Document:

ex_10-36.htm

    
      

      

    

    Exhibit
10.36

     

    
      SUBORDINATED
COLLATERAL AGREEMENT

       

       

      SUBORDINATED COLLATERAL
AGREEMENT, dated as of August 17, 2009, by and among GENERAL
ENVIRONMENTAL MANAGEMENT, INC., a Nevada corporation (“GEM-NV”),
GENERAL ENVIRONMENTAL MANAGEMENT, INC., a Delaware corporation (“GEM-DE”),
GENERAL ENVIRONMENTAL MANAGEMENT OF RANCHO CORDOVA LLC, a California limited
liability company (“GEMRC”),
GEM 6 ACQUISITIONS CORPORATION, a Delaware corporation (“GEM
6”), ISLAND ENVIRONMENTAL SERVICES, INC., a California corporation
(“Island”)
and any and all Additional Grantors who may become a party to this Agreement
from time to time (the Borrower, GEM-DE, GEMRC, GEM 6, Island and such
Additional Grantors are each hereinafter referred to as a “Grantor”
and collectively as the “Grantors”),
and MTS ACQUISITION COMPANY, INC., a California corporation (the “Secured
Party”).

       

      STATEMENT
OF PURPOSE

       

      On the
date hereof, GEM-NV, GEM-DE and the Secured Party are consummating the
transactions contemplated by the Purchase Agreement, and pursuant to the terms
of the Purchase Agreement, GEM-NV and GEM-DE may hereafter become obligated to
make indemnification payments to the Secured Party in accordance with Section 7
of the Purchase Agreement (the “Obligations”).

       

      It is a
condition precedent to the obligation of the Secured Party to consummate the
transactions under the Purchase Agreement that the Grantors shall have executed
and delivered this Agreement to the Secured Party.

       

      NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by the parties hereto, each Grantor hereby agrees
with the Secured Party, as follows:

       

      ARTICLE
I

       

      DEFINED
TERMS

       

      Section
1.1.       Terms
Defined in the Uniform Commercial Code.

       

      (a)           The
following terms when used in this Agreement shall have the meanings assigned to
them in the UCC (as defined in Section
1.2 below) as in effect from time to time:  “Account”,
“Account
Debtor”, “Authenticate”,
“Certificated
Security”, “Chattel
Paper”; “Commercial
Tort Claim”, “Deposit
Account”, “Documents”,
“Electronic
Chattel Paper”, “Equipment”,
“Farm
Products” “Fixture”,
“General
Intangible”, “Instrument”,
“Inventory”,
“Investment
Company Security”, “Investment
Property”, “Issuer”,
“Letter
of Credit Rights”, “Proceeds”,
“Record”,
“Registered
Organization”, “Security”,
“Securities
Entitlement”, “Securities
Intermediary”, “Securities
Account”, “Supporting
Obligation”, “Tangible
Chattel Paper”, and “Uncertificated
Security”.

       

      
        
          
          

        

        
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      (b)           Terms
defined in the UCC and not otherwise defined herein shall have the meaning
assigned in the UCC as in effect from time to time.

       

      Section
1.2.       Definitions.  The
following terms when used in this Agreement shall have the meanings assigned to
them below:

       

      “Additional
Grantor” means each Subsidiary of the Borrower which hereafter becomes a
Grantor pursuant to Section
7.15 hereof.

       

      “Agreement”
means this Collateral Agreement, as amended, restated, supplemented or otherwise
modified from time to time.

       

      “Applicable
Insolvency Laws” means all Applicable Laws governing bankruptcy,
reorganization, arrangement, adjustment of debts, relief of debtors,
dissolution, insolvency, fraudulent transfers or conveyances or other similar
laws (including, without limitation, 11 U.S.C. Sections 547, 548 and 550
and other “avoidance” provisions of Title 11 of the United States Code, as
amended or supplemented).

       

      “Applicable
Law” means all applicable provisions of all (a) constitutions, statutes,
ordinances, rules, regulations and orders of all governmental and/or
quasi-governmental bodies, (b) authorizations, consents, non-actions, approvals,
licenses or exemptions of, registration or filing with, or report to, any
governmental or quasi-governmental department, agency, body or other unit, and
(c) orders, judgments and decrees of all courts and arbitrators.

