Document:

Exhibit 10.23

 

EXECUTION
COPY

 

SECURITY
AGREEMENT

 

This SECURITY AGREEMENT (this “Agreement”) is made this 30th day
of November, 2004, among Grantors listed on the signature pages hereof and
those additional entities that hereafter become parties hereto by executing the
form of Supplement attached hereto as Annex 1 (collectively, jointly and
severally, “Grantors” and each individually “Grantor”), and WELLS
FARGO FOOTHILL, INC., in its capacity as administrative agent for the Lender
Group and the Bank Product Providers (together with its successors and assigns
in such capacity, “Agent”).

 

W I T N E S S E T H:

 

WHEREAS,
pursuant to that certain Credit Agreement dated of even date herewith (as
amended, restated, amended and restated, supplemented or otherwise modified
from time to time, including all exhibits and schedules thereto, the “Credit
Agreement”) among Altra Industrial Motion, Inc., a Delaware corporation (“Parent”),
each of its Subsidiaries identified on the signature pages thereof (Parent and
such Subsidiaries, “Borrowers”), the lenders party thereto as “Lenders”
(“Lenders”), and Agent, the Lender Group is willing to make certain
financial accommodations available to Borrowers from time to time pursuant to
the terms and conditions thereof;

 

WHEREAS,
Agent has agreed to act as agent for the benefit of the Lender Group and the Bank
Product Providers in connection with the transactions contemplated by the
Credit Agreement and the other Loan Documents; and

 

WHEREAS,
in order to induce the Lender Group to enter into the Credit Agreement and the
other Loan Documents and to induce the Lender Group to make and extend the financial
accommodations to Borrowers as provided for in the Credit Agreement, Grantors
have agreed to grant a continuing security interest in and to the Collateral in
order to secure the prompt and complete payment, observance and performance of,
among other things, (a) the obligations of Grantors arising from this
Agreement, the Credit Agreement, and the other Loan Documents, including, without
limitation, the Guaranty, (b) all Bank Product Obligations, and (c) all
Obligations of Borrowers (including, without limitation, any interest, fees or
expenses that accrue after the filing of an Insolvency Proceeding, regardless
of whether allowed or allowable in whole or in part as a claim in any
Insolvency Proceeding), plus reasonable attorneys fees and expenses if the
obligations represented thereunder are collected by law, through an
attorney-at-law, or under advice therefrom, to the extent such fees and
expenses are required to be paid by Borrowers under the Credit Agreement (clauses
(a), (b), and (c) being hereinafter referred to as the “Secured Obligations”),
by the granting of the security interests contemplated by this Agreement.

 

NOW,
THEREFORE, for and in consideration of the recitals made above and other good
and valuable consideration, the receipt, sufficiency and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:

 

1.             Defined Terms. All capitalized terms used herein (including,
without limitation, in the preamble and recitals hereof) without definition
shall have the meanings ascribed thereto in the Credit Agreement.  In addition to those terms defined elsewhere
in this Agreement, as used in this Agreement, the following terms shall have
the following meanings:

 

(a)           “Agent”
has the meaning set forth in the preamble hereto.

 

 

(b)           “Agreement”
has the meaning set forth in the preamble hereto.

 

(c)           “Books”
has the meaning set forth in Section 2.

 

(d)           “Chattel
Paper” has the meaning set forth in Section 2.

 

(e)           “Code”
means the New York Uniform Commercial Code, as in effect from time to time; provided,
however, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection, priority, or remedies with
respect to Agent’s Lien on any Collateral is governed by the Uniform Commercial
Code as enacted and in effect in a jurisdiction other than the State of New
York, the term “Code” shall mean the Uniform Commercial Code as enacted and in
effect in such other jurisdiction solely for purposes of the provisions thereof
relating to such attachment, perfection, priority, or remedies.

 

(f)            “Collateral”
has the meaning set forth in Section 2.

 

(g)           “Commercial
Tort Claims” has the meaning set forth in Section 2.

 

(h)           “Copyrights”
means all of the following now owned or hereafter adopted or acquired by a
Grantor: copyrights and copyright registrations, including, without limitation,
the copyright registrations and recordings thereof and all applications in
connection therewith listed on Schedule 1 attached hereto and made a
part hereof, and (i) all restorations, reversions, renewals or extensions
thereof, (ii) all income, royalties, damages and payments now and hereafter due
and/or payable under and with respect thereto, including, without limitation,
payments under all licenses entered into in connection therewith and damages
and payments for past or future infringements thereof, (iii) the right to sue
for past, present and future infringements thereof, and (iv) all of each
Grantor’s rights corresponding thereto throughout the world.

 

(i)            “Copyright
Security Agreement” means each Copyright Security Agreement among Grantors,
or any of them, and Agent, for the benefit of the Lender Group and the Bank Product
Providers, in substantially the form of Exhibit A attached hereto.

 

(j)            “Credit
Agreement” has the meaning set forth in the recitals hereto.

 

(k)           “General
Intangibles” has the meaning set forth in Section 2.

 

(l)            “Grantor”
and “Grantors” have the meanings set forth in the preamble hereto.

 

(m)          “Intellectual
Property” means any and all Intellectual Property Licenses, Patents,
Copyrights, Trademarks, the goodwill associated with such Trademarks, trade
secrets and customer lists.

 

(n)           “Intellectual
Property Licenses” means any grant of a right to use any patent, trademark,
copyright or other intellectual property, including software license agreements
with any other party, whether the applicable Grantor is a licensee or licensor with
respect to such rights, including, without limitation, the license agreements
listed on Schedule 2 attached hereto and made a part hereof.

 

(o)           “Investment
Related Property” means (i) investment property (as that term is defined in
the Code), and (ii) all of the following regardless of whether classified as
investment property under the Code:  all
Pledged Interests, Pledged Operating Agreements, and Pledged Partnership
Agreements.

 

(p)           “Lenders”
has the meaning set forth in the recitals hereto.

 

(q)           “Negotiable
Collateral” has the meaning set forth in Section 2.

 

(r)            “Parent”
has the meaning set forth in the recitals hereto.

 

2

 

(s)           “Patents”
means all of the following now owned or hereafter adopted or acquired by a
Grantor: patents and patent applications, including, without limitation, the
patents and patent applications listed on Schedule 3 attached hereto and
made a part hereof, and (i) all reissues, continuations, continuations-in-part,
substitutes, extensions or renewals thereof, and improvements thereon, (ii) all
income, royalties, damages and payments now and hereafter due and/or payable
under and with respect thereto, including, without limitation, payments under
all licenses entered into in connection therewith and damages and payments for
past or future infringements thereof, (iii) the right to sue for past, present
and future infringements thereof, and (iv) all of each Grantor’s rights
corresponding thereto throughout the world.

 

(t)            “Patent
Security Agreement” means each Patent Security Agreement among Grantors, or
any of them, and Agent, for the benefit of the Lender Group and the Bank
Product Providers, in substantially the form of Exhibit B attached
hereto.

 

(u)           “Pledged
Companies” means each Person listed on Schedule 4 hereto as a “Pledged
Company,” together with each other Person, all or a portion of whose Stock is
acquired or otherwise owned by a Grantor after the Closing Date.

 

(v)           “Pledged
Interests” means all of each Grantor’s right, title and interest in and to
all of the Stock now or hereafter owned by such Grantor, regardless of class or
designation, including, without limitation, in each of the Pledged Companies,
and all substitutions therefor and replacements thereof, all proceeds thereof
and all rights relating thereto, including, without limitation, any
certificates representing the Stock, the right to request after the occurrence
and during the continuation of an Event of Default that such Stock be
registered in the name of Agent or any of its nominees, the right to receive
any certificates representing any of the Stock and the right to require that
such certificates be delivered to Agent together with undated powers or
assignments of investment securities with respect thereto, duly endorsed in
blank by such Grantor, all warrants, options, share appreciation rights and
other rights, contractual or otherwise, in respect thereof and of all
dividends, distributions of income, profits, surplus, or other compensation by
way of income or liquidating distributions, in cash or in kind, and cash,
instruments, and other property from time to time received, receivable, or
otherwise distributed in respect of or in addition to, in substitution of, on
account of, or in exchange for any or all of the foregoing.

 

(w)          “Pledged
Interests Addendum” means a Pledged Interests Addendum substantially in the
form of Exhibit C to this Agreement.

 

(x)            “Pledged
Operating Agreements” means all of each Grantor’s rights, powers, and
remedies under the limited liability company operating agreements of the
Pledged Companies that are limited liability companies, if any.

 

(y)           “Pledged
Partnership Agreements” means all of each Grantor’s rights, powers, and
remedies under the partnership agreements of each of the Pledged Companies that
are partnerships, if any.

 

(z)            “Proceeds”
has the meaning set forth in Section 2.

 

(aa)         “Records”
means information that is inscribed on a tangible medium or which is stored in
an electronic or other medium and is retrievable in perceivable form.

 

(bb)         “Secured Obligations”
has the meaning set forth in the recitals hereto.

 

(cc)         “Security
Interest” has the meaning set forth in Section 2.

 

(dd)         “Supporting
Obligations” has the meaning set forth in Section 2.

 

3

 

(ee)         “Trademarks”
means all of the following now owned or hereafter adopted or acquired by a
Grantor: trademarks, trade names, registered trademarks, trademark
applications, service marks, registered service marks and service mark
applications, including, without limitation, the trade names, registered
trademarks, trademark applications, registered service marks and service mark
applications listed on Schedule 5 attached hereto and made a part
hereof, and (i) all extensions, modifications and renewals thereof, (ii) all
income, royalties, damages and payments now and hereafter due and/or payable
under and with respect thereto, including, without limitation, payments under
all licenses entered into in connection therewith and damages and payments for
past or future infringements or dilutions thereof, (iii) the right to sue for
past, present and future infringements and dilutions thereof, (iv) the goodwill
of each Grantor’s business symbolized by the foregoing, and (v) all of each
Grantor’s rights corresponding thereto throughout the world.

 

(ff)           “Trademark
Security Agreement” means each Trademark Security Agreement among Grantors,
or any of them, and Agent, for the benefit of the Lender Group and the Bank
Product Providers, in substantially the form of Exhibit D attached
hereto.

 

(gg)         “URL”
means “uniform resource locator,” an internet web address.

