Document:

Security Agreement

    Exhibit
      10.3

    

    

    SECURITY
      AGREEMENT

    

    THIS
      SECURITY AGREEMENT is entered into as of April 6, 2007 by and between (i) SYPRIS
      SOLUTIONS, INC., a Delaware corporation with its principal office and place
      of
      business and registered office in Louisville, Jefferson County, Kentucky (the
      "Borrower"), (ii) SYPRIS TEST & MEASUREMENT, INC., a Delaware corporation
      and subsidiary of the Borrower ("ST&M"), (iii) SYPRIS TECHNOLOGIES, INC., a
      Delaware corporation and subsidiary of the Borrower ("ST"), (iv) SYPRIS
      ELECTRONICS, LLC, a Delaware corporation and subsidiary of the Borrower ("SE"),
      (v) SYPRIS DATA SYSTEMS, INC., a Delaware corporation and subsidiary of the
      Borrower ("SDS"), (vi) SYPRIS TECHNOLOGIES MARION, LLC, a Delaware corporation
      and subsidiary of the Borrower ("STM"), (vii) SYPRIS TECHNOLOGIES KENTON, INC.,
      a Delaware corporation and subsidiary of the Borrower ("STK") and (viii) SYPRIS
      TECHNOLOGIES MEXICAN HOLDINGS, LLC ("STMH"), a Delaware corporation and
      subsidiary of the Borrower ("SMH") (ST&M, ST, SE, SDS, STM, STK and STMH,
      collectively, the "Guarantors"), and (ix) JPMORGAN CHASE BANK, N.A., with its
      main office in Chicago, Illinois, a national banking association, in its
      capacity as agent (the "Agent Bank") under the Loan Agreement referred to below,
      and in its capacity as Collateral Agent ("the "Collateral Agent") under the
      Collateral Sharing Agreement (defined below), for the benefit of the Banks
      (defined below) and the Noteholders (defined below). Except as otherwise defined
      herein, terms used herein and defined in the Collateral Sharing Agreement
      (defined below) shall be used herein as therein defined.

    

    PRELIMINARY
      STATEMENT

    

    WHEREAS,
      the Agent Bank, the Banks identified on Schedule
      1.1
      thereto,
      the Borrower and the Guarantors are entering into a certain Amended and Restated
      Loan Agreement, dated as of the date hereof, as subsequently amended (the "Loan
      Agreement"), providing for the making of Loans and the issuance of, and
      participation in, Letters of Credit as contemplated therein;

    

    WHEREAS,
      the Borrower in June, 2004 issued its Senior Notes in the aggregate principal
      amount of $55,000,000 in favor of the Noteholders, pursuant to the Note Purchase
      Agreement; 

    

    WHEREAS,
      the Borrower and the Noteholders are entering into a certain Third Amendment
      to
      Note Purchase Agreement, dated the date hereof (the "Third NPA Amendment")
      pursuant to which the Borrowers and Noteholders agreed to amend certain terms
      of
      the Note Purchase Agreement;

    

    WHEREAS,
      the Borrower, the Guarantors, the Agent Bank, the Banks and the Noteholders
      have
      entered into an Amended and Restated Collateral Sharing Agreement dated as
      of
      the date hereof (as amended, restated or otherwise modified from time to time,
      the "Collateral Sharing Agreement"), pursuant to which JP Morgan Chase Bank.
      N.A., has been appointed as Collateral Agent, for the Banks and the
      Noteholders;

    

    WHEREAS,
      it is a condition to the effectiveness of the Loan Agreement and the Third
      NPA
      Amendment that the Borrower and the Guarantors grant to the Collateral Agent,
      for the benefit of the Collateral Agent, the Banks and the Noteholders, a
      security interest in their accounts, equipment, general intangibles,
      instruments, inventory, pledged deposits, and other collateral, as hereinafter
      provided;

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    NOW,
      THEREFORE, the Borrower and the Guarantors (each, an "Obligor and collectively,
      the "Obligors") and the Collateral Agent, on behalf of the Banks and the
      Noteholders, hereby agree as follows:

    

    ARTICLE
      I

    DEFINITIONS

    

    1.1.     Terms
      Defined in Collateral Sharing Agreement.
      All
      capitalized terms used herein and not otherwise defined shall have the meanings
      assigned to such terms in the Collateral Sharing Agreement.

    

    1.2.     Terms
      Defined in Kentucky Uniform Commercial Code.
      Terms
      defined in the Kentucky UCC which are not otherwise defined in this Security
      Agreement are used herein as defined in the Kentucky UCC.

    

    1.3.     Definitions
      of Certain Terms Used Herein.
      As used
      in this Security Agreement, in addition to the terms defined in the introductory
      paragraph hereof and the Preliminary Statement, the following terms shall have
      the following meanings:

    

    "Accounts"
      shall have the meaning set forth in Article 9 of the Kentucky UCC.

    

    "Article"
      means a numbered article of this Security Agreement, unless another document
      is
      specifically referenced.

    

    "Banks"
      means the lenders party to the Loan Agreement and their successors and
      assigns.

     

    "Chattel
      Paper" shall have the meaning set forth in Article 9 of the Kentucky
      UCC.

    

    "Collateral"
      means all Accounts, Chattel Paper, Commercial Tort Claims, Documents, Equipment,
      Fixtures, General Intangibles (including, without limitation, any Dana Claim),
      Instruments, Investment Property (other than any equity interest in Subsidiaries
      of the Obligors), Inventory, Pledged Deposits, cash and cash equivalents,
      letter-of-credit rights, letters of credit and Deposit Accounts or other
      deposits (general or special, time or demand, provisional or final) with any
      bank or other financial institution or otherwise, wherever located, to the
      full
      extent of each Obligor's ownership right or ownership interest therein, now
      or
      hereafter acquired, and the Proceeds, insurance proceeds and products thereof,
      and any Supporting Obligations relating to any of the foregoing, together with
      all books and records, customer lists, credit files, computer files, programs,
      printouts and other computer materials and records related thereto.

     

    "Commercial
      Tort Claims" shall have the meaning set forth in Article 9 of the Kentucky
      UCC.

    

    "Control"
      shall have the meaning set forth in Article 8 or, if applicable, in Section
      9-104, 9-105, 9-106 or 9-107 of Article 9 of the Kentucky UCC.

    

    "Dana
      Bankruptcy Proceedings" means the bankruptcy case of Dana Corporation, a
      Virginia corporation, under chapter 11 of the United States Code, 11 U.S.C.
      §§101 - 1532, captioned as In re 

     

     

    
      
        
        

      

      
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    Dana
      Corporation, et al., case no. 06-10354 (jointly administered) before the United
      States Bankruptcy Court in the Southern District of New York, and any other
      bankruptcy case or proceeding (foreign or domestic) relating to any of the
      Dana
      Entities.

     

    "Dana
      Claim" means any interest in any claim of any Obligor for damages arising out
      of
      any termination or rejection of any one or more of the Dana Supply Agreements
      in
      connection with or arising out of the Dana Bankruptcy Proceedings.

    

    "Dana
      Entities" means Dana Corporation, a Virginia corporation, its subsidiaries
      and
      affiliates, together with their respective successors and assigns, including,
      without limitation any debtor-in-possession or any bankruptcy trustee acting
      on
      any of their behalf in connection with the Dana Bankruptcy
      Proceedings."

    

    "Dana
      Supply Agreements" those certain agreements by and among any one or more of
      the
      Obligors on the one hand and any one or more of the Dana Entities on the other
      hand, as each such agreement is amended, restated, replaced or otherwise
      modified from time to time.

    

    "Default"
      means an event described in Section 5.1.

    

    "Deposit
      Accounts" shall have the meaning set forth in Article 9 of the Kentucky
      UCC.

    

    "Documents"
      shall have the meaning set forth in Article 9 of the Kentucky UCC.

    

    "Equipment"
      shall have the meaning set forth in Article 9 of the Kentucky UCC.

    

    "Exhibit"
      refers to a specific exhibit to this Security Agreement, unless another document
      is specifically referenced.

    

    "Fixtures"
      shall have the meaning set forth in Article 9 of the Kentucky UCC.

    

    "General
      Intangibles" shall have the meaning set forth in Article 9 of the Kentucky
      UCC.

    

    "Kentucky
      UCC" means the Kentucky Uniform Commercial Code as
      in
      effect
      from time to time. 

    

    "Instruments"
      shall have the meaning set forth in Article 9 of the Kentucky UCC.

