Document:

Exhibit

Exhibit 10.3

    
    

FOURTH AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
dated as of
August 5, 2016
Among
PREFERRED APARTMENT COMMUNITIES OPERATING PARTNERSHIP, L.P. 
as a Grantor,

THE OTHER GRANTORS NAMED HEREIN,

and

KEYBANK NATIONAL ASSOCIATION,
as the Administrative Agent,

for the benefit of

THE SECURED CREDITORS NAMED HEREIN

    
    

    

TABLE OF CONTENTS

Page

		
	ARTICLE I.
	DEFINITIONS AND TERMS    2

		
	Section 1.01
	Defined Terms 2

		
	Section 1.02
	Additional Defined Terms 2

		
	Section 1.03
	Terms Generally  7

		
	ARTICLE II.
	SECURITY INTEREST 7

		
	Section 2.01
	Grant of Security Interest 7

		
	Section 2.02
	Excluded Property 8

		
	Section 2.03
	No Assumption of Liability 9

		
	Section 2.04
	Power of Attorney 9

		
	Section 2.05
	Irrevocable Proxy 9

		
	ARTICLE III.
	REPRESENTATIONS AND WARRANTIES 10

		
	Section 3.01
	Title and Authority 10

		
	Section 3.02
	Absence of Other Liens 10

		
	Section 3.03
	Validity of Security Interest 10

		
	Section 3.04
	Perfection of Security Interest under UCC 10

		
	Section 3.05
	Perfection Certificates 10

		
	Section 3.06
	Places of Business; Jurisdiction of Organization; Locations of Collateral 11

		
	Section 3.07
	Pledged Collateral 11

		
	Section 3.08
	[Intentionally Omitted.] 11

		
	Section 3.09
	Deposit Accounts 11

		
	Section 3.10
	Securities Accounts 11

		
	Section 3.11
	Status of Pledged Collateral 11

		
	ARTICLE IV.
	GENERAL COVENANTS 12

		
	Section 4.01
	No Other Liens; Defense of Title 12

		
	Section 4.02
	Further Assurances; Filings and Recordings 12

		
	Section 4.03
	Use and Disposition of the Collateral 12

		
	Section 4.04
	Delivery or Marking of Chattel Paper; Other Actions 13

		
	Section 4.05
	Authorization to File Financing Statements 13

		
	Section 4.06
	Maintenance of Records 13

		
	Section 4.07
	Perfection Certificates; Collateral Reports 13

		
	Section 4.08
	Legal Status 14

		
	Section 4.09
	Inspections and Verification 14

		
	Section 4.10
	Insurance 15

	
			
	 
	i
	 

TABLE OF CONTENTS
(continued)
Page

		
	Section 4.11
	Proceeds of Casualty Insurance, Condemnation or Taking 15

		
	Section 4.12
	Commercial Tort Claims 15

		
	Section 4.13
	Electronic Chattel Paper and Transferable Records 15

		
	Section 4.14
	Letter-of-Credit Rights 16

		
	Section 4.15
	Protective Advances by the Administrative Agent 16

		
	ARTICLE V.
	ACCOUNTS AND COLLECTION OF ACCOUNTS 16

		
	Section 5.01
	Deposit Accounts 16

		
	Section 5.02
	Securities Accounts 16

		
	Section 5.03
	Operation of Collateral Accounts 17

		
	Section 5.04
	Collection of Accounts 17

		
	Section 5.05
	Collateral Concentration Account 17

		
	ARTICLE VI.
	PLEDGED COLLATERAL 18

		
	Section 6.01
	Delivery of Certificates and Instruments for Pledged Collateral 18

		
	Section 6.02
	No Assumption of Liability 19

		
	Section 6.03
	Registration of Collateral in the Name of the Administrative Agent19

		
	Section 6.04
	Appointment of Sub-Agents; Endorsements; etc 19

		
	Section 6.05
	Voting Rights 19

		
	Section 6.06
	Entitlement of Grantors to Cash Dividends and Distributions 19

		
	Section 6.07
	Entitlement of Administrative Agent to Dividends and Distributions 20

		
	Section 6.08
	Application of Dividends and Distributions 20

		
	Section 6.09
	Turnover by Grantors 20

		
	Section 6.10
	Registration under 1933 Act 20

		
	Section 6.11
	Sale of Pledged Equity Interests in Connection with Enforcement 21

		
	ARTICLE VII.
	Intellectual property 21

		
	Section 7.01
	Collateral Assignments; Further Assurances 21

		
	Section 7.02
	Remedies Relating to Intellectual Property 21

		
	ARTICLE VIII.
	REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT 22

		
	Section 8.01
	Remedies Generally 22

		
	Section 8.02
	Disposition of the Collateral 23

		
	Section 8.03
	Grant of License to Use Intellectual Property 24

		
	Section 8.04
	Waiver of Claims 24

		
	Section 8.05
	Application of Proceeds    24

		
	Section 8.06
	Remedies Cumulative    25

TABLE OF CONTENTS
(continued)
Page

		
	Section 8.07
	Discontinuance of Proceedings    25

		
	Section 8.08
	Purchasers of Collateral    25

		
	ARTICLE IX.
	MISCELLANEOUS    25

		
	Section 9.01
	Notices    25

		
	Section 9.02
	Entire Agreement    26

		
	Section 9.03
	Obligations Absolute    26

		
	Section 9.04
	Successors and Assigns    26

		
	Section 9.05
	Headings Descriptive    27

		
	Section 9.06
	Severability    27

		
	Section 9.07
	Enforcement Expenses, etc    27

		
	Section 9.08
	Release of Portions of Collateral    27

		
	Section 9.09
	Termination    27

		
	Section 9.10
	Administrative Agent    28

		
	Section 9.11
	Only Administrative Agent to Enforce on Behalf of Secured Creditors    28

		
	Section 9.12
	Other Creditors, etc. Not Third-Party Beneficiaries    28

		
	Section 9.13
	Counterparts    28

		
	Section 9.14
	Amendments; Additional Grantors    28

		
	Section 9.15
	Separate Actions    28

		
	Section 9.16
	Full Recourse Obligations; Effect of Fraudulent Transfer Laws    29

		
	Section 9.17
	Governing Law; Venue; Waiver of Jury Trial    29

		
	Section 9.18
	Amended and Restated Pledge and Security Agreement    29

EXHIBITS

Exhibit A        Security Agreement Joinder
Exhibit B        Perfection Certificate

THIS FOURTH AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT, dated as of August 5, 2016 (as the same may be amended, restated or otherwise modified from time to time, this “Agreement”), among: (i)  PREFERRED APARTMENT COMMUNITIES OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the “Borrower”); (ii) each of the Subsidiaries (as defined in the Credit Agreement referred to below) of the Borrower that is a signatory hereto (each such Subsidiary, together with each Additional Grantor (defined below) that becomes a party hereto pursuant to Section 9.14 hereof and together with the Borrower, collectively, the “Grantors” and, individually, each a “Grantor”); and (iii) KEYBANK NATIONAL ASSOCIATION, as administrative agent (the “Administrative Agent”), for the benefit of the Secured Creditors (as defined below):
RECITALS:

 (1)    Borrower, Preferred Apartment Communities, Inc., a Maryland corporation (the “Parent”), the financial institutions from time to time party to the Original Credit Agreement (as defined below) (together with their successors and assigns, the “Lenders”), and the Administrative Agent previously executed a Third Amended and Restated Credit Agreement, dated as of August 28, 2015 (as amended, restated, supplemented or otherwise modified as of the date hereof, the “Original Credit Agreement”), whereby Lenders agreed to make revolving loans available to Borrower in the maximum principal amount of Seventy Million Dollars ($70,000,000) (the “Existing Revolving Commitment”).  In connection with the Original Credit Agreement and the Existing Revolving Commitment, Borrower and certain Subsidiaries of Borrower executed a Third Amended and Restated Pledge and Security Agreement, dated as of August 28, 2015, in favor of Administrative Agent (as so amended, the “Original Pledge Agreement”).
(2)    Pursuant to the Fourth Amended and Restated Credit Agreement, dated as of the date hereof, among the Borrower, the Parent, the Lenders, and the Administrative Agent (as the same may be amended, restated or otherwise modified from time to time, the “Credit Agreement”), the Lenders have agreed to, among other things, increase the Revolving Commitment to $135,000,000.
(3)    It is a condition precedent to the making of Loans under the Credit Agreement that each Grantor shall have executed and delivered to the Administrative Agent this Agreement, which amends, restates and replaces the Original Pledge Agreement in its entirety.
(4)    Each Subsidiary Grantor is a direct or indirect Subsidiary of the Borrower.
(5)    Each Grantor will obtain benefits from the Credit Agreement and, accordingly, desires to execute this Agreement in order to satisfy the condition described above and to induce the Secured Creditors to extend credit pursuant to the Credit Agreement and other Loan Documents.
NOW, THEREFORE, in consideration of the benefits accruing to each Grantor, the receipt and sufficiency of which are hereby acknowledged, each Grantor hereby makes the following representations and warranties to the Administrative Agent and to the other Secured Creditors and hereby covenants and agrees with the Administrative Agent and to the other Secured Creditors as follows:
ARTICLE I. 
 
DEFINITIONS AND TERMS
Section 1.01    Defined Terms.  Capitalized terms used in this Agreement and not otherwise defined in this Agreement shall have the meanings given to such terms in the Credit Agreement.  Unless otherwise defined herein, all terms used herein and defined in the UCC shall have the same definitions 

herein as specified therein; provided, however, that if a term is defined in Article 9 of the UCC differently than in another Article of the UCC, the term shall have the meaning specified in Article 9 of the UCC.
Section 1.02    Additional Defined Terms.  The following terms shall have the meanings herein specified unless the context otherwise requires:
“Accounts Receivable” means (i) all accounts, now existing or hereafter arising; and (ii) without limitation of the foregoing, in any event including (A) all right to a payment, whether or not earned by performance, for goods or other property (other than money) that has been or is to be sold, consigned, leased, licensed, assigned or otherwise disposed of, for services rendered or to be rendered, for a policy of insurance issued or to be issued, for a suretyship obligation incurred or to be incurred, for energy provided or to be provided, or for the use or hire of a vessel under a charter or other contract whether due or to become due, whether or not it has been earned by performance, and whether now existing or hereafter acquired or arising in the future, including Accounts Receivable from employees and Affiliates of any Grantor, (B) all rights evidenced by an account, invoice, purchase order, requisition, bill of exchange, note, contract, security agreement, lease, chattel paper, or any evidence of indebtedness or security related to the foregoing, (C) all security pledged, assigned, hypothecated or granted to or held by a Grantor to secure the foregoing, including all supporting obligations, (D) all guarantees, letters of credit, banker’s acceptances, drafts, endorsements, credit insurance and indemnifications on, for or of, any of the foregoing, including all rights to make drawings, claims or demands for payment thereunder, and (E) all powers of attorney for the execution of any evidence of indebtedness, guaranty, letter of credit or security or other writing in connection therewith.
“Additional Grantor” has the meaning provided in Section 9.14.
“Administrative Agent” has the meaning provided in the first paragraph of this Agreement.
“Agreement” has the meaning provided in the first paragraph of this Agreement.
“Borrower” has the meaning provided in the first paragraph of this Agreement.
“Collateral” has the meaning provided in Section 2.01 hereof.
“Collateral Account” means any Controlled Deposit Account or Controlled Securities Account.
“Collateral Assignment Agreement” means a Collateral Assignment of Patents, a Collateral Assignment of Trademarks or a Collateral Assignment of Copyrights.
“Collateral Assignment of Copyrights” means a Collateral Assignment of Copyrights in form and substance acceptable to the Administrative Agent.
“Collateral Assignment of Patents” means a Collateral Assignment of Patents in form and substance acceptable to the Administrative Agent.
“Collateral Assignment of Trademarks” means a Collateral Assignment of Trademarks in form and substance acceptable to the Administrative Agent.
“Collateral Concentration Account” means a cash collateral deposit account established in the name of the Administrative Agent, and under the sole dominion and control of the Administrative Agent, for the benefit of the Secured Creditors, at an office of the Administrative Agent.

Exhibit 10.3

“Contract Rights” means all rights of a Grantor under or in respect of a Contract, including all rights to payment, damages, liquidated damages, and enforcement.
“Contract” means any contract, agreement or other writing between a Grantor and one or more additional parties.
“Control” means (i) when used with respect to any security or security entitlement, the meaning specified in Section 8-106 of the UCC; and (ii) when used with respect to any deposit account, the meaning specified in Section 9-104 of the UCC.
“Control Agreement” means any Deposit Account Control Agreement or Securities Account Control Agreement or any other control agreement delivered in connection with this Agreement.
“Controlled Deposit Account” means a deposit account (i) that is subject to a Deposit Account Control Agreement or (ii) as to which the Administrative Agent is the Depositary Bank’s “customer” (as defined in Section 4-104 of the UCC).
“Controlled Securities Account” means a securities account that (i) is maintained in the name of a Grantor at an office of a Securities Intermediary located in the United States of America and (ii) together with all financial assets credited thereto and all related security entitlements, is subject to a Securities Account Control Agreement.
“Copyrights” means any copyright to which a Grantor now or hereafter has title, as well as any application for a copyright hereafter made by such Grantor.
“Credit Agreement” has the meaning provided in the Recitals of this Agreement.
“Deposit Account Control Agreement” means, with respect to a deposit account of a Grantor, a Deposit Account Control Agreement in form and substance acceptable to the Administrative Agent among such Grantor, the Administrative Agent and the relevant Depositary Bank.
“Depositary Bank” means a bank at which a deposit account of any Grantor is maintained.
“Equity Interests” means (i) all of the issued and outstanding shares of all classes of capital stock of any corporation at any time directly owned by any Grantor and the certificates representing such capital stock, (ii) all of the membership interests in a limited liability company at any time owned or held by any Grantor, and (iii) all of the equity interests in any other form of organization at any time owned or held by any Grantor.
“Event of Default” means any Event of Default under, and as defined in, the Credit Agreement.
“Governing Documents” means all agreements and instruments evidencing or relating to investments in or ownership, voting or disposition of, any of the Pledged Collateral.
“Grantor” and “Grantors” have the meaning provided in the first paragraph of this Agreement.
“Intercompany and Third-Party Notes” means all promissory notes, instruments, debentures, bonds, evidences of indebtedness and similar securities from time to time issued to, or held by, any Grantor.
“Issuer” means the issuer of any Pledged Collateral.