 

2.             Grant of Security.  Each
Grantor hereby unconditionally grants, assigns and pledges to Agent (and its
agents and designees), for the benefit of the Lender Group and the Bank Product
Providers, a continuing security interest in (hereinafter referred to as the “Security
Interest”) all of such Grantor’s right, title, and interest in and to the
following personal property, whether now owned or hereafter acquired or arising
and wherever located (the “Collateral”):

 

(a)           all of such
Grantor’s Accounts;

 

(b)           all of such
Grantor’s books and records (including all of its Records indicating,
summarizing, or evidencing its assets (including the Collateral) or
liabilities, all of its Records relating to its business operations or
financial condition, and all of its goods or General Intangibles related to
such information) (“Books”);

 

(c)           all of such
Grantor’s chattel paper (as that term is defined in the Code) and, in any
event, including, without limitation, tangible chattel paper and electronic
chattel paper (“Chattel Paper”);

 

(d)           all of such
Grantor’s interest with respect to any Deposit Account;

 

(e)           all of such
Grantor’s Equipment and fixtures;

 

(f)            all of such
Grantor’s general intangibles (as that term is defined in the Code) and, in any
event, including, without limitation, payment intangibles, contract rights,
rights to payment, rights arising under common law, statutes, or regulations,
choses or things in action, goodwill (including the goodwill associated with
any Trademark, Patent, or Copyright), Patents, Trademarks (provided that no
security interest shall be granted in United States intent-to-use trademark
applications to the extent that, and solely during the period in which, the
grant of a security interest therein would impair the validity or
enforceability of such intent-to-use trademark applications under applicable
federal law), Copyrights, URLs and domain names, industrial designs, other
industrial or Intellectual Property or rights therein or applications therefor,
whether under license or otherwise, rights in programs, programming materials,
blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, including Intellectual Property
Licenses, infringement claims, rights in computer programs, information
contained on computer disks or tapes, software, literature, reports, catalogs,
pension plan refunds, pension plan refund claims, insurance premium rebates,
tax refunds, and tax refund claims, uncertificated securities, and any other
personal property other than Commercial Tort Claims, money, Accounts, Chattel
Paper, Deposit Accounts, goods, Investment Related Property, Negotiable
Collateral, and oil, gas, or other minerals before extraction (“General
Intangibles”);

 

4

 

(g)           all of such
Grantor’s Inventory;

 

(h)           all of such
Grantor’s Investment Related Property;

 

(i)            all of such
Grantor’s letters of credit, letter of credit rights, instruments, promissory
notes, drafts, and documents (as such terms may be defined in the Code) (“Negotiable
Collateral”);

 

(j)            all of such
Grantor’s rights in respect of supporting obligations (as such term is defined
in the Code), including letters of credit and guaranties issued in support of
Accounts, Chattel Paper, documents, General Intangibles, instruments, or
Investment Related Property (“Supporting Obligations”);

 

(k)           all of such
Grantor’s interest with respect to any commercial tort claims (as that term is
defined in the Code), including, without limitation those commercial tort
claims listed on Schedule 6 attached hereto (“Commercial Tort Claims”);

 

(l)            all of such
Grantor’s money, Cash Equivalents, or other assets of such Grantor that now or
hereafter come into the possession, custody, or control of Agent (or its agent
or designee) or any other member of the Lender Group;

 

(m)          all of the
proceeds and products, whether tangible or intangible, of any of the foregoing,
including proceeds of insurance or commercial tort claims covering or relating
to any or all of the foregoing, and any and all Accounts, Books, Chattel Paper,
Deposit Accounts, Equipment, General Intangibles, Inventory, Investment Related
Property, Negotiable Collateral, Supporting Obligations, Commercial Tort
Claims, money, or other tangible or intangible property resulting from the
sale, lease, license, exchange, collection, or other disposition of any of the
foregoing, the proceeds of any award in condemnation with respect to any of the
property of Grantors, any rebates or refunds, whether for taxes or otherwise,
and all proceeds of any such proceeds, or any portion thereof or interest
therein, and the proceeds thereof, and all proceeds of any loss of, damage to,
or destruction of the above, whether insured or not insured, and, to the extent
not otherwise included, any indemnity, warranty, or guaranty payable by reason
of loss or damage to, or otherwise with respect to any of the foregoing
Collateral (the “Proceeds”). 
Without limiting the generality of the foregoing, the term “Proceeds”
includes whatever is receivable or received when Investment Related Property or
proceeds are sold, exchanged, collected, or otherwise disposed of, whether such
disposition is voluntary or involuntary, and includes, without limitation,
proceeds of any indemnity or guaranty payable to any Grantor or Agent from time
to time with respect to any of the Investment Related Property.

 

Notwithstanding
the foregoing, “Collateral” shall not include (a) any rights or interests in
any lease, license, contract, or agreement (including Pledged Operating
Agreements and Pledged Partnership Agreements), as such, if under the terms of
such lease, license, contract, or agreement (including Pledged Operating
Agreements and Pledged Partnership Agreements), or applicable law with respect
thereto, the valid grant of a security interest or lien therein to Agent is
prohibited and such prohibition has not been or is not waived or the consent of
the other party to such lease, license, contract, or agreement (including
Pledged Operating Agreements and Pledged Partnership Agreements) has not been
or is not otherwise obtained or under applicable law such prohibition cannot be
waived; provided, that the foregoing exclusion shall in no way be (i)
construed to apply if any such prohibition would be rendered ineffective under
the Code or other applicable law (including the Bankruptcy Code) or principles
of equity, (ii) construed so as to limit, impair or otherwise affect Agent’s
unconditional continuing security interests in and liens upon any rights or
interests of Grantors in or to the proceeds thereof, including monies due or to
become due under any such lease, license, contract, or agreement (including
Pledged Operating Agreements and Pledged Partnership Agreements) (including any
Accounts), or (iii) construed to apply at such time as the condition causing
such prohibition shall be remedied and, to the extent severable, “Collateral”
shall include any portion of such lease, license, contract, or agreement
(including Pledged Operating Agreements and Pledged Partnership Agreements)
that does not result in such prohibition; or (b) any of the outstanding capital
Stock of any Controlled Foreign Corporation in excess of 65% of the voting
power of all classes of capital stock of such Controlled Foreign Corporation
entitled to vote.

 

5

 

3.             Security for Obligations.  This
Agreement and the Security Interest created hereby secures the payment and
performance of all the Secured Obligations, whether now existing or arising
hereafter.  Without limiting the
generality of the foregoing, this Agreement secures the payment of all amounts
which constitute part of the Obligations and would be owed by Grantors, or any
of them, to Agent, the Lender Group, the Bank Product Providers or any of them,
but for the fact that they are unenforceable or not allowable due to the
existence of an Insolvency Proceeding involving any Grantor.

 

4.             Grantors Remain Liable. 
Anything herein to the contrary notwithstanding, (a) each of the
Grantors shall remain liable under the contracts and agreements included in the
Collateral, including, without limitation, the Pledged Operating Agreements and
the Pledged Partnership Agreements, to perform all of the duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by Agent or any other member of the Lender Group of
any of the rights hereunder shall not release any Grantor from any of its
duties or obligations under such contracts and agreements included in the
Collateral until such Grantor no longer has any interest therein, and (c) none
of the members of the Lender Group shall have any obligation or liability under
such contracts and agreements included in the Collateral by reason of this
Agreement, nor shall any of the members of the Lender Group be obligated to
perform any of the obligations or duties of any Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.  Until an Event of Default shall occur and be
continuing, except as otherwise provided in this Agreement, the Credit
Agreement, or any other Loan Document, Grantors shall have the right to
possession and enjoyment of the Collateral for the purpose of conducting the
ordinary course of their respective businesses, subject to and upon the terms
hereof and of the Credit Agreement and the other Loan Documents.  Without limiting the generality of the
foregoing, it is the intention of the parties hereto that record and beneficial
ownership of the Pledged Interests, including, without limitation, all voting,
consensual, and dividend rights, shall remain with the applicable Grantor until
the occurrence of an Event of Default and until Agent shall notify the
applicable Grantor of Agent’s exercise of voting, consensual, and/or dividend
rights with respect to the Pledged Interests pursuant to Section 15
hereof.

 

5.             Representations and Warranties.  Each
Grantor hereby represents and warrants as follows:

 

(a)           The exact legal
name of each of the Grantors is set forth on the signature pages of this
Agreement or a written notice provided to Agent pursuant to Section 6.5
of the Credit Agreement.

 

(b)           Schedule 7 attached
hereto sets forth all Real Property owned by Grantors as of the Closing
Date.  

 

(c)           Such Grantor is
the sole legal and beneficial owner, or, to such Grantor’s knowledge, a licensee,
of all Intellectual Property owned or purported to be owned by such Grantor or
licensed to such Grantor that are material to the conduct of its business.  As of the Closing Date, (i) such Grantor
has no ownership interest in, or title to, any Copyrights, Patents or
Trademarks that are registered or the subject of pending applications for
registrations, except as set forth on Schedules 1(a), 3(a) and 5(a),
respectively, attached hereto; (ii) such Grantor has no ownership interest
in, or title to, any Copyrights, Patents or Trademarks that are material to
such Grantor’s business and that are not registered or the subject of pending
applications for registrations, except as set forth in Schedules 1(b), 3(b)
and 5(b), respectively, attached hereto; and (iii) such Grantor is not
a party to any Intellectual Property Licenses that are material to such Grantor’s
business, except as set forth on Schedule 2, attached hereto.  This Agreement is effective to create a valid
and continuing Lien on such Grantor’s Copyrights, Patents and Trademarks, and
all of its rights and interests in and to any Intellectual Property
Licenses.  To the extent that the
Security Interest in and to such Grantor’s Patents, Trademarks and Copyrights
can be perfected by filing the following documents, upon the filing of the
Copyright Security Agreement with the United States Copyright Office and filing
of the Patent Security Agreement and the Trademark Security Agreement with the
United States Patent and Trademark Office, and the filing of appropriate
financing statements in the jurisdictions listed on Schedule 8 hereto,
all action necessary to perfect the Security Interest in and to such Grantor’s
Patents, Trademarks, and Copyrights, will

 

6

 

have been taken and such perfected Security Interests will
be enforceable as such as against any and all creditors of and purchasers from
any Grantor.

 

(d)           This Agreement
creates a valid security interest in the Collateral of such Grantors, to the
extent a security interest therein can be created under the Code, securing the
payment and performance of the Secured Obligations.  To the extent a security interest in the
Collateral can be perfected by the filing of a financing statement under the
Code, all filings and other actions necessary to perfect such security interest
as of the Closing Date have been duly taken or will have been taken upon the
filing of financing statements listing such Grantor, as a debtor, and Agent, as
secured party, in the jurisdictions listed next to such Grantor’s name on Schedule
8 attached hereto.  Upon the making
of such filings, Agent shall have a first priority perfected security interest
in the Collateral (subject to Permitted Liens) of such Grantor to the extent
such security interest can be perfected by the filing of a financing statement
under the Code.

