreement, and Debtor shall not be entitled to the return of the Collateral
        or
        any portion thereof subject thereto, notwithstanding the fact that after
        Secured
        Party shall have entered into such an agreement, all Events of Default shall
        have been remedied and the Secured Obligations paid in full. 

       

      (e)
        Upon any sale of
        Collateral by Secured Party (including a sale pursuant to a power of sale
        granted by statute or under a judicial proceeding), the receipt of Secured
        Party
        or of the officer making the sale shall be a sufficient discharge to the
        purchaser or purchasers of the Collateral being 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 Secured Party or such officer or be answerable
        in
        any way for the misapplication thereof. 

      

      ARTICLE
        VII 

       

      POWER
        OF ATTORNEY 

       

      7.01
Power
        of Attorney; Collections by Secured
        Party. 

       

      (a)
        Debtor hereby appoints Secured Party as Debtor’s
        attorney-in-fact, with power of substitution, which appointment is irrevocable
        and coupled with an interest, to do each of the following in the name of
        Debtor
        or in the name of Secured Party or 

       

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

       

      otherwise,
        for the use and benefit of Secured Party, but at the
        cost and expense of Debtor, and with or without notice to Debtor: (i) notify
        the
        Account Debtors and insurers to make payments directly to Secured Party,
        and to
        take control of the cash and non-cash Proceeds of any Collateral or insurance;
        (ii) renew, extend or compromise any of the Collateral or deal with the same
        as
        Secured Party may deem advisable; (iii) release, exchange, substitute, or
        surrender all or any part of the Collateral; (iv) remove from Debtor’s places of
        business all Collateral Records without cost or expense to Secured Party;
        (v)
        make such use of Debtor’s places of business as may be reasonably necessary to
        administer, control and collect the Collateral; (vi) repair, alter or supply
        Goods, if any, necessary to fulfill in whole or in part the purchase order
        or
        similar order of any Account Debtor; (vii) demand, collect, give receipt
        for,
        and give renewals, extensions, discharges and releases of any of the Collateral;
        (viii) institute and prosecute legal and equitable proceedings to enforce
        collection of, or realize upon, any of the Collateral; (ix) settle, renew,
        extend, compromise, compound, exchange or adjust claims with respect to any
        of
        the Collateral or any legal proceedings brought with respect thereto; (x)
        indorse the name of Debtor upon any item of payment relating to the Collateral
        or upon any proof of claim in bankruptcy against any Collateral; and (xi)
        institute and prosecute legal and equitable proceedings to reclaim any of
        the
        Goods sold to any Account Debtor obligated on an Account at a time when such
        Account Debtor was insolvent. Secured Party agrees that it shall not exercise
        any power or authority granted under this power of attorney unless an Event
        of
        Default has occurred and is continuing. The foregoing power of attorney is
        in
        addition to any other power of attorney that may be granted to Secured Party
        under any Finance Document. 

       

      (b)
        NONE OF SECURED PARTY OR ITS AFFILIATES, OFFICERS, DIRECTORS,
        EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO DEBTOR FOR ANY
        ACT
        OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT
        OF
        DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
        AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR ANY
        PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES. 

       

      ARTICLE
        VIII 

      GENERAL
        PROVISIONS 

       

      8.01
Remedies
        Cumulative. Upon the
        occurrence and during the continuance of any Event of Default, and in addition
        to such other rights and remedies as Secured Party may have under other
        provisions of this Agreement or any other Finance Document, Secured Party
        may
        exercise any one or more of its rights and remedies under common or statutory
        law. No failure or delay on the part of Secured Party in exercising any right,
        power or privilege hereunder or under any other Finance Document and no course
        of dealing between Debtor or any other Obligor or other Person and Secured
        Party
        shall operate as a waiver thereof; nor shall any single or partial exercise
        of
        any right, power or privilege hereunder or under any other Finance Document
        preclude any other or further exercise thereof or the exercise of any other
        right, power or privilege hereunder or thereunder. The rights and remedies
        provided in this Agreement are cumulative and not exclusive of any rights
        or
        remedies which Secured Party would otherwise have and may be exercised
        simultaneously. No notice to or demand on Debtor in any case shall entitle
        Debtor or any other obligor or any other Person to any other or further notice
        or demand in similar or other circumstances or constitute a waiver of the
        rights
        of Secured Party to any other or further action in any circumstances without
        notice or demand. 

       

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

       

      ARTICLE
        IX 

      MISCELLANEOUS

       

      9.01
        Each of the Debtors agrees to pay all expenses, including
        reasonable attorney's fees and charges (including time charges of attorneys
        who
        are employees of Secured Party) paid or incurred by Secured Party in endeavoring
        to collect the Secured Obligations of such Debtor, or any part thereof, and
        in
        enforcing this Agreement against such Debtor, and such obligations will
        themselves be Secured Obligations. 

       

      9.02
        No delay on the part of Secured Party in the exercise of any
        right or remedy shall operate as a waiver thereof, and no single or partial
        exercise by Secured Party of any right or remedy shall preclude other or
        further
        exercise thereof or the exercise of any other right or remedy. 

       

      9.03
        This Security Agreement shall remain in full force and effect
        until all Secured Obligations have been paid in full. If at any time all
        or any
        part of any payment theretofore applied by the Secured Party to any of the
        Secured Obligations is or must be rescinded or returned by the Secured Party
        for
        any reason whatsoever (including the insolvency, bankruptcy or reorganization
        of
        any Debtor), such Secured Obligations shall, for the purposes of this Agreement,
        to the extent that such payment is or must be rescinded or returned, be deemed
        to have continued in existence, notwithstanding such application by the Secured
        Party, and this Agreement shall continue to be effective or be reinstated,
        as
        the case may be, as to such Secured Obligations, all as though such application
        by the Secured Party had not been made. 

       

      9.04
        The rights and privileges of Secured Party hereunder shall
        inure to the benefit of its successors and assigns. 

       

      9.05
Secured
        Party’s Rights to Release Obligors;
        etc. Secured Party may take or release other security, may release
        any party primarily or secondarily liable for any Secured Obligations or
        other
        indebtedness to Secured Party, may grant extensions, renewals or indulgences
        with respect to such Secured Obligations or other indebtedness and may apply
        any
        other security therefor held by Secured Party to the satisfaction of such
        Secured Obligations or other indebtedness, all without prejudice to any of
        Secured Party’s rights under this Agreement. 