Exhibit 10.3

“Intellectual Property” means (i) all Trademarks, together with the registrations and right to all renewals thereof, and the good will of the business of any Grantor symbolized by the Trademarks; (ii) all Patents; (iii) all Copyrights; (iv) all computer programs and software applications and source codes of such Grantor and all intellectual property rights therein and all other Proprietary Information of such Grantor, including Trade Secrets; and (v) all Permits. 
“Inventory” means (i) all inventory; and (ii) without limitation of the foregoing, and in all cases including all merchandise and other goods held for sale or lease, or furnished or to be furnished under contracts for service, including raw materials, works in process, finished goods, products made or processed, intermediates, packing materials, shipping materials, labels, semi-finished inventory, scrap inventory, spare parts inventory, manufacturing supplies, consumable supplies, other substances commingled therewith or added thereto, and all such goods that have been returned, reclaimed, repossessed or exchanged.
“Lender” has the meaning provided in the Recitals of this Agreement.
“Loan Document Obligations” means, collectively, (i) the principal of and interest on the Notes issued by, and the Loans made to, the Borrower under the Credit Agreement, (ii) all indebtedness and other obligations of Parent and each Subsidiary Grantor under the Guaranty, (iii) all other indebtedness, obligations and liabilities owing by the Borrower and the other Credit Parties to the Administrative Agent or any of the Lenders under the Credit Agreement and the other Loan Documents to which the Borrower or any other Credit Party is now or may hereafter become a party (including indemnities, fees and other amounts payable thereunder), whether primary, secondary, direct, contingent, fixed or otherwise, in all cases whether now existing, or hereafter incurred or arising, including any such interest or other amounts incurred or arising during the pendency of any bankruptcy, insolvency, reorganization, receivership or similar proceeding, regardless of whether allowed or allowable in such proceeding or subject to an automatic stay under Section 362(a) of the Bankruptcy Code and (iv) all other Obligations. Notwithstanding anything to the contrary in this definition, “Loan Document Obligations” shall not include any Excluded Swap Obligations.
“Notice of Exclusive Control” means a “Notice of Exclusive Control” as defined in each of the Control Agreements.
“Patents” means any patent to which a Grantor now or hereafter has title, as well as any application for a patent now or hereafter made by a Grantor.
“Perfection Certificate” means a certificate in the form of Exhibit B hereto, completed and supplemented with the schedules contemplated thereby to the reasonable satisfaction of the Administrative Agent, and signed by an Authorized Officer of the applicable Grantor delivering the same.
“Permits” means all licenses, permits, rights, orders, variances, franchises or authorizations of or from any Governmental Authority.
“Pledged Collateral” means the Pledged Equity Interests and the Pledged Debt.
“Pledged Debt” means all of the Intercompany and Third-Party Notes presently owned or hereafter acquired from time to time by any Grantor, and all interest, cash, instruments and other property hereafter from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing.
“Pledged Entity” means the Issuer of any Pledged Equity Interests.

Exhibit 10.3

“Pledged Equity Interests” means all of the Equity Interests now owned or hereafter acquired by each Grantor (other than Equity Interests that are excluded from the Collateral pursuant to Section 2.02), and all of such Grantor’s other rights, title and interests in, or in any way related to, each Pledged Entity to which any of such Equity Interests relate, including: (i) all dividends, cash, instruments and other property hereafter from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Equity Interests and in all profits, losses and other distributions to which such Grantor shall at any time be entitled in respect of any such Equity Interest; (ii) all other payments due or to become due to such Grantor in respect of any such Equity Interest, whether under any partnership agreement, limited liability company agreement, other agreement or otherwise, whether as contractual obligations, damages, insurance proceeds or otherwise; (iii) all of such Grantor’s claims, rights, powers, privileges, authority, puts, calls, options, security interests, liens and remedies, if any, under any partnership agreement, limited liability company agreement, other agreement or at law or otherwise in respect of any such Equity Interest; (iv) all present and future claims, if any, of such Grantor against any such Pledged Entity for moneys loaned or advanced, for services rendered or otherwise; (v) all of such Grantor’s rights under any partnership agreement, limited liability company agreement, other agreement or at law to exercise and enforce every right, power, remedy, authority, option and privilege of such Grantor relating to any such Equity Interest; (vi) all other property hereafter delivered in substitution for or in addition to any of the foregoing; (vii) all certificates and instruments representing or evidencing any of the foregoing; and (vii) all cash, securities, interest, distributions, dividends, rights and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all thereof.
“Proceeds” means (i) all proceeds; and (ii) without limitation of the foregoing and in all cases, including (A) whatever is acquired upon the sale, lease, license, exchange, or other disposition of any Collateral, (B) whatever is collected on, or distributed on account of, any Collateral, (C) rights arising out of any Collateral, (D) claims arising out of the loss or nonconformity of, defects in, or damage to any Collateral, (E) claims and rights to any proceeds of any insurance, indemnity, warranty or guaranty payable to a Grantor (or the Administrative Agent, as assignee, loss payee or an additional insured) with respect to any of the Collateral, (G) claims and rights to payments (in any form whatsoever) made or due and payable to a Grantor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under color of Governmental Authority), (H) all cash, money, checks and negotiable instruments received or held on behalf of the Administrative Agent pursuant to any lockbox or similar arrangement relating to the payment of Accounts Receivable or other Collateral, and (I) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral.
“Proprietary Information” means all information and know-how worldwide, including technical data; manufacturing data; research and development data; data relating to compositions, processes and formulations, manufacturing and production know-how and experience; management know-how; training programs; manufacturing, engineering and other drawings; specifications; performance criteria; operating instructions; maintenance manuals; technology; technical information; software; computer programs; engineering and computer data and databases; design and engineering specifications; catalogs; promotional literature; financial, business and marketing plans; and inventions and invention disclosures.
“Secured Creditors” means, collectively, the Administrative Agent, the Lenders, each Secured Hedge Provider and each Designated Hedge Creditor and the respective successors and assigns of each of the foregoing.
“Secured Obligations” means, collectively, (i) all Loan Document Obligations; (ii) any and all sums advanced by the Administrative Agent in order to preserve any of the Collateral or to preserve or protect its 

Exhibit 10.3

security interest in such Collateral, including sums advanced to pay or discharge insurance premiums, taxes, Liens and claims; and (iii) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities referred to in clauses (i) and (ii) above, the expenses of re-taking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on any of the Collateral, or of any exercise by the Administrative Agent of its rights hereunder in respect of any Grantor or any of the Collateral, together with reasonable out-of-pocket attorneys’ fees and court costs. Notwithstanding anything to the contrary in this definition, “Secured Obligations” shall not include any Excluded Swap Obligations.
“Securities Account Control Agreement” means, with respect to a securities account of a Grantor, a Securities Account Control Agreement in form and substance acceptable to the Administrative Agent among the relevant Securities Intermediary, such Grantor and the Administrative Agent.
“Securities Intermediary” means a clearing corporation or a Person, including a bank or broker, that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity.
“Security Agreement Joinder” means a Security Agreement Joinder, substantially in the form of Exhibit A hereto, or otherwise in form and substance acceptable to the Administrative Agent.
“SPE” means the entities set forth on Schedule 2 attached hereto. 
“Subsidiary Grantor” means each Grantor other than the Borrower.
“Trademarks” means any trademarks and service marks now held or hereafter acquired by a Grantor, any unregistered marks used by a Grantor and trade dress including logos and/or designs in connection with which any of these registered or unregistered marks are used.
“Trade Secrets” means any secretly held existing engineering and other data, information, production procedures and other know-how relating to the design, manufacture, assembly, installation, use, operation, marketing, sale and servicing of any products or business of a Grantor worldwide whether written or not written.
“UCC” means the Uniform Commercial Code, as at any time adopted and in effect in the State of New York, or if the context indicates otherwise, in effect in the applicable jurisdiction, in each case specifically including and taking into account all amendments, supplements, revisions and other modifications thereto.
Section 1.03    Terms Generally.  The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”  The word “will” shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, and (d) unless otherwise specified, all references herein to Sections, Schedules, Annexes and Exhibits shall be construed to refer to Sections of, and Schedules, Annexes and Exhibits to, this Agreement.

Exhibit 10.3

ARTICLE II.
     
 
SECURITY INTEREST
Section 2.01    Grant of Security Interest.  As security for the prompt and complete payment and performance when due of all of the Secured Obligations, each Grantor does hereby pledge, sell, assign and transfer unto the Administrative Agent, and does hereby grant to the Administrative Agent, for the benefit of the Secured Creditors, a continuing security interest in all of the right, title and interest of such Grantor in, to and under all of the following of each Grantor, whether now existing or hereafter from time to time arising or acquired and wherever located (collectively, the “Collateral”):
(i)    all accounts, including  each and every Account Receivable;
(ii)    all goods;
(iii)    all Inventory;
(iv)    all equipment;
(v)    all documents;
(vi)    all instruments;
(vii)    all chattel paper;
(viii)    all money;
(ix)    all deposit accounts, including the Collateral Concentration Account and all Controlled Deposit Accounts, together with all monies, securities and instruments at any time deposited in any such deposit account or otherwise held for the credit thereof;
(x)    all securities accounts, together with all financial assets credited therein from time to time, and all financial assets, monies, securities, cash and other property held therein or credited thereto;
(xi)    all investment property;
(xii)    all fixtures;
(xiii)    all as-extracted collateral, including all minerals;
(xiv)    all general intangibles, including all Contract Rights;
(xv)    all commercial tort claims;
(xvi)    all Intellectual Property;
(xvii)    all letters of credit and letter-of-credit rights;
(xviii)    all payment intangibles;

Exhibit 10.3

(xix)    all promissory notes;
(xx)    all supporting obligations;
(xxi)    all Pledged Debt and Pledged Equity Interests;
(xxii)    all other items, kinds and types of personal property, tangible or intangible, of whatever nature, and regardless of whether the creation or perfection or effect of perfection or non-perfection of a security interest therein is governed by the UCC of any particular jurisdiction or by any other applicable treaty, convention, statute, law or regulation of any applicable jurisdiction;
(xxiii)    all additions, modifications, alterations, improvements, upgrades, accessions, components, parts, appurtenances, substitutions and/or replacements of, to or for any of the foregoing; and
(xxiv)    all Proceeds and products of any and all of the foregoing.
Section 2.02    Excluded Property.  Notwithstanding anything in Section 2.01 hereof to the contrary, the term Collateral shall not include: (i) any equipment or goods that are subject to a “purchase money security interest” to the extent that such purchase money security interest (x) constitutes a Permitted Lien under the Credit Agreement and (y) prohibits the creation by a Grantor of a junior security interest therein, unless the holder thereof has consented to the creation of such a junior security interest; (ii) any Equity Interests in any Real Estate Subsidiary, if (a) the terms of the Property Senior Loan Documents of such Subsidiary or (b) a provision of such Subsidiary Organizational Documents included either as a condition of the Property Senior Loan Documents or as a condition to the negotiated business arrangement with the holder of an Equity Interest in any such Subsidiary that is a Non-Wholly Owned Subsidiary, in either case, do not permit the grant of a security interest in such Equity Interests by the owner thereof or the applicable Grantor has been unable to obtain any approval or consent to the creation of a security interest therein which is required under such Property Senior Loan Documents or Organizational Documents; provided that such security interest shall attach immediately and automatically to such Equity Interests in such Subsidiary if such Subsidiary is no longer subject to such restrictions or such approval or consent is obtained; (iii) any Equity Interests in a Real Estate Subsidiary in excess of 49% of the Equity Interests in such Real Estate Subsidiary; provided that such security interest shall attach immediately and automatically to the remaining 51% of the Equity Interests in such Real Estate Subsidiary if such Real Estate Subsidiary is no longer subject to a any restriction in any document or agreement entered into in connection with the incurrence of Indebtedness permitted by the Credit Agreement that prohibits the Grantor that owns the Equity Interests in such Real Estate Subsidiary from granting a security interest in more than 49% of the Equity Interests of such Real Estate Subsidiary, (iv) any Equity Interests in any Subsidiary whose assets consist solely of Equity Interests in another Subsidiary, (v) so long as the Anderson Interim Loan Agreement is in effect, any Equity Interest in New Market-Anderson or any property of New Market Anderson that would otherwise constitute Collateral, provided that such security interest shall attach upon termination of the Anderson Interim Loan Agreement unless excluded pursuant to either of clauses (ii) or (iii) of this Section, and (vi) any Equity Interests owned or acquired by a Grantor in a Subsidiary of such Grantor, which Subsidiary does not own or have any interests in any property; provided that, subject to the foregoing clauses (ii) and (iii), such Equity Interests shall be Pledged Equity Interests and constitute Collateral upon such Subsidiary owing or having any interests in any property.
Section 2.03    No Assumption of Liability.  The security interest hereunder of any Grantor is granted as security only and shall not subject the Administrative Agent or any other Secured Creditor to, 

Exhibit 10.3

or in any way alter or modify, any obligation or liability of such Grantor with respect to or arising out of any of the Collateral.
Section 2.04    Power of Attorney.  Each Grantor hereby irrevocably constitutes and appoints the Administrative Agent its true and lawful agent and attorney-in-fact, and in such capacity the Administrative Agent shall have, upon the occurrence and continuance of an Event of Default, without any further action required by or on behalf of any Grantor, the right, with full power of substitution, in the name of such Grantor or otherwise, for the use and benefit of the Administrative Agent and the other Secured Creditors:  (i) to receive, endorse, present, assign, deliver and/or otherwise deal with any and all notes, acceptances, letters of credit, checks, drafts, money orders, or other evidences of payment relating to the Collateral of such Grantor or any part thereof; (ii) to demand, collect, receive payment of, and give receipt for and give credits, allowances, discounts, discharges, releases and acquittances of and for any or all of the Collateral of such Grantor; (iii) to sign the name of such Grantor on any invoice or bill of lading relating to any of the Collateral of such Grantor; (iv) to send verifications of any or all of the Accounts Receivable of such Grantor to its account debtors; (v) to commence and prosecute any and all suits, actions or proceedings at law or in equity in or before any court or other tribunal (including any arbitration proceedings) to collect or otherwise realize on all or any of the Collateral of such Grantor, or to enforce any rights of such Grantor in respect of any of its Collateral; (vi) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to any or all of the Collateral of such Grantor; (vii) to notify, or require such Grantor to notify or cause to be notified, its account debtors to make payment directly to the Administrative Agent or to a Controlled Deposit Account; or (viii) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with any or all of the Collateral of such Grantor, and to do all other acts and things necessary or appropriate to carry out the intent and purposes of this Agreement, as fully and completely as though the Administrative Agent were the absolute owner of the Collateral of such Grantor for all purposes.
Section 2.05    Irrevocable Proxy.  Each Grantor hereby irrevocably grants and appoints Administrative Agent, from the date of this Agreement until the termination of this Agreement in accordance with its terms, as such Grantor’s true and lawful proxy, for and in such Grantor’s name, place and stead to vote, upon the occurrence and continuance of an Event of Default, the Pledged Equity Interest in any Pledged Entity by such Grantor, whether directly or indirectly, beneficially or of record, now owned or hereafter acquired.  The proxy granted and appointed in this Section 2.05 shall include the right to sign any Grantor’s name (as a member of a Pledged Entity) to any consent, certificate or other document relating to the Pledged Equity Interests that applicable law may permit or require, to cause the Pledged Equity Interests to be voted in accordance with the preceding sentence.  Each Grantor hereby represents and warrants that there are no other proxies and powers of attorney and the Pledged Equity Interests that any Grantor may have granted or appointed.  No Grantor will give a subsequent proxy or power of attorney or enter into any other voting agreement with respect to the Pledged Equity Interests and any attempt to do so shall be void and of no effect.  The proxies and powers granted by each Grantor pursuant to this Agreement are coupled with an interest and are given to secure the performance of such Grantor’s obligations.
ARTICLE III.
                 REPRESENTATIONS AND WARRANTIES
Each Grantor represents and warrants to the Administrative Agent and the other Secured Creditors, which representations and warranties shall survive the execution and delivery of this Agreement until the termination of this Agreement in accordance with Section 9.09, as follows:

Exhibit 10.3

Section 3.01    Title and Authority.  Such Grantor has (i) good, valid and unassailable title to all tangible items owned by it and constituting any portion of the Collateral with respect to which it has purported to grant the security interest, and good, valid and unassailable rights in all other Collateral with respect to which it has purported to grant the security interest, and (ii) full power and authority to grant to the Administrative Agent the security interest in such Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other Person other than any consent or approval that has been obtained.
Section 3.02    Absence of Other Liens.
(a)    There is no financing statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind of such Grantor in the Collateral, except for any filings or recordings made in connection with any Permitted Liens.
(b)    Such Grantor is, and as to any Collateral acquired by it from time to time after the date hereof such Grantor will be, the owner of all of its Collateral free and clear of any Lien except for Permitted Liens, and the security interest of such Grantor in its Collateral is and will be superior and prior to any other security interest or other Lien, except for Permitted Liens  that are prior by operation of applicable law.
Section 3.03    Validity of Security Interest.  The security interest of such Grantor constitutes a legal, valid and enforceable first priority (except as to any Permitted Liens  that are prior by operation of applicable law) security interest in all of the Collateral of such Grantor, securing the payment and performance of the Secured Obligations.
Section 3.04    Perfection of Security Interest under UCC. 
(a)    All notifications and other actions, including (i) all deposits of certificates and instruments evidencing any Collateral (duly endorsed or accompanied by appropriate instruments of transfer), (ii) all notices to and acknowledgments of any bailee or other Person, (iii) all acknowledgments and agreements respecting the right of the Administrative Agent to obtain control with respect to any Collateral, and (iv) all filings, registrations and recordings, which are (x) required by the terms of this Agreement to have been given, made, obtained, done and accomplished, and (y) necessary to create, preserve, protect and perfect the security interest granted by such Grantor to the Administrative Agent hereby in respect of its portion of the Collateral, have been given, made, obtained, done and accomplished.
(b)    After giving effect to all such actions, the security interest granted by such Grantor to the Administrative Agent pursuant to this Agreement in and to its portion of the Collateral will be perfected to the maximum extent a security interest in such Grantor’s portion of the Collateral can be perfected under the UCC of any applicable jurisdiction.
Section 3.05    Perfection Certificates.  Each Perfection Certificate delivered by any Grantor (whether delivered pursuant to Section 4.07(a) of this Agreement or pursuant to the Credit Agreement), and all information set forth therein, is true and correct in all respects, except to the extent that such Perfection Certificate has been supplemented or replaced in each case in accordance with this Agreement.
Section 3.06    Places of Business; Jurisdiction of Organization; Locations of Collateral.  Each Grantor represents and warrants that (i) the principal place of business of such Grantor, or its chief executive office, if it has more than one place of business, is located at the address indicated on the most 

Exhibit 10.3

recent Perfection Certificate executed and delivered by such Grantor to the Administrative Agent; (ii) the jurisdiction of formation or organization of such Grantor is set forth on the most recent Perfection Certificate executed and delivered by such Grantor to the Administrative Agent; and (iii) the U.S. Federal Tax I.D. Number and, if applicable, the organizational identification number of such Grantor is set forth on the most recent Perfection Certificate executed and delivered by such Grantor to the Administrative Agent.  Such Grantor does not, at and as of the date hereof, conduct business in any jurisdiction, and except as set forth in the most recent Perfection Certificate delivered to the Administrative Agent, in the preceding five years, such Grantor and any predecessors in interest have not conducted business in any jurisdiction, under any trade name, fictitious name or other name (including any names of divisions or predecessor entities), except the current legal name of such Grantor and such other trade, fictitious and other names as are listed on the most recent Perfection Certificate executed and delivered by such Grantor to the Administrative Agent.
Section 3.07    Pledged Collateral.  Schedule 1 hereto sets forth a true and complete list of all of the Pledged0 Collateral owned by each Grantor as of the Closing Date.  As of the Closing Date, all of the Equity Interests that constitute Pledged Equity Interests are “Securities” under Article 8 of the UCC (other than the Equity Interests of the SPEs that constitute Pledged Equity Interests).
Section 3.08    [Intentionally Omitted.]
Section 3.09    Deposit Accounts.  The most recent Perfection Certificate delivered by each Grantor to the Administrative Agent sets forth a true and complete list of all deposit accounts owned by each Grantor or in which any such Grantor’s Collateral is held.  To the extent required pursuant to Section 5.01 of this Agreement, all of the deposit accounts of each Grantor are, and all cash and money of each Grantor is held in, Controlled Deposit Accounts.
Section 3.10    Securities Accounts.  The most recent Perfection Certificate delivered by each Grantor to the Administrative Agent sets forth a true and complete list of all securities accounts owned by each Grantor or in which any such Grantor’s Collateral is held.  Unless otherwise permitted pursuant to Section 5.02 of this Agreement, no Grantor has any securities accounts or otherwise owns or is entitled to any financial assets or securities entitlements other than Controlled Securties Accounts and financial assets or securities entitlements that are subject to a Controlled Securities Account.
Section 3.11    Status of Pledged Collateral.  All of the Pledged Equity Interests of each Grantor hereunder have been duly and validly issued and are fully paid and non-assessable (to the extent such concepts are applicable to the respective Equity Interests).  All of the Pledged Debt of each Grantor is the legal, valid and binding obligation of the Issuer thereof, enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors’ rights and by equitable principles.  Except as permitted pursuant to the Credit Agreement, no Grantor has any obligation to make any further or additional loans or advances to, or purchases of securities from, any Issuer with respect to any of the Pledged Debt.  No Grantor is in default in the payment of any portion of any mandatory capital contribution, cash call, or other funding, if any, required to be made under any Governing Document relating to any of the Pledged Equity Interests of such Grantor.  No Grantor is in violation or default of any other material provisions of any such Governing Document.  No Pledged Collateral of any Grantor is subject to any defense, offset or counterclaim, nor have any of the foregoing been asserted or alleged against such Grantor by any Person.

Exhibit 10.3

ARTICLE IV.
     
 
GENERAL COVENANTS
Section 4.01    No Other Liens; Defense of Title.  No Grantor will make or grant, or suffer or permit to exist, any Lien on any of its Collateral, other than the Permitted Liens that are prior by operation of applicable law.  Each Grantor, at its sole cost and expense, will take any and all actions reasonably necessary and appropriate to defend title to its Collateral against any and all Persons and to defend the validity, enforceability, perfection and effectiveness of the security interest of the Administrative Agent therein against any Lien other than Permitted Liens and the priority of the security interest of the Administrative Agent therein against any Lien other than any Permitted Lien that has priority by operation of applicable law.
Section 4.02    Further Assurances; Filings and Recordings.
(a)    Each Grantor, at its sole cost and expense, will duly execute, acknowledge and deliver all such agreements, instruments and other documents and take all such actions (including (i) physically pledging instruments, documents, promissory notes, chattel paper and certificates evidencing any investment property or any of the Pledged Collateral with the Administrative Agent, (ii) obtaining securities account Control Agreements and Deposit Account Control Agreements in accordance with this Agreement as the Administrative Agent requests, (iii) obtaining from other Persons lien waivers and bailee letters as the Administrative Agent shall reasonably request, (iv) obtaining from other Persons agreements evidencing the exclusive control and dominion of the Administrative Agent over any of the Collateral, in instances where obtaining control over such Collateral is the only or best method of perfection, and (v) making filings, recordings and registrations), as the Administrative Agent may from time to time instruct to better assure, preserve, protect and perfect the security interest of the Administrative Agent in the Collateral of such Grantor, and the rights and remedies of the Administrative Agent hereunder, or otherwise to further effectuate the intent and purposes of this Agreement and to carry out the terms hereof.
(b)    Each Grantor, at its sole cost and expense, will (i) at all times cause this Agreement (and/or proper notices, financing statements or other registrations or filings in respect hereof, and supplemental collateral assignments or collateral security agreements in respect of any portion of the Collateral) to be duly filed, recorded, registered and published, and re-filed, re-recorded, re-registered and re-published in such manner and in such places as may be required under the UCC or other applicable law in order to establish, perfect, preserve and protect the rights, remedies and security interest of the Administrative Agent in or with respect to the Collateral of such Grantor, and (ii) pay all taxes, fees and charges and comply with all statutes and regulations applicable to such filing, recording, registration and publishing and such re-filing, re-recording, re-registration and re-publishing.
Section 4.03    Use and Disposition of the Collateral.  Unless and until an Event of Default shall have occurred and be continuing and the Administrative Agent shall have notified the Grantors thereof in writing that the rights of any or all of the Grantors under this Section 4.03(a) are suspended during the continuance of such Event of Default, each Grantor may use and dispose of its Collateral in any lawful manner not inconsistent with the provisions of this Agreement, the Credit Agreement or any other Loan Document.
Section 4.04    Delivery or Marking of Chattel Paper; Other Actions.  Without limitation of any of the provisions of Section 4.02(a) or Section 4.13 hereof:

Exhibit 10.3

(a)    If any amount payable to a Grantor under or in connection with any of the Collateral shall be or become evidenced by any chattel paper, document, promissory note or instrument, such Grantor will, unless otherwise agreed to in writing by the Administrative Agent, cause such chattel paper, document, promissory note or instrument to be delivered to the Administrative Agent and pledged as part of the Collateral hereunder, accompanied by any appropriate instruments or endorsements or transfer.  In the case of any chattel paper, the Administrative Agent may require, in lieu of the delivery thereof to the Administrative Agent, that the writings evidencing the chattel paper be legended to reflect the security interest of the Administrative Agent therein, all in a manner acceptable to the Administrative Agent.
(b)    If at any time any Grantor shall take and perfect a security interest in any property of an account debtor, as security for the Accounts Receivable owed by such account debtor and/or any of its Affiliates, or take and perfect a security interest arising out of the consignment to any Person of any Inventory or other Collateral, such Grantor shall, if requested by the Administrative Agent (which request may be made by the Administrative Agent only upon the written instructions of the Required Lenders, issued by the Required Lenders, in their sole respective discretion), promptly execute and deliver to the Administrative Agent a separate assignment of all financing statements and other filings made to perfect the same.  Such separate assignment need not be filed of public record unless necessary to continue the perfected status of the security interest of such Grantor against creditors of any transferees from the account debtor or consignee.
Section 4.05    Authorization to File Financing Statements.  Each Grantor irrevocably authorizes the Administrative Agent at any time and from time to time to file in any jurisdiction any initial financing statements and all amendments thereto that (a) indicate the Collateral (i) as “all assets” or “all personal property” of such Grantor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of the UCC, or (ii) as being of an equal or lesser scope or with greater detail, and (b) contain any other information required pursuant to the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether such Grantor is an organization, the type of organization and any organization identification number, and (ii) in the case of a financing statement that is filed as a fixture filing or indicating Collateral as as-extracted collateral or timber to be cut, a sufficient description of real property to which the Collateral relates.
Section 4.06    Maintenance of Records.  Each Grantor will keep and maintain at its own cost and expense reasonably satisfactory and complete records of its Accounts Receivable, Contracts and other Collateral, including the originals of all documentation with respect thereto, records of all payments received, all credits granted thereon, all merchandise returned and all other dealings therewith.  All billings and invoices issued by a Grantor with respect to its Accounts Receivable will be in compliance with, and conform to, the requirements of all applicable federal, state and local laws and any applicable laws of any relevant foreign jurisdiction.  If an Event of Default shall have occurred and be continuing and the Administrative Agent so directs, each Grantor shall legend, in form and manner reasonably satisfactory to the Administrative Agent, its Accounts Receivable and Contracts, as well as books, records and documents of such Grantor evidencing or pertaining thereto with an appropriate reference to the fact that such Accounts Receivable and Contracts have been assigned to the Administrative Agent and that the Administrative Agent has a security interest therein.
Section 4.07    Perfection Certificates; Collateral Reports.
(a)    Each Grantor shall provide to the Administrative Agent a completed Perfection Certificate, duly executed by an Authorized Officer of such Grantor, together with all schedules required 

Exhibit 10.3

to be delivered in connection therewith (i) on the Closing Date as required pursuant to the Credit Agreement, (ii) on the date that a Subsidiary is required, pursuant to Section 6.09 of the Credit Agreement, to execute a Guaranty Supplement and provide documentation and other deliverables to the Administrative Agent and (iii) any other date reasonably requested by the Administrative Agent.  
(b)    Collateral Reports.  Whenever requested to do so by the Administrative Agent, each Grantor will promptly, at its own sole cost and expense, deliver to the Administrative Agent, in written hard copy form or other readable form, as specified by the Administrative Agent, such listings, agings, descriptions, schedules and other reports with respect to its Accounts Receivable, Inventory, equipment and other Collateral as the Administrative Agent may instruct, all of the same to be in such scope, categories and detail as the Administrative Agent may reasonably request and to be accompanied by copies of invoices and other documentation as and to the extent instructed by the Administrative Agent.
Section 4.08    Legal Status.  Each Grantor agrees that (a) it will not change its name, place of business or if more than one, chief executive office, or its mailing address or organizational identification number if it has one, in each case without providing the Administrative Agent at least thirty days’ prior written notice thereof, (b) if such Grantor does not have an organizational identification number and later obtains one, it will promptly notify the Administrative Agent of such organizational identification number, and (c) it will not change its type of organization, jurisdiction of organization or other legal structure in each case unless (i) it shall have provided the Administrative Agent at least thirty days’ prior written notice thereof, and (ii) such action is permitted pursuant to the Credit Agreement.
Section 4.09    Inspections and Verification.  The Administrative Agent and such Persons as the Administrative Agent may designate shall have the right, at the Administrative Agent’s and the Lenders’ cost and expense (or if an Event of Default has occurred and is continuing, the Grantor’s own cost and expense), at any time or from time to time, on not less than two Business Days’ prior notice to the Borrower (on behalf of any applicable Grantor) if no Event of Default has occurred and is continuing, and in the event an Event of Default has occurred and is continuing, on not less than one Business Day’s prior notice to the Borrower (on behalf of any applicable Grantor), to inspect the Collateral of such Grantor, all books and records related thereto (and to make extracts and copies thereof) and the premises upon which any of such Collateral is located, to discuss such Grantor’s affairs with the officers of such Grantor and its independent accountants, and to verify under reasonable procedures the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, such Collateral, including, in the case of accounts or other Collateral in the possession of any third Person, by contacting account debtors or the third Person possessing such Collateral (after not less than two days’ prior notice to the applicable Grantor) for the purpose of making such verification.  Any procedures or actions taken, prior to the occurrence and continuance of an Event of Default, in order to verify accounts by contacting account debtors, shall be effected by the Borrower’s independent accountants, acting at the direction of the Administrative Agent, in such manner (consistent with their normal auditing procedures) so as not to reveal the identity of the Administrative Agent or the existence of the security interest to the account debtors.  The Borrower will instruct its independent accountants to undertake any such verification when and as requested by the Administrative Agent.  The results of any such verification by independent accountants shall be reported by such independent accountants to both the Administrative Agent and the Borrower.  The Administrative Agent shall have the absolute right to share any information it gains from any such inspection or verification or from collateral reports furnished to it by a Grantor with the other Secured Creditors.