 

(e)           Except for the Security
Interest created hereby, (i) subject to Section 6.3 and Section 6.4
of the Credit Agreement, such Grantor is and will at all times be the sole
holder of record and the legal and beneficial owner, free and clear of all
Liens other than Permitted Liens, of the Pledged Interests indicated on Schedule
4 hereto (as supplemented or modified by any Pledged Interests Addendum or
any Supplement to this Agreement) as being owned by such Grantor and, when
acquired by such Grantor, any Pledged Interests acquired after the Closing
Date; (ii) all of the Pledged Interests are duly authorized, validly issued,
fully paid and nonassessable and the Pledged Interests constitute or will
constitute the percentage of the issued and outstanding Stock of the Pledged
Companies of such Grantor identified on Schedule 4 hereto as
supplemented or modified by any Pledged Interests Addendum or any Supplement to
this Agreement; (iii) such Grantor has the right and requisite authority to
pledge the Investment Related Property constituting Collateral pledged by such
Grantor to Agent as provided herein; (iv) all actions necessary to perfect,
establish the first priority of (subject to Permitted Liens) Agent’s Liens in
the Investment Related Property constituting Collateral, and the proceeds
thereof, have been duly taken, (A) upon the execution and delivery of this
Agreement, (B) upon the taking of possession by Agent (or its agent or
designee) of any certificates constituting the Pledged Interests, to the extent
such Pledged Interests are represented by certificates, together with undated
powers endorsed in blank by such Grantor, (C) upon the filing of financing
statements in the applicable jurisdiction set forth on Schedule 8
attached hereto for such Grantor with respect to the Pledged Interests of such
Grantor that are not represented by certificates, and (D) with respect to any
Securities Accounts, upon the delivery of Control Agreements with respect
thereto; and (v) such Grantor has delivered to and deposited with Agent (or,
with respect to any Pledged Interests created after the Closing Date, will
deliver and deposit in accordance with Sections 6(a) and 8
hereof) all certificates representing the Pledged Interests owned by such
Grantor to the extent such Pledged Interests constitute Collateral and are
represented by certificates, and undated powers endorsed in blank with respect
to such certificates.

 

(f)            No consent,
approval, authorization, or other order or other action by, and no notice to or
filing with, any Governmental Authority or any other Person is required (i) for
the grant of a Security Interest by such Grantor in and to the Collateral
pursuant to this Agreement or for the execution, delivery, or performance of
this Agreement by such Grantor, or (ii) for the exercise by Agent of the voting
or other rights provided for in this Agreement with respect to the Investment
Related Property constituting Collateral or the remedies in respect of the
Collateral pursuant to this Agreement, except as may be required in connection
with such disposition of Investment Related Property by laws affecting the
offering and sale of securities generally.

 

(g)           [intentionally omitted]

 

(h)           Such Grantor
has made in good faith and in accordance with the procedures and regulations of
the United States Copyright Office and the United States Patent and Trademark
Office, as applicable, all payments, filings and recordations necessary to
protect and maintain its interest in the Copyrights, Patents and Trademarks utilized
and identified on Schedules 1(a), 3(a) and 5(a) in the
United States in a manner sufficient to claim in the public record such Grantor’s
ownership thereof, including (i) making all necessary registration,
maintenance, and renewal fee payments; and (ii) filing all necessary

 

7

 

documents, including all applications for registration
of such Copyrights, Patents and Trademarks, in each case, except to the extent
the failure to do so could not reasonably be expected to have a Material
Adverse Change.

 

(i)            [intentionally
omitted]

 

(j)            [intentionally
omitted]

 

(k)           No claim has
been made in writing and is continuing or, to such Grantor’s knowledge,
threatened in any written communication directed toward any Grantor that the
use by such Grantor of any Intellectual Property does or may violate the
Intellectual Property of any Person, except to the extent the same could not
reasonably be expected to have a Material Adverse Change. To such Grantor’s
knowledge, there is currently no infringement or unauthorized use of any item
of Intellectual Property contained on Schedules 1, 3 or 5,
except to the extent the same could not reasonably be expected to have a
Material Adverse Change.

 

6.             Covenants.  Each Grantor, jointly and
severally, covenants and agrees with Agent and the Lender Group that from and
after the date of this Agreement and until the date of termination of this
Agreement in accordance with Section 22 hereof:

 

(a)           Possession or
Control of Collateral.  In
the event that any Collateral, including Proceeds, is evidenced by or consists
of Negotiable Collateral, Investment Related Property, Chattel Paper, or
Deposit Accounts, and if and to the extent that perfection or priority of Agent’s
Security Interest is dependent on possession or control, such Grantor,
immediately upon the request of Agent and in accordance with Section 8
hereof, shall execute such other documents and instruments as shall be reasonably
requested by Agent or endorse and deliver physical possession of such
Negotiable Collateral, Investment Related Property, or Chattel Paper, together
with such undated powers endorsed in blank as shall be requested by Agent (or
its agent or designee), or grant control of such Deposit Account, as
applicable, to Agent (or its agent or designee).  Such Grantor hereby acknowledges and agrees
that any such agent or designee of Agent shall be deemed to be a “secured party”
with respect to such Collateral for all purposes.

 

(b)           Chattel Paper.

 

(i)            Such Grantor
shall take all commercially reasonable steps necessary to grant Agent control
of all electronic Chattel Paper in accordance with the Code and all “transferable
records” as that term is defined in Section 16 of the Uniform Electronic
Transaction Act and Section 201 of the federal Electronic Signatures in Global
and National Commerce Act as in effect in any relevant jurisdiction;

 

(ii)           If such Grantor
retains possession of any Chattel Paper or instruments (which retention of
possession shall be subject to the extent permitted hereby and by the Credit
Agreement), promptly upon the request of Agent, such Chattel Paper and
instruments shall be marked with the following legend: “This writing and the
obligations evidenced or secured hereby are subject to the Security Interest of
Wells Fargo Foothill, Inc., as Agent for the benefit of the Lender Group and
the Bank Product Providers, pursuant to the Security Agreement dated as of November 30,
2004”.

 

(c)           Control
Agreements.

 

(i)            Except to the
extent otherwise permitted by the Credit Agreement, such Grantor shall obtain
an authenticated Control Agreement from each bank holding a Deposit Account for
such Grantor.

 

(ii)           Except to the
extent otherwise permitted by the Credit Agreement, such Grantor shall obtain
authenticated Control Agreements from each issuer of uncertificated securities,
securities

 

8

 

intermediary, or commodities intermediary issuing or
holding any financial assets or commodities to or for any Grantor.

 

(d)           Letter of
Credit Rights.  If such
Grantor is or becomes the beneficiary of a letter of credit with a value in
excess of $100,000, such Grantor shall (i) if the value is in excess of
$1,000,000, promptly (and in any event within 10 Business Days after becoming a
beneficiary) and (ii) if the value is not in excess of $1,000,000,
simultaneously with the delivery of quarterly financial statements required
pursuant to Section 5.3 of the Credit Agreement, notify Agent thereof
and, upon the request by Agent, enter into a tri-party agreement with Agent and
the issuer and/or confirmation bank with respect to letter-of-credit rights (as
that term is defined in the Code) assigning such letter-of-credit rights to
Agent and directing all payments thereunder to Agent’s Account, all in form and
substance reasonably satisfactory to Agent.

 

(e)           Commercial Tort
Claims.  Such Grantor shall (i) if the
value is in excess of $1,000,000, promptly (and in any event within 10 Business
Days thereafter) and (ii) if the value is not in excess of $1,000,000,
simultaneously with the delivery of quarterly financial statements required
pursuant to Section 5.3 of the Credit Agreement, notify Agent in writing
upon incurring or otherwise obtaining a Commercial Tort Claim with a value in
excess of $100,000 after the date hereof against any third party and, upon
request of Agent, promptly amend Schedule 6 to this Agreement, authorize
the filing of additional financing statements or amendments to existing
financing statements and do such other acts or things deemed necessary by Agent
to give Agent a first priority, perfected security interest (subject to
Permitted Liens) in any such Commercial Tort Claim.

 

(f)            [intentionally
omitted].

 

(g)           Intellectual
Property.

 

(i)            Upon the
reasonable written request of Agent, in order to facilitate filings with the
United States Patent and Trademark Office and the United States Copyright
Office, such Grantor shall execute and deliver to Agent one or more Copyright
Security Agreements, Trademark Security Agreements, and/or Patent Security
Agreements to evidence Agent’s Lien on such Grantor’s Patents, Trademarks,
and/or Copyrights, and the General Intangibles of such Grantor relating thereto
or represented thereby.

 

(ii)           Such Grantor
shall have the duty, to the extent material to the operation of such Grantor’s
business, (A) to reasonably investigate any third party infringement, or
misappropriation of any Intellectual Property within a reasonable amount of
time after such Grantor becomes aware of such infringement or misappropriation and,
if determined by such Grantor to be reasonably necessary to protect such
Grantor’s rights in such Intellectual Property, take appropriate reasonable
action to abate such infringement or misappropriation, (B) to prosecute
diligently any trademark application or service mark application that is part
of the Trademarks pending as of the date hereof or hereafter until the
termination of this Agreement (other than applications that are deemed by such
Grantor in its reasonable business judgment to no longer be necessary to the
conduct of such Grantor’s business), (C) to prosecute diligently any patent
application that is part of the Patents pending as of the date hereof or
hereafter until the termination of this Agreement (other than applications that
are deemed by such Grantor in its reasonable business judgment to no longer be
necessary to the conduct of such Grantor’s business), and (D) to take
reasonable and necessary action to preserve and maintain all of such Grantor’s
Trademarks, Patents, Copyrights, Intellectual Property Licenses, and its rights
therein, including the filing of applications for renewal, affidavits of use,
and affidavits of incontestability.  Any
expenses incurred in connection with the foregoing shall be borne by the
appropriate Grantor (other than Trademarks, Patents, Copyrights or Intellectual
Property Licenses that are deemed by such Grantor in its reasonable business
judgment to be no longer necessary in the conduct of such Grantor’s business).  Such Grantor further agrees not to abandon
any Trademark, Patent, Copyright, or Intellectual Property License that is
material to the operation of such Grantor’s business without the prior written
consent of Agent.

 

9

 

(iii)          Such Grantor
acknowledges and agrees that the Lender Group shall have no duties with respect
to the Trademarks, Patents, Copyrights, or Intellectual Property Licenses.  Without limiting the generality of this Section
6(g), such Grantor acknowledges and agrees that no member of the Lender
Group shall be under any obligation to take any steps necessary to preserve
rights in the Trademarks, Patents, Copyrights, or Intellectual Property
Licenses against any other Person, but Agent may do so at its option from and
after the occurrence and during the continuance of an Event of Default and all
expenses incurred by Agent and Lenders in connection therewith (including,
without limitation, reasonable fees and expenses of attorneys and other
professionals), to the extent required to be paid under the Credit Agreement,
shall be for the sole account of Borrowers and shall be chargeable to the Loan
Account.

 

(iv)          With respect to
the Intellectual Property that a Grantor determines, in its reasonable business
judgment, is material to the conduct of Grantor’s business, such Grantor agrees
to take such steps as are reasonably necessary, including making all necessary
payments and filings in connection with registration, maintenance, and renewal
of Copyrights, Trademarks and Patents in the United States Copyright Office,
the United States Patent and Trademark Office, any other relevant government
agencies in foreign jurisdictions that Grantor in its reasonable business
judgment deems material to its business, to maintain each such Intellectual
Property.  Such Grantor hereby agrees to
take corresponding steps with respect to each new or acquired Intellectual
Property to which it or any of its Subsidiaries is now or later becomes the
sole owner or licensee of all rights, title and interest that such Grantor
determines, in its reasonable business judgment, are material to the conduct of
its businesses. Any expenses incurred in connection with such activities shall
be borne solely by such Grantor.