       

      9.06
Notices.
        Any notices, consents,
        waivers or other communications required or permitted to be given under the
        terms of this Agreement must be in writing and will be deemed to have been
        delivered (i) upon delivery, when delivered personally; (ii) upon receipt,
        when
        sent by facsimile (provided a confirmation of transmission is mechanically
        or
        electronically generated and kept on file by the sending party); or (iii)
        one
        (1) day after deposit with a nationally recognized overnight delivery service,
        so long as it is properly addressed. The addresses and facsimile numbers
        for
        such communications shall be: 

       

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

       

      If
        to any Debtor: 

       

      Joel
        Sens 

      Seawright
        Holdings 

      600
        Cameron St 

      Alexandria,
        VA 22314 

      Telephone:
        703-340-1629 

      Facsimile:
        703-576-9888 

       

      If
        to the Secured Party: 

       

      Dutchess
        Capital Management, LLC 

      Douglas
        Leighton 

      50
        Commonwealth Ave, Suite 2 

      Boston,
        MA 02116 

      Telephone:
        (617) 301-4700 

      Facsimile:
        (617) 249-0947 

       

      9.07
Term.
        The term of this Agreement shall
        commence with the date of this Agreement and shall continue in full force
        and
        effect and be binding upon Debtor until all Secured Obligations of Debtor
        to
        Secured Party shall have been fully paid and satisfied and Secured Party
        shall
        have given Debtor written notice of the termination of this Agreement (excluding
        provisions that by their terms survive termination of other provisions of
        this
        Agreement or survive the termination of the security interest created under
        this
        Agreement). Secured Party shall not be obligated to give Debtor written notice
        of termination of this Agreement, or to terminate any financing statements
        or
        other Lien Notices, until all Secured Obligations of Debtor to Secured Party
        shall have been fully paid and satisfied and there is no commitment on the
        part
        of Secured Party to make an advance, incur an obligation or otherwise give
        value, and Debtor shall have given Secured Party a written demand requesting
        the
        termination of this Agreement and any financing statements at which time
        Secured
        Party shall execute and deliver such documents, at Debtor’s expense, as are
        necessary to release Secured Party’s liens in the Collateral. Notwithstanding
        anything to the contrary in this Agreement or any other Finance Documents,
        this
        Agreement shall continue to be effective or be reinstated, as the case may
        be,
        if at any time any amount received by Secured Party in respect of the Secured
        Obligations is rescinded or must otherwise be restored or returned by Secured
        Party upon the insolvency, bankruptcy, dissolution, liquidation or
        reorganization of Debtor or upon the appointment of any intervenor or
        conservator of, or trustee or similar official for, Debtor or any substantial
        part of Debtor’s assets, or otherwise, all as though such payments had not been
        made. 

       

      9.08
Further
        Assurances. Debtor shall execute
        and deliver to Secured Party such further assurances and take such other
        further
        actions as Secured Party may from time to time request to further the intent
        and
        purpose of this Agreement and to maintain and protect the rights and remedies
        intended to be created in favor of Secured Party under this Agreement. 

       

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

       

      9.09
Amendments,
        Waivers and Consents; Successors and
        Assigns. Neither this Agreement nor any other Finance Document nor
        any of the terms hereof or thereof may be amended, modified, changed, waived,
        discharged or terminated, nor shall any consent be given, unless such amendment,
        modification, change, waiver, discharge, termination or consent is in writing
        signed by Secured Party and Debtor. This Agreement shall create a continuing
        security interest in the Collateral and shall (i) remain in full force and
        effect until the Secured Obligations have been fully paid and satisfied and
        this
        Agreement has been terminated, (ii) be binding upon Debtor and its successors
        and assigns, and (iii) inure, together with the rights and remedies of Secured
        Party hereunder, to the benefit of Secured Party and Secured Party’s successors,
        transferees and assigns. This Agreement may not be assigned by Debtor without
        prior written consent of Secured Party, which consent may be withheld in
        Secured
        Party’s sole discretion. 

       

      9.10
Entire
        Agreement. This Agreement and
        any other Finance Documents are a complete and exclusive expression of all
        the
        terms of the matters expressed therein, and all prior agreements, statements,
        and representations, whether written or oral, which relate thereto in any
        way
        are hereby superseded and shall be given no force and effect. No promise,
        inducement, or representation has been made to Debtor which relates in any
        way
        to the matters expressed in this Agreement and in any other Finance Documents,
        other than what is expressly stated herein and in such Finance Documents.

       

      9.11
No
        Strict Construction. The parties
        hereto have participated jointly in the negotiation and drafting of this
        Agreement. In the event of any ambiguity or question of intent or interpretation
        arises, this Agreement shall be construed as if drafted jointly by the parties
        hereto and no presumption or burden of proof shall arise favoring or disfavoring
        any party by virtue of the authorship of any provisions of this Agreement.
        

       

      9.12
Governing
        Law. This Agreement and all
        related instruments and documents and the rights and obligations of the parties
        hereunder and thereunder shall, in all respects, be governed by, and construed
        in accordance with, the internal laws of the Commonwealth of Massachusetts,
        without regard to conflicts of law principles, regardless of the location
        of the
        Collateral, excepting, however, that the Uniform Commercial Code (or decisional
        law) of a jurisdiction other than the Commonwealth of Massachusetts may provide
        the method of perfection, the effect of perfection or non-perfection, or
        the
        priority of liens and security interests created under this Agreement. 

       

      9.13
DISPUTES
        SUBJECT TO ARBITRATION. The
        parties to this Agreement will submit all disputes arising under it to
        arbitration in Boston, Massachusetts before a single arbitrator of the American
        Arbitration Association (“AAA”). The arbitrator shall be selected by application
        of the rules of the AAA, or by mutual agreement of the parties, except that
        such
        arbitrator shall be an attorney admitted to practice law in the Commonwealth
        of
        Massachusetts. No party to this agreement will challenge the jurisdiction
        or
        venue provisions as provided in this section. Nothing in this section shall
        limit the Secured Party’s right to obtain an injunction for a breach of this
        Agreement from a court of law. 