    

    "Inventory"
      shall have the meaning set forth in Article 9 of the Kentucky UCC.

    

    "Investment
      Property" shall have the meaning set forth in Article 9 of the Kentucky
      UCC.

    

    "Lien"
      means any lien (statutory or other), security interest, mortgage, pledge,
      hypothecation, assignment, deposit arrangement, encumbrance or preference,
      priority or other security agreement or preferential arrangement of any kind
      or
      nature whatsoever (including, without limitation, the interest of a vendor
      or
      lessor under any conditional sale, capitalized lease or other title retention
      agreement). 

     

     

    
      
        
        

      

      
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    "Noteholders"
      means the holders of the Senior Notes, together with their successors and
      assigns.

    

    "Obligations"
      shall have the meaning set forth in the Collateral Sharing
      Agreement.

    

    "Person"
      means an individual, partnership, corporation, limited liability company,
      association, trust, unincorporated organization, or a government or agency
      or
      political subdivision thereof.

    

    "Pledge
      Agreement" means the Pledge Agreement, dated as of September 13, 2005, among
      the
      Borrower, STMH, ST and the Collateral Agent, as amended, restated or otherwise
      modified from time to time.

    

    "Pledged
      Deposits" means all time deposits of money (other than Deposit Accounts and
      Instruments), whether or not evidenced by certificates, and all rights to
      receive interest on said deposits.

    

    "Proceeds"
      shall have the meaning set forth in Article 9 of the Kentucky UCC.

    

    "Rate
      Management Transaction" means any transaction (including an agreement with
      respect thereto) now existing or hereafter entered into between any Obligor
      and
      any Bank or Affiliate thereof which is a rate swap, basis swap, forward rate
      transaction, commodity swap, commodity option, equity or equity index swap,
      equity or equity index option, bond option, interest rate option, foreign
      exchange transaction, cap transaction, floor transaction, collar transaction,
      forward transaction, currency swap transaction, cross-currency rate swap
      transaction, currency option or any other similar transaction (including any
      option with respect to any of these transactions) or any combination thereof,
      whether linked to one or more interest rates, foreign currencies, commodity
      prices, equity prices or other financial measures.

     

    "Rate
      Management Obligations" means any and all obligations of any Obligor, whether
      absolute or contingent and howsoever and whensoever created, arising, evidenced
      or acquired (including all renewals, extensions and modifications thereof and
      substitutions therefor), under (i) any and all Rate Management Transactions,
      and
      (ii) any and all cancellations, buy backs, reversals, terminations or
      assignments of any Rate Management Transactions. 

    

    "Receivables"
      means the Accounts, Chattel Paper, Documents, Instruments or Pledged Deposits,
      and any other rights or claims to receive money which are General Intangibles
      or
      which are otherwise included as Collateral.

     

    "Requisite
      Creditors" shall have the meaning set forth in the Collateral Sharing Agreement.
      

    

    "Section"
      means a numbered section of this Security Agreement, unless another document
      is
      specifically referenced.

    

    "Security"
      has the meaning set forth in Article 8 of the Kentucky UCC.

     

     

    
      
        
        

      

      
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    "Subsidiary"
      means, as to any Person, any corporation, association or other business entity
      in which such Person or one or more of its Subsidiaries owns sufficient equity
      or voting interests to enable it or them (as a group) ordinarily, in the absence
      of contingencies, to elect a majority of the directors (or Persons performing
      similar functions) of such entity, and any partnership or joint venture if
      more
      than a 50% interest in the profits or capital thereof is owned by such Person
      or
      one or more of its Subsidiaries (unless such partnership can and does ordinarily
      take major business actions without the prior approval of such Person or one
      or
      more of its Subsidiaries). Unless the context otherwise clearly requires, any
      reference to a "Subsidiary" is a reference to a Subsidiary of the
      Borrower.

    

    "Supporting
      Obligations" shall have the meaning set forth in Article 9 of the Kentucky
      UCC.

    

    "Unmatured
      Default" means an event which but for the lapse of time or the giving of notice,
      or both, would constitute a Default.

     

    The
      foregoing definitions shall be equally applicable to both the singular and
      plural forms of the defined terms.

    

    

    ARTICLE
      II

    GRANT
      OF
      SECURITY INTEREST

    

    Each
      Obligor hereby pledges, assigns and grants to the Collateral Agent, on behalf
      of
      and for the ratable benefit of the Banks, (to the extent specifically provided
      herein) their Affiliates party to Rate Management Transactions, and the
      Noteholders, a security interest in all of such Obligor's right, title and
      interest in and to the Collateral to secure the prompt and complete payment
      and
      performance of the Obligations. 

    

    

    ARTICLE
      III

    REPRESENTATIONS
      AND WARRANTIES

    

    Each
      Obligor represents and warrants to the Collateral Agent and the Banks
      that:

    

    3.1.     Title,
      Authorization, Validity and Enforceability.
      Each
      Obligor has good and valid rights in and title to the Collateral with respect
      to
      which it has purported to grant a security interest hereunder, free and clear
      of
      all Liens except for Liens permitted under Section 4.1.6, and has full power
      and
      authority to grant to the Collateral Agent the security interest in such
      Collateral pursuant hereto. The execution and delivery by each Obligor of this
      Security Agreement has been duly authorized by proper corporate or limited
      liability company proceedings, as applicable, and this Security Agreement
      constitutes a legal, valid and binding obligation of each Obligor and creates
      a
      security interest which is enforceable against each Obligor in all now owned
      and
      hereafter acquired Collateral. 

    

          3.2.     Conflicting
      Laws and Contracts.
      Neither
      the execution and delivery by the Obligors of this Security Agreement, the
      creation and perfection of the security interest in the Collateral granted
      hereunder, nor compliance with the terms and provisions hereof will violate
      any
      law, rule, regulation, order, writ, judgment, injunction, decree or award
      binding on any Obligor or such Obligor's articles or

     

     

    
      
        
        

      

      
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    certificate
      of incorporation or by-laws or articles of organization or operating agreement,
      as applicable, the provisions of any indenture, instrument or agreement to
      which
      each Obligor is a party or is subject, or by which it, or its property, is
      bound, or conflict with or constitute a default thereunder, or result in the
      creation or imposition of any Lien pursuant to the terms of any such indenture,
      instrument or agreement (other than any Lien of the Collateral Agent on behalf
      of the Banks and the Noteholders).

    

    3.3.     Obligor
      Names.
      Exhibit
      "A" sets forth the true and correct entity name of each Obligor as set forth
      in
      the records of the Secretary of State of its jurisdiction of organization.
      No
      Obligor (or any predecessor company) has transacted business under any name
      other than those set forth on Exhibit "A" at any time in the last five
      years.

    

    3.4.     Type
      and Jurisdiction of Organization.
      The
      Borrower, ST&M, ST, SDS and STK each is a corporation organized under the
      laws of the State of Delaware. SE and STM each is a limited liability company
      organized under the laws of the State of Delaware.

    

    3.5.     Principal
      Location.
      Each
      Obligor's mailing address and the location of its place of business (if it
      has
      only one) or its chief executive office (if it has more than one place of
      business), is disclosed in Exhibit "A". The Obligors have no other places of
      business except those set forth in Exhibit "A".

    

    3.6.     Property
      Locations.
      

    

    (a)     The
      material Equipment and Inventory of the Obligors are located at the principal
      business locations of the Obligors, which are identified in Exhibit "A". For
      purposes of this Section 3.6 only, "material" shall be deemed to mean at least
      90% of the net book value of the Obligors' Equipment and Inventory. All of
      said
      locations are owned by the Obligors except for locations which are leased by
      the
      Obligors as lessee and designated in Part B of Exhibit "A". All of such owned
      locations are owned free and clear of any mortgage or other Lien on the real
      property and improvements located as such locations, except to the extent such
      Lien or mortgage is permitted under both Section 7.4 of the Loan Agreement
      and
      Section 10.4 of the Note Purchase Agreement. The Inventory of the Obligors
      which
      is held in a public warehouse or is otherwise held by a bailee or on consignment
      is not a material part of the assets of the Obligors. 

    

    (b)     The
      Borrower has identified the following business locations as locations at which
      business assets of the Obligors with a net book value of $1,000,000 or more
      are
      located and has covenanted in Section 4.3C of the Loan Agreement to cause
      fixture filings to be made with respect to such locations within 10 days from
      the date hereof :

    

    Leased
      facilities:

    

    (i)     Sypris
      Electronics, LLC - Tampa, Florida facility;

    (ii)     Sypris
      Data Systems, Inc. - Centennial, Colorado facility;

    (iii)     Sypris
      Data Systems, Inc. - San Dimas, California facility; 

    (iv)     Sypris
      Test & Measurement, Inc. - Phoenix, Arizona facility; and

    (v)     Sypris
      Test & Measurement, Inc. - Burlington, Massachusetts facility.