 

(v)           On each date on
which the Compliance Certificate is delivered by Administrative Borrower
pursuant to Section 5.3 of the Credit Agreement, such Grantor shall
provide Agent with a written report of all new Copyrights, Patents and
Trademarks that are registered or the subject of pending applications for
registrations, which were acquired or filed by such Grantor during the prior
period.  In the case of such
registrations or applications therefor which were acquired by such Grantor,
such Grantor shall file the necessary documents with the appropriate filing
office identifying such Grantor as the owner thereof.  In each of the foregoing cases, such Grantor
shall cause to be prepared, executed, and delivered to Agent supplemental
schedules to the applicable Loan Documents to identify such Copyright, Patent
and Trademark registrations and applications therefor as being subject to the
security interests created thereunder.

 

(vi)          Upon such a
Grantor’s receipt from the United States Copyright Office of written notice of
registration of any Copyright(s), such Grantor shall promptly (but in no event
later than 30 days following such receipt) notify Agent of such registration by
delivering, or causing to be delivered to Agent, via overnight courier,
electronic mail or telefacsimile at the addresses designated in the Credit
Agreement, documentation reasonably sufficient for Agent to perfect Agent’s
Liens on such Copyright(s).

 

(h)           Investment
Related Property.

 

(i)            Subject to Section
5.16 of the Credit Agreement, if such Grantor shall receive or become
entitled to receive any Pledged Interests after the Closing Date, it shall (i)
if the value is in excess of $1,000,000, promptly (and in any event within 10
Business Days thereafter) and (ii) if the value is not in excess of $1,000,000,
simultaneously with the delivery of quarterly financial statements required
pursuant to Section 5.3 of the Credit Agreement, deliver to Agent a duly
executed Pledged Interests Addendum identifying such Pledged Interests.

 

(ii)           All sums of
money and property paid or distributed in respect of the Investment Related
Property which are received by such Grantor shall be held by such Grantor in
trust for the benefit of Agent segregated from such Grantor’s other property.

 

(iii)          Such Grantor
shall promptly deliver to Agent a copy of each material notice or other material
communication received by it in respect of any Pledged Interests.

 

10

 

(iv)          After an Event
of Default has occurred and is continuing, such Grantor agrees that it will
cooperate with Agent in obtaining all necessary approvals and making all
necessary filings under federal, state, local, or foreign law in connection
with the Security Interest on the Investment Related Property or any sale or
transfer thereof.

 

(v)           As to all
limited liability company or partnership interests issued under any Pledged
Operating Agreement or Pledged Partnership Agreement, such Grantor hereby
represents, warrants and covenants that the Pledged Interests issued pursuant
to any such agreement (A) are not and shall not be dealt in or traded on
securities exchanges or in securities markets, (B) do not and will not
constitute investment company securities, and (C) are not and will not be
held by such Pledgor in a securities account.

 

(i)            [intentionally
omitted].

 

(j)            Transfers and
Other Liens.  Such
Grantor shall not (i) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the
Collateral, except as expressly permitted by the Credit Agreement, or (ii)
create or permit to exist any Lien upon or with respect to any of its
Collateral, except for Permitted Liens. 
The inclusion of Proceeds in the Collateral shall not be deemed to
constitute Agent’s consent to any sale or other disposition of any of the
Collateral except as expressly permitted in this Agreement or the other Loan
Documents.

 

(k)           Other Actions
as to Any and All Collateral.  Subject to Section 5.16 of the Credit
Agreement, such Grantor shall (i) if the value is in excess of $1,000,000,
promptly (and in any event within 10 Business Days thereafter) and (ii) if the
value is not in excess of $1,000,000, simultaneously with the delivery of
quarterly financial statements required pursuant to Section 5.3 of the
Credit Agreement, notify Agent in writing upon (i) acquiring or otherwise
obtaining any Collateral (other than Intellectual Property, which are governed
by Sections 6(g)(v)) after the date hereof consisting of Investment
Related Property, Chattel Paper (electronic, tangible or otherwise), documents
(as defined in the Code), promissory notes (as defined in the Code), or
instruments (as defined in the Code) or (ii) any amount payable under or in
connection with any of the Collateral being or becoming evidenced after the
date hereof by any Chattel Paper, documents, promissory notes or instruments,
and, upon the request of Agent and in accordance with Section 8 hereof,
promptly execute such other documents and instruments, or if applicable,
deliver such Chattel Paper, documents, promissory notes, instruments, or
certificates evidencing any Investment Related Property in accordance with Section
6 hereof and do such other acts or things deemed necessary by Agent to
protect Agent’s Security Interest therein.

 

7.             Relation to Other Security Documents.  The
provisions of this Agreement shall be read and construed with the other Loan
Documents referred to below in the manner so indicated.

 

(a)           Credit
Agreement. In the event of any conflict between any provision
in this Agreement and a provision in the Credit Agreement, such provision of
the Credit Agreement shall control.

 

(b)           Patent,
Trademark, Copyright Security Agreements.  The provisions of the Copyright Security
Agreements, Trademark Security Agreements, and Patent Security Agreements are supplemental
to the provisions of this Agreement, and nothing contained in the Copyright
Security Agreements, Trademark Security Agreements, or the Patent Security
Agreements shall limit any of the rights or remedies of Agent hereunder.

 

11

 

8.             Further Assurances.

 

(a)           Each Grantor
agrees that from time to time, at its own expense, such Grantor will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or that Agent may reasonably request, in order to
perfect and protect any Security Interest granted or purported to be granted
hereby or to enable Agent to exercise and enforce its rights and remedies
hereunder with respect to any of the Collateral.

 

(b)           Each Grantor
hereby authorizes the filing of such financing or continuation statements, or
amendments thereto, and such Grantor will execute and deliver to Agent such
other instruments or notices, as may be necessary or as Agent may reasonably
request, in order to perfect and preserve the Security Interest granted or
purported to be granted hereby.

 

(c)           Each Grantor
hereby authorizes Agent to file, transmit, or communicate, as applicable,
financing statements and amendments describing the Collateral as “all personal
property of debtor” or “all assets of debtor” or words of similar effect, in
order to perfect Agent’s security interest in the Collateral without such
Grantor’s signature.

 

(d)           Each Grantor
acknowledges that, prior to the termination of this Agreement, it is not
authorized to file any financing statement or amendment or termination
statement with respect to any financing statement filed in connection with this
Agreement without the prior written consent of Agent, subject to such Grantor’s
rights under Section 9-509(d)(2) of the Code.

 

9.             Agent’s Right to Perform Contracts.  Upon
the occurrence and during the continuance of an Event of Default, Agent (or its
designee) may proceed to perform any and all of the obligations of any Grantor
contained in any contract, lease, or other agreement and exercise any and all
rights of any Grantor therein contained as fully as such Grantor itself could,
subject to the terms of such contract, lease or other agreement.

 

10.           Agent Appointed Attorney-in-Fact.  Each
Grantor hereby irrevocably appoints Agent its attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such
Grantor or otherwise, at such time as an Event of Default has occurred and is
continuing under the Credit Agreement, to take any action and to execute any
instrument which Agent may reasonably deem necessary or advisable to accomplish
the purposes of this Agreement, including, without limitation:

 

(a)           to ask, demand,
collect, sue for, recover, compromise, receive and give acquittance and
receipts for moneys due and to become due under or in connection with the
Accounts or any other Collateral of such Grantor;

 

(b)           to receive and
open all mail addressed to such Grantor and to notify postal authorities to
change the address for the delivery of mail to such Grantor to that of Agent;

 

(c)           to receive,
indorse, and collect any drafts or other instruments, documents, Negotiable
Collateral or Chattel Paper;

 

(d)           to file any
claims or take any action or institute any proceedings which Agent may deem
necessary or desirable for the collection of any of the Collateral of such
Grantor or otherwise to enforce the rights of Agent with respect to any of the
Collateral;

 

(e)           to repair,
alter, or supply goods, if any, necessary to fulfill in whole or in part the
purchase order of any Person obligated to such Grantor in respect of any
Account of such Grantor;

 

(f)            to use any
labels, Patents, Trademarks, trade names, URLs, domain names, industrial
designs, Copyrights, advertising matter or other industrial or intellectual
property rights, in advertising for sale

 

12

 

and selling Inventory and other Collateral and to
collect any amounts due under Accounts, contracts or Negotiable Collateral of
such Grantor; and

 

(g)           Agent, on
behalf of the Lender Group and the Bank Product Providers, shall have the
right, but shall not be obligated, to bring suit in its own name to enforce the
Trademarks, Patents, Copyrights and Intellectual Property Licenses and, if
Agent shall commence any such suit, the appropriate Grantor shall, at the
request of Agent, do any and all lawful acts and execute any and all proper
documents reasonably required by Agent in aid of such enforcement.

 

To
the extent permitted by law, each Grantor hereby ratifies all that such
attorney-in-fact shall lawfully do or cause to be done by virtue hereof.  This power of attorney is coupled with an
interest and shall be irrevocable until this Agreement is terminated.

 

11.           Agent May Perform.  If
any Grantor fails to perform any agreement contained herein, Agent may itself
perform, or cause performance of, such agreement, and the reasonable expenses
of Agent incurred in connection therewith shall be payable, jointly and
severally, by Grantors.

 

12.           Agent’s Duties.  The
powers conferred on Agent hereunder are solely to protect Agent’s interest in
the Collateral, for the benefit of the Lender Group and the Bank Product
Providers, and shall not impose any duty upon Agent to exercise any such powers.  Except for the safe custody of any Collateral
in its actual possession and the accounting for moneys actually received by it
hereunder, Agent shall have no duty as to any Collateral or as to the taking of
any necessary steps to preserve rights against prior parties or any other
rights pertaining to any Collateral. 
Agent shall be deemed to have exercised reasonable care in the custody
and preservation of any Collateral in its actual possession if such Collateral
is accorded treatment substantially equal to that which Agent accords its own
property.

 

13.           Collection of Accounts, General Intangibles
and Negotiable Collateral.  At any time upon the occurrence and during
the continuation of an Event of Default, Agent or Agent’s designee may (a)
notify Account Debtors of any Grantor that such Grantor’s Accounts, General
Intangibles, Chattel Paper or Negotiable Collateral have been assigned to
Agent, for the benefit of the Lender Group and the Bank Product Providers, or
that Agent has a security interest therein, and (b) collect such Grantor’s
Accounts, General Intangibles and Negotiable Collateral directly, and any
collection costs and expenses shall constitute part of such Grantor’s Secured
Obligations under the Loan Documents.