       

      “Assignment
of Claims Act” means the Assignment of Claims Act of 1940 (41 U.S.C.
Section 15, 31 U.S.C.  Section 3737, and 31 U.S.C. Section 3727),
including all amendments thereto and regulations promulgated
thereunder.

       

      “Collateral”
has the meaning assigned thereto in Section
2.1.

       

      “Collateral
Account” means any collateral account established by the Secured Party as
provided in Section
5.2.

       

      “Contract”
shall mean any indenture, agreement (other than this Agreement), other
contractual restriction, lease in which any Grantor is a lessor or lessee,
license or instrument.

       

      “Control”
means the manner in which “control” is achieved under the UCC with respect to
any Collateral for which the UCC specifies a method of achieving
“control”.

       

      “Controlled
Depository” has the meaning assigned thereto in Section
4.6(a).

       

      “Copyrights”
means collectively, all of the following of any Grantor: (a) all
copyrights, rights and interests in copyrights, works protectable by copyright,
copyright registrations and copyright applications anywhere in the world,
(b) all reissues, extensions, continuations (in whole or in part) and
renewals of any of the foregoing, (c) all income, royalties, damages and
payments now or hereafter due and/or payable under any of the foregoing or with
respect to any of the foregoing, including, without limitation, damages or
payments for past or future infringements of any of the foregoing, (d) the
right to sue for past, present and future infringements of any of the foregoing,
and (e) all rights corresponding to any of the foregoing throughout the
world.

       

      
        
          
          

        

        
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      “Copyright
Licenses” means any written agreement naming any Grantor as licensor or
licensee, granting any right under any Copyright, including, without limitation,
the grant of rights to manufacture, distribute, exploit and sell materials
derived from any Copyright.

       

      “Domestic
Subsidiary” shall mean any Subsidiary which is incorporated or formed
under the laws of the United States, any State or Commonwealth in the United
States, or the District of Columbia.

       

      “Effective
Endorsement and Assignment”  means, with respect to any
specific type of Collateral, all such endorsements, assignments and other
instruments of transfer reasonably requested by the Secured Party with respect
to the Security Interest granted in such Collateral, and in each case, in form
and substance satisfactory to the Secured Party.

       

      “Event
of Default” shall mean the failure of GEM-NV or GEM-DE to pay or cause to
be paid any amount due and payable for indemnification under Section 7 of the
Purchase Agreement as and when such obligation shall be determined pursuant to a
written agreement of GEM-NV or GEM-DE or any judgment or arbitrator’s
award.

       

      “Government
Approval” means any of the items described in clause (b) of the
definition of “Applicable Law” above.

       

      “Government
Contract” means a contract between any Grantor and an agency, department
or instrumentality of the United States or any state, municipal or local
governmental authority located in the United States or all obligations of any
such governmental authority arising under any Account now or hereafter owing by
any such governmental authority, as account debtor, to any Grantor.

       

      “Grantors”
has the meaning set forth in the preamble of this Agreement.

       

      “Intellectual
Property” means collectively, all of the following of any Grantor:
(a)  all systems software, applications software and internet rights,
including, without limitation, screen displays and formats, internet domain
names, web sites (including web links), program structures, sequence and
organization, all documentation for such software, including, without
limitation, user manuals, flowcharts, programmer’s notes, functional
specifications, and operations manuals, all formulas, processes, ideas and
know-how embodied in any of the foregoing, and all program materials,
flowcharts, notes and outlines created in connection with any of the foregoing,
whether or not patentable or copyrightable, (b) concepts, discoveries,
improvements and ideas, (c) any useful information relating to the items
described in clause (a) or (b), including know-how, technology, engineering
drawings, reports, design information, trade secrets, practices, laboratory
notebooks, specifications, test procedures, maintenance manuals, research,
development, manufacturing, marketing, merchandising, selling, purchasing and
accounting, (d) Patents and Patent Licenses, Copyrights and Copyright
Licenses, Trademarks and Trademark Licenses, and (e) other licenses to use
any of the items described in the foregoing clauses (a), (b), (c) and (d) or any
other similar items of such Grantor necessary for the conduct of its
business.

       

      
        
          
          

        

        
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      “Issuer”
means any issuer of any Investment Property or Partnership/LLC Interests
(including, without limitation, any Issuer as defined in the UCC).