       

      
        
           

        

        
          19

          
            

          

        

        
           

        

      

       

      9.14
Severability.
        Any provision of this
        Agreement, or of any other Finance Document, that is prohibited by, or
        unenforceable under, the laws of any jurisdiction shall, as to such
        jurisdiction, be ineffective to the extent of such prohibition or
        unenforceability, without invalidating the remaining provisions of this
        Agreement, and any such prohibition or unenforceability in any jurisdiction
        shall not invalidate or render unenforceable such provision in any other
        jurisdiction. To the extent permitted by applicable law, Debtor hereby waives
        any provision of law which renders any provision of this Agreement or any
        other
        Finance Document prohibited or unenforceable in any respect. 

       

      9.15
Counterparts.
        This Agreement may be
        executed in counterparts and each shall be effective as an original, and
        a
        photocopy, facsimile or telecopy of this executed Agreement shall be effective
        as an original. In making proof of this Agreement, it shall not be necessary
        to
        produce more than one counterpart, photocopy, facsimile, or telecopy of this
        executed Agreement. 

       

      9.16
Time.
        Time is of the essence of this
        Agreement. 

       

      [SIGNATURE
        PAGE FOLLOWS] 

       

      
        
           

        

        
          20

          
            

          

        

        
           

        

      

       

      IN
        WITNESS WHEREOF, and intending to be legally
        bound hereby, each Debtor has executed this Agreement as of the date first
        above
        written. 

       

                          DEBTOR:
        

      

                          SEAWRIGHT
        HOLDINGS,
        INC. 

       

                          By:

                             
        Name: 

                             
        Title: 

       

       

       

       

                          SECURED
        PARTY: 

       

       

                          DUTCHESS
        PRIVATE
        EQUITIES FUND, LTD 

       

                          By:

                             
        Name: 

                             
        Title: 

       

      
 

      
        
           

        

        
          21

          
            

          

        

        
           

        

      

      

      LIST
        OF SCHEDULES 

       

      Schedule
        2.01(d) (Commercial Tort claims) 

       

      Schedule
        2.01(q) (Equity Interests) 

       

      Schedule
        2.02 (Deposit Accounts) 

       

      Schedule
        3.01 (Designated Locations) 

       

      Schedule
        3.04 (Tangible Collateral) 

       

      Schedule
        3.06 (Leases) 

       

      Schedule
        3.07 (Permitted Liens) 

       

      Schedule
        3.08 (Subsidiaries) 

       

      

      
        
           

        

        
          22

          
            

          

        

        
           

        

      

       

      Schedule
        2.01(d) 

       

      Commercial
        Tort claims

       

      

       

      None

       

       

      
        
           

        

        
          23

          
            

          

        

        
           

        

      

      

       

      Schedule
        2.01(q) 

       

      Equity
        Interests 

      

        
          	
                  Issuer
                    

                	
                  Class
                    of Stock 

                	
                  Certificate
                    No(s) 

                	
                  Number
                    of Shares 

                	
                  Percentage
                    of all Issued Equity Interests of Issuer

                
	 	
                  Common

                	 	 	
                  100%
                    

                

        

      

       

      
        
           

        

        
          24

          
            

          

        

        
           

        

      

      
 

       

      Schedule
        2.02 

      Intentionally
        Omitted 

       

      
        
           

        

        
          25

          
            

          

        

        
           

        

      

      

       

      Schedule
        3.01 

      Designated
        Locations 

      

        NAME                                                                                                                                                                  
MAILING
          ADDRESS 

      

       

       

      
        
           

        

        
          26

          
            

          

        

        
           

        

      

       

      Schedule
        3.04 

       

      Tangible
        Collateral 

       

      None

       

       

      
        
           

        

        
          27

          
            

          

        

        
           

        

      

       

      Schedule
        3.06 

       

      Leases

       

      
        
           

        

        
          28

          
            

          

        

        
           

        

      

      

       

      Schedule
        3.07 

       

      Permitted
        Liens 

      

      
        
           

        

        
          29

          
            

          

        

        
           

        

      

       

      Schedule
        3.08 

       

      Subsidiaries

       

       

       

      30QuickLinks
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PARAMOUNT ACQUISITION CORP.
  787 7th Avenue
  New York, NY 10019    
    

June 15,
2007 

Mr. Chuck
Kelly

c/o B.J.K. Inc.

750 Park Place

Long Beach, NY 11561 

Dear
Mr. Kelly: 

        Paramount
Acquisition Corp., a Delaware corporation ("Paramount"), and B.J.K. Inc., a New York corporation d/b/a Chem Rx ("Chem Rx"), are parties to a Stock Purchase Agreement,
dated as of June 1, 2007 (the "Purchase Agreement"). Pursuant to the Purchase Agreement, Paramount will acquire 100% of the Capital Stock of Chem Rx and Chem Rx New Jersey, LLC ("ChemRx
NJ"). This Employment Letter sets forth the terms and conditions of your employment with Paramount and its subsidiaries and affiliates from time to time, including, without limitation, Chem Rx and
ChemRx NJ (collectively, the "Group"). 

        1.    Employment.    Unless your employment is terminated in accordance with Section 6 below, you agree to be
employed, and Paramount agrees to employ you, during the period commencing upon the closing date of the transactions contemplated by the Purchase Agreement (the "Effective Date") and ending on
December 31, 2010. Such period is referred to as the "Term". The portion of the Term during which you are actually employed by Paramount is referred to as the "Employment Period". Should the
Purchase Agreement be terminated pursuant to Section 10.1 thereof, this Employment Letter shall be null and void and of no further force and effect. Each party to this Employment Letter agrees
that it
has no claims, rights or obligations against any other party by virtue of this Employment Letter unless and until the closing of the transactions contemplated by the Purchase Agreement occurs. 

        2.    Position; Duties.    

        (a)   You
will be employed by Paramount as its Chief Financial Officer. In such capacity, you will report to the Chief Operating Officer of Paramount, and shall have such
authority and perform such duties customary for a chief financial officer of a Delaware corporation or as may be assigned by the Chief Executive Officer consistent with your position as Chief
Operating Officer. You agree to comply with such lawful policies of Paramount as may be adopted from time to time. During the Employment Period, your principal place of employment will be at the
Group's headquarters in Long Beach, New York. 