 

14.           Disposition of Pledged Interests by Agent.  None
of the Pledged Interests existing as of the date of this Agreement are, and
none of the Pledged Interests hereafter acquired on the date of acquisition
thereof will be, registered or qualified under the various federal or state
securities laws of the United States and disposition thereof after an Event of
Default may be restricted to one or more private (instead of public) sales in
view of the lack of such registration. 
Each Grantor understands that in connection with such disposition, Agent
may approach only a restricted number of potential purchasers and further
understands that a sale under such circumstances may yield a lower price for
the Pledged Interests than if the Pledged Interests were registered and
qualified pursuant to federal and state securities laws and sold on the open
market.  Each Grantor, therefore, agrees
that:  (a) if Agent shall, pursuant to
the terms of this Agreement, sell or cause the Pledged Interests or any portion
thereof to be sold at a private sale, Agent shall have the right to rely upon
the advice and opinion of any nationally recognized brokerage or investment
firm (but shall not be obligated to seek such advice and the failure to do so
shall not be considered in determining the commercial reasonableness of such
action) as to the best manner in which to offer the Pledged Interest for sale
and as to the best price reasonably obtainable at the private sale thereof; and
(b) such reliance shall be conclusive evidence that Agent has handled the
disposition in a commercially reasonable manner.

 

13

 

15.           Voting Rights.

 

(a)           Upon the
occurrence and during the continuation of an Event of Default, (i) Agent may,
at its option, and with prior notice (unless such Event of Default is an Event
of Default specified in Section 7.4 or 7.5 of the Credit
Agreement, in which case no such notice need be given) to each Grantor, and in
addition to all rights and remedies available to Agent under any other
agreement, at law, in equity, or otherwise, exercise all voting rights, and all
other ownership or consensual rights in respect of the Pledged Interests owned
by such Grantor, but under no circumstances is Agent obligated by the terms of
this Agreement to exercise such rights, and (ii) if Agent duly exercises its
right to vote any of such Pledged Interests, each Grantor hereby appoints Agent
such Grantor’s true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote
such Pledged Interests in any manner Agent deems advisable for or against all
matters submitted or which may be submitted to a vote of shareholders, partners
or members, as the case may be.  The
power-of-attorney granted hereby is coupled with an interest and shall be
irrevocable.

 

(b)           For so long as
any Grantor shall have the right to vote the Pledged Interests owned by it,
such Grantor covenants and agrees that it will not, without the prior written
consent of Agent, vote or take any consensual action with respect to such
Pledged Interests which would materially and adversely affect the rights of
Agent and the other members of the Lender Group or that would result in any
violation of any provision of the Credit Agreement or any other Loan Document.

 

16.           Remedies.  Upon the occurrence and during
the continuance of an Event of Default:

 

(a)           Agent may
exercise in respect of the Collateral, in addition to other rights and remedies
provided for herein, in the other Loan Documents, or otherwise available to it,
all the rights and remedies of a secured party on default under the Code or any
other applicable law.  Without limiting
the generality of the foregoing, each Grantor expressly agrees that, in any
such event, Agent, without demand of performance or other demand, advertisement
or notice of any kind (except a notice specified below of time and place of
public or private sale) to or upon any of Grantors or any other Person (all and
each of which demands, advertisements and notices are hereby expressly waived
to the maximum extent permitted by the Code or any other applicable law), may
take immediate possession of all or any portion of the Collateral and (i)
require Grantors to, and each Grantor hereby agrees that it will at its own
expense and upon request of Agent forthwith, assemble all or part of the
Collateral as directed by Agent and make it available to Agent at one or more
locations where such Grantor regularly maintains Inventory, and (ii) without
notice except as specified below, sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any of Agent’s offices or
elsewhere, for cash, on credit, and upon such other terms as Agent may deem
commercially reasonable.  Each Grantor
agrees that, to the extent notice of sale shall be required by law, at least 10
days notice (or such longer notice period as may be required by law) to any of
Grantors of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification and
specifically such notice shall constitute a reasonable “authenticated
notification of disposition” within the meaning of Section 9-611 of the
Code.  Agent shall not be obligated to
make any sale of Collateral regardless of notice of sale having been
given.  Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.

 

(b)           Agent is hereby
granted a non-exclusive license or other right to use, without liability for
royalties or any other charge, each Grantor’s labels, Patents, Copyrights,
rights of use of any name, trade secrets, trade names, Trademarks, service
marks and advertising matter, URLs, domain names, industrial designs, other
industrial or intellectual property or any property of a similar nature,
whether owned or licensable by any Grantor or with respect to which any Grantor
has sublicensable rights under license, sublicense, or other agreements, as it
pertains to the Collateral, in preparing for sale, advertising for sale and
selling any Collateral, and each Grantor’s rights under all licenses and all
franchise agreements shall inure to the benefit of Agent; provided, however,
that Agent may exercise the foregoing only upon the occurrence and during the
continuance of an Event of Default.

 

14

 

(c)           Any cash held
by Agent as Collateral and all cash proceeds received by Agent in respect of
any sale of, collection from, or other realization upon all or any part of the
Collateral shall be applied against the Secured Obligations in the order set
forth in the Credit Agreement.   In the
event the proceeds of Collateral are insufficient to satisfy all of the Secured
Obligations in full, each Grantor shall remain jointly and severally liable for
any such deficiency.

 

(d)           Agent shall
have the right to seek the appointment of a receiver for the properties and
assets of each Grantor and hereby waives the right to have a bond or other
security posted by Agent.

 

17.           Remedies Cumulative.  Each
right, power, and remedy of Agent as provided for in this Agreement or in the
other Loan Documents or now or hereafter existing at law or in equity or by
statute or otherwise shall be cumulative and concurrent and shall be in
addition to every other right, power, or remedy provided for in this Agreement
or in the other Loan Documents or now or hereafter existing at law or in equity
or by statute or otherwise, and the exercise or beginning of the exercise by
Agent, of any one or more of such rights, powers, or remedies shall not
preclude the simultaneous or later exercise by Agent of any or all such other
rights, powers, or remedies.

 

18.           Marshaling. Agent shall not 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 Secured Obligations or any of them or to resort
to such collateral security or other assurances of payment in any particular
order, and all of its rights and remedies hereunder and 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
Grantor 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 Agent’s rights and remedies under this Agreement or under any other
instrument creating or evidencing any of the Secured Obligations or under which
any of the Secured Obligations is outstanding or by which any of the Secured
Obligations is secured or payment thereof is otherwise assured, and, to the
extent that it lawfully may, each Grantor hereby irrevocably waives the
benefits of all such laws.

 

19.           Indemnity and Expenses.

 

(a)           Each Grantor
agrees to indemnify, defend and hold harmless Agent and the other members of
the Lender Group to the same extent and in the same manner as the indemnity
made by the Borrowers pursuant to Section 10.3 of the Credit
Agreement.  This provision shall survive
the termination of this Agreement and the Credit Agreement and the repayment of
the Secured Obligations.

 

(b)           Grantors,
jointly and severally, shall, upon demand, pay to Agent (or Agent, may charge
to the Loan Account) all the Lender Group Expenses which Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or, upon an Event of Default, the sale of,
collection from, or other realization upon, any of the Collateral in accordance
with this Agreement and the other Loan Documents, (iii) the exercise or
enforcement of any of the rights of Agent hereunder or (iv) the failure by any
of Grantors to perform or observe any of the provisions hereof.

 

20.           Merger, Amendments; Etc.  THIS
WRITTEN AGREEMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE
PARTIES.  No waiver of any provision of
this Agreement, and no consent to any departure by any of Grantors herefrom,
shall in any event be effective unless the same shall be in writing and signed
by Agent, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.  No amendment of any provision of this
Agreement shall be effective unless the same shall be in writing and signed by
Agent and each of Grantors to which such amendment applies.

 

15

 

21.           Addresses for Notices.  All
notices and other communications provided for hereunder shall be given in the
form, manner and delivered to Agent at its address specified in the Credit
Agreement, and to any of the Grantors at their respective addresses specified
in the Credit Agreement or Guaranty, as applicable, or, as to any party, at
such other address as shall be designated by such party in a written notice to
the other party.

 

22.           Continuing Security Interest; Assignments
under Credit Agreement.  This Agreement shall create a continuing
security interest in the Collateral and shall (a) remain in full force and
effect until the Obligations have been paid in full in cash in accordance with
the provisions of the Credit Agreement and the Commitments have expired or have
been terminated, (b) be binding upon each Grantor, and their respective
successors and assigns, and (c) inure to the benefit of, and be enforceable by,
Agent, and its successors, permitted transferees and permitted assigns.  Without limiting the generality of the
foregoing clause (c), any Lender may, in accordance with the provisions of the
Credit Agreement, assign or otherwise transfer all or any portion of its rights
and obligations under the Credit Agreement to any other Person, and such other
Person shall thereupon become vested with all the benefits in respect thereof
granted to such Lender herein or otherwise. 
Upon payment in full in cash of the Obligations in accordance with the
provisions of the Credit Agreement and the expiration or termination of the
Commitments, the Security Interest granted hereby shall terminate and this
Agreement and all rights to the Collateral shall revert to Grantors or any
other Person entitled thereto.  At such
time, Agent will file, or authorize the filing of, appropriate termination
statements to terminate such Security Interests, will return any Collateral in
its possession to the applicable Grantor (or its designee) and will execute any
documents and take such commercially reasonable actions as are reasonably
requested by any Grantor to evidence such termination and release.  No transfer or renewal, extension,
assignment, or termination of this Agreement or of the Credit Agreement, any
other Loan Document, or any other instrument or document executed and delivered
by any Grantor to Agent nor any additional Advances or other loans made by any
Lender to Borrowers, nor the taking of further security, nor the retaking or
re-delivery of the Collateral to Grantors, or any of them, by Agent, nor any
other act of the Lender Group or the Bank Product Providers, or any of them,
shall release any Grantor from any obligation, except a release or discharge
executed in writing by Agent in accordance with the provisions of the Credit
Agreement.  Agent shall not by any act,
delay, omission or otherwise, be deemed to have waived any of its rights or
remedies hereunder, unless such waiver is in writing and signed by Agent and
then only to the extent therein set forth. 
A waiver by Agent of any right or remedy on any occasion shall not be
construed as a bar to the exercise of any such right or remedy which Agent
would otherwise have had on any other occasion.

 

23.           Governing Law.

 

(a)           THE VALIDITY OF
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE
CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER
OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

(b)           THE PARTIES AGREE
THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF
NEW YORK, STATE OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT
SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT
AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING
SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  EACH GRANTOR AND EACH MEMBER OF THE LENDER
GROUP AND EACH BANK PRODUCT PROVIDER WAIVE, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE

 

16

 

DOCTRINE OF FORUM  NON  CONVENIENS
OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE
WITH THIS SECTION 23.

 

(c)           EACH GRANTOR
AND EACH MEMBER OF THE LENDER GROUP AND EACH BANK PRODUCT PROVIDER HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.  EACH GRANTOR AND EACH MEMBER OF THE LENDER
GROUP AND EACH BANK PRODUCT PROVIDER REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. 
IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

24.           New Subsidiaries.  To
the extent required by Section 5.16 of the Credit Agreement, any new
direct or indirect Subsidiary (whether by acquisition or creation) of Borrowers
or any other Grantor is required to enter into this Agreement by executing and
delivering in favor of Agent a supplement to this Security Agreement in the
form of Annex 1 attached hereto. 
Upon the execution and delivery of such supplement by such new Subsidiary,
such Subsidiary shall become a Grantor hereunder with the same force and effect
as if originally named as a Grantor herein. 
The execution and delivery of any instrument adding an additional
Grantor as a party to this Agreement shall not require the consent of any
Grantor hereunder.  The rights and
obligations of each Grantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Grantor hereunder.