Exhibit 10.3

Section 4.10    Insurance.  Each Grantor will at all times keep its business and its Collateral insured in accordance with Section 6.03 of the Credit Agreement.
Section 4.11    Proceeds of Casualty Insurance, Condemnation or Taking.
(a)    All amounts recoverable under any policy of casualty insurance or any award for the condemnation or taking by any governmental authority of any portion of the Collateral are hereby assigned to the Administrative Agent.
(b)    Each Grantor will apply any such proceeds or amounts received by it in the manner provided in the Credit Agreement, including, if required under the terms of the Credit Agreement, by paying over the same directly to the Administrative Agent.
(c)    In the event any portion of the Collateral suffers a casualty loss or is involved in any proceeding for condemnation or taking by any Governmental Authority, then if an Event of Default has occurred and is continuing, the Administrative Agent is authorized and empowered, at its option, to participate in, control, direct, adjust, settle and/or compromise any such loss or proceeding, to collect and receive the proceeds therefrom and, after deducting from such proceeds any expenses incurred by it in connection with the collection or handling thereof, to apply the net proceeds to the Secured Obligations in accordance with Section 8.03 of the Credit Agreement.
(d)    If any proceeds are received by the Administrative Agent as a result of a casualty, condemnation or taking involving the Collateral and no Event of Default has occurred and is continuing, then the Administrative Agent will promptly release such proceeds to the applicable Grantor, unless the Credit Agreement provides otherwise.
Section 4.12    Commercial Tort Claims.  If any Grantor shall at any time hold or acquire a commercial tort claim, the recovery from which could reasonably be expected to exceed $1,000,000, such Grantor shall promptly notify the Administrative Agent thereof in a writing signed by such Grantor, which sets forth the details thereof and grants to the Administrative Agent (for the benefit of the Secured Parties) a Lien thereon and on the Proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to the Administrative Agent.
Section 4.13    Electronic Chattel Paper and Transferable Records.  If any Grantor at any time holds or acquires an interest in any electronic chattel paper or any “transferable record,” as defined in Section 201 of the Federal Electronic Signatures  in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act, as in effect in any relevant jurisdiction, such Grantor shall promptly notify the Administrative Agent thereof and, at the request of the Administrative Agent, shall take such action as the Administrative Agent may reasonably request to vest in the Administrative Agent control under the UCC or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record.  The Administrative Agent agrees with such Grantor that the Administrative Agent will arrange, pursuant to procedures reasonably satisfactory to the Administrative Agent and so long as such procedures will not result in the Administrative Agent’s loss of control, for the Grantor to make alterations to the electronic chattel paper or transferable record permitted under the UCC or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor with respect to such electronic chattel paper or transferable record.

Exhibit 10.3

Section 4.14    Letter-of-Credit Rights.  If any Grantor is at any time a beneficiary under a letter of credit now or hereafter issued in favor of such Grantor, such Grantor shall promptly notify the Administrative Agent thereof and, at the request of the Administrative Agent, such Grantor shall, pursuant to an agreement in form and substance satisfactory to the Administrative Agent, either (i) arrange for the issuer or any confirming bank of such letter of credit to consent to an assignment to the Administrative Agent of the proceeds of any drawing under the letter of credit or (ii) arrange for the Administrative Agent to become the transferee beneficiary of the letter of credit, with the Administrative Agent agreeing, in each case, that the proceeds of any drawing under the letter of credit are to be paid to the applicable Grantor unless an Event of Default has occurred and is continuing.
Section 4.15    Protective Advances by the Administrative Agent.  At its option, but without being obligated to do so, the Administrative Agent may, upon prior notice to any applicable Grantor, after the occurrence and during the continuance of an Event of Default, (i) pay and discharge past due taxes, assessments and governmental charges, at any time levied on or with respect to any of the Collateral of such Grantor which such Grantor has failed to pay and discharge in accordance with the requirements of this Agreement or any of the other Loan Documents, (ii) pay and discharge any claims of other creditors of such Grantor which are secured by any Lien on any Collateral, other than a Permitted Lien, (iii) pay for the maintenance, repair, restoration and preservation of the Collateral to the extent such Grantor fails to comply with its obligations in regard thereto under this Agreement and the other Loan Documents or the Administrative Agent reasonably believes payment of the same is necessary or appropriate to avoid a material loss or material diminution in value of the Collateral, and/or (iv) obtain and pay the premiums on insurance for the Collateral which such Grantor fails to maintain in accordance with the requirements of this Agreement and the other Loan Documents, and each Grantor agrees to reimburse the Administrative Agent, on demand, for all payments and expenses incurred by the Administrative Agent with respect to such Grantor or any of its Collateral pursuant to the foregoing authorization, provided, however, that nothing in this Section shall be construed as excusing any Grantor from the performance of, or imposing any obligation on the Administrative Agent or any other Secured Creditor to cure or perform, any covenants or other agreements of any Grantor with respect to any of the foregoing matters as set forth herein or in any of the other Loan Documents.
ARTICLE V.
     
 
ACCOUNTS AND COLLECTION OF ACCOUNTS
Section 5.01    Deposit Accounts.
(a)    Upon the request of the Administrative Agent, the Grantors shall cause any deposit accounts that are not Controlled Deposit Accounts of the type described in clause (ii) of the definition of that term to be subject to Deposit Account Control Agreements.
(b)    Promptly upon the creation or acquisition of any new deposit account or any interest therein by any Grantor held at a depositary institution other than KeyBank National Association, which, in the case of the Borrower, the Administrative Agent must have provided consent pursuant to Section 7.14 of the Credit Agreement, such Grantor, upon the request of the Administrative Agent, shall cause such deposit account to become subject to a Deposit Account Control Agreement, prior to the deposit of any funds therein.
Section 5.02    Securities Accounts.

Exhibit 10.3

(a)    Upon the request of the Administrative Agent, the Grantors shall cause all securities accounts to be Controlled Securities Accounts.
(b)    Promptly upon the creation or acquisition of any new securities account or any interest therein by any Grantor, such Grantor shall promptly notify the Administrative Agent, and upon the request of the Administrative Agent, shall cause such securities account to be a Controlled Securities Account, prior to the crediting of any financial asset with respect to which any Grantor is an entitlement holder.
Section 5.03    Operation of Collateral Accounts.  Upon the request of the Administrative Agent, the Grantors shall cause all cash and Cash Equivalents and all securities entitlements to be maintained in Collateral Accounts.  If required to hold all cash and Cash Equivalents in any Collateral Account pursuant to this Agreement or the Credit Agreement, prior to the occurrence and continuance of an Event of Default, the Grantors may withdraw, or direct the disposition of, funds and other investments or financial assets held in the Collateral Accounts.  Upon the occurrence and during the continuance of an Event of Default, upon written notice to any Grantor, the Administrative Agent shall be permitted to (i) retain, or instruct the relevant Securities Intermediary or Depositary Bank to retain, all cash and investments held in any Collateral Account, (ii) liquidate or issue entitlement orders with respect to, or instruct the relevant Securities Intermediary or Depositary Bank to liquidate, any or all investments or financial assets held in any Collateral Account, (iii) issue a Notice of Exclusive Control or other similar instructions with respect to any Collateral Account and instruct the Depositary Bank or Securities Intermediary to follow the instructions of the Administrative Agent, and (iv) withdraw any amounts held in any Collateral Account and apply such amounts in accordance with the terms of this Agreement.
Section 5.04    Collection of Accounts.
(a)    Each Grantor shall, in a manner consistent with the provisions of this Article V, endeavor to cause to be collected from the account debtor named in each of its Accounts Receivable, as and when due (including amounts which are delinquent, such amounts to be collected in accordance with generally accepted lawful collection procedures), any and all amounts owing under or on account of such Accounts Receivable and shall, if required to do so pursuant to the terms of this Agreement, cause such collections to deposited or held in a Collateral Account.
(b)    Each Grantor shall, and the Administrative Agent hereby authorizes each Grantor to, enforce and collect all amounts owing to it on its Inventory and Accounts Receivable, for the benefit and on behalf of the Administrative Agent and the other Secured Creditors; provided, however, that such privilege may at the sole option of the Administrative Agent, by notice to the Borrower (on behalf of all Grantors), be terminated upon the occurrence and during the continuance of any Event of Default.
Section 5.05    Collateral Concentration Account.
(a)    After the occurrence and during the continuance of an Event of Default, the Administrative Agent shall have the right, upon written notice to the Borrower, to establish the Collateral Concentration Account pursuant to which, among other things, the Administrative Agent shall have sole dominion and control over all funds held to the credit of, and all disbursements from, the Collateral Concentration Account.
(b)    Upon the establishment of the Collateral Concentration Account, (i) all of the funds on deposit in or credited to any Controlled Deposit Account (other than, in the discretion of the Administrative Agent, balances of $1,000 or less) shall, upon the instruction of the Administrative Agent 

Exhibit 10.3

to the appropriate Depositary Banks after the issuance of a Notice of Exclusive Control, be transferred to the Collateral Concentration Account on a daily or other basis specified by the Administrative Agent, (ii) no Grantor will have the right of withdrawal from the Collateral Concentration Account or any of the Collateral Accounts, (iii) the Administrative Agent shall have the right to liquidate any investments held in any Controlled Securities Account and have the proceeds thereof deposited in the Collateral Concentration Account, and (iv) all amounts held in the Collateral Concentration Account or any of the Collateral Accounts may be applied, in the Administrative Agent’s discretion, towards payment of the Secured Obligations in accordance with the terms of this Agreement.
(c)    Upon the establishment of the Collateral Concentration Account and at all times thereafter, each Grantor agrees (i) to cause all payments by its account debtors to be promptly deposited in Controlled Deposit Accounts, if such account debtors have not already been instructed to do so, and (ii) to deposit promptly all payments received by it from any other sale of any of its Collateral, whether in the form of cash, checks, notes, drafts, bills of exchange, money orders or otherwise, in a Controlled Deposit Account precisely in the form received (but with any endorsements of such Grantor necessary for deposit or collection).  Until any such payments are so deposited, such payments shall be held in trust by such Grantor for and as the property of the Administrative Agent, for the benefit of the Administrative Agent and the other Secured Creditors hereunder.
ARTICLE VI.
     
 
PLEDGED COLLATERAL
Section 6.01    Delivery of Certificates and Instruments for Pledged Collateral.
(a)    On or prior to the Closing Date, each Grantor shall pledge and deposit with the Administrative Agent all certificates or instruments, if any, representing any of the Pledged Collateral at the time owned by such Grantor and subject to the security interest hereof, duly endorsed in blank in the case of any instrument, and accompanied by undated stock powers duly executed in blank by such Grantor or such other instruments of transfer as are acceptable to the Administrative Agent, in the case of Pledged Equity Interests.
(b)    If a Grantor shall acquire (by purchase, conversion, exchange, stock dividend or otherwise) any additional Pledged Collateral, at any time or from time to time after the date hereof which is or are intended to be subjected to the security interest hereof and which is or are represented by certificates or instruments, such Grantor shall (i) forthwith pledge and deposit with the Administrative Agent all such certificates or instruments, duly endorsed in blank in the case of Intercompany and Third-Party Notes, and accompanied by undated stock powers duly executed in blank by such Grantor or such other instruments of transfer as are acceptable to the Administrative Agent, in the case of Equity Interests, and (ii) promptly thereafter deliver to the Administrative Agent a certificate executed by an authorized officer of such Grantor describing such additional Pledged Collateral and certifying that the same have been duly pledged with the Administrative Agent hereunder.
(c)    Without limitation of any other provision of this Agreement, if any of the Pledged Collateral of a Grantor (whether or not now owned or hereafter acquired) which is intended to be subjected to the security interest hereof is (i) an uncertificated security, each such Grantor shall cause each such uncertificated security to be certificated in all respects in accordance with applicable laws, accompanied by undated stock powers duly executed in blank by each such Grantor or by such other instruments of transfer as are acceptable to the Administrative Agent, and promptly thereafter deposited 

Exhibit 10.3

with the Administrative Agent or otherwise provide the Administrative Agent control with respect to such uncertificated security, or (ii) held in a securities account that is not already subject to a Securities Account Control Agreement, such Grantor shall promptly take all actions required to make such securities account subject to a Securities Account Control Agreement.  Each Grantor further agrees to take such actions as the Administrative Agent deems reasonably necessary or desirable to effect the foregoing and to permit the Administrative Agent to exercise any of its rights and remedies hereunder in respect thereof, and agrees to provide an opinion of counsel reasonably satisfactory to the Administrative Agent with respect to any such pledge of any of the securities described in clauses (i) and (ii) above, promptly upon the request of the Administrative Agent.
(d)    After the Closing Date, no Grantor shall permit any SPE to elect to opt into or voluntarily allow any Equity Interest to be governed by Article 8 of the applicable Uniform Commercial Code without the prior written consent of the Secured Party.  Grantor shall cause all Issuers that are limited liability companies or limited partnerships (other than the SPEs) to elect to opt into and cause all Equity Interests in such Issuers to be securities governed by, Article 8 of the applicable Uniform Commercial Code.
Section 6.02    No Assumption of Liability.  The security interest of any Grantor is granted as security only and shall not subject the Administrative Agent or any other Secured Creditor to, or in any way alter or modify, any obligation or liability of such Grantor with respect to or arising out of any of the Pledged Collateral.  Nothing herein shall be construed to make the Administrative Agent liable as a general partner or limited partner of any Pledged Entity or a shareholder of any corporation, and the Administrative Agent by virtue of this Agreement or any actions taken as contemplated hereby (except as referred to in the following sentence) shall not have any of the duties, obligations or liabilities of a general partner or limited partner of any Pledged Entity or a stockholder of any corporation.  The parties hereto expressly agree that, unless the Administrative Agent shall become the absolute owner of an Equity Interest pursuant hereto, this Agreement shall not be construed as creating a partnership or joint venture among the Administrative Agent and/or a Grantor or any other Person.
Section 6.03    Registration of Collateral in the Name of the Administrative Agent.  The Administrative Agent shall have the right, at any time in its discretion and without notice to any Grantor, to transfer to or to register in the name of the Administrative Agent or any of its nominees any or all of the Pledged Collateral, subject only to the revocable voting and similar rights specified in this Article VI.  In addition, the Administrative Agent shall have the right at any time to exchange certificates or instruments representing or evidencing any Pledged Collateral for certificates or instruments of smaller or larger denominations.
Section 6.04    Appointment of Sub-Agents; Endorsements; etc.  The Administrative Agent shall have the right to appoint one or more sub-agents for the purpose of retaining physical possession of the instruments and certificates evidencing any of the Pledged Collateral, which may be held (in the sole discretion of the Administrative Agent) in the name of the relevant Grantor, endorsed or assigned in blank or in favor of the Administrative Agent or any nominee or nominees of the Administrative Agent or a sub-agent appointed by the Administrative Agent.
Section 6.05    Voting Rights.  Unless and until an Event of Default shall have occurred and be continuing, each Grantor shall be entitled to exercise all voting rights attaching to any and all Pledged Collateral owned by it, and to give consents, waivers or ratifications in respect thereof, provided that no vote shall be cast or any consent, waiver or ratification given or any action taken which would violate, result in breach of any covenant contained in or be inconsistent with any of the terms of this Agreement, 

Exhibit 10.3

any other Loan Document, or which would have the effect of impairing the position or interests of the Administrative Agent or any Secured Creditor therein.  All such rights of such Grantor to vote and to give consents, waivers and ratifications shall cease in case an Event of Default shall occur and be continuing.
Section 6.06    Entitlement of Grantors to Cash Dividends and Distributions.  A Grantor shall be entitled to receive all cash dividends or distributions payable in respect of its Pledged Collateral, except as otherwise provided in this Article VI.
Section 6.07    Entitlement of Administrative Agent to Dividends and Distributions.  The Administrative Agent shall be entitled to receive and to retain as part of the Pledged Collateral:
(a)    all cash dividends and distributions payable in respect of the Pledged Collateral at any time when an Event of Default shall have occurred and be continuing;  and
(b)    regardless of whether or not an Event of Default shall have occurred and be continuing at the time of payment or distribution thereof, and except to the extent any of the following is otherwise permitted by the Credit Agreement: (i) all cash dividends and distributions in respect of the Pledged Collateral which are reasonably determined by the Administrative Agent to represent in whole or in part an extraordinary, liquidating or other distribution in return of capital; (ii) all other or additional stock, other securities, partnership interests, membership interests or property (other than cash to which a Grantor is entitled under Section 6.06) paid or distributed by way of dividend (including any payment in kind dividend) or otherwise in respect of the Pledged Collateral; (iii) all other or additional stock, other securities, partnership interests, membership interests or property (including cash) paid or distributed in respect of the Pledged Collateral by way of stock split, spin-off, split up, reclassification, combination of shares or similar rearrangement; and (iv) all other or additional stock, other securities, partnership interests, membership interests or property (including cash) which may be paid in respect of the Pledged Collateral by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar corporate, partnership or limited liability company reorganization.
Section 6.08    Application of Dividends and Distributions.  If no Event of Default shall have occurred and be continuing at such time, the Administrative Agent will, at the request of the Borrower (on behalf of any applicable Grantor or Grantors), pay over to the Administrative Agent, for application to the payment or prepayment of any of the Loan Document Obligations, any cash held by it as Pledged Collateral which is attributable to dividends or distributions received by it and then held as part of the Collateral pursuant to this Article VI.  If an Event of Default shall have occurred and be continuing, all dividends and distributions received by the Administrative Agent and then held by it pursuant to this Article VI as part of the Pledged Collateral will be applied as provided in Section 8.05 hereof.
Section 6.09    Turnover by Grantors.  All dividends, distributions or other payments that are received by any Grantor contrary to the provisions of this Agreement shall be received in trust for the benefit of the Administrative Agent, shall be segregated from other property or funds of such Grantor and shall be forthwith paid over to the Administrative Agent as Collateral in the same form as so received (with any necessary endorsement).
Section 6.10    Registration under 1933 Act.  If an Event of Default shall have occurred and be continuing and a Grantor shall have received from the Administrative Agent a written request or requests that such Grantor cause any registration, qualification or compliance under any Federal or state securities law or laws to be effected with respect to all or any part of the Pledged Equity Interest of its Subsidiaries, such Grantor as soon as practicable and at its expense will use its best efforts to cause such registration to be effected (and be kept effective) and will use its best efforts to cause such qualification and compliance 