    

    

    
      
        
        

      

      
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    Owned
      facilities:

    (vi)     Sypris
      Electronics, LLC - 6120 Hanging Moss Road, Orlando, Florida
      facility;

    (vii)     Sypris
      Test & Measurement, Inc. - 6120 Hanging Moss Road, Orlando, Florida
      facility;

    (viii)    Sypris
      Technologies, Inc. - 2612 Howard Street, Louisville, Kentucky
      facility;

    (ix)     Sypris
      Technologies, Inc. - 2820 Broadway, Louisville, Kentucky facility;

    (x)   
Sypris
      Technologies, Inc. - 105 Wamsutta Mill Road, Morganton, North Carolina
      facility;

    (xi)     Sypris
      Technologies Kenton, Inc. - 13267 State Road 68, Kenton, Ohio facility;
      and

    (l)     
       Sypris
      Technologies Marion, LLC - 1550 Marion Agosta Road, Marion,. Ohio
      facility.

    

    The
      Borrower additionally covenants to notify the Collateral Agent of any other
      location (in addition to the above) where business assets of the Obligors are
      located with net book value of $1,000,000 or more as at the end of any two
      consecutive fiscal quarters of the Borrower, and to cooperate with the
      Collateral Agent in filing fixture financing statement(s) with respect to such
      additional locations. 

    

    3.7.     No
      Default.
      No
      Default or Unmatured Default exists.

    

    3.8.     Accounts
      and Chattel Paper.
      The
      names of the obligors, amounts owing, due dates and other information with
      respect to the Accounts and Chattel Paper are and will be correctly stated
      in
      all material respects and in accordance with GAAP in all records of the Obligors
      relating thereto and in all invoices and reports with respect thereto furnished
      to the Collateral Agent by the Obligors from time to time. 

    

    3.9.     Filing
      Requirements with respect to Patents and Trademarks.
      The
      Obligor's patents and trademarks are identified in Part A of Exhibit "B". The
      Obligors shall cause filing statements to be filed with the US Patent and
      Trademark Office within 60 days after the date hereof, perfecting the Collateral
      Agent's' security interest in the Obligor's patents and trademarks.

    

    3.10.     No
      Financing Statements.
      No
      financing statement describing all or any portion of the Collateral which has
      not lapsed or been terminated naming any Obligor as debtor has been filed in
      any
      jurisdiction except (i) financing statements naming the Collateral Agent on
      behalf of the Banks and the Noteholders as the secured party, (ii) financing
      statements described in Exhibit "C" and (iii) as permitted by Section
      4.1.6.

    

    3.11.     Federal
      Employer Identification Number.
      Each
      Obligor's Federal employer identification number is set forth in Exhibit
      A.

     

     

    
      
        
        

      

      
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    3.12.     State
      Organization Number.
      Each
      Obligor's State organization number is set forth in Exhibit A.

     

    3.13     Deposit
      and Securities Accounts.
      Exhibit
      "E" sets forth a complete and correct list of all of the Obligors' deposit
      accounts and all accounts in which any securities owned by any Obligor are
      held,
      which in each case hold a balance in cash or securities with a fair market
      value
      in excess of $100,000, and listing, as to each such account, the depositary
      institution at which such account is held, the type of account, the account
      number and the holder of such account. The Company has complied with the terms
      of Section 4.6 and 4.7 with respect to each such account.

    

    ARTICLE
      IV

    COVENANTS

    

    From
      the
      date of this Security Agreement, and thereafter until this Security Agreement
      is
      terminated:

    

    4.1.     General.

    

    4.1.1.     Inspection.
      Each
      Obligor will permit the Collateral Agent, by its representatives and agents
      (i)
      to inspect the Collateral, (ii) to examine and make copies of the records of
      each Obligor relating to the Collateral and (iii) to discuss the Collateral
      and
      the related records of each Obligor with, and to be advised as to the same
      by,
      each Obligor's officers and employees (and, in the case of any Receivable,
      with
      any person or entity which is or may be obligated thereon), all at such
      reasonable times and intervals as the Collateral Agent may determine, and all
      at
      each Obligor's expense.

    

    4.1.2.     Taxes.
      Each
      Obligor will pay when due all material taxes, assessments and governmental
      charges and levies upon the Collateral, except those which are being contested
      in good faith by appropriate proceedings and with respect to which no Lien
      exists.

    

    4.1.3.     Records
      and Reports; Notification of Default.
      Each
      Obligor will maintain materially complete and accurate books and records with
      respect to the Collateral, and furnish to the Collateral Agent, such reports
      relating to the Collateral as the Collateral Agent shall from time to time
      request. Each Obligor will give prompt notice in writing to the Collateral
      Agent
      and the Banks of the occurrence of any Default or Unmatured Default and of
      any
      other development, financial or otherwise, which might materially and adversely
      affect the Collateral.

     

              4.1.4.    
Authorization
      to File Financing Statements; Defense of Title.
      Each
      Obligor hereby irrevocably authorizes the Collateral Agent at any time and
      from
      time to time to file in any filing office in any Uniform Commercial Code
      jurisdiction any initial financing statements and amendments thereto relating
      to
      the security interests granted hereunder. Each Obligor will take any and all
      actions reasonably necessary to defend title to the Collateral against all
      persons and to defend the security interest of the Collateral Agent, on behalf
      of the Banks and the Noteholders, in the Collateral and the priority thereof
      against any Lien not expressly permitted hereunder.

     

     

    
      
        
        

      

      
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    4.1.5.     Disposition
      of Collateral.
      No
      Obligor will sell, lease or otherwise dispose of the Collateral except (i)
      prior
      to the occurrence of a Default or Unmatured Default, dispositions that would
      not
      violate the Loan Agreement or the Note Purchase Agreement, (ii) until such
      time
      following the occurrence of a Default as any Obligor receives a notice from
      the
      Collateral Agent instructing an Obligor to cease such transactions, sales or
      leases of Inventory in the ordinary course of business, and (iii) until such
      time as an Obligor receives a notice from the Collateral Agent pursuant to
      Article VII, proceeds of Inventory and Accounts collected in the ordinary course
      of business. 

    

    4.1.6.     Liens.
      No
      Obligor will create, incur, or suffer to exist any Lien on the Collateral except
      (i) the security interest created by this Security Agreement, (ii) existing
      Liens described in Exhibit "E" and (iii) other Liens permitted pursuant to
      both
      Section 7.4 of the Loan Agreement and Section 10.4 of the Note Purchase
      Agreement.

    

    4.1.7.      Change
      in Corporate Existence,
      Type or Jurisdiction of Organization, Location, Name.
      So that
      the perfection of the security interest granted to Collateral Agent shall remain
      perfected, each Obligor will:

    

    
      	(a)  	
               preserve
                its existence as
                a corporation and not, in one transaction or a series of related
                transactions, merge into or consolidate with any other entity, or
                sell all
                or substantially all of its assets;

            

    

    

    
      	(b)  	
              not
                change its state of organization;
                and

            

    

    

    
      	(c)  	
              not
                (i) change its name or taxpayer identification number or (ii) change
                its
                mailing address, 

            

    

    

    
      	 	
              unless
                the Obligors shall have given the Collateral Agent at least
                contemporaneous written notice of such event or occurrence. Failure
                of an
                Obligor to give timely written notice as required by this Section
                shall
                not be a Default hereunder unless, as result of such failure, the
                Collateral Agent shall no longer have a perfected, first priority
                security
                interest in such Obligor's
                Collateral.

            

    

    

    4.1.8.     Other
      Financing Statements.
      No
      Obligor will sign or authorize the signing on its behalf or the filing of any
      financing statement naming it as debtor covering all or any portion of the
      Collateral, except as permitted by Section 4.1.6.

    

    4.1.9.     Collateral
      Locations.
      The
      material (as defined in Section 3.6) Equipment and Inventory will be kept at
      those locations listed on Exhibit A and Exhibit B.