       

      “Liens”
has the meaning ascribed to such term in the Loan Agreement.

       

      “Loan
Agreement” means the Revolving Credit and Term Loan Agreement dated as of
August 31, 2008 by and between CVC California, LLC and GEM-NV, as same may be
amended, modified, supplemented and/or restated from time to time.

       

      “Material
Adverse Effect” means any event, act, omission, condition or circumstance
which has or would reasonably be expected to have a material adverse effect on
(a) the business, operations, properties, assets or condition, financial or
otherwise, of GEM-NV and its Subsidiaries, taken as a whole, or (b) the validity
or enforceability of, or the Secured Party’s rights and remedies under, this
Agreement.

       

      Obligations”
has the meaning ascribed to such term in the first recital paragraph
above.

       

      “Partnership/LLC
Interests” means, with respect to any Grantor, the entire partnership,
membership interest or limited liability company interest, as applicable, of
such Grantor in each partnership, limited partnership or limited liability
company owned thereby, including, without limitation, such Grantor’s capital
account, its interest as a partner or member, as applicable, in the net cash
flow, net profit and net loss, and items of income, gain, loss, deduction and
credit of any such partnership, limited partnership or limited liability
company, as applicable, such Grantor’s interest in all distributions made or to
be made by any such partnership, limited partnership or limited liability
company, as applicable, to such Grantor and all of the other economic rights,
titles and interests of such Grantor as a partner or member, as applicable, of
any such partnership, limited partnership or limited liability company, as
applicable, whether set forth in the partnership agreement or membership
agreement, as applicable, of such partnership, limited partnership or limited
liability company, as applicable, by separate agreement or
otherwise.

       

      “Patents”
means collectively, all of the following of any Grantor: (a) all patents,
rights and interests in patents, patentable inventions and patent applications
anywhere in the world, (b) all reissues, extensions, continuations (in
whole or in part) and renewals of any of the foregoing, (c) all income,
royalties, damages or payments now or hereafter due and/or payable under any of
the foregoing or with respect to any of the foregoing, including, without
limitation, damages or payments for past or future infringements of any of the
foregoing, (d) the right to sue for past, present and future infringements
of any of the foregoing, and (e) all rights corresponding to any of the
foregoing throughout the world.

       

      “Patent
License” means all agreements now or hereafter in existence, whether
written or oral, providing for the grant by or to any Grantor of any right to
manufacture, use or sell any invention covered in whole or in part by a
Patent.

       

      “Perfection
Certificate” means (a) the perfection certificate dated as of the date
hereof, substantially in the form of Exhibit
A attached hereto, and otherwise in form and substance satisfactory to
the Secured Party, and duly certified by an authorized officer of the Borrower,
and (b) a perfection certificate in form and substance satisfactory to the
Secured Party, delivered by each Additional Grantor at the time that such
Additional Grantor becomes a party hereto, which shall be duly certified by an
authorized officer of such Additional Grantor.

       

      
        
          
          

        

        
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      “Permitted
Liens” has the meaning ascribed to such term in the Loan
Agreement.

       

      “Person”
shall mean any individual, partnership, corporation, limited liability company,
banking association, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.

       

      “Purchase
Agreement” means the Stock Purchase Agreement of even date herewith by
and among GEM-NV, GEM-DE, GEM Mobile Treatment Services, Inc., and the Secured
Party, as same may be amended, modified, supplemented and/or restated from time
to time.

       

      “Secured
Party” has the meaning assigned thereto in the preamble of this
Agreement.

       

      “Securities
Act” means the Securities Act of 1933, including all amendments thereto
and regulations promulgated thereunder.

       

      “Security
Interests” means the liens and security interests granted pursuant to
Article
II.

       

      “Senior
Liens” shall mean the liens and security interests securing the Senior
Obligations from time to time.

       

      “Senior
Obligations” means the “Obligations” under and as defined in the Loan
Agreement.

       

      “Subsidiary”
shall mean any corporation, limited liability company or other entity of which
50% or more of the outstanding shares of capital stock or other equity interests
of each class having ordinary voting power and/or rights to profits (other than
stock having such power only by reason of the happening of a contingency) is at
the time owned by GEM-NV, directly or indirectly through one or more
Subsidiaries of GEM-NV.