Exhibit 10.3

to be effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such stock, including registration under the Securities Act of 1933, as then in effect (the “Securities Act”) (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with any other governmental requirements, provided that the Administrative Agent shall furnish to such Grantor such information regarding the Administrative Agent as such Grantor may request in writing and as shall be required in connection with any such registration, qualification or compliance.  The relevant Grantor will advise the Administrative Agent in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof, will furnish to the Administrative Agent such number of prospectuses, offering circulars and other documents incident thereto as the Administrative Agent from time to time may reasonably request, and will indemnify the Administrative Agent and all others participating in the distribution of such Pledged Equity Interests against all claims, losses, damages or liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration statement, notification or the like) or by any omission (or alleged omission) to state therein (or in any related registration statement, notification or the like) a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same may have been caused by an untrue statement or omission based upon information furnished in writing to such Grantor by the Administrative Agent expressly for use therein.
Section 6.11    Sale of Pledged Equity Interests in Connection with Enforcement.  If at any time when the Administrative Agent shall determine to exercise its right to sell all or any part of the Pledged Equity Interests pursuant to Section 8.01, such Pledged Equity Interests or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Securities Act of 1933, as then in effect, the Administrative Agent may, in its sole and absolute discretion and to the fullest extent permitted by applicable law now or hereafter in effect, sell such Pledged Equity Interests or part thereof by private sale in such manner and under such circumstances as the Administrative Agent may deem necessary or advisable in order that such sale may legally be effected without such registration, provided that at least ten days’ notice of the time and place of any such sale shall be given to the relevant Grantor.  Without limiting the generality of the foregoing, in any such event the Administrative Agent, in its sole and absolute discretion, (a) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Equity Interests or part thereof shall have been filed under such Securities Act, (b) may approach and negotiate with a single possible purchaser to effect such sale and (c) may restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Equity Interests or part thereof.  In the event of any such sale, the Administrative Agent shall incur no responsibility or liability to any Grantor for selling all or any part of the Pledged Equity Interests at a price which the Administrative Agent may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until the registration as aforesaid.
ARTICLE VII.
     
 
INTELLECTUAL PROPERTY
Section 7.01    Collateral Assignments; Further Assurances.  Upon request of the Administrative Agent whenever made, any Grantor shall promptly execute and deliver to the Administrative Agent such Collateral Assignment Agreements as the Administrative Agent shall reasonably request in connection with such Grantor’s Intellectual Property.  Each Grantor agrees that it will take such action, and deliver 

Exhibit 10.3

such documents or instruments, as the Administrative Agent shall reasonably request in connection with the preparation, filing or registration and enforcement of any Collateral Assignment Agreement.
Section 7.02    Remedies Relating to Intellectual Property.  If an Event of Default shall occur and be continuing, the Administrative Agent may, by written notice to the relevant Grantor, take any or all of the following actions: (i) declare the entire right, title and interest of such Grantor in and to each of the Copyrights, Patents and Trademarks, together with all trademark rights and rights of protection to the same, vested, in which event such rights, title and interest shall immediately vest in the Administrative Agent for the benefit of the Secured Creditors, in which case such Grantor agrees to execute an assignment in form and substance reasonably satisfactory to the Administrative Agent of all its rights, title and interest in and to the Copyrights, Patents and Trademarks to the Administrative Agent for the benefit of the Secured Creditors; (ii) take and practice or sell the Copyrights or Patents and take and use or sell the Trademarks and the good will of such Grantor’s business symbolized by the Trademarks and the right to carry on the business and use the assets of the Grantor in connection with which the Trademarks have been used; and (iii) direct such Grantor to refrain, in which event such Grantor shall refrain, from using the Copyrights, Patents and Trademarks in any manner whatsoever, directly or indirectly, and, if requested by the Administrative Agent, change such Grantor’s corporate name to eliminate therefrom any use of any mark and execute such other and further documents that the Administrative Agent may request in connection with such Grantor’s obligations under this Agreement and to transfer ownership of the Copyrights, Patents and Trademarks, and registrations and any pending trademark application, to the Administrative Agent for the benefit of the Secured Parties.
ARTICLE VIII.
     
 
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
Section 8.01    Remedies Generally.  Each Grantor agrees that, if any Event of Default shall have occurred and be continuing, then and in every such case, subject to any mandatory requirements of applicable law then in effect, the Administrative Agent, in addition to any rights now or hereafter existing under applicable law, shall have all rights as a secured creditor under the UCC in all relevant jurisdictions and may exercise any or all of the following rights (all of which each Grantor hereby agrees is commercially reasonable to the fullest extent permitted under applicable law now or hereafter in effect):
(a)    personally, or by agents’ attorneys or other authorized representatives, immediately retake possession of the Collateral or any part thereof from such Grantor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon such Grantor’s or such other Person’s premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of such Grantor;
(b)    instruct the obligor or obligors on any Account Receivable, agreement, instrument or other obligation (including account debtors) constituting the Collateral to make any payment required by the terms of such Account Receivable, agreement, instrument or other obligation directly to the Administrative Agent and/or directly to a lockbox under the sole dominion and control of the Administrative Agent or to the Collateral Concentration Account;
(c)    sell, assign or otherwise liquidate, or direct such Grantor to sell, assign or otherwise liquidate, any or all of the Collateral or any part thereof, and take possession of the proceeds of any such sale or liquidation;

Exhibit 10.3

(d)    issue a Notice of Exclusive Control with respect to any or all of the Collateral Accounts and issue entitlement orders or instructions with respect thereto;
(e)    withdraw any or all monies, securities and/or instruments in the Collateral Concentration Account or any Collateral Account for application to the Secured Obligations in accordance with Section 8.05 hereof; 
(f)    pay and discharge taxes, Liens or claims on or against any of the Collateral;
(g)    pay, perform or satisfy, or cause to be paid, performed or satisfied, for the benefit of any Grantor, any of the obligations, terms, covenants, provisions or conditions to be paid, observed, performed or satisfied by such Grantor under any contract, agreement or instrument relating to its Collateral, all in accordance with the terms, covenants, provisions and conditions thereof, as and to the extent that such Grantor fails or refuses to perform or satisfy the same;
(h)    enter into any extension of, or any other agreement in any way relating to, any of the Collateral;
(i)    make any compromise or settlement the Administrative Agent deems desirable or necessary with respect to any of the Collateral; and/or
(j)    take possession of the Collateral or any part thereof, by directing such Grantor or any other Person in possession thereof in writing to deliver the same to the Administrative Agent at any place or places designated by the Administrative Agent, in which event such Grantor shall at its own expense:
(i)    forthwith cause the same to be moved to the place or places so designated by the Administrative Agent and delivered to the Administrative Agent,
(ii)    store and keep any Collateral so delivered to the Administrative Agent at such place or places pending further action by the Administrative Agent as provided in Section 8.02, and
(iii)    while the Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain them in substantially the same condition prior to such action;
it being understood that such Grantor’s obligation so to deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Administrative Agent shall be entitled to a decree requiring specific performance by such Grantor of said obligation.
Section 8.02    Disposition of the Collateral.  Upon the occurrence and continuance of an Event of Default, any Collateral repossessed by the Administrative Agent under or pursuant to Section 8.01 and any other Collateral whether or not so repossessed by the Administrative Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale of the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Administrative Agent may, in compliance with any mandatory requirements of applicable law, determine to be commercially reasonable.  Any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Administrative Agent or after any overhaul or repair which the Administrative Agent shall 

Exhibit 10.3

determine to be commercially reasonable.  Except in the case of any Collateral that is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, (i) in the case of any such disposition which shall be a private sale or other private proceedings permitted by such requirements, such sale shall be made upon not less than ten days’ written notice to such Grantor specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the ten days after the giving of such notice, to the right of the relevant Grantor or any nominee of the relevant Grantor to  acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified, and (ii) in the case of any such disposition which shall be a public sale permitted by such requirements, such sale shall be made upon not less than ten days’ written notice to the relevant Grantor specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at the Administrative Agent’s sole option, be subject to reserve), after publication of notice of such auction not less than ten days prior thereto in two newspapers in general circulation in the city where such Collateral is located.  To the extent permitted by any such requirement of law, the Administrative Agent on behalf of the Secured Creditors (or certain of them) may bid for and become the purchaser (by bidding in Secured Obligations or otherwise) of the Collateral or any item thereof offered for sale in accordance with this Section without accountability to the relevant Grantor (except to the extent of surplus money received as provided in Section 8.05).  Unless so obligated under mandatory requirements of applicable law, the Administrative Agent shall not be required to make disposition of the Collateral within a period of time which does not permit the giving of notice to the Grantor as hereinabove specified.  The Administrative Agent need give the relevant Grantor only such notice of disposition as the Administrative Agent shall deem to be reasonably practicable in view of such mandatory requirements of applicable law.
Section 8.03    Grant of License to Use Intellectual Property.  For the purpose of enabling the Administrative Agent to exercise rights and remedies under this Article VIII at such time as the Administrative Agent shall be lawfully entitled to exercise such rights and remedies and for no other purpose, each Grantor hereby grants to the Administrative Agent an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to the Grantor) to use, assign or sublicense any of the Intellectual Property of such Grantor, now owned or hereafter acquired by such Grantor, and wherever the same may be located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof.
Section 8.04    Waiver of Claims.  Except as otherwise provided in this Agreement, EACH GRANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE ADMINISTRATIVE AGENT’S TAKING POSSESSION OR THE ADMINISTRATIVE AGENT’S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH THE GRANTOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and each Grantor hereby further waives, to the extent permitted by law: (i) all damages occasioned by such taking of possession except any damages which are the direct result of the Administrative Agent’s gross negligence or willful misconduct; (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Administrative Agent’s rights hereunder; and (iii) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Collateral or any portion thereof, and each Grantor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, 

Exhibit 10.3

hereby waives the benefit of all such laws to the fullest extent permitted by applicable law now or hereafter in effect.  Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the relevant Grantor therein and thereto, and shall be a perpetual bar both at law and in equity against the relevant Grantor and against any and all Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under the relevant Grantor.
Section 8.05    Application of Proceeds.  All Collateral and proceeds of Collateral obtained and realized by the Administrative Agent in connection with the enforcement of this Agreement pursuant to this Article VIII shall be applied as follows:
(i)    first, to the payment  to the Administrative Agent, for application to the Secured Obligations as provided in Section 8.03 of the Credit Agreement; and
(ii)    second, to the extent remaining after the application pursuant to the preceding clause (i) and following the termination of this Agreement pursuant to Section 9.09 hereof, to the relevant Grantor or to whomever may be lawfully entitled to receive such payment.
Section 8.06    Remedies Cumulative.  Each and every right, power and remedy hereby specifically given to the Administrative Agent shall be in addition to every other right, power and remedy specifically given under this Agreement or the other Loan Documents, any Designated Hedge Agreements or any agreement in respect of Banking Services Obligations or now or hereafter existing at law or in equity, or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Administrative Agent.  All such rights, powers and remedies shall be cumulative and the exercise or the beginning of exercise of one shall not be deemed a waiver of the right to exercise any other or others.  No delay or omission of the Administrative Agent in the exercise of any such right, power or remedy, or partial or single exercise thereof, and no renewal or extension of any of the Secured Obligations, shall impair or constitute a waiver of any such right, power or remedy or shall be construed to be a waiver of any Default or Event of Default or an acquiescence therein.  No notice to or demand on any Grantor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Administrative Agent to any other or further action in any circumstances without notice or demand.  In the event that the Administrative Agent shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Administrative Agent may recover reasonable, actual expenses, including attorneys’ fees, and the amounts thereof shall be included in such judgment.
Section 8.07    Discontinuance of Proceedings.  In case the Administrative Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Administrative Agent, then and in every such case the relevant Grantor, the Administrative Agent and each holder of any of the Secured Obligations shall be restored to their former positions and rights hereunder with respect to the Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of the Administrative Agent shall continue as if no such proceeding had been instituted.
Section 8.08    Purchasers of Collateral.  Upon any sale of any of the Collateral by the Administrative Agent hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Administrative Agent or the officer making the sale shall 

Exhibit 10.3

be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Administrative Agent or such officer or be answerable in any way for the misapplication or nonapplication thereof.
ARTICLE IX.
     