    

    4.2.     Receivables.

    

    4.2.1.    
Certain
      Agreements on Receivables.
      No
      Obligor will make or agree to make any discount, credit, rebate or other
      reduction in the original amount owing on a Receivable or accept in satisfaction
      of a Receivable less than the original amount thereof, except that, prior to
      the
      occurrence of a Default, the Obligors may reduce the amount of Accounts arising
      from the

     

     

    
      
        
        

      

      
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sale
        of
        Inventory in accordance with their present policies (including the Obligors'
        present policies with respect to counterparties on Receivables that are in
        bankruptcy) and in the ordinary course of business .

    

    

    4.2.2.    
Collection
      of Receivables.
      Except
      as otherwise provided in this Security Agreement, each Obligor will collect
      and
      enforce, at each Obligor's sole expense, all material amounts due or hereafter
      due to each Obligor under the Receivables.

    

    4.2.3.     Delivery
      of Invoices.
      Each
      Obligor will deliver to the Collateral Agent immediately upon its request after
      the occurrence of a Default duplicate invoices with respect to each Account
      bearing such language of assignment as the Collateral Agent shall
      specify.

    

    4.2.4.    
Instructions
      to Account Debtors; Transfer of Payments to Control Accounts.
      Each
      Obligor will promptly after the date hereof (a) direct all Account debtors
      to
      make any and all payments on Accounts directly to a Deposit Account subject
      to a
      control agreement described in Section 4.6 (to the extent any such payments
      are
      being directed to any other account) and (b) cause any such payments received
      in
      any other Deposit Account (or otherwise received by any Obligor) to be
      transferred forthwith to a Deposit Account subject to such a control
      agreement.

    

    4.3.     Inventory
      and Equipment.

    

    4.3.1.    
Maintenance
      of Inventory and Equipment.
      Each
      Obligor will do all things necessary to maintain, preserve, protect and keep
      the
      Inventory and the Equipment in good repair and working and saleable condition,
      consistent with the Obligor's past practices regarding maintenance of Inventory
      and Equipment.

    

    4.3.2.    
Insurance.
      (a)
      Each Obligor will (i) maintain fire and extended coverage insurance on the
      Collateral which is tangible, real or personal property containing a lender's
      loss payable clause in favor of the Collateral Agent, on behalf of the Banks
      and
      the Noteholders, and providing that said insurance will not be terminated except
      after at least 30 days' written notice from the insurance company to the
      Collateral Agent, (ii) maintain such other insurance on the Collateral for
      the
      benefit of the Collateral Agent as the Collateral Agent shall from time to
      time
      request, (iii) furnish to the Collateral Agent upon the request of the
      Collateral Agent from time to time the originals of all policies of insurance
      on
      the Collateral and certificates with respect to such insurance and (iv) maintain
      general liability insurance naming the Collateral Agent, on behalf of the Banks
      and the Noteholders, as an additional insured.

    

    (b)     The
      proceeds of any casualty insurance in respect of any casualty loss of any of
      the
      Collateral shall, subject to the rights, if any, of other parties with an
      interest having priority in the property covered thereby, (a) so long as no
      Unmatured Default or Default has occurred and is continuing and to the extent
      that the amount of such proceeds is less than $1,000,000, be disbursed to the
      Obligor suffering such loss for direct application by such Obligor solely to
      the
      repair or replacement of such Obligor's property so damaged or destroyed and
      (b)
      in all other circumstances, be held by the Collateral Agent as cash collateral
      for the Obligations. The Collateral Agent may, at its sole option (as directed
      by the Requisite Creditors under the

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        
Collateral
        Sharing Agreement), disburse from time to time all or any part of such proceeds
        so held as cash collateral, upon such terms and conditions as the Collateral
        Agent may reasonably prescribe, for direct application by the Obligor suffering
        such loss solely to the repair or replacement of such Obligor's property
        so
        damaged or destroyed, or the Collateral Agent may apply all or any part of
        such
        proceeds to the Obligations in accordance with the terms of the Collateral
        Sharing Agreement.

    

     

    4.4.     Instruments,
      Chattel Paper, Documents and Pledged Deposits.
      Each
      Obligor will (i) if
      it
      shall now or at any time hereafter hold or acquire any promissory notes or
      tangible Chattel Paper with an aggregate book value exceeding $100,000, promptly
      notify the Collateral Agent of such fact and forthwith endorse, assign and
      deliver the same to the Collateral Agent, accompanied by such instruments of
      transfer or assignment duly executed in blank as the Collateral Agent may from
      time to time specify, (ii) deliver to the Collateral Agent such Pledged Deposits
      which are evidenced by certificates included in the Collateral endorsed in
      blank, marked with such legends and assigned as the Collateral Agent shall
      specify, and (iii) upon the Collateral Agent's request, after the occurrence
      and
      during the continuance of a Default, deliver to the Collateral Agent (and
      thereafter hold in trust for the Collateral Agent upon receipt and immediately
      deliver to the Collateral Agent) any Document evidencing or constituting
      Collateral.

    

    4.5.     Pledged
      Deposits.
      No
      Obligor will withdraw all or any portion of any Pledged Deposit or fail to
      rollover said Pledged Deposit without the prior written consent of the
      Collateral Agent.

    

    4.6.     Deposit
      Accounts.
      Each
      Obligor will (i) promptly inform the Collateral Agent in writing at any time
      that a Deposit Account in which it has an interest holds cash or securities
      with
      a fair market value in excess of $100,000 that is not the subject of a control
      agreement of the type described in this Section 4.6, (ii) upon the Collateral
      Agent's request, cause each bank or other financial institution in which it
      maintains (a) such a Deposit Account to enter into a control agreement with
      the
      Collateral Agent, in form and substance satisfactory to the Collateral Agent
      in
      order to give the Collateral Agent Control of the Deposit Account or (b) other
      deposits (general or special, time or demand, provisional or final) with any
      bank or other financial institution holding cash or securities with a fair
      market value in excess of $100,000 to be notified of the security interest
      granted to the Collateral Agent hereunder and cause each such bank or other
      financial institution to acknowledge such notification in writing, and (iii)
      upon the Collateral Agent's request after the occurrence and during the
      continuance of a Default, deliver to each such bank or other financial
      institution a letter, in form and substance acceptable to the Collateral Agent,
      transferring ownership of each Deposit Account to the Collateral Agent or
      transferring dominion and control over each such other deposit to the Collateral
      Agent until such time as no Default exists. In the case of deposits maintained
      with Banks, the terms of such letter shall be subject to the provisions of
      the
      Loan Agreement regarding setoffs.

    

    4.7.     Investment
      Property.
      If any
      Obligor shall, now or at any time hereafter, hold or acquire any certificated
      securities (other than any equity interest in any of its Subsidiaries), such
      Obligor shall forthwith endorse, assign and deliver the same to the Collateral
      Agent, accompanied by such instruments of transfer or assignment duly executed
      in blank as the Collateral Agent may from time to time specify. If any
      securities (other than any equity interest in any Subsidiary of the Borrower
      or
      any Guarantor) now or hereafter acquired by any Obligor are uncertificated
      and
      are issued to any Obligor or its nominee directly by the issuer thereof, the
      Company shall immediately notify the Collateral Agent

     

     

    
      
        
        

      

      
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    thereof
      and, at the Collateral Agent's request and option, pursuant to an agreement
      in
      form and substance satisfactory to the Collateral Agent, either (a) cause the
      issuer to agree to comply without further consent of such Obligor or such
      nominee, at any time with instructions from the Collateral Agent as to such
      securities, or (b) arrange for the Collateral Agent to become the registered
      owner of the securities. If any securities, whether certificated or
      uncertificated, or other investment property now or hereafter acquired by such
      Obligor with a fair market value of greater than $100,000 are held by such
      Obligor or its nominee through a securities intermediary or commodity
      intermediary, such Obligor shall immediately notify the Collateral Agent thereof
      in writing and, at the Collateral Agent's request and option, pursuant to an
      agreement in form and substance satisfactory to the Collateral Agent, either
      (i)
      cause such securities intermediary or (as the case may be) commodity
      intermediary to agree to comply, in each case without further consent of such
      Obligor or such nominee, at any time with entitlement orders or other
      instructions from the Collateral Agent to such securities intermediary as to
      such securities or other investment property, or (as the case may be) to apply
      any value distributed on account of any commodity contract as directed by the
      Collateral Agent to such commodity intermediary, or (ii) in the case of
      financial assets or other investment property held through a securities
      intermediary, arrange for the Collateral Agent to become the entitlement holder
      with respect to such investment property, with such Obligor being permitted,
      only with the consent of the Collateral Agent, to exercise rights to withdraw
      or
      otherwise deal with such investment property. The Collateral Agent agrees with
      the Obligors that the Collateral Agent shall not give any such entitlement
      orders or instructions or directions to any such issuer, securities intermediary
      or commodity intermediary, and shall not withhold its consent to the exercise
      of
      any withdrawal or dealing rights by the Obligors, unless a Default has occurred
      and is continuing, or, after giving effect to any such investment and withdrawal
      rights not otherwise permitted by the Creditor Documents, would occur. The
      provisions of this paragraph shall not apply to any financial assets credited
      to
      a securities account for which the Collateral Agent is the securities
      intermediary. Nothing in this paragraph or in this Agreement shall limit the
      obligations of any Obligor party to the Pledge Agreement under the terms of
      such
      agreement or the obligations of any Obligor under any agreement that it may
      hereafter enter into in which such Obligor pledges to the Collateral Agent,
      as
      security for the Obligations, such Obligor's equity interests in any of its
      Subsidiaries.