       

      “Subsidiary
Issuer” means any Issuer of Investment Property or any Partnership/LLC
Interests, which is a direct or indirect Subsidiary of any Grantor.

       

      “Trademarks”
means collectively, all of the following of any Grantor: (a) all
trademarks, rights and interests in trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos, other business identifiers, prints and labels on which any of the
foregoing have appeared or appear, all registrations and recordings thereof, and
all applications in connection therewith anywhere in the world, (b) all
reissues, extensions, continuations (in whole or in part) and renewals of any of
the foregoing, (c) all income, royalties, damages and payments now or
hereafter due and/or payable under any of the foregoing or with respect to any
of the foregoing, including, without limitation, damages or payments for past or
future infringements of any of the foregoing, (d) the right to sue for
past, present and future infringements of any of the foregoing, and (e) all
rights corresponding to any of the foregoing throughout the world.

       

      
        
          
          

        

        
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      “Trademark
License” means any agreement now or hereafter in existence, whether
written or oral, providing for the grant by or to any Grantor of any right to
use any Trademark.

       

      “UCC”
means the Uniform Commercial Code as in effect in the State of California, as
amended or modified from time to time.

       

      “Vehicles”
means all cars, trucks, trailers, and other vehicles covered by a certificate of
title under the laws of any state, all tires and all other appurtenances to any
of the foregoing.

       

      Section
1.3.       Other
Definitional Provisions.  The
words “hereof,” “herein”, “hereto” and “hereunder” and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and Section and Schedule references
are to this Agreement unless otherwise specified.  The meanings given
to terms defined herein shall be equally applicable to both the singular and
plural forms of such terms.  Where the context requires, terms
relating to the Collateral or any part thereof, when used in relation to a
Grantor, shall refer to such Grantor’s Collateral or the relevant part
thereof.  The word “including” and words of similar import when used
in this Agreement shall mean “including, without limitation,” unless otherwise
specified.

       

      ARTICLE
II

       

      SECURITY
INTEREST

       

      Section
2.1.       Grant
of Security Interest.

       

      (a)           Each
Grantor hereby grants, pledges and collaterally assigns to the Secured Party a
security interest in all of such Grantor’s right, title and interest in the
following property now owned or at any time hereafter acquired by such Grantor
or in which such Grantor now has or at any time in the future may acquire any
right, title or interest, and wherever located or deemed located (collectively,
the “Collateral”),
as collateral security for the prompt and complete payment and performance when
due (whether at the stated maturity, by acceleration or otherwise) of the
Obligations:

       

      (i)        all
Accounts;

       

      (ii)       all
cash and currency;

       

      (iii)      all
Chattel Paper;

       

      (iv)      all
Commercial Tort Claims;

       

      (v)       all
Deposit Accounts;

       

      (vi)      all
Documents;

       

      (vii)     all
Equipment;

       

      (viii)    all
Fixtures;

       

      
        
          
          

        

        
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      (ix)      all
General Intangibles (including, without limitation, any and all indemnification
claims against the Seller under the Acquisition Agreement);

       

      (x)       all
Instruments;

       

      (xi)      all
Intellectual Property;

       

      (xii)     all
Inventory;

       

      (xiii)    all
Investment Property;

       

      (xiv)    all
Letter of Credit Rights;

       

      (xv)     all
Vehicles;

       

      (xvi)    all
other personal property not otherwise described above;

       

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

       

      (xviii)  to
the extent not otherwise included, all Proceeds and products of any and all of
the foregoing and all collateral security and Supporting Obligations (as now or
hereafter defined in the UCC) given by any Person with respect to any of the
foregoing.

       

      (b)           Notwithstanding
clause (a) of this Section
2.1, to the extent that, at any time, the grant of a security interest in
any contract rights would, notwithstanding Sections 9-407 and 9-408 of the UCC
or other applicable law, cause a breach of the subject Contract permitting the
conterparty thereto to terminate such Contract under applicable law, such
contract rights shall not at such time be part of the Collateral (but the
proceeds thereof and any Supporting Obligations therefor shall be part of the
Collateral).  Each Grantor shall use all commercially reasonable
efforts to obtain any necessary consents or waivers required in order for such
Grantor to grant the Security Interests in any affected Contract.