 
MISCELLANEOUS
Section 9.01    Notices.  Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing, sent by telecopier, mailed or delivered, (i) if to the Borrower, at its address specified in or pursuant to the Credit Agreement, (ii) if to any Subsidiary Grantor, to it c/o the Borrower at its address specified in or pursuant to the Credit Agreement, (iii) if to the Administrative Agent, to it at the Notice Office of the Administrative Agent, and (iv) if to any Lender, at its address specified in or pursuant to the Credit Agreement; or in any case at such other address as any of the Persons listed above may hereafter notify the others in writing.  All such notices and communications shall be mailed, telecopied, sent by overnight courier or delivered, and shall be effective when received.
Section 9.02    Entire Agreement.  This Agreement and the other Loan Documents represent the final agreement among the parties with respect to the subject matter hereof and thereof, supersede any and all prior agreements and understandings, oral or written, relating to the subject matter hereof and thereof, and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements among the parties.  There are no unwritten oral agreements among the parties.
Section 9.03    Obligations Absolute.  The obligations of each Grantor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, other than indefeasible payment in full of, and complete performance of, all of the Secured Obligations, including:
(a)    any renewal, extension, amendment or modification of, or addition or supplement to, or deletion from other Loan Documents, or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof;
(b)    any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument or this Agreement except as expressly provided in such renewal, extension, amendment, modification, addition, supplement, assignment or transfer;
(c)    any furnishing of any additional security to the Administrative Agent or its assignee or any acceptance thereof or any release of any security by the Administrative Agent or its assignee;
(d)    any limitation on any Person’s liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof;
(e)    any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to a Grantor or any Subsidiary of a Grantor, or any action 

Exhibit 10.3

taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not a Grantor shall have notice or knowledge of any of the foregoing; or
(f)    to the fullest extent permitted by applicable law now or hereafter in effect, any other event or circumstance which, but for this provision, might release or discharge a guarantor or other surety from its obligations as such.
Section 9.04    Successors and Assigns.  This Agreement shall be binding upon each Grantor and its successors and assigns and shall inure to the benefit of the Administrative Agent and each other Secured Creditor and their respective successors and assigns, provided that no Grantor may transfer or assign any or all of its rights or obligations hereunder without the written consent of the Administrative Agent.  All agreements, statements, representations and warranties made by each Grantor herein or in any certificate or other instrument delivered by such Grantor or on its behalf under this Agreement shall be considered to have been relied upon by the Secured Creditors and shall survive the execution and delivery of this Agreement and the other Loan Documents regardless of any investigation made by the Secured Creditors on their behalf.
Section 9.05    Headings Descriptive.  The headings of the several Sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.
Section 9.06    Severability.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 9.07    Enforcement Expenses, etc.  The Grantors hereby jointly and severally agree to pay, to the extent not paid pursuant to Section 11.01 of the Credit Agreement, all reasonable, actual out-of-pocket costs and expenses of the Administrative Agent and each other Secured Creditor in connection with the enforcement of this Agreement, the preservation of the Collateral, the perfection of the security interest, and any amendment, waiver or consent relating hereto (including the reasonable fees and disbursements of counsel employed by the Administrative Agent or any of the other Secured Creditors).
Section 9.08    Release of Portions of Collateral.
(a)    So long as no Event of Default is in existence or would exist after the application of proceeds as provided below, the Administrative Agent shall, at the request of a Grantor, release any or all of the Collateral of such Grantor, provided that (i) such release is permitted by the terms of the Credit Agreement (it being agreed for such purposes that a release will be deemed “permitted by the terms of the Credit Agreement” if the proposed transaction constitutes an exception contained in Section 7.02 of the Credit Agreement) or otherwise has been approved in writing by the Required Lenders (or, to the extent required by Section 11.12 of the Credit Agreement, all of the applicable Lenders) and (ii) the proceeds of such Collateral are to be applied as required pursuant to the Credit Agreement or any consent or waiver entered into with respect thereto.
(b)    At any time that a Grantor desires that the Administrative Agent take any action to give effect to any release of Collateral pursuant to the foregoing Section 9.08(a), it shall deliver to the Administrative Agent a certificate signed by a principal executive officer stating that the release of the respective Collateral is permitted pursuant to Section 9.08(a).  In the event that any part of the Collateral 

Exhibit 10.3

is released as provided in Section 9.08(a), the Administrative Agent, at the request and expense of a Grantor, will duly release such Collateral and assign, transfer and deliver to such Grantor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold and as may be in the possession of the Administrative Agent and has not theretofore been released pursuant to this Agreement.  The Administrative Agent shall have no liability whatsoever to any Secured Creditor as the result of any release of Collateral by it as permitted by this Section 9.08.
Section 9.09    Termination.  After the termination of all of the Commitments and when all Loans and other Secured Obligations (other than unasserted indemnity obligations) have been paid in full, this Agreement shall terminate, and the Administrative Agent, at the request and expense of the Grantors, will execute and deliver to the relevant Grantor a proper instrument or instruments (including UCC termination statements on form UCC-3) acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to the relevant Grantor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Administrative Agent and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement.
Section 9.10    Administrative Agent.  The Administrative Agent will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement.  The acceptance by the Administrative Agent of this Agreement, with all the rights, powers, privileges and authority so created, shall not at any time or in any event obligate the Administrative Agent to appear in or defend any action or proceeding relating to the Collateral to which it is not a party, or to take any action hereunder or thereunder, or to expend any money or incur any expenses or perform or discharge any obligation, duty or liability under the Collateral.  By accepting the benefits of this Agreement, each Secured Creditor acknowledges and agrees that the rights and obligations of the Administrative Agent shall be as set forth in Article IX of the Credit Agreement.  Notwithstanding anything to the contrary contained in Section 9.03 of this Agreement or Section 11.12 of the Credit Agreement, this Section 9.10, and the duties and obligations of the Administrative Agent set forth in this Section 9.10, may not be amended or modified without the consent of the Administrative Agent.
Section 9.11    Only Administrative Agent to Enforce on Behalf of Secured Creditors.  The Secured Creditors agree by their acceptance of the benefits hereof that this Agreement may be enforced on their behalf only by the action of the Administrative Agent, acting upon the instructions of the Required Lenders and that no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent, for the benefit of the Secured Creditors, upon the terms of this Agreement.
Section 9.12    Other Creditors, etc. Not Third-Party Beneficiaries.  No creditor of any Grantor or any of its Affiliates, or other Person claiming by, through or under any Grantor or any of its Affiliates, other than the Administrative Agent and the other Secured Creditors, and their respective successors and assigns, shall be a beneficiary or third-party beneficiary of this Agreement or otherwise shall derive any right or benefit herefrom.
Section 9.13    Counterparts.  This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, including via facsimile transmission or other electronic transmission capable of authentication, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same agreement.  A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent.

Exhibit 10.3

Section 9.14    Amendments; Additional Grantors.  No amendment or waiver of any provision of this Agreement and no consent to any departure by any Grantor shall in any event be effective unless the same shall be in writing and signed by the Administrative Agent acting at the direction of the requisite number of Lenders, if any, required pursuant to Section 11.12 of the Credit Agreement, and the applicable Grantor or Grantors, as the case may be, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.  Upon the execution and delivery by any Person of a Security Agreement Joinder, (a) such Person shall be referred to as an “Additional Grantor” and shall become and be a Grantor hereunder, and each reference in this Agreement to a “Grantor” shall also mean and be a reference to such Additional Grantor, and each reference in any other Loan Document to a “Grantor” shall also mean and be a reference to such Additional Grantor, and (b) each reference herein to “this Agreement,” “hereunder,” “hereof” or words of like import referring to this Agreement, and each reference in any other Loan Document to the “Security Agreement,” “thereunder,” “thereof” or words of like import referring to this Agreement, shall mean and be a reference to this Agreement as supplemented by such Security Agreement Joinder.
Section 9.15    Separate Actions.  A separate action may be brought and prosecuted against any Grantor, any other guarantor or obligor or the Borrower, and whether or not any other Grantor, any other guarantor or obligor or the Borrower be joined in such action or actions.
Section 9.16    Full Recourse Obligations; Effect of Fraudulent Transfer Laws.  It is the desire and intent of each Grantor, the Administrative Agent and the other Secured Creditors that this Agreement shall be enforced as a full recourse obligation of each Grantor to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought.  If and to the extent that the obligations of any Grantor under this Agreement would, in the absence of this sentence, be adjudicated to be invalid or unenforceable because of any applicable state or federal law relating to fraudulent conveyances or transfers, then the amount of such Grantor liability hereunder in respect of the Secured Obligations shall be deemed to be reduced ab initio to that maximum amount that would be permitted without causing such Grantor’s obligations hereunder to be so invalidated.
Section 9.17    Governing Law; Venue; Waiver of Jury Trial.
(a)    THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(b)    EACH GRANTOR HEREBY IRREVOCABLY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK CITY IN ANY LITIGATION OR OTHER PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE SECURED CREDITORS, OR THE GRANTORS IN CONNECTION HEREWITH OR THEREWITH; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND; PROVIDED, FURTHER, THAT NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY SECURED CREDITOR TO BRING PROCEEDINGS AGAINST ANY GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION.

Exhibit 10.3

(c)    EACH GRANTOR IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR NOTICES SPECIFIED IN SECTION 11.05 OF THE CREDIT AGREEMENT.  EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO IN CLAUSE (b) ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  TO THE EXTENT THAT ANY GRANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH GRANTOR HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT OR THE LOAN DOCUMENTS.  EACH GRANTOR HEREBY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT THAT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN THIS SECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.
(d)    THE ADMINISTRATIVE AGENT, EACH SECURED CREDITOR AND EACH GRANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, ANY LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, SUCH SECURED CREDITOR OR SUCH GRANTOR IN CONNECTION THEREWITH.  EACH GRANTOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT AND EACH SECURED CREDITOR ENTERING INTO THIS AGREEMENT.
Section 9.18    Amended and Restated Pledge and Security Agreement.  This Agreement amends, restates and replaces the Original Pledge Agreement in its entirety; provided, all accrued liabilities of Borrower and Grantor under the Original Pledge Agreement (if any) and the Liens granted in favor of the Administrative Agent for the benefit of the Secured Creditors thereunder shall continue under this Agreement.
[Remainder of page intentionally left blank]

Exhibit 10.3

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written.
	
		
	 
	PREFERRED APARTMENT COMMUNITIES OPERATING PARTNERSHIP, L.P.

By:    Preferred Apartment Advisors, LLC, its manager

By:/s/ Jeffrey R. Sprain                                           
Name: Jeffrey R. Sprain
Title:   Senior Vice President, 
                      General Counsel & Secretary

	 
	SUNBELT RETAIL, LLC
HAVEN WEST MEZZANINE LENDING, LLC
STARKVILLE MEZZANINE LENDING, LLC
SUMMIT CROSSING III MEZZANINE LENDING, LLC
OXFORD OVERTURE LENDING, LLC
HAVEN LUBBOCK LENDING, LLC
NEWPORT KENNESAW MEZZANINE LENDING, LLC
BRISTOL BIRMINGHAM LENDING, LLC 
360 IRVINE LENDING, LLC
CITY PARK II CAPITAL LENDING, LLC 
CITY PARK MEZZANINE LENDING, LLC
CRESCENT AVE LENDING, LLC 
ENCORE CAPITAL LENDING, LLC 
HAVEN LUBBOCK II LENDING, LLC 
HAVEN NORTHGATE LENDING, LLC
HAVEN TAMPA LENDING, LLC
HAVEN WACO LENDING, LLC
HIDDEN RIVER CAPITAL LENDING, LLC 
MAIN STREET APARTMENT HOMES, LLC 
NEW MARKET PROPERTIES, LLC
NEWPORT BISHOP LENDING, LLC 
OXFORD HIDDEN RIVER LENDING, LLC 
PAC CARVEOUT, LLC
PAC DAWSON LENDING, LLC
PAC LENDING, LLC
PAC LENOX, LLC
PREFERRED CAMPUS COMMUNITIES, LLC 
SE GROCERY LLC
PAC CITY VISTA APARTMENTS, LLC

  By:    Preferred Apartment Advisors, LLC, its agent

By:_/s/ Jeffrey R. Sprain                                           
Name: Jeffrey R. Sprain
Title:   Senior Vice President,
                         General Counsel & Secretary

Signature Page – Fourth Amended and Restated Pledge and Security Agreement

	
		
	

Accepted by:

KEYBANK NATIONAL ASSOCIATION,
as Administrative Agent

By: /s/ James K. Komperda                  
   Name: James K. Komperda
   Title:   Vice President

	

Signature Page – Amended and Restated Pledge and Security Agreement
C:\Users\jseff.PAA\Desktop\8-k keybank\NAI_1501138587_6_KeyBank - PAC - Fourth A&R Pledge and Security Agreement.DOC 

SCHEDULE 1
Pledged Collateral
I.    Equity Interests
	
					
	Grantor
	Issuer and Type of Organization
	Certificate Number
	Percent of Equity Interest Owned
	Percent of Equity Interest Pledged

	Preferred Apartment Communities Operating Partnership, L.P.
	Haven West Mezzanine Lending, LLC
	1
	100%
	100%

	Preferred Apartment Communities Operating Partnership, L.P.
	Starkville Mezzanine Lending, LLC
	1
	100%
	100%

	Preferred Apartment Communities Operating Partnership, L.P.
	Summit Crossing III Mezzanine Lending, LLC
	1
	100%
	100%

	Preferred Apartment Communities Operating Partnership, L.P.
	Oxford Overture Lending, LLC (f/k/a Iris Crosstown Mezzanine Lending II, LLC)
	1
	100%
	100%

	Preferred Apartment Communities Operating Partnership, L.P.
	Haven Lubbock Lending, LLC (f/k/a Lubbock Mezzanine Lending, LLC)
	1
	100%
	100%

	Preferred Apartment Communities Operating Partnership, L.P.
	Newport Kennesaw Mezzanine Lending, LLC
	1
	100%
	100%

	Preferred Apartment Communities Operating Partnership, L.P.
	Stone Rise Apartments, LLC
	1
	100%
	49%

	Preferred Apartment Communities Operating Partnership, L.P.
	PAC Summit Crossing, LLC
	1
	100%
	49%

	Preferred Apartment Communities Operating Partnership, L.P.
	WAM McNeil Ranch, LLC
	1
	100%
	49%

	Preferred Apartment Communities Operating Partnership, L.P.
	Lake Cameron, LLC
	1
	100%
	49%

	Preferred Apartment Communities Operating Partnership, L.P.
	Ashford Park, LLC
	1
	100%
	49%

	Preferred Apartment Communities Operating Partnership, L.P.
	PAC Summit Crossing II, LLC
	1
	100%
	49%

	Preferred Apartment Communities Operating Partnership, L.P.
	Stoneridge Farms Hunt Club, LLC
	1
	100%
	49%

    

	
					
	Grantor
	Issuer and Type of Organization
	Certificate Number
	Percent of Equity Interest Owned
	Percent of Equity Interest Pledged

	Preferred Apartment Communities Operating Partnership, L.P.
	PAC Vineyards, LLC
	1
	100%
	49%

	Preferred Apartment Communities Operating Partnership, L.P.
	PAC Enclave at Vista Ridge, LLC
	1
	100%
	49%

	Preferred Apartment Communities Operating Partnership, L.P.
	Sandstone Creek, LLC
	1
	100%
	49%

	Preferred Apartment Communities Operating Partnership, L.P.
	PAC Northpointe, LLC
	1
	100%
	49%

	Preferred Apartment Communities Operating Partnership, L.P.
	PAC Cypress, LLC
	1
	100%
	49%

	Preferred Apartment Communities Operating Partnership, L.P.
	Haven Waco Lending, LLC
	1
	100%
	100%

	Preferred Apartment Communities Operating Partnership, L.P.
	Haven Tampa Lending, LLC
	1
	100%
	100%

	Preferred Apartment Communities Operating Partnership, L.P.
	360 Irvine Lending, LLC
	1
	100%
	100%

	Preferred Apartment Communities Operating Partnership, L.P.
	PAC Sarasota, LLC
	1
	100%
	49%

	Preferred Apartment Communities Operating Partnership, L.P.
	PAC Naples, LLC
	1
	100%
	49%

	Preferred Apartment Communities Operating Partnership, L.P.
	PAC Citypark View, LLC
	1
	100%
	49%

	Preferred Apartment Communities Operating Partnership, L.P.
	Newport Bishop Lending, LLC
	1
	100%
	100%

	Preferred Apartment Communities Operating Partnership, L.P.
	Oxford Hidden River Lending, LLC
	1
	100%
	100%

	Preferred Apartment Communities Operating Partnership, L.P.
	Hidden River Capital Lending, LLC
	1
	100%
	100%

	Preferred Apartment Communities Operating Partnership, L.P.
	Encore Capital Lending, LLC
	1
	100%
	100%

	Preferred Apartment Communities Operating Partnership, L.P.
	City Park Mezzanine Lending, LLC
	1
	100%
	100%

    

	
					
	Grantor
	Issuer and Type of Organization
	Certificate Number
	Percent of Equity Interest Owned
	Percent of Equity Interest Pledged

	Preferred Apartment Communities Operating Partnership, L.P.
	City Park II Capital Lending, LLC
	1
	100%
	100%

	Preferred Apartment Communities Operating Partnership, L.P.
	Crescent Ave Lending, LLC
	1
	100%
	100%

	Preferred Apartment Communities Operating Partnership, L.P.
	PAC Crosstown Walk, LLC
	1
	100%
	49%

	Preferred Apartment Communities Operating Partnership, L.P.
	PAC Overton Rise, LLC
	1
	100%
	49%