    

    4.8.     Collateral
      in the Possession of a Bailee.
      If any
      Collateral with a fair market value of greater than $100,000 is, now or at
      any
      time hereafter, in the possession of a bailee, the Obligor owning such
      Collateral shall promptly notify the Collateral Agent thereof and, at the
      Collateral Agent's request and option, shall promptly obtain an acknowledgement
      from the bailee, in form and substance satisfactory to the Collateral Agent,
      that the bailee holds such Collateral for the benefit of the Collateral Agent
      and such bailee's agreement to comply, without further consent of such Obligor,
      at any time with instructions of the Collateral Agent as to such Collateral.
      The
      Collateral Agent agrees with the Obligors that the Collateral Agent shall not
      give any such instructions unless a Default has occurred and is continuing
      or
      would occur after taking into account any action by such Obligors with respect
      to the bailee.

    

    4.9.     Electronic
      Chattel Paper, Electronic Documents and Transferable Records.
      If any
      Obligor, now or at any time hereafter, holds or acquires an interest in any
      electronic chattel paper, any electronic document or any "transferable record,"
      as that term is defined in Section 201 of the federal Electronic Signatures
      in
      Global and National Commerce Act, or in §16 of the Uniform Electronic
      Transactions Act as in effect in any relevant jurisdiction, such Obligor shall
      promptly notify the

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Collateral
      Agent thereof and, at the request and option of the Collateral Agent, shall
      take
      such action as the Collateral Agent may reasonably request to vest in the
      Collateral Agent control, under §9-105 of the Kentucky UCC or any other relevant
      jurisdiction, of such electronic chattel paper, control, under Section 201
      of
      the federal Electronic Signatures in Global and National Commerce Act or, as
      the
      case may be, §16 of the Uniform Electronic Transactions Act, as so in effect in
      such jurisdiction, of such transferable record. 

    

    4.10.     Commercial
      Tort Claims.
      If any
      Obligor shall, now or at any time hereafter, hold or acquire a commercial tort
      claim where the stated amount of such claim is in excess of $100,000, such
      Obligor shall immediately notify the Collateral Agent in a writing signed by
      such Obligor of the particulars thereof and grant to the Collateral Agent in
      such writing a security interest therein and in the proceeds thereof, all upon
      the terms of this Agreement, with such writing to be in form and substance
      satisfactory to the Collateral Agent.

    

    4.11     Letter-of-Credit
      Rights.
      Each
      Obligor will upon the Collateral Agent's request, cause each issuer of a letter
      of credit, to consent to the assignment of proceeds of the letter of credit
      in
      order to give the Collateral Agent Control of the letter-of-credit rights to
      such letter of credit.

    

    4.12     Federal,
      State or Municipal Claims.
      Each
      Obligor will notify the Collateral Agent of any Collateral which constitutes
      a
      claim against the United States government or any state or local government
      or
      any instrumentality or agency thereof, the assignment of which claim is
      restricted by federal, state or municipal law.

    

    4.13.     Other
      Actions as to any and all Collateral.
      Each
      Obligor further agrees, upon the request of the Collateral Agent and at the
      Collateral Agent's option, to take any and all other actions as the Collateral
      Agent may determine to be necessary or useful for the attachment, perfection
      and
      first priority of, and the ability of the Collateral Agent to enforce, the
      Collateral Agent's security interest in any and all of the Collateral, including
      (a) executing, delivering and, where appropriate, filing financing statements
      and amendments relating thereto under the Uniform Commercial Code of any
      relevant jurisdiction, to the extent, if any, that the Company's signature
      thereon is required therefor, (b) causing the Collateral Agent's name to be
      noted as secured party on any certificate of title for a titled good if such
      notation is a condition to attachment, perfection or priority of, or ability
      of
      the Collateral Agent to enforce, the Collateral Agent's security interest in
      such Collateral, (c) complying with any provision of any statute, regulation
      or
      treaty of the United States as to any Collateral if compliance with such
      provision is a condition to attachment, perfection or priority of, or ability
      of
      the Collateral Agent to enforce, the Collateral Agent's security interest in
      such Collateral, (d) obtaining governmental and other third party waivers,
      consents and approvals, in form and substance satisfactory to the Collateral
      Agent, including any consent of any licensor, lessor or other person obligated
      on Collateral, (e) obtaining waivers from mortgagees, warehousemen, bailees
      and
      landlords with respect to any locations holding Collateral with a net book
      value
      in excess of $1,000,000, in form and substance satisfactory to the Collateral
      Agent and (f) taking all actions under any earlier versions of the Uniform
      Commercial Code or under any other law, as reasonably determined by the
      Collateral Agent to be applicable in any relevant Uniform Commercial Code or
      other jurisdiction, including any foreign jurisdiction.

     

     

    
      
        
        

      

      
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    ARTICLE
      V

    DEFAULT

    

    5.1.     The
      occurrence of any one or more of the following events shall constitute a
      Default:

    

    5.1.1.    
Any
      representation or warranty made by or on behalf of an Obligor under or in
      connection with this Security Agreement shall be materially false as of the
      date
      on which made.

    

    5.1.2.     The
      breach by
      any Obligor of any of the terms or provisions of Article IV or Article
      VII.

    

    5.1.3.     The
      breach by
      any Obligor (other than a breach which constitutes a Default under Section
      5.1.1
      or 5.1.2) of any of the terms or provisions of this Security Agreement which
      is
      not remedied within 10 days after the giving of written notice to such Obligor
      by the Collateral Agent.

    

    5.1.4.     Any
      material
      portion of the Collateral shall be transferred or otherwise disposed of, either
      voluntarily or involuntarily, in any manner not permitted by Section 4.1.5
      or
      8.9 or shall be lost, stolen, damaged or destroyed.

    

    5.1.5.     Any
      Obligation shall not be paid when due, whether at stated maturity, upon
      acceleration, or otherwise. 

    

    5.1.6.     The
      occurrence of any "Default" under, and as defined in, the Collateral Sharing
      Agreement.

     

    5.2.     Acceleration
      and Remedies.
      Upon
      the acceleration of any of the Obligations, such Obligations (including, to
      the
      extent provided for under the Rate Management Transactions, the Rate Management
      Obligations) shall immediately become due and payable without presentment,
      demand, protest or notice of any kind, all of which are hereby expressly waived,
      and the Collateral Agent may, with the concurrence or at the direction of the
      Requisite Creditors, exercise any or all of the following rights and
      remedies:

    

    5.2.1.    Those
      rights
      and remedies provided in this Security Agreement and any other Collateral
      Document, provided
      that
      this Section 5.2.1 shall not be understood to limit any rights or remedies
      available to the Collateral Agent, the Banks or the Noteholders prior to a
      Default.

    

    5.2.2.    Those
      rights
      and remedies available to a secured party under the Kentucky UCC (whether or
      not
      the Kentucky UCC applies to the affected Collateral) or under any other
      applicable law (including, without limitation, any law governing the exercise
      of
      a bank's right of setoff or bankers' lien) when a debtor is in default under
      a
      security agreement.

    

    5.2.3.    Without
      notice except as specifically provided in Section 8.1 or elsewhere herein,
      sell,
      lease, assign, grant an option or options to purchase or otherwise dispose
      of
      the Collateral or any part thereof in one or more parcels at public or private
      sale, for cash, on credit or for

     

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        
future
        delivery, and upon such other terms as the Collateral Agent (as instructed
        by
        the Requisite Creditors) may deem commercially reasonable.