 

25.           Agent.  Each reference herein to any
right granted to, benefit conferred upon or power exercisable by the “Agent”
shall be a reference to Agent, for the benefit of the Lender Group and the Bank
Product Providers.

 

26.           Miscellaneous.

 

(a)           This Agreement
may be executed in any number of counterparts and by different parties on
separate counterparts, each of which, when executed and delivered, shall be
deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement. 
Delivery of an executed counterpart of this Agreement by telefacsimile
or other electronic method of transmission shall be equally as effective as
delivery of an original executed counterpart of this Agreement.  Any party delivering an executed counterpart
of this Agreement by telefacsimile or other electronic method of transmission
also shall deliver an original executed counterpart of this Agreement but the
failure to deliver an original executed counterpart shall not affect the
validity, enforceability, and binding effect of this Agreement.  The foregoing shall apply to each other Loan
Document mutatis mutandis.

 

(b)           Any provision
of this Agreement which is prohibited or unenforceable shall be ineffective to
the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof in that jurisdiction or affecting the validity or
enforceability of such provision in any other jurisdiction.

 

(c)           Headings used
in this Agreement are for convenience only and shall not be used in connection
with the interpretation of any provision hereof.

 

(d)           The pronouns
used herein shall include, when appropriate, either gender and both singular
and plural, and the grammatical construction of sentences shall conform
thereto.

 

[SIGNATURE PAGES TO FOLLOW]

 

17

 

IN
WITNESS WHEREOF, the undersigned parties hereto have executed this Agreement by
and through their duly authorized officers, as of the day and year first above
written.

 

 

	
  GRANTORS:

  	
  ALTRA INDUSTRIAL MOTION, INC.,

  a Delaware corporation, as a Grantor,

  WARNER ELECTRIC LLC,

  a Delaware limited liability company, as a Grantor,

  KILIAN MANUFACTURING CORPORATION,

  a Delaware corporation, as a Grantor,

  WARNER ELECTRIC TECHNOLOGY LLC,

  a Delaware limited liability company, as a Grantor,

  FORMSPRAG LLC,

  a Delaware limited liability company, as a Grantor,

  BOSTON GEAR LLC,

  a Delaware limited liability company, as a Grantor,

  NUTTALL GEAR L L C,

  a Delaware limited liability company, as a Grantor,

  THE KILIAN COMPANY,

  a Delaware corporation, as a Grantor,

  WARNER ELECTRIC INTERNATIONAL

  HOLDING, INC.,

  a Delaware corporation, as a Grantor,

  AMERICAN ENTERPRISES MPT CORP.,

  a Delaware corporation, as a Grantor, and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
    Michael
  L. Hurt

  
	
   

  	
   

  	
  Title:

  	
    Chief
  Executive Officer

  

 

 

[SIGNATURE PAGE OF
WFF SECURITY AGREEMENT]

 

 

	
   

  	
   

  	
  AMERIDRIVES INTERNATIONAL, L.P., a Delaware

  limited partnership, as a Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:          American Enterprises MPT Corp., its general

  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:  Michael L. Hurt

  
	
   

  	
   

  	
   

  	
  Title:    Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AMERICAN ENTERPRISES MPT HOLDINGS, L.P.,

  
	
   

  	
   

  	
  a
  Delaware limited partnership, as a Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:          Altra Industrial Motion, Inc., its general
  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:  Michael L. Hurt

  
	
   

  	
   

  	
   

  	
  Title:    Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
  AGENT:

  	
   

  	
  WELLS FARGO FOOTHILL, INC.,

  
	
   

  	
   

  	
  a California corporation, as Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
								

 

 

[SIGNATURE PAGE OF
WFF SECURITY AGREEMENT]

 

 

SCHEDULE 1

 

COPYRIGHTS

 

Schedule
1(a)

 

	
  Grantor

  	
   

  	
  Country

  	
   

  	
  Copyright

  	
   

  	
  Registration No.

  	
   

  	
  Registration Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Schedule
1(b)

 

 

SCHEDULE 2

 

INTELLECTUAL PROPERTY
LICENSES

 

 

SCHEDULE 3

 

PATENTS

 

Schedule
3(a)

 

	
  Grantor

  	
   

  	
  Country

  	
   

  	
  Patent

  	
   

  	
  Registration No.

  	
   

  	
  Registration Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

Schedule
3(b)

 

 

SCHEDULE 4

 

PLEDGED COMPANIES

 

	
  Name of Pledgor

  	
   

  	
  Name of Pledged

  Company

  	
   

  	
  Number of

  Shares/Units

  	
   

  	
  Class of

  Interests

  	
   

  	
  Percentage of

  Class Owned

  	
   

  	
  Certificate

  Nos.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

SCHEDULE 5

 

TRADEMARKS

 

Schedule
5(a)

 

	
  Grantor

  	
   

  	
  Country

  	
   

  	
  Mark

  	
   

  	
  Application/

  Registration No.

  	
   

  	
  App/Reg

  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Schedule 5(b)

 

 

SCHEDULE 6

 

COMMERCIAL TORT CLAIMS

 

[include specific case
caption or descriptions per Official Code Comment 5 to Section 9-108 of the
Code]

 

 

SCHEDULE 7

 

OWNED REAL PROPERTY

 

 

SCHEDULE 8

 

LIST OF UNIFORM COMMERCIAL
CODE FILING JURISDICTIONS

 

	
  Grantor

  	
   

  	
  Jurisdictions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

 

ANNEX 1 TO SECURITY
AGREEMENT

FORM OF SUPPLEMENT

 

Supplement
No.          (this “Supplement”)
dated as of                               ,
200  , to the Security Agreement dated as of November 30, 2004 (as
amended, restated, supplemented or otherwise modified from time to time, the “Security
Agreement”) by each of the parties listed as “Grantors” on the signature
pages thereto and those additional entities that thereafter become grantors
thereunder (collectively, jointly and severally, “Grantors” and each
individually “Grantor”), and WELLS FARGO FOOTHILL, INC., in its capacity
as Agent for the Lender Group and the Bank Product Providers (together with its
successors and assigns in such capacity, “Agent”).

 

W I T N E S S E T H:

 

WHEREAS,
pursuant to that certain Credit Agreement dated of November 30, 2004 (as
amended, restated, supplemented or otherwise modified from time to time,
including all exhibits and schedules thereto, the “Credit Agreement”)
among Altra Industrial Motion, Inc., a Delaware corporation (“Parent”), each
of its Subsidiaries identified on the signature pages thereof (Parent and such
Subsidiaries, “Borrowers”), the lenders party thereto as “Lenders” (“Lenders”),
and Agent, the Lender Group agreed to make certain financial accommodations
available to Borrowers from time to time pursuant to the terms and conditions
thereof;

 

WHEREAS,
capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Security Agreement and/or the Credit
Agreement;

 

WHEREAS,
Grantors have entered into the Security Agreement in order to induce the Lender
Group to make certain financial accommodations to Borrowers; and

 

WHEREAS,
pursuant to Section 5.16 of the Credit Agreement, new direct or indirect
Restricted Subsidiaries of Borrowers and the other Grantors, must execute and
deliver to Agent certain Loan Documents, including the Security Agreement, and
the execution of the Security Agreement by the undersigned new Grantor or
Grantors (collectively, the “New Grantors”) may be accomplished by the
execution of this Supplement in favor of Agent, for the benefit of the Lender
Group and the Bank Product Providers.

 

NOW,
THEREFORE, for and in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
each New Grantor hereby agrees as follows:

 

1.             In accordance with Section 24 of the
Security Agreement, each New Grantor, by its signature below, becomes a “Grantor”
under the Security Agreement with the same force and effect as if originally
named therein as a “Grantor” and each New Grantor hereby (a) agrees to all of
the terms and provisions of the Security Agreement applicable to it as a “Grantor”
thereunder and (b) represents and warrants that the representations and
warranties made by it as a “Grantor” thereunder are true and correct on and as
of the date hereof.  In furtherance of
the foregoing, each New Grantor, as security for the payment and performance in
full of the Secured Obligations, does hereby grant, assign, and pledge to
Agent, for the benefit of the Lender Group and the Bank Product Providers, a
security interest in and security title to the assets of such New Grantor of
the type described in Section 2 of the Security Agreement to secure the
full and prompt payment of the Secured Obligations, including, without
limitation, any interest thereon, plus reasonable attorneys’ fees and expenses
if the Secured Obligations represented by the Security Agreement are collected
by law, through an attorney-at-law, or under advice therefrom to the extent
such fees and expenses are required to be paid by the Borrowers under the
Credit Agreement.  Schedule 1, “Copyrights,”
Schedule 2, “Intellectual Property Licenses,” Schedule 3, “Patents,”
Schedule 4, “Pledged Companies,” Schedule 5, “Trademarks,” Schedule
6, “Commercial Tort Claims,” Schedule 7, “Owned Real Property,” and Schedule
8, “List of Uniform Commercial Code Filing Jurisdictions,” attached hereto
supplement Schedule 1,  Schedule 2, Schedule 3,  Schedule
4, Schedule 5,  Schedule 6, Schedule 7, and Schedule
8, respectively, to the Security Agreement and shall be deemed a part
thereof for all purposes of the Security Agreement.  Each reference to a “Grantor” in the Security

 

 

Agreement shall be deemed to include each New
Grantor.  The Security Agreement is
incorporated herein by reference.

 

2.             Each New Grantor represents and warrants to
Agent, the Lender Group and the Bank Product Providers that this Supplement has
been duly executed and delivered by such New Grantor and constitutes its legal,
valid and binding obligation, enforceable against it in accordance with its
terms, except as enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium or other similar
laws affecting creditors’ rights generally and general principles of equity
(regardless of whether such enforceability is considered in a proceeding at law
or in equity).

 

3.             This Supplement may be executed in multiple
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same
instrument.  Delivery of a counterpart
hereof by facsimile transmission or by e-mail transmission shall be as effective
as delivery of a manually executed counterpart hereof.

 

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

 

5.             This Supplement shall be construed in
accordance with and governed by the laws of the State of New York, without
regard to the conflict of laws principles thereof.

 

[SIGNATURE PAGE FOLLOWS]

 

 

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

 

	
  NEW GRANTORS:

  	
   

  	
  [Name of New Grantor]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [Name of New Grantor]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  AGENT:

  	
   

  	
  WELLS FARGO FOOTHILL, INC.,

  
	
   

  	
   

  	
  a
  California corporation, as Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
								

 

 

SIGNATURE PAGE OF
SUPPLEMENT TO SECURITY AGREEMENT

 

 

EXHIBIT A

 

FORM OF COPYRIGHT SECURITY
AGREEMENT

 

This
COPYRIGHT SECURITY AGREEMENT (this “Copyright Security Agreement”) is
made this        day of                       ,
2004, among Grantors listed on the signature pages hereof (collectively,
jointly and severally, “Grantors” and each individually “Grantor”),
and WELLS FARGO FOOTHILL, INC., in its capacity as Agent for the Lender Group and
the Bank Product Providers (together with its successors and assigns in such
capacity, the “Agent”).