	New Market Properties, LLC
	Spring Hill Plaza, LLC
	1
	100%
	49%

	New Market Properties, LLC
	Parkway Town Centre, LLC
	1
	100%
	49%

	New Market Properties, LLC
	Woodstock Crossing Center, LLC
	1
	100%
	49%

	New Market Properties, LLC
	Sunbelt Retail, LLC
	1
	100%
	49%

	New Market Properties, LLC
	PAC Dawson Lending, LLC
	1
	100%
	100%

	Sunbelt Retail, LLC
	Deltona Landing, LLC
	1
	100%
	49%

	Sunbelt Retail, LLC
	Powder Springs-Macland Retail, LLC
	1
	100%
	49%

	Sunbelt Retail, LLC
	NMP Kingwood Glen, LLC
	1
	100%
	49%

	Sunbelt Retail, LLC
	Barclay Crossing, LLC
	1
	100%
	49%

	Sunbelt Retail, LLC
	Sweetgrass Corner, LLC
	1
	100%
	49%

	Sunbelt Retail, LLC
	Parkway Centre, LLC
	1
	100%
	49%

	Sunbelt Retail, LLC
	New Market –Plano, LLC
	1
	100%
	49%

	Sunbelt Retail, LLC
	New Market – Royal Lakes, LLC
	1
	100%
	49%

	Sunbelt Retail, LLC
	New Market – Summit Point, LLC
	1
	100%
	49%

	Sunbelt Retail, LLC
	New Market – Overlook, LLC
	1
	100%
	49%

	Sunbelt Retail, LLC
	New Market – Wade Green, LLC
	1
	100%
	49%

	Sunbelt Retail, LLC
	New Market – Cumming, LLC
	1
	100%
	49%

	Sunbelt Retail, LLC
	New Market – Victory Village, LLC
	1
	100%
	49%

    

	
					
	Grantor
	Issuer and Type of Organization
	Certificate Number
	Percent of Equity Interest Owned
	Percent of Equity Interest Pledged

	PAC Carveout, LLC
	PAC Citilakes, LLC
	1
	100%
	49%

	PAC Carveout, LLC
	PAC Galleria 75, LLC
	1
	100%
	49%

	PAC Carveout, LLC
	PAC City Vista Apartments, LLC
	1
	100%
	49%

	PAC Lenox, LLC
	PAC Lenox Regent, LLC
	1
	100%
	49%

	PAC Lenox, LLC
	PAC Lenox Retreat, LLC
	1
	100%
	49%

	PAC Lenox, LLC
	PAC Lenox Village, LLC
	1
	100%
	49%

	Main Street Apartment Homes, LLC
	Main Street Stone Creek, LLC
	1
	100%
	49%

	Main Street Apartment Homes, LLC
	Main Street Baldwin, LLC
	1
	100%
	49%

	Main Street Apartment Homes, LLC
	525 Avalon Park, LLC
	1
	100%
	49%

	Preferred Campus Communities, LLC
	PCC Tallahassee, LLC
	1
	100%
	49%

	PAC Lending, LLC
	Haven Northgate Lending, LLC
	1
	100%
	100%

	PAC Lending, LLC
	Haven Lubbock II Lending, LLC
	1
	100%
	100%

	PAC Lending, LLC
	Bristol Birmingham Lending, LLC
	1
	100%
	100%

	SE Grocery LLC
	New Market – Rosewood LLC
	1
	100%
	49%

	SE Grocery LLC
	New Market – East Gate LLC
	1
	100%
	49%

	SE Grocery LLC
	New Market – Fairview LLC
	1
	100%
	49%

	SE Grocery LLC
	New Market – Thompson Bridge, LLC
	1
	100%
	49%

	SE Grocery LLC
	New Market – Sandy Plains, LLC
	1
	100%
	49%

	SE Grocery LLC
	New Market – University Palms, LLC
	1
	100%
	49%

	SE Grocery LLC
	New Market – Oak Park, LLC
	1
	100%
	49%

	SE Grocery LLC
	New Market – Anderson, LLC
	1
	100%
	49%

	SE Grocery LLC
	New Market – Southgate LLC
	1
	100%
	49%

	SE Grocery LLC
	New Market – Furys Ferry LLC
	1
	100%
	49%

	SE Grocery LLC
	New Market – Cherokee, LLC
	1
	100%
	49%

	SE Grocery LLC
	New Market – Parkland, LLC
	1
	100%
	49%

    

	
					
	Grantor
	Issuer and Type of Organization
	Certificate Number
	Percent of Equity Interest Owned
	Percent of Equity Interest Pledged

	SE Grocery LLC
	New Market – Heritage, LLC
	1
	100%
	49%

    

II.    Instruments
	
						
	Grantor
	Obligor
	Amount of Instrument
	Date of Instrument

	Preferred Apartment Communities Operating Partnership, L.P.
	Preferred Apartment Advisors, LLC
	

	$15,000,000
	

	January 27, 2016

	Preferred Apartment Communities Operating Partnership, L.P.
	Oxford Contracting LLC
	

	$1,500,000
	

	August 27, 2013

	Preferred Apartment Communities Operating Partnership, L.P.
	Preferred Capital Marketing Services, LLC
	

	$1,500,000
	

	December 31, 2014

	Preferred Apartment Communities Operating Partnership, L.P.
	360 Residential, LLC
	

	$2,000,000
	

	June 30, 2016

	Preferred Apartment Communities Operating Partnership, L.P.
	Haven Campus Communities, LLC
	

	$11,500,000
	

	March 14, 2016

	Preferred Apartment Communities Operating Partnership, L.P.
	Newport Development Partners, LLC
	

	$3,000,000
	

	June 30, 2016

	Preferred Apartment Communities Operating Partnership, L.P.
	Oxford Capital Partners, LLC
	

	$13,400,000
	

	October 5, 2015

	Preferred Apartment Communities Operating Partnership, L.P.
	Hendon Properties, LLC
	

	$2,000,000
	

	December 8, 2015

	Preferred Apartment Communities Operating Partnership, L.P.
	360 Residential, LLC II
	

	$3,255,000
	

	December 30, 2015

	Preferred Apartment Communities Operating Partnership, L.P.
	Mulberry Development Group, LLC
	

	$500,000
	

	March 31, 2016

	Preferred Apartment Communities Operating Partnership, L.P.
	360 Capital Company, LLC
	

	$2,000,000
	

	May 24, 2016

	Haven West Mezzanine Lending, LLC
	Haven Campus Communities Member, LLC
	

	$6,940,795
	

	July 15, 2013

	Starkville Mezzanine Lending, LLC
	Haven Campus Communities Starkville Member, LLC
	

	$6,116,384
	

	June 16, 2014

	360 Irvine Lending, LLC
	Fusion Mezzanine Borrower, LLC
	

	$59,052,583
	

	July 1, 2015

	Oxford Overture Lending, LLC
	Overture Partners, LLC
	

	$6,920,000
	

	July 21, 2015

	Haven Lubbock Lending, LLC
	Haven Lubbock Partners, LLC
	

	$15,598,352
	

	April 9, 2015

	Newport Kennesaw Mezzanine Lending, LLC
	Newport Town Village Holdings, LLC
	

	$10,975,000
	

	January 27, 2015

	Haven Waco Lending, LLC
	Haven Waco Partners, LLC
	

	$15,455,668
	

	May 1, 2015

    

	
						
	Grantor
	Obligor
	Amount of Instrument
	Date of Instrument

	Haven Tampa Lending, LLC
	Haven Tampa Partners, LLC
	

	$9,819,662
	

	March 29, 2016

	PAC Dawson Lending, LLC
	Hendon-Bre Dawson Capital, LLC
	

	$12,857,005
	

	December 16, 2015

	Hidden River Capital Lending, LLC
	Mill Green Capital, LLC
	

	$5,380,000
	

	December 4, 2015

	Oxford Hidden River Lending, LLC
	Hidden River Capital, LLC
	

	$4,734,960
	

	December 4, 2015

	Encore Capital Lending, LLC
	Encore Capital Member, LLC
	

	$9,758,200
	

	October 9, 2015

	Crescent Ave Lending, LLC
	1122 Crescent Land Holdings, LLC
	

	$6,000,000
	

	January 13, 2016

	Newport Bishop Lending, LLC
	Bishop Street Capital Member, LLC
	

	$12,693,457
	

	February 18, 2016

	City Park II Capital Lending, LLC
	City Park II Capital Member, LLC
	

	$3,916,000
	

	January 8, 2016

	City Park Mezzanine Lending, LLC
	Oxford City Park Capital II LLC
	

	$3,364,800
	

	January 8, 2016

	Haven Lubbock II Lending, LLC
	Haven Lubbock II Partners, LLC
	

	$9,357,171
	

	April 19, 2016

	Haven Northgate Lending, LLC
	Haven Campus Communities-Northgate, LLC
	

	$64,678,549
   
	

	June 21, 2016

    

SCHEDULE 2

360 Irvine Lending, LLC
525 Avalon Park, LLC 
Ashford Park, LLC
Barclay Crossing, LLC 
Bristol Birmingham Lending, LLC
City Park Mezzanine Lending, LLC
City Park II Capital Lending, LLC
Crescent Ave Lending, LLC
Deltona Landing, LLC 
Encore Capital Lending, LLC
Haven Fayetteville Lending, LLC
Haven Lubbock II Lending, LLC
Haven Northgate Lending, LLC
Haven West Mezzanine Lending, LLC
Haven Waco Lending, LLC
Haven Lubbock Lending, LLC
Haven Tampa Lending, LLC
Hidden River Capital Lending, LLC
Lake Cameron, LLC
Main Street Apartment Homes, LLC
Main Street Stone Creek, LLC 
Main Street Baldwin, LLC 
New Market Properties, LLC
New Market –Anderson, LLC
New Market – Cherokee, LLC 
New Market – Cumming, LLC 
New Market – East Gate LLC 
New Market – Fairview LLC
New Market – Furys Ferry LLC
New Market – Heritage, LLC 
New Market – Oak Park, LLC
New Market – Overlook, LLC

    

New Market – Parkland, LLC 
New Market – Plano, LLC 
New Market – Rosewood LLC 
New Market – Royal Lakes, LLC 
New Market – Sandy Plains, LLC
New Market – Southgate LLC 
New Market – Summit Point, LLC
New Market – Thompson Bridge, LLC
New Market – University Palms, LLC 
New Market – Victory Village, LLC 
New Market – Wade Green, LLC 
Newport Bishop Lending, LLC
Newport Kennesaw Mezzanine Lending, LLC
NMP Kingwood Glen, LLC 
Oxford City Vista Apartments, LLC 
Oxford City Vista Development, LLC 
Oxford Hidden River Lending, LLC
Oxford Overture Lending, LLC
PAC Brookwood Center, LLC
PAC Carveout, LLC
PAC Citilakes, LLC 
PAC Citypark View, LLC
PAC City Vista Apartments, LLC
PAC Creekside, LLC
PAC Crosstown Walk, LLC
PAC Cypress, LLC
PAC Dawson Lending, LLC 
PAC Enclave at Vista Ridge, LLC
PAC Galleria 75, LLC
PAC Lending, LLC
PAC Lenox, LLC 
PAC Lenox Regent, LLC
PAC Lenox Retreat, LLC 
PAC Lenox Village, LLC 
PAC Naples, LLC

    

PAC Northpointe, LLC
PAC Overton Rise, LLC
PAC Sarasota, LLC
PAC Sorrel, LLC
PAC Summit Crossing, LLC
PAC Summit Crossing II, LLC
PAC Vineyards, LLC
Parkway Centre, LLC 
Parkway Town Centre, LLC 
PCC Tallahassee, LLC 
Powder Springs-Macland Retail, LLC 
Preferred Campus Communities, LLC
Sandstone Creek, LLC
Salem Cove, LLC 
SE Grocery LLC 
Spring Hill Plaza, LLC 
Starkville Mezzanine Lending, LLC
Stone Rise Apartments, LLC
Stoneridge Farms Hunt Club, LLC
Summit Crossing III Mezzanine Lending, LLC
Sunbelt Retail, LLC 
Sweetgrass Corner, LLC 
WAM McNeil Ranch, LLC
Woodstock Crossing Center, LLC 

    

Exhibit A
to Pledge and Security Agreement
SECURITY AGREEMENT JOINDER
SECURITY AGREEMENT JOINDER dated as of _________, ____ (this “Agreement”) made by [Insert Name of New Grantor], a [Insert State of Organization] [corporation, limited partnership or limited liability company] (the “New Grantor”) in favor of KeyBank National Association, as Administrative Agent (the “Administrative Agent”) for the benefit of the Secured Creditors (as defined in the Security Agreement referred to below).
RECITALS:

(1)    Preferred Apartment Communities Operating Partnership, L.P., a Delaware limited partnership (the “Borrower”), Preferred Apartment Communities, Inc., a Maryland corporation (the “Parent”), the lenders party thereto (the “Lenders”) and the Administrative Agent are parties to a Fourth Amended and Restated Credit Agreement, dated as of August 5, 2016 (as the same may from time to time be amended, restated or otherwise modified, the “Credit Agreement”).
(2)    In connection with the Credit Agreement, the Borrower and certain of its subsidiaries (such subsidiaries, together with the Borrower, collectively, the “Grantors” and individually, each a “Grantor”) entered into a Fourth Amended and Restated Pledge and Security Agreement (as the same may from time to time be amended, restated or otherwise modified, the “Security Agreement”), pursuant to which the Grantors granted to the Administrative Agent, for the benefit of the Secured Creditors a security interest in and pledge of substantially all of their assets.
(3)    The New Grantor is a Subsidiary (as defined in the Credit Agreement), of the Borrower and desires to become a party to the Security Agreement pursuant to Section 9.14 of the Security Agreement and to become a “Grantor” thereunder.
(4)    Capitalized terms used but not defined herein shall have the meanings given to such terms in the Security Agreement.
NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt of which is hereby acknowledged, the New Grantor hereby agrees as follows:
Section 1.    Assumption and Joinder.
(a)    The New Grantor hereby expressly assumes, and hereby agrees to perform and observe, each and every one of the covenants, rights, promises, agreements, terms, conditions, obligations, appointments, duties and liabilities of a “Grantor” under the Security Agreement and all of the other Loan Documents (as defined in the Credit Agreement) applicable to it as a Grantor under the Security Agreement.  By virtue of the foregoing, the New Grantor hereby accepts and assumes any liability of a Grantor related to each representation, warranty, covenant or obligation made by a Grantor in the Security Agreement, and hereby expressly affirms, as of the date hereof, each of such representations, warranties, covenants and obligations.  In connection with the foregoing, the New Grantor hereby grants to the Administrative Agent for the benefit of the Secured Creditors a security interest in, and hereby pledges to the Administrative Agent, for the benefit of the Secured Creditors, all of the Collateral of the New Grantor on the terms and conditions set forth in the Security Agreement.