    

    

    The
      Collateral Agent, on behalf of the secured parties, may comply with any
      applicable state or federal law requirements in connection with a disposition
      of
      the Collateral and compliance will not be considered to adversely affect the
      commercial reasonableness of any sale of the Collateral.

    

    If,
      after
      the Creditor Documents have terminated by their terms and all of the Obligations
      have been paid in full, there remain Rate Management Obligations outstanding,
      the Requisite Creditors may exercise the remedies provided in this Section
      5.2
      upon the occurrence of any event which would allow or require the termination
      or
      acceleration of any Rate Management Obligations pursuant to the terms of the
      agreement governing any Rate Management Transaction.

    

    5.3.     Debtor's
      Obligations Upon Default.
      Upon
      the request of the Collateral Agent after the occurrence of a Default, the
      Obligors will:

    

    5.3.1.     Assembly
      of Collateral.
      Assemble and make available to the Collateral Agent the Collateral and all
      records relating thereto at any place or places specified by the Collateral
      Agent.

    

    5.3.2.    
Secured
      Party Access.
      Permit
      the Collateral Agent, by the Collateral Agent's representatives and agents,
      to
      enter any premises where all or any part of the Collateral, or the books and
      records relating thereto, or both, are located, to take possession of all or
      any
      part of the Collateral and to remove all or any part of the
      Collateral.

    

    5.4.    
License.
      The
      Collateral Agent is hereby granted a license or other right to use, following
      the occurrence and during the continuance of a Default, without charge, each
      Obligor's labels, patents, copyrights, rights of use of any name, trade secrets,
      trade names, trademarks, service marks, customer lists and advertising matter,
      or any property of a similar nature, as it pertains to the Collateral, in
      completing production of, advertising for sale, and selling any Collateral,
      and,
      following the occurrence and during the continuance of a Default, each Obligor's
      rights under all licenses and all franchise agreements shall inure to the
      Collateral Agent's benefit. In addition, each Obligor hereby irrevocably agrees
      that the Collateral Agent may, following the occurrence and during the
      continuance of a Default, sell any of each Obligor's Inventory directly to
      any
      person, including without limitation persons who have previously purchased
      each
      Obligor's Inventory from such Obligor and in connection with any such sale
      or
      other enforcement of the Collateral Agent's rights under this Agreement, may
      sell Inventory which bears any trademark owned by or licensed to any Obligor
      and
      any Inventory that is covered by any copyright owned by or licensed to any
      Obligor and the Collateral Agent may finish any work in process and affix any
      trademark owned by or licensed to any Obligor and sell such Inventory as
      provided herein.

     

    ARTICLE
      VI

    WAIVERS,
      AMENDMENTS AND REMEDIES

     

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        
    No
        delay or
        omission of the Collateral Agent, the Banks or the Noteholders to exercise
        any
        right or remedy granted under this Security Agreement shall impair such right
        or
        remedy or be construed to be a waiver of any Default or an acquiescence therein,
        and any single or partial exercise of any such right or remedy shall not
        preclude any other or further exercise thereof or the exercise of any other
        right or remedy. No waiver, amendment or other variation of the terms,
        conditions or provisions of this Security Agreement whatsoever shall be valid
        unless in writing signed by the Collateral Agent with the concurrence or
        at the
        direction of the Requisite Creditors required under the Collateral Sharing
        Agreement and then only to the extent in such writing specifically set forth.
        All rights and remedies contained in this Security Agreement or by law afforded
        shall be cumulative and all shall be available to the Collateral Agent, the
        Banks and the Noteholders until the Obligations have been paid in
        full.

    

     

    ARTICLE
      VII

    PROCEEDS;
      COLLECTION OF RECEIVABLES

    

    7.1.     Lockboxes.
      Upon
      request of the Collateral Agent after the occurrence of a Default or Unmatured
      Default, each Obligor shall execute and deliver to the Collateral Agent
      irrevocable lockbox agreements in the form provided by or otherwise acceptable
      to the Collateral Agent, which agreements shall be accompanied by an
      acknowledgment by the bank where the lockbox is located of the Lien of the
      Collateral Agent granted hereunder and of irrevocable instructions to wire
      all
      amounts collected therein to a special collateral account at the Collateral
      Agent.

    

    7.2.     Collection
      of Receivables.
      The
      Collateral Agent may at any time in its sole discretion, by giving the Obligors
      written notice, elect to require that the Receivables be paid directly to the
      Collateral Agent for the benefit of the Banks and the Noteholders. In such
      event, the Obligors shall, and shall permit the Collateral Agent to, promptly
      notify the account debtors or obligors under the Receivables of the interests
      of
      the Banks and Noteholders therein and direct such account debtors or obligors
      to
      make payment of all amounts then or thereafter due under the Receivables
      directly to the Collateral Agent. Upon receipt of any such notice from the
      Collateral Agent, the Obligors shall thereafter hold in trust for the Collateral
      Agent, on behalf of the Banks and the Noteholders, all amounts and proceeds
      received by it with respect to the Receivables and immediately and at all times
      thereafter deliver to the Collateral Agent all such amounts and proceeds in
      the
      same form as so received, whether by cash, check, draft or otherwise, with
      any
      necessary endorsements. The Collateral Agent shall hold and apply funds so
      received as provided by the terms of Sections 7.3 and 7.4.

    

    7.3.     Special
      Collateral Account.
      The
      Collateral Agent may require all cash proceeds of the Collateral to be deposited
      in a special non-interest bearing cash collateral account with the Collateral
      Agent and held there as security for the Obligations. Each Obligor shall have
      no
      control whatsoever over said cash collateral account. If no Default or Unmatured
      Default has occurred or is continuing, the Collateral Agent shall upon the
      direction of the Requisite Creditors from time to time deposit the collected
      balances in said cash collateral account into the Borrower's general operating
      account with the Collateral Agent. If any Default or Unmatured Default has
      occurred and is continuing, the Collateral Agent may (and shall, at the
      direction of the Requisite Creditors), from time to time, apply the collected
      balances in said cash collateral account to the payment of the Obligations
      whether or not the Obligations shall then be due.

     

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

     

    7.4.     Application
      of Proceeds.
      The
      proceeds of the Collateral shall be applied by the Collateral Agent to payment
      of the Obligations as provided in the Collateral Sharing Agreement.

    

    ARTICLE
      VIII

    GENERAL
      PROVISIONS

    

    8.1.     Notice
      of Disposition of Collateral; Condition of Collateral.
      Each
      Obligor hereby waives notice of the time and place of any public sale or the
      time after which any private sale or other disposition of all or any part of
      the
      Collateral may be made. To the extent such notice may not be waived under
      applicable law, any notice made shall be deemed reasonable if sent to the
      Obligors, addressed as set forth in Article IX, at least ten days prior to
      (i)
      the date of any such public sale or (ii) the time after which any such private
      sale or other disposition may be made. Collateral Agent shall have no obligation
      to clean-up or otherwise prepare the Collateral for sale.

    

    8.2.     Compromises
      and Collection of Collateral.
      Each
      Obligor and the Collateral Agent recognize that setoffs, counterclaims, defenses
      and other claims may be asserted by obligors with respect to certain of the
      Receivables, that certain of the Receivables may be or become uncollectible
      in
      whole or in part and that the expense and probability of success in litigating
      a
      disputed Receivable may exceed the amount that reasonably may be expected to
      be
      recovered with respect to a Receivable. In view of the foregoing, the Obligors
      agree that the Collateral Agent may at any time and from time to time, if a
      Default has occurred and is continuing, compromise with the obligor on any
      Receivable, accept in full payment of any Receivable such amount as the
      Collateral Agent in its sole discretion shall determine or abandon any
      Receivable, and any such action by the Collateral Agent shall be commercially
      reasonable so long as the Collateral Agent acts in good faith based on
      information known to it at the time it takes any such action.

    

    8.3.     Secured
      Party Performance of Debtor Obligations.
      Without
      having any obligation to do so, the Collateral Agent may perform or pay any
      obligation which the Obligors have agreed to perform or pay in this Security
      Agreement and the Obligors shall reimburse the Collateral Agent for any amounts
      paid by the Collateral Agent pursuant to this Section 8.3. Each Obligor's
      obligation to reimburse the Collateral Agent pursuant to the preceding sentence
      shall be a Obligation payable on demand.