       

      Section
2.2.       Grantors
Remain Liable.  Anything
herein to the contrary notwithstanding: (a) each Grantor shall remain liable
under the contracts and agreements included in the Collateral to the extent set
forth therein to perform all of its duties and obligations thereunder to the
same extent as if this Agreement had not been executed, (b) the exercise by
Secured Party of any of the rights hereunder shall not release any Grantor from
any of its duties or obligations under the contracts and agreements included in
the Collateral, (c) the Secured Party shall have no obligation or liability
under the contracts and agreements included in the Collateral by reason of this
Agreement, nor shall the Secured Party 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, and (d) the Secured Party
shall have no liability in contract or tort for any Grantor’s acts or
omissions.

       

      
        
          
          

        

        
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      ARTICLE
III

       

      REPRESENTATIONS
AND WARRANTIES

       

      To induce
the Secured Party to consummate the transactions under the Purchase Agreement,
each Grantor hereby represents and warrants to the Secured Party
that:

       

      Section
3.1.       Existence.  Each
Grantor is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or formation, has the requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being and hereafter proposed to be conducted and is duly
qualified and authorized to do business in each jurisdiction in which the
character of its properties or the nature of its business requires such
qualification and authorization other than in any such jurisdiction where
failure to so qualify would not reasonably be expected to have a Material
Adverse Effect.

       

      Section
3.2.      Authorization
of Agreement; No Conflict.  Each
Grantor has the right, power and authority and has taken all necessary corporate
or other organizational action to authorize the execution, delivery and
performance of, this Agreement.  This Agreement has been duly executed
and delivered by the duly authorized officers of each Grantor and this Agreement
constitutes the legal, valid and binding obligation of the Grantors enforceable
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar state or federal
debtor relief laws from time to time in effect which affect the enforcement of
creditors’ rights in general, and general limitations on the availability of
equitable remedies.  The execution, delivery and performance by the
Grantors of this Agreement will not, by the passage of time, the giving of
notice or otherwise, violate any material provision of any Applicable Law or any
Contract material to the business of any Grantor and will not result in the
creation or imposition of any Lien, other than the Security Interests, upon or
with respect to any property or revenues of any Grantor.

       

      Section
3.3.      Consents.  No
approval, consent, exemption, authorization or other action by, or notice to, or
filing with, any governmental authority or any other Person is necessary or
required in connection with the execution, delivery or performance by, or
enforcement against any Grantor or any Subsidiary Issuer of this Agreement,
except (i) as may be required by laws affecting the offering and sale of
securities generally, (ii) filings with the United States Copyright Office
and/or the United States Patent and Trademark Office, and (iii) filings under
the UCC and/or the Assignment of Claims Act.

       

      Section
3.4.       Perfected
Priority Liens.  The
Security Interests granted pursuant to this Agreement (a) constitute valid
security interests in all of the Collateral in favor of the Secured Party, as
collateral security for the Obligations, enforceable in accordance with the
terms hereof against all creditors of such Grantor and any Persons purporting to
purchase any Collateral from such Grantor, and (b) are prior to all other
Liens on the Collateral in existence on the date hereof except (i) that the
Senior Liens shall have absolute priority over the Security Interests, and (ii)
to the extent of any priority accorded under Applicable Law to any Permitted
Liens.  Upon the filing of financing statements in the jurisdiction of
formation of the respective Grantors reflected in the respective Perfection
Certificates, and the filing of appropriate collateral assignments with the
United States Copyright Office and the United States Patent and Trademark
Office, the Security Interests will be perfected first priority security
interests (subject only to the exceptions noted in the immediately preceding
sentence) in all Collateral in which a security interest can be perfected by
means of filing; and after the repayment in full of the Senior Obligations and
termination of all lending commitments under the Loan Agreement, upon delivery
to the Secured Party of the certificates representing the Collateral consisting
of Certificated Securities, the Security Interests will be perfected first
priority security interests in such Collateral.