        (b)   You
agree to use your best efforts, and devote substantially all of your working time, to perform such duties faithfully, and while you remain employed, not to engage in
any other business activity that is in conflict with your duties and obligations to the Group. 

        Notwithstanding
the foregoing, you may engage in the activities of (i) serving as an officer or director of, or otherwise participating in, non-profit educational,
welfare, social, religious and civil organizations, and (ii) managing personal and family investments, provided that such activities set forth in clauses (i) and (ii) do not
materially interfere with the performance and fulfillment of your duties and responsibilities hereunder. 

        3.    Base Salary; Bonus.    

        (a)   During
the Employment Period, Paramount will pay you a base salary ("Base Salary") at an annual rate of $265,000, which will be reviewed and subject to upward adjustment
based on the recommendation of the Board of Directors of Paramount (the 

1

 

"Board
of Directors") (or a committee thereof) and the review and approval of the members of the Board of Directors, and payable in accordance with Paramount's normal payroll practices. 

        (b)   For
each calendar year that ends during the Employment Period beginning with the 2008 calendar year, you will have the opportunity to earn a bonus (a "Bonus") of up to
$125,000. The amount of your Bonus, if any, for any calendar year, shall be determined in the sole discretion of the Board of Directors or a committee thereof. Except as set forth in Section 6,
to receive a Bonus, you must be
employed on the last day of the calendar year for which a Bonus is awarded. Each Bonus shall be paid 90 days after the end of the applicable calendar year. 

        4.    Benefits; Reimbursement of Expenses.    

        (a)    Benefits.    You shall participate in all medical, dental, pension and other benefit plans available to other
senior executives of Paramount generally, as the Board of Directors shall adopt consistent with industry practice as of the Effective Date or as soon thereafter as the Board of Directors may determine
in its reasonable discretion, provided that until such time as medical and dental insurance is in place, Paramount agrees to reimburse or pay on your behalf premiums for "COBRA" coverage to which you
may be entitled. Nothing in this Employment Letter shall restrict Paramount's ability to change or terminate any or all of its benefit plans and programs from time to time; nor shall anything in this
Employment Letter prevent any such change from affecting you. If you die during the Employment Period, Paramount will pay the COBRA premiums for the continuation of medical insurance coverage for your
spouse for a period of 12 months following the date of death or such shorter period as your spouse may be eligible for COBRA coverage (it being understood that to the extent such payment would
constitute a taxable benefit, Paramount may make applicable withholding with respect to such taxable benefit from any amounts otherwise payable to your estate upon your death). 

        (b)    Reimbursement of Expenses.    Paramount shall pay or reimburse you for all reasonable
out-of-pocket expenses incurred by you during the Employment Period. You shall submit proof of expenses (including, in the case of reimbursement, proof of payment) in
conformity with the regular policies and practices of Paramount for its executive employees, but in no event shall you be permitted to submit a claim for reimbursement more than three years after your
separation from service with the Group. 

        5.    Vacation.    You shall be entitled to such reasonable paid vacation time as may be compatible with your
positions with Paramount and determined by the Board of Directors from time to time, giving due regard to the preservation of your health and also to the reasonable scheduling needs of Paramount in
connection with your employment. 

        6.    Termination of Employment.    

        (a)    Death.    Your employment will terminate upon your death. Your beneficiaries will be entitled to (i) any
earned but unpaid Base Salary, (ii) any Bonus earned with respect to a completed period but not yet paid, (iii) unreimbursed business expenses submitted in accordance with
paragraph 4(b), and (iv) any amounts accrued and payable under the terms of any of the Group's benefit plans (collectively the "Accrued Obligations"). In addition, your beneficiaries
will be entitled to the Prorated Bonus. For purposes of this Employment Letter, "Prorated Bonus" means the Bonus to which you would have been entitled had you remained employed until the end of the
calendar year in which such termination occurs, multiplied by a fraction, the numerator of which is the number of days that you were employed during such calendar year, and the denominator of which is
365. Any payments under this provision shall be made 30 days after the date of your death, except that payment of the Prorated Bonus, if any, shall be made 90 days after 

2

 

the
end of the calendar year in which termination occurs and amounts payable under any of the Group's benefit plans shall be paid in accordance with the terms of such plans. 

        (b)    Disability.    Paramount may terminate your employment by reason of your Disability. "Disability" means your
inability to perform your essential job functions by reason of a physical or mental impairment for a period of 120 consecutive days (or an aggregate of 180 days) within a period of 365
consecutive days as determined by an independent physician reasonably approved by you (or your representative) and Paramount. Upon such termination, you will be entitled to the Accrued Obligations and
the Prorated Bonus. Any payments to you under this provision shall be made 30 days after the date on which your employment is terminated, except that payment of the Prorated Bonus, if any,
shall be made 90 days after the end of the calendar year in which termination occurs and amounts payable under any of the Group's benefit plans shall be paid in accordance with the terms of
such plans. Payment of the Prorated Bonus shall be conditional upon your continuing compliance, other than any isolated, insubstantial and inadvertent failure to comply that is not in bad faith, with
the restrictive covenants contained in Section 7, as well as your execution, delivery and nonrevocation of release of claims in favor of Paramount, in substantially the form attached as
Exhibit A (the "Release"). If you fail to comply with the restrictive covenants set forth in Section 7 or to timely deliver the Release so that the Revocation Period (as such term is
defined in the Release) has expired before the date that the Prorated Bonus would otherwise be paid under this Section 6(b), you will not be entitled to receive the Prorated Bonus. 