 

W I  T  N  E  S  S  E  T
H:

 

WHEREAS,
pursuant to that certain Credit Agreement dated of November 30, 2004 (as
amended, restated, amended and restated, supplemented or otherwise modified
from time to time, including all exhibits and schedules thereto, the “Credit
Agreement”) among Altra Industrial Motion, Inc., a Delaware corporation (“Parent”),
each of Parent’s Subsidiaries identified on the signature pages thereof (Parent
and such Subsidiaries, “Borrowers”), the lenders party thereto as “Lenders”
(“Lenders”), and Agent, the Lender Group agreed to make certain
financial accommodations available to Borrowers from time to time pursuant to
the terms and conditions thereof;

 

WHEREAS,
the members of the Lender Group are willing to make the financial
accommodations to Borrowers as provided for in the Credit Agreement, but only
upon the condition, among others, that Grantors shall have executed and
delivered to Agent, for the benefit of the Lender Group and the Bank Product
Providers, that certain Security Agreement dated as of November 30, 2004 (including
all annexes, exhibits or schedules thereto, as from time to time amended,
restated, amended and restated, supplemented or otherwise modified, the “Security
Agreement”); and

 

WHEREAS,
pursuant to the Security Agreement, Grantors are required to execute and
deliver to Agent, for the benefit of the Lender Group and the Bank Product
Providers, this Copyright Security Agreement.

 

NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantors hereby agree as follows:

 

1.             DEFINED TERMS.  All
capitalized terms used but not otherwise defined herein have the meanings given
to them in the Security Agreement and/or the Credit Agreement.

 

2.             GRANT OF SECURITY INTEREST IN COPYRIGHT
COLLATERAL.  Each Grantor hereby grants to Agent, for the
benefit of the Lender Group and the Bank Product Providers, a continuing first
priority security interest (subject to Permitted Liens) in all of such Grantor’s right, title and
interest in, to and under the following, whether presently existing or
hereafter created or acquired (collectively, the “Copyright Collateral”):

 

(a)           all of such
Grantor’s Copyrights and rights in or to Copyright Intellectual Property
Licenses to which it is a party including those referred to on Schedule I
hereto;

 

(b)           all
restorations, reversions, renewals or extensions of the foregoing; and

 

(c)           all products
and proceeds of the foregoing, including, without limitation, any claim by such
Grantor against third parties for past, present or future infringement of any
Copyright.

 

 

3.             SECURITY AGREEMENT.  The
security interests granted pursuant to this Copyright Security Agreement are
granted in conjunction with the security interests granted to Agent, for the
benefit of the Lender Group and the Bank Product Providers, pursuant to the
Security Agreement.  Each Grantor hereby
acknowledges and affirms that the rights and remedies of Agent with respect to
the security interest in the Copyright Collateral made and granted hereby are
more fully set forth in the Security Agreement, the terms and provisions of
which are incorporated by reference herein as if fully set forth herein.

 

4.             AUTHORIZATION
TO SUPPLEMENT.  Grantors hereby authorize Agent unilaterally
to modify this Agreement by amending Schedule I to include any United
States registered copyrights or applications therefor which become part of the
Copyright Collateral under the Security Agreement.  Notwithstanding the foregoing, no failure to
so modify this Copyright Security Agreement or amend Schedule I shall in
any way affect, invalidate or detract from Agent’s continuing security interest
in all Collateral, whether or not listed on Schedule I.

 

5.             COUNTERPARTS.  This
Copyright Security Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all such separate
counterparts shall together constitute but one and the same instrument.  Any signatures delivered by a party by
facsimile transmission or by e-mail transmission shall be deemed an original
signature hereto.

 

[SIGNATURE PAGES
FOLLOW]

 

3

 

IN
WITNESS WHEREOF, each Grantor has caused this Copyright Security Agreement to
be executed and delivered by its duly authorized officer as of the date first
set forth above.

 

	
  GRANTORS:

  	
   

  	
                                                           ,

  
	
   

  	
   

  	
  a
                    
  corporation, as a Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
                                                           ,

  
	
   

  	
   

  	
  a
                    
  corporation, as a Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
                                                           ,

  
	
   

  	
   

  	
  a
                    
  corporation, as a Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  

 

 

SIGNATURE PAGE OF
COPYRIGHT SECURITY AGREEMENT

 

 

	
  AGENT:

  	
   

  	
  WELLS FARGO FOOTHILL, INC., 

  
	
   

  	
   

  	
  a
  California corporation, as Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  

 

 

SIGNATURE PAGE OF
COPYRIGHT SECURITY AGREEMENT

 

 

SCHEDULE I

TO

COPYRIGHT SECURITY AGREEMENT

 

COPYRIGHT REGISTRATIONS

 

	
  Grantor

  	
   

  	
  Country

  	
   

  	
  Copyright

  	
   

  	
  Registration No.

  	
   

  	
  Registration Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

EXHIBIT B

 

FORM OF PATENT SECURITY AGREEMENT

 

This
PATENT SECURITY AGREEMENT (this “Patent Security Agreement”) is made
this        day of                       ,
2004, among the Grantors listed on the signature pages hereof (collectively,
jointly and severally, “Grantors” and each individually “Grantor”),
and WELLS FARGO FOOTHILL, INC., in its capacity as administrative agent for the
Lender Group and the Bank Product Providers (together with its successors and assigns
in such capacity, “Agent”).

 

W I  T  N  E  S  S  E  T
H:

 

WHEREAS,
pursuant to that certain Credit Agreement dated of November 30, 2004 (as
amended, restated, amended and restated, supplemented or otherwise modified
from time to time, including all exhibits and schedules thereto, the “Credit
Agreement”) among Altra Industrial Motion, Inc., a Delaware corporation (“Parent”),
each of its Subsidiaries identified on the signature pages thereof (Parent and
such Subsidiaries, “Borrowers”), the lenders party thereto as “Lenders”
(“Lenders”), and Agent, the Lender Group agreed to make certain
financial accommodations available to Borrowers from time to time pursuant to
the terms and conditions thereof;

 

WHEREAS,
the members of Lender Group are willing to make the financial accommodations to
Borrowers as provided for in the Credit Agreement, but only upon the condition,
among others, that the Grantors shall have executed and delivered to Agent, for
the benefit of the Lender Group and the Bank Product Providers, that certain
Security Agreement dated as of November 30, 2004 (including all annexes,
exhibits or schedules thereto, as from time to time amended, restated, amended
and restated, supplemented or otherwise modified, the “Security Agreement”);
and

 

WHEREAS,
pursuant to the Security Agreement, Grantors are required to execute and
deliver to Agent, for the benefit of the Lender Group and the Bank Product
Providers, this Patent Security Agreement.

 

NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each Grantor hereby agrees as
follows:

 

1.             DEFINED TERMS.  All
capitalized terms used but not otherwise defined herein have the meanings given
to them in the Security Agreement and/or the Credit Agreement.

 

2.             GRANT OF SECURITY INTEREST IN PATENT
COLLATERAL.  Each Grantor hereby grants to Agent, for the
benefit of the Lender Group and the Bank Product Providers, a continuing first
priority security interest (subject to Permitted Liens) in all of such Grantor’s right, title and
interest in, to and under the following, whether presently existing or
hereafter created or acquired (collectively, the “Patent Collateral”):

 

(a)           all of its Patents and rights in and to Patent
Intellectual Property Licenses to which it is a party including those referred
to on Schedule I hereto;

 

(b)           all reissues, continuations,
continuations-in-part, substitutes, extensions or renewals of, and improvements
on, the foregoing; and

 

(c)           all products and proceeds of the foregoing,
including, without limitation, any claim by such Grantor against third parties
for past, present or future infringement of any Patent.

 

 

3.             SECURITY AGREEMENT.  The
security interests granted pursuant to this Patent Security Agreement are
granted in conjunction with the security interests granted to Agent, for the
benefit of the Lender Group and the Bank Product Providers, pursuant to the
Security Agreement.  Each Grantor hereby
acknowledges and affirms that the rights and remedies of Agent with respect to
the security interest in the Patent Collateral made and granted hereby are more
fully set forth in the Security Agreement, the terms and provisions of which
are incorporated by reference herein as if fully set forth herein.

 

4.             AUTHORIZATION
TO SUPPLEMENT.  Grantors hereby authorize Agent unilaterally
to modify this Agreement by amending Schedule I to include any patentable
inventions or applications therefor which become part of the Patent Collateral
under the Security Agreement.  Notwithstanding
the foregoing, no failure to so modify this Patent Security Agreement or amend Schedule
I shall in any way affect, invalidate or detract from Agent’s continuing
security interest in all Collateral, whether or not listed on Schedule I.

 

5.             COUNTERPARTS.  This
Patent Security Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all such separate counterparts
shall together constitute but one and the same instrument.  Any signatures delivered by a party by
facsimile transmission or by e-mail transmission shall be deemed an original
signature hereto.

 

[SIGNATURE PAGES FOLLOW]

 

3

 

IN WITNESS WHEREOF, each
Grantor has caused this Patent Security Agreement to be executed and delivered
by its duly authorized officer as of the date first set forth above.

 

	
  GRANTORS:

  	
                                                              ,

  
	
   

  	
  a
                    
  corporation, as a Grantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
                                                              ,

  
	
   

  	
  a
                    
  corporation, as a Grantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
                                                              ,

  
	
   

  	
  a
                    
  corporation, as a Grantor

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

 

SIGNATURE PAGE OF PATENT SECURITY AGREEMENT

 

 

	
  AGENT:

  	
  WELLS FARGO FOOTHILL, INC.,

  
	
   

  	
  a
  California corporation, as Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

 

SIGNATURE PAGE OF PATENT SECURITY AGREEMENT

 

 

SCHEDULE I

TO

PATENT SECURITY AGREEMENT

 

PATENTS AND PATENT APPLICATIONS

 

	
  Grantor

  	
   

  	
  Country

  	
   

  	
  Patent

  	
   

  	
  Registration No.

  	
   

  	
  Registration Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

EXHIBIT C

 

PLEDGED
INTERESTS ADDENDUM

 

This
Pledged Interests Addendum, dated as of                   
      , 20      ,
is delivered pursuant to Section 6 of the Security Agreement
referred to below.  The undersigned
hereby agrees that this Pledged Interests Addendum may be attached to that
certain Security Agreement, dated as of November 30, 2004 (as amended,
restated, amended and restated, supplemented or otherwise modified from time to
time, the “Security Agreement”), made by the undersigned, together with
the other Grantors named therein, to Wells Fargo Foothill, Inc., as Agent.  Initially capitalized terms used but not
defined herein shall have the meanings ascribed to such terms in the Security
Agreement and/or the Credit Agreement. 
The undersigned hereby agrees that the additional interests listed on
this Pledged Interests Addendum as set forth below shall be and become part of
the Pledged Interests pledged by the undersigned to the Agent in the Security
Agreement and any pledged company set forth on this Pledged Interests Addendum
as set forth below shall be and become a “Pledged Company” under the Security
Agreement, each with the same force and effect as if originally named therein.