       

      
        
          
          

        

        
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      Section
3.5.       Title;
No Other Liens.  Except
for the Security Interests, each Grantor owns each item of the Collateral free
and clear of any and all Liens or claims other than the Senior Liens and
Permitted Liens.  No financing statement under the UCC of any state
which names a Grantor as debtor or other public notice with respect to all or
any part of the Collateral is on file or of record in any public office, except
such as have been filed in favor of the Secured Party pursuant to this Agreement
or in respect of the Senior Liens and Permitted Liens.  No Collateral
is in the possession or Control of any Person asserting any claim thereto or
security interest therein, except that (a) the holder of the Senior Liens is
entitled to possession of all possessory Collateral until the payment in full of
the Senior Obligations and termination of all lending commitments under the Loan
Agreement, (b) the Secured Party or its designee may have possession or Control
of Collateral as contemplated hereby, (c) a depositary bank may have Control of
a Deposit Account owned by a Grantor at such depositary bank and a Securities
Intermediary may have Control over a Securities Account owned by a Grantor at
such Securities Intermediary, in each case subject to the terms of any Deposit
Account control agreement or Securities Account control agreement, as applicable
and to the extent required by Section
4, in favor of the holder of the Senior Liens or the Secured Party (as
applicable), and (d) a bailee, consignee or other Person may have possession of
Collateral as contemplated by, and so long as, the applicable Grantors have
complied to the satisfaction of the Secured Party with the applicable provisions
of Section 4.

       

      Section
3.6.       State
of Organization; Location of Inventory, Equipment and Fixtures; Other
Information.

       

      (a)           The
exact legal name of each Grantor is as set forth in its Perfection
Certificate.

       

      (b)           Each
Grantor is a Registered Organization organized under the laws of the
jurisdiction identified for such Grantor in its Perfection
Certificate.  The taxpayer identification number and Registered
Organization number of each Grantor is as set forth for such Grantor in its
Perfection Certificate.

       

      (c)           All
Collateral consisting of Inventory, Equipment and Fixtures (whether now owned or
hereafter acquired) is (or will be) located at the locations specified in the
Perfection Certificates.

       

      (d)           The
mailing address, chief place of business, chief executive office and office
where each Grantor keeps its books and records relating to the Accounts,
Documents, General Intangibles, Instruments and Investment Property in which it
has any interest is located at the locations specified for such Grantor in its
Perfection Certificate.  No Grantor has any other places of
business.  No Grantor does business nor has done business during the
past five years under any trade name or fictitious business name except as
disclosed for such Grantor in its Perfection Certificate.  Except as
disclosed in its Perfection Certificate, no Grantor has acquired assets from any
Person, other than assets acquired in the ordinary course of such Grantor’s
business, during the past five years.

       

      
        
          
          

        

        
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      Section
3.7.       Accounts.  Each
existing Account constitutes, and each hereafter arising Account will
constitute, the legally valid and binding obligation of the applicable Account
Debtor.  The amount represented by each Grantor to the Secured Party
as owing by each Account Debtor is, or will be, the correct amount actually and
unconditionally owing, except for normal cash discounts and allowances in the
ordinary course of business where applicable.  No Account Debtor has
any defense, set-off, claim or counterclaim against any Grantor that can be
asserted against the Secured Party, whether in any proceeding to enforce Secured
Party’s rights in the Collateral or otherwise, except defenses, set-offs, claims
or counterclaims that are not, in the aggregate, material to the value of the
Accounts.  None of the Accounts is, nor will any hereafter arising
Account be, evidenced by a promissory note or other Instrument, other than a
check, that has not been pledged and delivered to the holder of the Senior Liens
(while any Senior Obligations are outstanding or any lending commitment under
the Loan Agreement remains in effect) or to the Secured Party in accordance with
the terms hereof.

       

      Section
3.8.       Chattel
Paper.  As
of the date hereof, the Borrower does not hold any Chattel
Paper.

       

      Section
3.9.       Commercial
Tort Claims.  As
of the date hereof, the Borrower does not hold any Commercial Tort Claims except
as described in its Perfection Certificate; and, upon becoming aware at any time
and from time to time of any further Commercial Tort Claims, the Grantors shall
notify the Secured Party thereof in accordance with Section
4.4.

       

      Section
3.10.     Deposit
Accounts.  As
of the date hereof, all Deposit Accounts (including, without limitation, cash
management accounts that are Deposit Accounts) owned by the Borrower are listed
in its Perfection Certificate.