        (c)    Termination for Cause.    Paramount may terminate your employment during the Term for Cause. "Cause" means your
(i) commission of an act that constitutes common law fraud or a felony, commission of any other crime involving moral turpitude, or commission of any other tortious or unlawful act causing
material harm to the business, standing or reputation of the Group without the good faith belief that such conduct was in the best interests of Paramount, (ii) material breach of this
Employment Letter, after Paramount has given you 10 days written notice and an opportunity to cure such breach to the extent curable, (iii) your willful failure or refusal to perform
your material duties or obligations under this Employment Letter, including, without limitation, willful refusal to abide by the directions of the Board of Directors or any reasonable policy adopted
by the Board of Directors, in each case after Paramount has given you 10 days written notice and an opportunity to cure such failure or refusal to the extent curable, (iv) willful
misconduct or gross negligence in the performance of your duties under this Employment Letter and (v) material misappropriation or embezzlement of any property of the Group. Paramount shall not
characterize any termination of your employment as a
termination for Cause unless (i) you are given written notice of the conduct that constitutes Cause and (ii) you are given an opportunity to be heard before the Board of Directors with
counsel of your choosing. If your employment is terminated for Cause, you will only be entitled to the Accrued Obligations. 

        (d)    Termination by Paramount without Cause.    Paramount may terminate your employment during the Term for any or
no reason. If such termination is not by the Company for Cause or by reason of your death or Disability or if your employment is terminated without Cause upon expiration of the Term, then, in addition
to the Accrued Obligations, and in lieu of any other severance benefits otherwise payable under any Paramount policy or otherwise, subject to the limitations set forth below, the Company shall pay or
provide you: (1) an amount equal to the sum of your annual Base Salary, payable over the one year period following termination of your employment in equal monthly installments paid on the first
of each month beginning with the second month following the date of termination; (2) the Prorated Bonus, which shall be paid on the 90th day after the end of the year in which your termination
occurs; and (3) one year of continued medical, dental and other benefits that may be in effect on the date of termination of your employment, provided that if Paramount's plans do not permit
you to participate on this 

3

 

basis,
Paramount will provide such benefits outside of the plans and provided that if you become employed during this period and are eligible for comparable coverage from your new employer, Paramount
shall cease providing such benefits. Your right to the payments and benefits set forth in clauses (1) through (3) above (collectively the "Severance Benefits") shall be conditional upon
your continuing compliance, other than any insubstantial failure to comply that is not in bad faith, with the restrictive covenants contained in Section 7, as well as your execution, delivery
and nonrevocation of the Release. If you fail to comply with the restrictive covenants set forth in Section 7 or to timely deliver the Release so that the Revocation Period (as such term is
defined in the Release) has expired before the earliest date that the applicable Severance Benefits would otherwise be paid under this Section 6(d), you will forfeit all Severance Benefits
(including the provision of benefits under clause (3) above). If you are eligible for cash payments under clause (1) and you are a "specified employee" under Section 409A of the
Internal Revenue Code of 1986, as amended and the regulations promulgated thereunder (collectively, the "Code"), any portion of the payments that either do not qualify under the
"short-term deferral rule" or exceed two times the lesser of (A) your "annualized compensation" for the calendar year preceding your termination of employment (in each case, as
those terms are defined under Section 409A of the Code), or (B) the maximum amount that may be taken into account under Section 401(a)(17) of the Code for the year in which you
terminate employment, shall be delayed until the first day of the seventh month following your termination of employment, or if earlier, your death. If you are eligible for cash payments under clauses
(2) and/or (3), such payments shall be made at the times as set forth above under clauses (2) and/or (3), respectively, except that, to the extent necessary to avoid adverse consequences
to you under Section 409A of the Code, any such payments shall be delayed, if later than the payment dates set forth in clauses (2) and (3) above, until the first day of the
seventh month following your termination of employment, or if earlier, your death. Furthermore, the Company shall not be required to make, and you shall not be required to receive, any severance or
other payment or benefit under Section 6 hereof at such time as the making of such payment or the provision of such benefit or the receipt thereof shall result in a tax to you arising under
Section 409A of the Code. The parties agree that for purposes of Code Section 409A and Treasury Regulation 1.409A-2(b)(2)(iii), amounts payable under clause (1)
shall be treated as a right to a series of separate payments. 

        (e)    Termination by You for Good Reason.    You may terminate your employment during the Term for Good Reason. "Good
Reason" means (i) any material breach by Paramount of its obligations under this Employment Letter, (ii) any material diminution of your duties, reporting lines or authority or
(iii) a relocation of your principal place of employment more than 50 miles from its location in Long Beach, New York as of the date hereof. However, none of the foregoing events or conditions
will constitute Good Reason unless (w) you provide the Company with a written objection of the event or condition within 30 days following the initial existence of the condition,
(x) Paramount does not reverse or otherwise cure the event or condition to the extent curable within 30 days of receiving that written objection (y) you resign your employment
within 30 days following the expiration of that cure period, and (z) your termination of employment occurs within two years following the initial existence of one or more of the
conditions described in the previous sentence. If you terminate your employment for Good Reason, you shall be treated as if your employment were terminated by Paramount without Cause during the Term
pursuant to Section 6(d) above. Your right to such Severance Benefits shall be subject to the same conditions as set forth in Section 6(d) regarding compliance with the restrictive
covenants and execution, delivery and nonrevocation of the Release. 

        (f)    Termination by You without Good Reason.    You may terminate your employment during the Term for any or no
reason. If such termination is without Good Reason, you must first provide Paramount advance written notice of at least 120 days. Upon such termination, you will only be entitled to the Accrued
Obligations. 

4

 

        7.    Restrictive Covenants.    

        (a)    Executive's Importance to the Group and the Effect of this Section 7.    You acknowledge that in the
course of your involvement in the Group's activities, you have had and will continue to have access to Trade Secrets or other Confidential Information and that you have profited and will continue to
profit from the goodwill associated with the Group. In view of your access to the Trade Secrets or other Confidential Information and your importance to the Group, if you compete with the Group either
during or for a period of time following the Term, the Group will likely suffer significant harm. In return for the benefits you will receive from Paramount under this Agreement and to induce
Paramount to enter into this Employment Letter and the Purchase Agreement and consummate transactions contemplated thereby, and in light of the potential harm that you could cause to the Group, you
agree to the provisions of this Section 7. You also acknowledge that Paramount would not have entered into the Purchase Agreement or this Employment Letter, if you did not agree to this
Section 7. This Section 7 limits your ability to earn a livelihood in a Competitive Enterprise (as defined below). You acknowledge, however, that complying with this Section 7
will not result in severe economic hardship for you or your family. 