 

The
undersigned hereby certifies that the representations and warranties set forth
in Section 5 of the Security Agreement of the undersigned are true and
correct as to the Pledged Interests listed herein on and as of the date hereof.

 

	
   

  	
  [                                      ]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

 

SIGNATURE PAGE OF PLEDGED INTERESTS ADDENDUM

 

 

	
  Name
  of Pledgor

  	
   

  	
  Name of Pledged

  Company

  	
   

  	
  Number of

  Shares/Units

  	
   

  	
  Class of

  Interests

  	
   

  	
  Percentage of 

  Class Owned

  	
   

  	
  Certificate 

  Nos.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

EXHIBIT D

 

FORM OF TRADEMARK SECURITY
AGREEMENT

 

This
TRADEMARK SECURITY AGREEMENT (this “Trademark Security Agreement”) is
made this        day of                       ,
2004, among Grantors listed on the signature pages hereof (collectively,
jointly and severally, “Grantors” and each individually “Grantor”), and
WELLS FARGO FOOTHILL, INC., in its capacity as Agent for the Lender Group and
the Bank Product Providers (together with its successors and assigns in such
capacity, “Agent”).

 

W I T N E S S E T H:

 

WHEREAS,
pursuant to that certain Credit Agreement dated of November 30, 2004 (as
amended, restated, amended and restated, supplemented or otherwise modified
from time to time, including all exhibits and schedules thereto, the “Credit
Agreement”) among Altra Industrial Motion, Inc., a Delaware corporation (“Parent”),
each of Parent’s Subsidiaries identified on the signature pages thereof (Parent
and such Subsidiaries, “Borrowers”), the lenders party thereto as “Lenders”
(“Lenders”), and Agent, the Lender Group agreed to make certain
financial accommodations available to Borrowers from time to time pursuant to
the terms and conditions thereof;

 

WHEREAS,
the members of the Lender Group are willing to make the financial
accommodations to Borrowers as provided for in the Credit Agreement, but only
upon the condition, among others, that Grantors shall have executed and
delivered to Agent, for the benefit of Lender Group and the Bank Product
Providers, that certain Security Agreement dated as of November 30, 2004 (including
all annexes, exhibits or schedules thereto, as from time to time amended,
restated, amended and restated, supplemented or otherwise modified, the “Security
Agreement”); and

 

WHEREAS,
pursuant to the Security Agreement, Grantors are required to execute and
deliver to Agent, for the benefit of Lender Group and the Bank Product
Providers, this Trademark Security Agreement.

 

NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each Grantor hereby agrees as
follows:

 

1.             DEFINED TERMS.  All
capitalized terms used but not otherwise defined herein have the meanings given
to them in the Security Agreement and/or the Credit Agreement.

 

2.             GRANT OF SECURITY INTEREST IN TRADEMARK
COLLATERAL.  Each Grantor hereby grants to Agent, for the
benefit of the Lender Group and the Bank Product Providers, a continuing first
priority security interest (subject to Permitted Liens) in all of such Grantor’s right, title and
interest in, to and under the following, whether presently existing or
hereafter created or acquired (collectively, the “Trademark Collateral”):

 

(a)           all of its
Trademarks and rights in and to Trademark Intellectual Property Licenses to
which it is a party including those referred to on Schedule I hereto;

 

(b)           all extensions,
modifications and renewals of the foregoing;

 

(c)           all goodwill of
the business connected with the use of, and symbolized by, each Trademark; and

 

 

(d)           all products
and proceeds of the foregoing, including, without limitation, any claim by such
Grantor against third parties for past, present or future (i) infringement or
dilution of any Trademark, or (ii) injury to the goodwill associated with any
Trademark.

 

3.             SECURITY AGREEMENT.  The
security interests granted pursuant to this Trademark Security Agreement are
granted in conjunction with the security interests granted to Agent, for the
benefit of the Lender Group and the Bank Product Providers, pursuant to the
Security Agreement.  Each Grantor hereby
acknowledges and affirms that the rights and remedies of Agent with respect to
the security interest in the Trademark Collateral made and granted hereby are more
fully set forth in the Security Agreement, the terms and provisions of which
are incorporated by reference herein as if fully set forth herein.

 

4.             AUTHORIZATION
TO SUPPLEMENT.  Grantors hereby authorize Agent unilaterally
to modify this Agreement by amending Schedule I to include any trademarks,
registrations, or applications therefor (including, without limitation,
extensions or renewals) which become part of the Trademark Collateral under the
Security Agreement.  Notwithstanding the
foregoing, no failure to so modify this Trademark Security Agreement or amend Schedule
I shall in any way affect, invalidate or detract from Agent’s continuing
security interest in all Collateral, whether or not listed on Schedule I.

 

5.             COUNTERPARTS.  This
Trademark Security Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all such separate
counterparts shall together constitute but one and the same instrument.  Any signatures delivered by a party by
facsimile transmission or by e-mail transmission shall be deemed an original
signature hereto.

 

[signature pages follow]

 

2

 

IN WITNESS WHEREOF, each
Grantor has caused this Trademark Security Agreement to be executed and
delivered by its duly authorized officer as of the date first set forth above.

 

	
  GRANTORS:

  	
                                                            ,

  
	
   

  	
  a
                    
  corporation, as a Grantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
                                                              ,

  
	
   

  	
  a
                    
  corporation, as a Grantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
                                                              ,

  
	
   

  	
  a
                    
  corporation, as a Grantor

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

 

SIGNATURE PAGE OF
TRADEMARK SECURITY AGREEMENT

 

 

 

	
  AGENT:

  	
  WELLS FARGO FOOTHILL, INC.,

  
	
   

  	
  a
  California corporation, as Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

 

SIGNATURE PAGE OF
TRADEMARK SECURITY AGREEMENT

 

 

SCHEDULE I

to

TRADEMARK SECURITY AGREEMENT

 

Trademark Registrations/Applications

 

	
  Grantor

  	
   

  	
  Country

  	
   

  	
  Mark

  	
   

  	
  Application/ 

  Registration No.

  	
   

  	
  App/Reg DateExhibit 10.24

 

EXECUTION COPY

 

PATENT SECURITY AGREEMENT

 

This PATENT SECURITY AGREEMENT (this “Patent
Security Agreement”) is made this 30th day of November, 2004,
among the Grantors listed on the signature pages hereof (collectively, jointly
and severally, “Grantors” and each individually “Grantor”), and
WELLS FARGO FOOTHILL, INC., in its capacity as administrative agent for the
Lender Group and the Bank Product Providers (together with its successors and
assigns in such capacity, “Agent”).

 

W I  T  N  E  S
S  E  T  H:

 

WHEREAS, pursuant to that certain Credit Agreement
dated of November 30, 2004 (as amended, restated, amended and restated,
supplemented or otherwise modified from time to time, including all exhibits
and schedules thereto, the “Credit Agreement”) among Altra Industrial
Motion, Inc., a Delaware corporation (“Parent”), each of its
Subsidiaries identified on the signature pages thereof (Parent and such
Subsidiaries, “Borrowers”), the lenders party thereto as “Lenders” (“Lenders”),
and Agent, the Lender Group agreed to make certain financial accommodations
available to Borrowers from time to time pursuant to the terms and conditions
thereof;

 

WHEREAS, the members of Lender Group are willing to
make the financial accommodations to Borrowers as provided for in the Credit
Agreement, but only upon the condition, among others, that the Grantors shall
have executed and delivered to Agent, for the benefit of the Lender Group and
the Bank Product Providers, that certain Security Agreement dated as of
November 30, 2004 (including all annexes, exhibits or schedules thereto, as
from time to time amended, restated, amended and restated, supplemented or
otherwise modified, the “Security Agreement”); and

 

WHEREAS, pursuant to the Security Agreement,
Grantors are required to execute and deliver to Agent, for the benefit of the
Lender Group and the Bank Product Providers, this Patent Security Agreement.

 

NOW, THEREFORE, in consideration of the premises and
mutual covenants herein contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, each Grantor
hereby agrees as follows:

 

1.             DEFINED TERMS.  All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Security Agreement and/or
the Credit Agreement.

 

2.             GRANT OF SECURITY INTEREST IN
PATENT COLLATERAL.  Each Grantor
hereby grants to Agent, for the benefit of the Lender Group and the Bank
Product Providers, a continuing first priority security interest (subject
to Permitted Liens) in all of
such Grantor’s right, title and interest in, to and under the following,
whether presently existing or hereafter created or acquired (collectively, the “Patent
Collateral”):

 

(a)           all of its Patents
and rights in and to Patent Intellectual Property Licenses to which it is a
party including those referred to on Schedule I hereto;

 

(b)           all reissues,
continuations, continuations-in-part, substitutes, extensions or renewals of,
and improvements on, the foregoing; and

 

(c)           all products and
proceeds of the foregoing, including, without limitation, any claim by such
Grantor against third parties for past, present or future infringement of any
Patent.

 

3.             SECURITY AGREEMENT.  The security interests granted pursuant to
this Patent Security Agreement are granted in conjunction with the security
interests granted to Agent, for the benefit of the Lender

 

 

Group and the Bank Product
Providers, pursuant to the Security Agreement. 
Each Grantor hereby acknowledges and affirms that the rights and
remedies of Agent with respect to the security interest in the Patent
Collateral made and granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein.

 

4.             AUTHORIZATION
TO SUPPLEMENT.  Grantors hereby authorize Agent unilaterally
to modify this Agreement by amending Schedule I to include any
patentable inventions or applications therefor which become part of the Patent
Collateral under the Security Agreement. 
Notwithstanding the foregoing, no failure to so modify this Patent
Security Agreement or amend Schedule I shall in any way affect,
invalidate or detract from Agent’s continuing security interest in all
Collateral, whether or not listed on Schedule I.

 

5.             COUNTERPARTS.  This Patent Security Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, but all such separate counterparts shall together constitute but one
and the same instrument.  Any signatures
delivered by a party by facsimile transmission or by e-mail transmission shall
be deemed an original signature hereto.

 

[SIGNATURE PAGES FOLLOW]

 

2

 

IN WITNESS WHEREOF, each Grantor has caused this Patent Security
Agreement to be executed and delivered by its duly authorized officer as of the
date first set forth above.

 

	
  GRANTORS:

  	
  WARNER ELECTRIC TECHNOLOGY

  LLC,

  a Delaware limited liability company, as a

  Grantor,

  BOSTON GEAR LLC,

  a Delaware limited liability company, as a Grantor,

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Michael L. Hurt  

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  AGENT:

  	
  WELLS FARGO FOOTHILL, INC.,

  
	
   

  	
  a California corporation,
  as Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
									

 

 

SCHEDULE
I

TO

PATENT SECURITY AGREEMENT

 

PATENTS AND PATENT APPLICATIONS

 

	
  Grantor

  	
   

  	
  Country

  	
   

  	
  Patent

  	
   

  	
  Registration No.

  	
   

  	
  Registration Date

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