E-4    

(b)    All references to the term Grantor in the Security Agreement or in any document or instrument executed and delivered or furnished, or to be executed and delivered or furnished, in connection therewith shall be deemed to be a reference to, and shall include, the New Grantor.
Section 2.    Representations and Warranties.  The New Grantor hereby represents and warrants to the Administrative Agent and the Secured Creditors as follows:
(a)    The New Grantor has the requisite [corporate, partnership or company] power and authority to enter into this Agreement and to perform its obligations hereunder and under the Security Agreement and any other Loan Document to which it is a party.  The execution, delivery and performance of this Agreement by the New Grantor and the performance of its obligations under this Agreement, the Security Agreement, and any other Loan Document have been duly authorized by the [Board of Directors of the New Grantor] and no other [corporate, partnership or company] proceedings on the part of the New Grantor are necessary to authorize the execution, delivery or performance of this Agreement, the transactions contemplated hereby or the performance of its obligations under this Agreement, the Security Agreement or any other Loan Document.  This Agreement has been duly executed and delivered by the New Grantor.  This Agreement, the Security Agreement and each Loan Document constitutes the legal, valid and binding obligation of the New Grantor enforceable against it in accordance with its respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally and by general principles of equity, whether such enforceability is considered in a proceeding at law or in equity.
(b)    The representations and warranties set forth in the Security Agreement are true and correct in all material respects on and as of the date hereof as such representations and warranties apply to the New Grantor (except to the extent that any such representations and warranties expressly relate to an earlier date) with the same force and effect as if made on the date hereof.
Section 3.    Perfection Certificate.  Attached hereto is a copy of a fully completed Perfection Certificate executed by the New Grantor.  The information contained in the Perfection Certificate delivered by the New Grantor is true and correct in all respects.
Section 4.    Further Assurances.  At any time and from time to time, upon the Administrative Agent’s request and at the sole expense of the New Grantor, the New Grantor will promptly and duly execute and deliver any and all further instruments and documents and take such further action as the Administrative Agent reasonably deems necessary to effect the purposes of this Agreement.
Section 5.    Binding Effect.  This Agreement shall be binding upon the New Grantor and shall inure to the benefit of the Administrative Agent and the other Secured Creditors and their respective successors and assigns.
Section 6.    Governing Law.  This Agreement and the rights of the parties hereunder shall be construed and interpreted in accordance with the laws of the State of [Ohio][New York], without application of the rules regarding conflicts of laws.
Section 7.    JURY TRIAL WAIVER.  THE NEW GRANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

E-5    

Section 8.    Miscellaneous.  Delivery of an executed signature page to this Agreement by facsimile shall be effective as delivery of a manually executed copy of this Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and delivered by its duly authorized officer as of the date first above written.
	
		
	 
	[___________________________]

By:__________________________________
   Name:
   Title:

E-6    

Exhibit B to
Pledge and Security Agreement
PERFECTION CERTIFICATE

In connection with a proposed transaction by and among Preferred Apartment Communities Operating Partnership, L.P., a Delaware limited partnership (the “Borrower”), certain lending institutions (the “Lenders”), KeyBank National Association, as the administrative agent for the Lenders (“Administrative Agent”) and the other grantors specified in Section 1 below under the heading “Name of Grantor” (together with the Borrower, collectively, the “Grantors” and, individually, “Grantor”), each Grantor hereby certifies as follows:
Section 1.    Legal Names, Organizations and Jurisdictions of Organization.  The exact legal name, the type of organization and the jurisdiction of organization or formation, as applicable, of each Grantor are as follows:
	
			
	Grantor
	Type of 
Organization
	Jurisdiction of 
Organization/ 
Formation

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

Section 2.    Organizational and Federal Taxpayer Identification Numbers.  The state issued organizational identification number and federal taxpayer identification number of each Grantor are as follows:
	
			
	Grantor
	Organizational  
Identification Number
	Federal Taxpayer 
Identification Number

	 
	 
	 

	 
	 
	 

	 
	 
	 

Section 3.    Chief Executive Offices and Mailing Addresses.  The chief executive office address and mailing address, including, in each case, street address, city, county, state and ZIP code, of each Grantor are as follows:

	
			
	Grantor
	Chief Executive Office
	Mailing Address

	 
	 
	 

	 
	 
	 

Section 4.    Changes in Name, Jurisdiction of Organization or Corporate Structure.  Except as set forth below, no Grantor has changed its legal name, jurisdiction of organization or corporate structure in any way (e.g., merger, consolidation, conversion, change in corporate form, change in jurisdiction of organization or otherwise) within the past five years:

	
			
	Grantor
	Date of Change
	Description of Change

	 
	 
	 

	 
	 
	 

	 
	 
	 

Section 5.    Prior Addresses.  Except as set forth below, no Grantor has changed its chief executive office within the past five years:

	
		
	Grantor
	Prior Address of Chief Executive Office

	 
	 

	 
	 

	 
	 

Section 6.    Trade Names.  Set forth below is each trade name or assumed name used by any Grantor during the past five years or by which any Grantor has been known or has transacted any business during the past five years:
	
		
	Grantor
	Trade/Assumed Name

	 
	 

	 
	 

	 
	 

Section 7.    Acquisitions of Equity Interests or Assets.  Except as set forth below, no Grantor has acquired any equity interests of another entity or substantially all the assets of another entity within the past five years:

	
			
	Grantor
	Date of Acquisition
	Description of Acquisition

	 
	 
	 

	 
	 
	 

	 
	 
	 

Section 8.    Intellectual Property.  Set forth below is a list of all copyrights, trademarks, patents, and applications therefor owned or used by any Grantor:

(a)    Copyrights:

	
				
	Grantor
	Copyright
	Registration Number
	Registration Date

	 
	 
	 
	 

	 
	 
	 
	 

(b)    Trademarks:
	
					
	Grantor
	Trademark
	Country
	Application No. and/or  
Registration No. 
	Application Filing Date and/or Registration Date

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

(c)    Patents:
	
					
	Grantor
	Patent
	Country
	Application No. or Registration No.  
(as applicable)
	Application Filing Date or Registration Date (as applicable)

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

Section 10.    Securities.  Set forth below is a list of all equity interests owned by each Grantor, together with the type of organization that issued such equity interests (e.g., corporation, limited liability company, partnership or trust):
	
						
	Grantor
	Issuer and Type  
of Organization
	# of 
Shares/Equity Interests 
Owned
	Total 
Shares/Equity Interests 
Outstanding
	% of 
Interest Pledged
	Certificate No. (if any)

	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 

Section 11.    Securities Accounts.  Set forth below is a list of all securities accounts in which any Grantor maintains securities or other similar assets:

	
				
	Grantor
	Securities Intermediary 
& Address
	Account Number
	Type of Account

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

Section 12.    Deposit Accounts.  Set forth below is a list of all deposit accounts of each Grantor:

	
				
	Grantor
	Depositary Institution 
& Address
	Account Number
	Type of Account

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

Section 13.    Instruments.  Set forth below is a list of all instruments that evidence amounts owed to any Grantor:

	
				
	Grantor
	Amount
	Date of Instrument
	Date of Maturity

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

Section 14.    Commercial Tort Claims.  The following is a list of each commercial tort claim held by each Grantor:

	
			
	Grantor
	Amount of Claim
	Brief Description  
of Claim

	 
	 
	 

Section 15.    Authorization to File Financing Statements.  Each Grantor hereby authorizes the Administrative Agent to file financing or continuation statements, and amendments thereto, in all jurisdictions and with all filing offices as the Administrative Agent may determine, in its sole discretion, are necessary or advisable to perfect the security interest granted or to be granted to Administrative Agent for the benefit of the Lenders.  Such financing statements may describe the collateral in the same manner as described in the agreement(s) granting a security interest or may contain an indication or description of collateral that describes such property in any other manner as the Administrative Agent may determine, in its sole discretion, is necessary or advisable to ensure the perfection of the security interest in the collateral granted or to be granted to the Administrative Agent for the benefit of the Lenders, including describing such property as “all assets” or “all personal property.”

IN WITNESS WHEREOF, each Grantor has caused this Perfection Certificate to be executed as of the ___ day of ________, ____ by its officer thereunto duly authorized.ex046formofrightscert14c

 {N0118404  }  RIGHTS CERTIFICATE #:                                                                                                                  NUMBER OF RIGHTS: THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN THE COMPANY’S PROSPECTUS DATED ___________, 2016 (THE “PROSPECTUS”) AND ARE INCORPORATED HEREIN BY REFERENCE.  COPIES OF THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM CONTINENTAL STOCK TRANSFER & TRUST COMPANY, THE SUBSCRIPTION AGENT. DLH HOLDINGS CORP. INCORPORATED UNDER THE LAWS OF NEW JERSEY  RIGHTS CERTIFICATE      EVIDENCING NON-TRANSFERABLE RIGHTS TO PURCHASE SHARES OF COMMON STOCK SUBSCRIPTION PRICE: $_____ PER SHARE VOID IF NOT EXERCISED ON OR BEFORE THE RIGHTS EXPIRATION DATE (AS SET FORTH IN THE PROSPECTUS)  Evidencing Subscription Rights, each to Purchase ___ Shares of Common Stock of DLH Holdings Corp. at Subscription Price: $_____ per Share  THE SUBSCRIPTION RIGHTS WILL EXPIRE IF NOT EXERCISED ON OR BEFORE 5:00 P.M., EASTERN TIME, ON _________, 2016, UNLESS EXTENDED BY THE COMPANY. THIS CERTIFIES THAT        The registered owner whose name is inscribed hereon is the owner of the number of subscription rights (“Rights”) set forth on the face of this Rights Certificate. Each whole Right entitles the holder thereof, or its assigns, to subscribe for and purchase _____ shares of common stock, with a par value of $0.001 per share (the “Shares”) of DLH Holdings Corp., a New Jersey corporation (the “Company”), at a subscription price of $_______ per Share (the “Basic Subscription Right”), pursuant to a rights offering (the “Rights Offering”), on the terms and subject to the conditions set forth in the Prospectus and the “Instructions as to the Use of DLH Holdings Corp. Rights Certificates” accompanying this Rights Certificate. The Rights expire at 5:00 p.m. on _______, 2016, unless extended. If any Shares available for purchase in the Rights Offering are not purchased by other holders of Rights pursuant to the exercise of their Basic Subscription Right (the “Excess Shares”), any Rights holder that exercises its Basic Subscription Right in full may subscribe for a number of Excess Shares pursuant to the terms and conditions of the Rights Offering, subject to allocation and proration, as described in the Prospectus (the “Over-Subscription Privilege”). The Company has implemented a limitation upon the subscription rights in the Over-Subscription Privilege which may be exercised by each subscriber in the Rights Offering. By signing the subscription Form of Election to Purchase, the subscriber agrees that:   the subscriber shall not have the right to purchase in the Over-Subscription Privilege more than a number of shares in excess of the number of shares of Common  Stock beneficially owned by such subscriber as of the Record Date; and   the Company shall have the right to instruct the Subscription Agent to reduce the amount of any over-subscription exercise in excess of the limitation set forth above.  The Rights represented by this Rights Certificate may be exercised by completing the Form of Election to Purchase on the reverse side hereof and by returning the full payment of the subscription price for each Share in accordance with the “Instructions as to the Use of DLH Holdings Corp. Rights Certificates” that accompanies this Rights Certificate. The Rights evidenced by this Rights Certificate may not be transferred or sold.  This Rights Certificate is not valid unless countersigned by the transfer agent and registered by the registrar.   Dated: _______________, 2016 WITNESS the facsimile signature of a duly authorized officer of DLH Holdings Corp.  DLH HOLDINGS CORP., COUNTERSIGNED AND REGISTERED CONTINENTAL STOCK TRANSFER & TRUST COMPANY                                  By: _______________________________________________ By: ______________________________________________  

 

 {N0118404  }  FORM OF ELECTION TO PURCHASE   Delivery other than in the manner or to the address listed below will not constitute valid delivery.  If delivering by mail, hand or overnight courier:  Continental Stock Transfer & Trust Company 17 Battery Place—8th Floor New York, NY 10004 Attn: Corporate Actions Department   PLEASE PRINT ALL INFORMATION CLEARLY AND LEGIBLY.  FORM 1 – EXECISE OF SUBSCRIPTION RIGHTS  The registered holder of this Rights Certificate is entitled to exercise the number of Rights shown in the upper right hand corner of the Rights Certificate and may subscribe for additional shares of common stock of DLH Holdings Corp. pursuant to the Over-Subscription Privilege upon the terms and conditions specified in the Prospectus. The undersigned hereby notifies the Subscription Agent of its irrevocable election to subscribe for shares of common stock in the following amounts:  To subscribe for shares of common stock pursuant to your Basic Subscription Right, please complete lines (a) and (c) and sign below. To subscribe for shares of common stock pursuant to your Over-Subscription Privilege, please also complete line (b).    (a) EXERCISE OF BASIC SUBSCRIPTION RIGHT:    I subscribe for ____________ (No. of shares of common stock) x $____ (Subscription Price) = $_____________ (Payment)    (b) EXERCISE OF OVER-SUBSCRIPTION PRIVILEGE:   If you have exercised your Basic Subscription Right in full and wish to subscribe for additional shares of common stock pursuant to your Over-Subscription Privilege:    I subscribe for ____________ (No. of shares of common stock) x $____ (Subscription Price) = $_____________ (Payment)    (c) Total Amount of Payment Enclosed $_______________  METHOD OF PAYMENT (check one):  Cashier’s Check or Check on a U.S. Bank payable to “Continental Stock Transfer and Trust Co. as Subscription Agent” Wire Transfer of immediately available funds directly to the account, maintained by Continental Stock Transfer & Trust Company, as Subscription Agent, for purposes of accepting subscription in the rights offering at JP Morgan Chase Bank ABA: 021000021, Account 475-587758, Account Name: Continental Stock Transfer and Trust as agent for DLH Holdings Corp.    The Company has implemented a limitation upon the subscription rights in the over-subscription privilege which may be exercised by the subscribers in the rights offering.  As a condition to the rights offering, and by signing the Election To Purchase, the subscriber understands and agrees that: (i) the subscriber shall not have the right to purchase in the over-subscription privilege more than a number of shares in excess of the number of shares of Common Stock beneficially owned by such subscriber as of the Record Date; and (ii) the Company shall the right to instruct the Subscription Agent to reduce the amount of any over-subscription exercise in excess of the limitation set forth above.  FORM 2 — DELIVERY TO DIFFERENT ADDRESS If you wish for the Common Stock underlying your Rights to be delivered to an address different from that shown on the face of this Non-Transferable Subscription Rights Certificate, please enter the alternate address below, sign under Form 3 and have your signature guaranteed under Form 4.   FORM 3 - SIGNATURE(S)  TO SUBSCRIBE: I acknowledge that I have received the Prospectus for the rights offering and I hereby irrevocably subscribe for the number of shares indicated under Form 1 above on the terms and conditions specified in the Prospectus.  This Form 3 must be signed by the registered holder(s) exactly as their name(s) appear(s) on the certificate(s) or by person(s) authorized to sign on behalf of the registered holder(s) by documents transmitted herewith.     Signature(s) of Subscriber(s)  Signature(s) of Subscriber(s) Date:   Daytime Telephone Number:  IMPORTANT: the signature(s) must correspond with the name(s) as printed on the reverse of this non-transferable subscription certificate in every particular, without alteration or enlargement or any other change whatsoever.  If signature is by trustee(s), executor(s), administrator(s), guardian(s), attorney(s)-in-fact, agent(s), officer(s) of a corporation or another acting in a fiduciary or representative capacity, please provide the following information (please print). See the instructions.  Name(s): ________________________________________________________  Capacity (Full Title): ________________________________________________    FORM 4 - SIGNATURE GUARANTEE  This form must be completed if you have completed any portion of Form 2.   Signature Guaranteed:     By:     (Name of Bank or Firm)     (Signature of Officer)   IMPORTANT: The signature(s) should be guaranteed by an eligible guarantor institution (bank, stock broker, savings & loan association or credit union) with membership in an approved guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15.   FOR INSTRUCTIONS ON THE USE OF NON-TRANSFERRABLE RIGHTS CERTIFICATES CONSULT CONTINENTAL STOCK TRANSFER & TRUST CO, THE INFORMATION AGENT, AT (917) 262-2378. THE RIGHTS OFFERING EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON _____________, 2016, AND THIS NON-TRANSFERABLE SUBSCRIPTION RIGHTS CERTIFICATE IS VOID THEREAFTER.

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