        (b)    Non-Competition.    During the period commencing on the Effective Date and ending on the second
anniversary following the termination of your employment for any reason (whether
during or upon expiration of the Term) (the "Restricted Period"), you will not (except as an officer, director, stockholder, member, manager, employee, agent or consultant of Paramount) directly or
indirectly, own, manage, operate, join, or have a financial interest in, control or participate in the ownership, management, operation or control of, or be employed as an employee, agent or
consultant, or in any other individual or representative capacity whatsoever, or use or permit your name to be used in connection with, or be otherwise connected in any manner with any business or
enterprise engaged in the institutional pharmacy business in any state in the United States in which the Group is then engaged or planning to engage in the institutional pharmacy business (any such
business or enterprise, a "Competitive Enterprise"); provided that the foregoing restriction shall not be construed to prohibit the ownership by you together with your affiliates and associates, as
the case may be, of not more than two percent (2%) of any class of securities of any corporation that is engaged in any of the foregoing businesses, having a class of securities registered pursuant to
the Securities Exchange Act of 1934, as amended, which securities are publicly owned and regularly traded on any national exchange or in the over-the-counter market, provided
further, that such ownership represents a passive investment and that you together with your affiliates and associates, either directly or indirectly, do not manage or exercise control of any such
corporation, guarantee any of its financial obligations, otherwise take part in its business other than exercising your rights as a shareholder, or seek to do any of the foregoing; and provided
further, that if any Severance Benefits due to you are not paid when due, your obligations under this paragraph 7(b) shall terminate upon failure of the Company to cure such
non-payment after thirty (30) days' prior written notice. Notwithstanding anything to the contrary in this Agreement or any other document or instrument, except as expressly set
forth in the preceding sentence, no breach or failure to perform on the part of the Paramount or any of its affiliates shall relieve you of your obligations under this Section 7. 

        (c)    Non-Solicitation.    During the period commencing on the Effective Date and ending on the third
anniversary following the termination of your employment for any reason (whether during or upon expiration of the Term), you agree to refrain from (i) contacting any of the Group's clients or
customers, or any prospective client or customer, for the purpose of soliciting such client or customer to transact business with a Competitive Enterprise or reduce or refrain from doing any business
with the Group, (ii) transacting business with any such client or customer that would cause you to be engaged in a Competitive Enterprise or to cause such client or customer to reduce or
refrain from doing any business with the Group or (iii) interfering with or damaging any 

5

 

relationship
between the Group and any such client or customer. You further agree that during the Restricted Period, you shall not, directly or indirectly, (x) solicit or influence any
individual who is an employee or consultant of the Group or was an employee or consultant of the Group during the Employment Period or within 12 months before the date of termination of the
Employment Period to terminate his or her employment or consulting relationship with the Group or to apply for or accept employment with a Competitive Enterprise or (y) employ or retain any
such individual. 

        (d)    Trade Secrets and Confidential Information.    You recognize that it is in the legitimate business interest of
Paramount to restrict your disclosure or use of Trade Secrets or other Confidential Information (as defined below) relating to the Group for any purpose other than in connection with your performance
of your duties to the Group, and to limit any potential appropriation of such Trade Secrets or other Confidential Information. You therefore agree that all Trade Secrets or other Confidential
Information relating to Paramount, Chem Rx or ChemRx NJ, or any of their respective subsidiaries or businesses
heretofore or in the future obtained by you shall be considered confidential and the proprietary information of Paramount. You shall not use or disclose, or authorize any other person or entity to use
or disclose, any Trade Secrets or other Confidential Information. The term "Trade Secrets or other Confidential Information" shall mean all secret, confidential or proprietary information (whether or
not reduced to writing and whether or not patentable or subject to protection by copyright and including, without limitation, any information conceived, originated, discovered or developed by you)
about the Group and its businesses, and its methods, processes, products and services, past, present or contemplated, including, without limitation: any and all information concerning strategies,
sales, sales volume, sales methods, sales proposals, pricing, customers and prospective customers, identity of key personnel in the employ of customers, customer lists, and prospective customers,
trade secrets, know-how, computer programs, system documentation, system hardware, product hardware, software systems, related software development, manuals, formulae, processes, methods,
machines, compositions, ideas, improvements, inventions, studies, policies, procedures or, information received by the Group from third parties in confidence and other confidential or proprietary
information belonging to the Group or relating to the affairs of the Group. Trade Secrets or other Confidential Information shall also include buying habits and preferences and other
non-public information concerning customers and prospective customers of the Group. Notwithstanding the foregoing, if you are compelled to disclose Trade Secrets or other Confidential
Information by court order or other legal process, to the extent permitted by applicable law, you shall promptly so notify the Group so that it may seek a protective order or other assurance that
confidential treatment of such Trade Secrets or other Confidential Information shall be afforded, and you shall reasonably cooperate with the Group in connection therewith. 

        (e)    Discoveries and Works.    All Discoveries and Works initiated, made or conceived by you, during your employment
by Paramount or any other member of the Group, whether alone or in conjunction with others and whether prior to or following the date hereof, that relate to the activities of the Group shall be owned
exclusively by Paramount, and you hereby assign to Paramount all right, title and interest you may have or acquire in all such Discoveries and Works. The term "Discoveries and Works" includes, by way
of example but without limitation, Trade Secrets or other Confidential Information, patents and patent applications, trademarks and trademark registrations and applications, service marks and service
mark registrations and applications, trade names, copyrights and copyright registrations and applications. You shall (a) promptly notify and make full disclosure to Paramount of any Discoveries
and Works, and execute and deliver any documents requested by Paramount to evidence or better assure title to Discoveries and Works in Paramount, as so requested, (b) renounce any and all
claims, including but not limited to claims of ownership and royalty, with respect to all Discoveries and Works and all other property owned or licensed by the Group, (c) assist Paramount in
obtaining, maintaining 

6

 

and
enforcing for itself at its own expense United States and foreign patents, copyrights, trade secret protection or other protection of or rights in any and all Discoveries and Works and
(d) promptly execute, whether during the Employment Period or thereafter, all applications or other endorsements necessary or appropriate to maintain patents and other rights for Paramount and
to protect the title of Paramount, including but not limited to assignments of such patents and other rights. You acknowledge that all Discoveries and Works shall be deemed "works made for hire" under
the Copyright Act of 1976, as amended, 17 U.S.C. § 101. 