    

    8.4.     Authorization
      for Secured Party to Take Certain Action.
      Each
      Obligor irrevocably authorizes the Collateral Agent at any time and from time
      to
      time in the sole discretion of the Collateral Agent and appoints the Collateral
      Agent as its attorney in fact (i) to execute on behalf of such Obligor as debtor
      and to file financing statements necessary or desirable in the Collateral
      Agent's sole discretion to perfect and to maintain the perfection and priority
      of the Collateral Agent's security interest in the Collateral, (ii) to indorse
      and collect any cash proceeds of the Collateral, (iii) to file a carbon,
      photographic or other reproduction of this Security Agreement or any financing
      statement with respect to the Collateral as a financing statement and to file
      any other financing statement or amendment of a financing statement (which
      does
      not add new collateral or add a debtor) in such offices as the Collateral Agent
      in its sole discretion deems necessary or desirable to perfect and to maintain
      the perfection and priority of the Collateral Agent's security interest in
      the
      Collateral, (iv) subject to the terms of Section 4.1.5, to enforce payment
      of
      the Receivables in the name of the Collateral Agent or 

     

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    the
      Obligor, (v) to apply the proceeds of any Collateral received by the Collateral
      Agent to the Obligations as provided in Article VII and (vi) to discharge past
      due taxes, assessments, charges, fees or Liens on the Collateral (except for
      such Liens as are specifically permitted hereunder), and the Obligors agree
      to
      reimburse the Collateral Agent on demand for any payment made or any expense
      incurred by the Collateral Agent in connection therewith, provided
      that
      this authorization shall not relieve the Obligors of any of their obligations
      under this Security Agreement or under the Loan Agreement.

    

    8.5.     Suretyship
      Waivers.
      Each
      Obligor waives demand, notice, protest, notice of acceptance of this Agreement,
      notice of loans made, credit extended, Collateral received or delivered or
      other
      action taken in reliance hereon and all other demands and notices of any
      description. With respect to both the Obligations and the Collateral, each
      Obligor assents to any extension or postponement of the time of payment or
      any
      other indulgence, to any substitution, exchange or release of or failure to
      perfect any security interest in any Collateral, to the addition or release
      of
      any party or person primarily or secondarily liable, to the acceptance of
      partial payment thereon and the settlement, compromising or adjusting of any
      thereof, all in such manner and at such time or times as the Collateral Agent
      may deem advisable. The Collateral Agent shall have no duty as to the collection
      or protection of the Collateral or any income therefrom, the preservation of
      rights against prior parties, or the preservation of any rights pertaining
      thereto beyond, with respect to the safe custody thereof, to
      deal
      with such Collateral in the same manner as the Collateral Agent deals with
      similar property for its own account. Each Obligor further waives any and all
      other suretyship defenses.

    

    8.6.     Marshaling.
      Neither
      the Collateral Agent nor any Bank nor any Noteholder shall be required to
      marshal any present or future collateral security (including but not limited
      to
      the Collateral) for, or other assurances of payment of, the Obligations or
      any
      of them or to resort to such collateral security or other assurances of payment
      in any particular order, and all of the rights and remedies of the Collateral
      Agent or any Bank or Noteholder hereunder and of the Collateral Agent or any
      Bank or Noteholder in respect of such collateral security and other assurances
      of payment shall be cumulative and in addition to all other rights and remedies,
      however existing or arising. To the extent that it lawfully may, each Obligor
      hereby agrees that it will not invoke any law relating to the marshaling of
      collateral which might cause delay in or impede the enforcement of the
      Collateral Agent's rights and remedies under this Agreement or under any other
      instrument creating or evidencing any of the Obligations or under which any
      of
      the Obligations is outstanding or by which any of the Obligations is secured
      or
      payment thereof is otherwise assured, and, to the extent that it lawfully may,
      each Obligor hereby irrevocably waives the benefits of all such
      laws.

    

    8.7.     Specific
      Performance of Certain Covenants.
      Each
      Obligor acknowledges and agrees that a breach of any of the covenants contained
      in Sections 4.1.5, 4.1.6, 4.4, 5.3, or 8.7 or in Article VII will cause
      irreparable injury to the Collateral Agent, the Banks and the Noteholders,
      that
      the Collateral Agent, the Banks and the Noteholders have no adequate remedy
      at
      law in respect of such breaches and therefore agrees, without limiting the
      right
      of the Collateral Agent, the Banks or the Noteholders to seek and obtain
      specific performance of other obligations of the Obligors contained in this
      Security Agreement, that the covenants of the Obligors contained in the Sections
      referred to in this Section 8.5 shall be specifically enforceable against the
      Obligors.

     

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

            

    

    8.8.     Use
      and Possession of Certain Premises.
      Upon
      the occurrence of a Default, the Collateral Agent shall be entitled to occupy
      and use any premises owned or leased by the Obligors where any of the Collateral
      or any records relating to the Collateral are located until the Obligations
      are
      paid or the Collateral is removed therefrom, whichever first occurs, without
      any
      obligation to pay the Obligors for such use and occupancy.

    

    8.9.     Dispositions
      Not Authorized.
      Each
      Obligor is not authorized to sell or otherwise dispose of the Collateral except
      as set forth in Section 4.1.5 and notwithstanding any course of dealing between
      the Obligors and the Collateral Agent or other conduct of the Collateral Agent,
      no authorization to sell or otherwise dispose of the Collateral (except as
      set
      forth in Section 4.1.5) shall be binding upon the Collateral Agent or the Banks
      or the Noteholders unless such authorization is in writing signed by the
      Collateral Agent with the consent or at the direction of the Requisite
      Creditors.

    

    8.10.    Benefit
      of Agreement.
      The
      terms and provisions of this Security Agreement shall be binding upon and inure
      to the benefit of the Obligors, the Collateral Agent, the Banks and the
      Noteholders and their respective successors and assigns (including all persons
      who become bound as a debtor to this Security Agreement), except that the
      Obligors shall not have the right to assign their rights or delegate their
      obligations under this Security Agreement or any interest herein, without the
      prior written consent of the Collateral Agent.

    

    8.11.    Survival
      of Representations.
      All
      representations and warranties of the Obligors contained in this Security
      Agreement shall survive the execution and delivery of this Security
      Agreement.

    

    8.12.    Taxes
      and Expenses.
      Any
      taxes (including income taxes) payable or ruled payable by Federal or State
      authority in respect of this Security Agreement shall be paid by the Obligors,
      together with interest and penalties, if any. Each Obligor shall reimburse
      the
      Collateral Agent for any and all out-of-pocket expenses and internal charges
      (including reasonable attorneys', auditors' and accountants' fees and reasonable
      time charges of attorneys, paralegals, auditors and accountants who may be
      employees of the Collateral Agent) paid or incurred by the Collateral Agent
      in
      connection with the preparation, execution, delivery, administration, collection
      and enforcement of this Security Agreement and in the audit, analysis,
      administration, collection, preservation or sale of the Collateral (including
      the expenses and charges associated with any periodic or special audit of the
      Collateral). Any and all costs and expenses incurred by the Obligors in the
      performance of actions required pursuant to the terms hereof shall be borne
      solely by the Obligors.

    

    8.13.     Headings.
      The
      title of and section headings in this Security Agreement are for convenience
      of
      reference only, and shall not govern the interpretation of any of the terms
      and
      provisions of this Security Agreement.

    

    8.14.     Termination.
      This
      Security Agreement shall continue in effect (notwithstanding the fact that
      from
      time to time there may be no Obligations outstanding) until (i) the other
      Creditor Documents have been terminated (pursuant to their express terms or
      otherwise) and (ii) all of the Obligations have been indefeasibly paid and
      performed in full and no commitments of the Collateral Agent, the Banks or
      the
      Noteholders which would give rise to any Obligations are
      outstanding.

     

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    

    8.15.     Entire
      Agreement.
      This
      Security Agreement embodies the entire agreement and understanding between
      the
      Obligors and the Collateral Agent relating to the Collateral and supersedes
      all
      prior agreements and understandings between the Obligors and the Collateral
      Agent relating to the Collateral.

    

    8.16.     CHOICE
      OF LAW.
      THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
      THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE COMMONWEALTH OF
      KENTUCKY, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
      BANKS.

     

    8.17.     Indemnity.
      Each
      Obligor hereby agrees to indemnify the Collateral Agent, the Banks and the
      Noteholders, and their respective successors, assigns, agents and employees,
      from and against any and all liabilities, damages, penalties, suits, costs,
      and
      expenses of any kind and nature (including, without limitation, all expenses
      of
      litigation or preparation therefor whether or not the Collateral Agent or any
      Bank or Noteholder is a party thereto) imposed on, incurred by or asserted
      against the Collateral Agent, the Banks or the Noteholders, or their respective
      successors, assigns, agents and employees, in any way relating to or arising
      out
      of this Security Agreement, or the manufacture, purchase, acceptance, rejection,
      ownership, delivery, lease, possession, use, operation, condition, sale, return
      or other disposition of any Collateral (including, without limitation, latent
      and other defects, whether or not discoverable by the Collateral Agent, the
      Banks, the Noteholders or the Obligors, and any claim for patent, trademark
      or
      copyright infringement).