        (f)    No Public Statements or Disparagement.    You agree that you will not make any public statements regarding your
employment or the termination of your employment (for whatever reason) that are not agreed to by Paramount. You agree that, except as required by applicable law or regulation, you will not knowingly
make any public statement that would libel, slander or disparage the Group or any of their respective past or present officers, directors, employees or agents. Paramount agrees that, except as
required by applicable law or regulation, it will not, and it will cause the other members of the Group not to, knowingly make any public statement that would libel, slander or disparage you.
Notwithstanding this Section, nothing contained herein shall limit or impair your or the Group's ability to provide truthful testimony in response to any validly issued subpoena. 

        (g)    Remedies.    You agree that Paramount's remedies at law for any breach or threat of breach by you of any of the
provisions of this Section 7 will be inadequate, and that, in addition to any other remedy to which Paramount may be entitled at law or in equity, Paramount shall be entitled to a temporary or
permanent injunction or injunctions or temporary restraining order or orders to prevent breaches of the provisions of this Section 7 and to enforce specifically the terms and provisions hereof,
in each case without the need to post any security or bond and without the requirement to prove that monetary damages would be difficult to calculate and that remedies at law would be inadequate.
Nothing herein contained shall be construed as prohibiting Paramount from pursuing, in addition, any other remedies available to the Group for such breach or threatened breach. 

        (h)    Enforceability.    It is expressly understood and agreed that although the parties consider the restrictions
contained in this Section 7 hereof to be reasonable for the purpose of preserving the goodwill, proprietary rights and going concern value of the Group, if a final determination is made by an
arbitrator or court, as the case may be, having jurisdiction that the time or territory or any other restriction contained in this Section 7 is an unenforceable restriction on your activities,
the provisions of this Section 7 shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such other extent as such arbitrator or court, as
the case may be, may determine or indicate to be reasonable. Alternatively, if the arbitrator or court, as the case may be, referred to above finds that any restriction contained in this
Section 7 or any remedy provided herein is unenforceable, and such restriction or remedy cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any
of the other restrictions contained therein or the availability of any other remedy. 

        8.    Indemnification.    Paramount shall indemnify and hold you harmless from and against any and all losses, costs,
damages or expenses (including reasonable attorneys' fees) arising out of any claim or legal action brought against you, whether or not ultimately defensible under the applicable "Business Judgment
Rule," relating in any way to the services performed by you as an officer, director or manager for Paramount or any of its subsidiaries, whether arising during or after the Employment Period. This
indemnification provision is intended to be broadly interpreted and to provide for indemnification to the full extent permitted by applicable law. 

        9.    Withholding.    Paramount shall have the right to withhold from any amount payable to you hereunder an amount
necessary in order for Paramount to satisfy any withholding tax obligation it may 

7

 

have
under applicable law. Notwithstanding the foregoing, you are solely responsible for paying all required taxes on any payments or other compensation provided under this Employment Letter. 

        10.    Governing Law.    The terms of this Employment Letter, and any action arising hereunder, shall be governed by
and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within the State. 

        11.    Waiver.    This Employment Letter may not be released, changed or modified in any manner, except by an
instrument in writing signed by you and Paramount. The failure of either party to enforce any of the provisions of this Employment Letter shall in no way be construed to be a waiver of any such
provision. No waiver of any breach of this Employment Letter shall be held to be a waiver of any other or subsequent breach. 

        12.    Assignment.    This Employment Letter is personal to you. You shall not assign this Employment Letter or any of
your rights and/or obligations under this Employment Letter to any other person. Paramount may, without your consent, assign this Employment Letter to any successor to its business. 

        13.    Dispute Resolution.    To benefit mutually from the time and cost savings of arbitration over the delay and
expense of the use of the federal and state court systems, all disputes involving this Employment Letter (except, at the election of Paramount, for injunctive relief with respect to disputes arising
out of an alleged breach or threatened breach of the restrictive covenants contained in Section 7), including claims of violations of federal or state discrimination statutes or public policy,
shall be resolved pursuant to binding arbitration in New York, New York administered by the American Arbitration Association under its Employment Dispute Resolution Rules then in effect. In the event
of a dispute, a written request for arbitration shall be submitted to the New York, New York office of the American Arbitration Association. The award of the arbitrators shall be final and binding and
judgment upon the award may be entered in any court having jurisdiction thereof. Except as otherwise provided above, this procedure shall be the exclusive means of settling any disputes that may arise
under this Employment Letter. For the purpose of any judicial proceeding to enforce such award or incidental to such arbitration or to compel arbitration and for purposes of Section 7 hereof,
the parties hereby submit to the non-exclusive jurisdiction of the Supreme Court of the State of New York, New York County, or the United States District Court for the Southern District of
New York, and agree that service of process in such arbitration or court proceedings shall be satisfactorily made upon it if sent by registered mail addressed to it at the address referred to below in
Section 17. All fees and expenses of the arbitrators and all other expenses of the arbitration, except for attorneys' fees and witness expenses which shall be borne by each party, shall be
shared equally by you and Paramount. However, if in any arbitration proceeding or injunctive action, an award or decision is made in your favor on any material claim, Paramount shall reimburse all of
your costs, including reasonable attorneys' fees, that you incurred in connection with such proceeding or action. You and Paramount agree that there will be no
punitive damages payable as a result of any dispute involving this Employment Letter or otherwise involving your employment and agree not to request punitive damages. 

        14.    No Conflicts.    You represent and warrant to Paramount that your acceptance of employment and the performance
of your duties for the Group will not conflict with or result in a violation or breach of, or constitute a default under any contract, agreement or understanding to which you are or were a party or of
which you are aware and that there are no restrictions, covenants, agreements or limitations on your right or ability to enter into and perform the terms of this Employment Letter. 

        15.    Entire Agreement.    Upon the Effective Date, this Employment Letter supersedes all previous and
contemporaneous communications, agreements and understandings between you Paramount, Chem Rx, ChemRx NJ or any other member of the Group, and constitutes the sole and entire agreement among you and
the Group pertaining to the subject matter hereof. 

8

 

        16.    Counterparts.    This Employment Letter may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by each party and delivered to the other party. 

        17.    Notices.    All notices, requests, demands and other communications under this Employment Letter must be in
writing and will be deemed given (i) on the business day sent, when delivered by hand or facsimile transmission (with confirmation) during normal business hours, (ii) on the business day
after the business day sent, if delivered by a nationally recognized overnight courier or (iii) on the third business day after the business day sent if delivered by registered or certified
mail, return receipt requested, in each case to the following address or number (or to such other addresses or numbers as may be specified by notice that conforms to this Section 17): 

	If to you, to your address then on file with Paramount's payroll department.
	

If to Paramount, to:
	

 	
 	

Paramount Acquisition Corp.

750 Park Place

Long Beach, NY 11561

Attention: Corporate Secretary
	

 	
 	

with a copy to:
	

 	
 	

Paramount Acquisition Corp.

c/o Paramount BioSciences, LLC

787 7th Avenue

48th Floor

New York, NY 10019

Attention: J. Jay Lobell

Facsimile: (212) 580-0801
	

 	
 	

and
	

 	
 	

Covington & Burling LLP

The New York Times Building

620 Eighth Avenue

New York, NY 10018

Attention: Stephen A. Infante, Esq.

Facsimile: (212) 841-1010

[SIGNATURE
PAGE FOLLOWS] 

9

   
        If the foregoing is acceptable to you, kindly sign and return to us one copy of this letter. 

	 	 	Sincerely yours,
	

 	
 	

PARAMOUNT ACQUISITION CORP.
	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

By:	
 	

/s/  J. JAY LOBELL      

	 	 	 	 	Name:	 	J. Jay Lobell
	 	 	 	 	Title:	 	Chief Executive Officer
	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

 	
 	

 	
 	

 
	AGREED TO AND ACCEPTED BY:	 	 	 	 	 	 
	

/s/  CHUCK KELLY      
 Chuck Kelly	
 	

 	
 	

 	
 	

 
	

 	
 	

 	
 	

 	
 	

 

[Signature Page to Employment Letter] 

10

  

 
 

Exhibit A
  
    RELEASE OF EMPLOYMENT CLAIMS    
    

        Chuck Kelly ("Executive"), for and in consideration of the payments and benefits that Executive shall receive under the Employment Agreement between the Executive
and Paramount Acquisition Corp. ("Paramount") dated June 15, 2007 (the "Employment Agreement"), hereby executes the following General Release
("Release") and agrees as follows: 

        1.    Executive,
on behalf of Executive and Executive's agents, assignees, attorneys, successors, assigns, heirs, administrators and executors, does hereby fully and completely
forever release Paramount and its subsidiaries, affiliates, predecessors and successors and all of its past and/or present officers, directors, partners, members, managing members, managers,
executives, agents, representatives, administrators, attorneys, insurers and fiduciaries in their individual and/or representative capacities (hereinafter collectively referred to as the
"Releasees"), from any and all causes of action, suits, agreements, promises, damages, disputes, controversies, contentions, differences, judgments,
claims, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, variances, trespasses, extents, executions and demands of any kind whatsoever, which
Executive or Executive's heirs, executors, administrators, successors and assigns ever had, now have or may have against the Releasees or any of them, in law, admiralty or equity, whether known or
unknown to Executive, for, upon, or by reason of, any matter, action, omission, course or thing whatsoever occurring up to the date this Release is signed by Executive that arises from, in connection
with or in relationship to Executive's employment or other service relationship with Paramount or its affiliates, the termination of any such employment or service relationship and any applicable
employment, compensatory or equity arrangement with Paramount or its affiliates; provided that such released claims shall not include any claims (i) to entitlements under Section 6 of
the Employment Agreement or (ii) for indemnification under Section 12 of the Employment Agreement or the certificate of incorporation, by-laws or other similar organizational
documents of Paramount with regard to Executive's service as an officer of Paramount, (such released claims are collectively referred to herein as the "Released
Claims"). 

        2.    Notwithstanding
the generality of paragraph (1) above, the Released Claims include, without limitation, (a) any and all claims under Title VII of the Civil
Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Civil Rights Act of 1971, the Civil Rights Act of 1991, the Fair Labor Standards Act, the Executive Retirement Income Security
Act of 1974, the Americans with Disabilities Act, the Family and Medical Leave Act of 1993, and any and all other federal, state or local laws, statutes, rules and regulations pertaining to employment
or otherwise, and (b) any claims for wrongful discharge, breach of contract, fraud, misrepresentation or any compensation claims, or any other claims under any statute, rule, regulation or
under the common law, including compensatory
damages, punitive damages, attorney's fees, costs, expenses and all claims for any other type of damage or relief. 

        3.    By
signing this Release, the Executive waives any right that the Executive has or may have had to bring a lawsuit or make any claim against the Releasees based on any
acts or omissions of the Releasees up to the date of the signing of this Release. 

        4.    Executive
represents that he has read carefully and fully understands the terms of this Release, and that Executive has been advised to consult with an attorney and has
had the opportunity to consult with an attorney prior to signing this Release. Executive acknowledges that he is executing this Release voluntarily and knowingly and that he has not relied on any
representations, promises or agreements of any kind made to Executive in connection with Executive's decision to accept the terms of this Release, other than those set forth in this Release. Executive
acknowledges that Executive has been given at least twenty-one (21) days to consider whether Executive wants to sign this Release and that the Age Discrimination in Employment Act
gives Executive the right to revoke this Release within seven 

11

 

(7) days
after it is signed, and Executive understands that he will not receive any payments due him under the Employment Agreement until such seven (7) day revocation period (the
"Revocation Period") has passed and then, only if Executive has not revoked this Release. Upon such revocation, this Release and the severance
provisions of the Employment Agreement shall be null and void and of no further force and effect. To the extent Executive has executed this Release within less than twenty-one
(21) days after its delivery to Executive, Executive hereby acknowledges that his decision to execute this Release prior to the expiration of such twenty-one (21) day period
was entirely voluntary. 

	

 	
 	

 
	 	 	
 Executive
	

 	
 	

 

12

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PARAMOUNT ACQUISITION CORP. 787 7th Avenue New York, NY 10019

Exhibit A RELEASE OF EMPLOYMENT CLAIMS

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