    

    8.18.     Impact
      of Applicable Laws upon Rights of the Collateral Agent, the Banks, the
      Noteholders and the Obligors with respect to Collateral.
      The
      Collateral Agent and the Obligors agree that the respective rights of the
      Obligors, the Collateral Agent, the Banks and the Noteholders with respect
      to
      the Collateral are at all times subject to any limitations of applicable federal
      or state laws (including laws related to national security) with respect to
      such
      Collateral.

     

    ARTICLE
      IX

    NOTICES

    

    9.1.     Sending
      Notices.
      All
      notices and other communications hereunder shall be in writing and shall be
      delivered or mailed by first class mail, postage prepaid, at the respective
      addresses set forth below, or at such other address as shall have been furnished
      in writing by any Person described above to the party required to give notice
      hereunder:

    

    The
      Collateral Agent:     JPMORGAN
      CHASE BANK, N.A.

                    416
      West Jefferson Street

                    Louisville,
      Kentucky 40202

                    Attn:
      J. Duffy Baker, Senior Vice President

     

    The
      Borrower and       SYPRIS
      SOLUTIONS, INC.

    the
      other
      Obligors:       101
      Bullitt Lane, Suite 450

                    
      Louisville, Kentucky 40222

                    Attn:
      President

     

     

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    

    SYPRIS
      TEST & MEASUREMENT, INC.

    6120
      Hanging Moss Road

    Orlando,
      Florida 32807

    Attention:
      President

    

    SYPRIS
      TECHNOLOGIES, INC.

    101
      Bullitt Lane, Suite 450

    Louisville,
      Kentucky 40222

    Attention:
      President

    

    SYPRIS
      ELECTRONICS, LLC

    10901
      Malcolm McKinley Drive

    Tampa,
      Florida 33612

    Attention:
      President

    

    SYPRIS
      DATA SYSTEMS, INC. 

    160
      E.
      Via Verde

    San
      Dimas, California 91773

    Attention:
      President

    

    SYPRIS
      TECHNOLOGIES MARION, LLC

    1550
      Marion Agosta Road

    Marion,
      Ohio 43302

    Attn:
      President

    

    SYPRIS
      TECHNOLOGIES KENTON, INC.

    13267
      State Route 68 South

    Kenton,
      Ohio 43326

    Attention:
      President

     

    
 

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    SYPRIS
      TECHNOLOGIES MEXICAN HOLDINGS, LLC

    101
      Bullitt Lane, Suite 450

    Louisville,
      Kentucky 40222

    Attention:
      President 

    

    9.2.     Change
      in Address for Notices.
      Each of
      the Obligors and the Collateral Agent may change the address for service of
      notice upon it by a notice in writing to the other parties.

    

    ARTICLE
      X

    THE
      COLLATERAL AGENT 

    

    JP
      Morgan
      Chase Bank, N.A. has been appointed Collateral Agent for the Banks and the
      Noteholders pursuant to the Collateral Sharing Agreement. It is expressly
      understood and agreed by the parties to this Security Agreement that any
      authority conferred upon the Collateral Agent hereunder is subject to the terms
      of the delegation of authority made by the Banks and the Noteholders to the
      Collateral Agent pursuant to the Collateral Sharing Agreement, and that the
      Collateral Agent has agreed to act (and any successor Collateral Agent shall
      act) as such hereunder only on the express conditions contained in the
      Collateral Sharing Agreement. Any successor Collateral Agent appointed pursuant
      to the Collateral Sharing Agreement shall be entitled to all the rights,
      interests and benefits of the Collateral Agent hereunder. 

    

    IN
      WITNESS WHEREOF, the Collateral Agent, the Borrower and the Guarantors have
      executed this Security Agreement as of the date first above
      written.

    

    

    JP
      MORGAN
      CHASE BANK, N.A.,

    as
      Collateral Agent

    

    By: 
      /s/ J. Duffy
      Baker                                

    Title:____SVP___________________ 

    

    

    SYPRIS
      SOLUTIONS, INC.

    the
      Borrower  

     

                                    By: 
      /s/
      Anthony C.
      Allen                                

                      
 Title: 
      Vice President & Treasurer

     

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    

    

    SYPRIS
      TEST & MEASUREMENT, INC.,

    a
      Guarantor

    

    By
      _/s/ Anthony C.
      Allen                           

        Anthony
      C.
      Allen

        Assistant
      Secretary

    

    

    SYPRIS
      TECHNOLOGIES, INC.

    a
      Guarantor

    

    

    By 
      /s/ Anthony C.
      Allen                 

    Anthony
      C. Allen

          Assistant
      Secretary

    

    

    SYPRIS
      ELECTRONICS, LLC,

    a
      Guarantor

    

    

    By 
      /s/ Anthony C.
      Allen                           

    Anthony
      C. Allen

          Assistant
      Secretary

    

    SYPRIS
      DATA SYSTEMS, INC.,

    a
      Guarantor

    

    By
/s/
      Anthony C.
      Allen                               

    Anthony
      C. Allen

           
      Assistant
      Secretary

    

    

    SYPRIS
      TECHNOLOGIES MARION, LLC,

    a
      Guarantor

    

    By   
      /s/ Anthony C.
      Allen                        

    Anthony
      C. Allen

          Assistant
      Secretary

     

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    

    

    SYPRIS
      TECHNOLOGIES KENTON, INC.

    a
      Guarantor

    

    By  
      /s/ Anthony C.
      Allen                           

    Anthony
      C. Allen

    Assistant
      Secretary

    

    

    SYPRIS
      TECHNOLOGIES MEXICAN HOLDINGS, LLC,

    a
      Guarantor

    

    By  
      /s/ Anthony C.
      Allen                                   

    Anthony
      C. Allen

                                       
Assistant
      Secretary 

    
      
         

        24Unassociated Document

     

    Exhibit
      10.1

    

    

     

    

      LIMITED
        BRANDS ANNOUNCES PROMOTION OF STUART

      BURGDOERFER
        TO CFO 

      

      

      Columbus,
        Ohio (April 11, 2007) — Limited Brands, Inc. (NYSE: LTD) today announced the
        promotion of Stuart Burgdoerfer, currently EVP, Finance, to Chief Financial
        Officer, effective immediately. He will also join the Company’s Executive
        Committee. 

      

      “Stuart
        possesses a compelling combination of skill and insight,” said Leslie H. Wexner,
        Chairman and CEO. He added that, “he has exceptional finance and accounting
        acumen, broad retail industry knowledge and deep operational understanding
        of
        the enterprise.”

      

      Mr.
        Burgdoerfer served in several roles of increasing responsibility at Limited
        Brands from 1998 to 2004, including VP of financial planning, CFO for the
        White
        Barn Candle Company, SVP of Finance and corporate controller. He was SVP
        of
        Finance at The Home Depot from 2004 until his return to Limited Brands in
        November, 2006. 

      

      Prior
        to
        joining Limited Brands in 1998, Stuart worked as a CPA with Deloitte and
        Touche,
        a management consultant with CSC-Index, and in strategic and financial planning
        roles at PepsiCo/Yum Brands.

      

      Mr.
        Burgdoerfer will continue to report to Martyn Redgrave, who had assumed the
        CFO
        responsibilities in August 2006, in addition to his ongoing role as EVP and
        Chief Administrative Officer.

      

      ABOUT
        LIMITED BRANDS:

      Limited
        Brands, through Victoria’s Secret, Bath & Body Works, C.O. Bigelow, Express,
        Limited Stores, La Senza, White Barn Candle Co., Henri Bendel and Diva London,
        presently operates 3,780 specialty stores. The Company’s products are also
        available online at www.VictoriasSecret.com,
www.BathandBodyWorks.com and www.LaSenza.com.

      

      

      
        	
                For
                  further information, please contact:

              	
                Tom
                  Katzenmeyer

              
	 	
                Sr.
                  Vice President, Investor, Media & Community
                  Relations

              
	 	
                Limited
                  Brands

              
	 	
                614-415-7076
                  tel.

              
	 	
                www.LimitedBrands.com

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