       

      Section
3.11.     Intellectual
Property.  None
of the Intellectual Property owned by any Grantor is the subject of any written
licensing or franchise agreement pursuant to which such Grantor is the licensor
or franchisor, except as would not reasonably be expected to have a Material
Adverse Effect.

       

      Section
3.12.     Inventory.  Collateral
consisting of Inventory is of good and merchantable quality, free from any
material defects, and has, to the knowledge of each Grantor, been manufactured
in accordance with the requirements of the Fair Labor Standards Act and all
other Applicable Law.  To the knowledge of each Grantor, none of such
Inventory is subject to any licensing, Patent, Trademark, trade name or
Copyright with any Person that restricts any Grantor’s ability to manufacture
and/or sell such Inventory.

       

      
        
          
          

        

        
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      Section
3.13.     Investment
Property; Partnership/LLC Interests.

       

      (a)           As
of the date hereof, all Investment Property (including, without limitation,
Securities Accounts and cash management accounts that are Investment Property)
and all Partnership/LLC Interests owned by the Borrower are listed in its
Perfection Certificate.

       

      (b)           All
Investment Property and all Partnership/LLC Interests issued by any Subsidiary
Issuer to any Grantor (i) have been duly and validly issued and, if applicable,
are fully paid and nonassessable, (ii) are beneficially owned as of record by
such Grantor, and (iii) represent the percentage ownership of all classes of the
capital stock or equity interests of such Subsidiary Issuer as set forth in such
Grantor’s Perfection Certificate.

       

      (c)           None
of the Partnership/LLC Interests (i) are traded on a securities exchange or in
securities markets, (ii) by their terms expressly provide that they are
Securities governed by Article 8 of the UCC, or (iii) are Investment Company
Securities.

       

      Section
3.14.     Instruments.  As
of the date hereof, except for promissory notes issued by the Secured Party to
GEM-DE, no Grantor holds any Instruments and is not named a payee of any
promissory note or other evidence of indebtedness.

       

      ARTICLE
IV

       

      COVENANTS

       

      Until any
outstanding Obligations shall have been indefeasibly paid in full and the
earliest indemnification claims period under the Purchase Agreement has expired
and all claims made within such claims period have been resolved, unless express
written consent has been obtained from the Secured Party, the Grantors covenant
and agree that:

       

      Section
4.1.       Maintenance
of Perfected Security Interest; Further Information.

       

      (a)           Each
Grantor shall maintain the Security Interest created by this Agreement as a
perfected Security Interest having at least the priority described in Section 3.4
and shall defend such Security Interest against the claims and demands of all
Persons whomsoever.

       

      (b)           Each
Grantor will furnish to the Secured Party from time to time statements and
schedules further identifying and describing the assets and property of such
Grantor and such other reports in connection therewith as the Secured Party may
reasonably request, all in reasonable detail.

       

      Section
4.2.       Maintenance
of Insurance.

       

      (a)           Each
Grantor will maintain, with financially sound and reputable companies, insurance
policies (i) insuring the Collateral against loss by fire, explosion,
theft, fraud and such other casualties, including business interruption, as may
be reasonably satisfactory to the Secured Party in amounts and with deductibles
at least as favorable as those generally maintained by businesses of similar
size engaged in similar activities, and (ii) insuring such Grantor and the
Secured Party against liability for hazards, risks and liability to persons and
property relating to the Collateral, in amounts and with deductibles at least as
favorable as those generally maintained by businesses of similar size engaged in
similar activities, such policies to be in such form and having such coverage as
may be reasonably satisfactory to the Lender.

       

      
        
          
          

        

        
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      (b)           All
such insurance (other than workers’ compensation) shall (i) name the
Secured Party as loss payee (to the extent covering risk of loss or damage to
tangible property) and as an additional insured as its interests may appear (to
the extent covering any other risk), (ii) provide that no cancellation
shall be effective until at least thirty (30) days after receipt by the Secured
Party of written notice thereof, and (iii) be reasonably satisfactory in
all other respects to the Secured Party.

       

      (c)           Upon
the request of the Secured Party, each Grantor shall deliver to the Secured
Party periodic information from a reputable insurance broker with respect to the
insurance referred to in this Section
4.2.

       

      Section
4.3.       Changes
in Locations; Changes in Name or Structure.  No
Grantor will, except upon fifteen (15) days’ prior written notice to the Secured
Party and delivery to the Secured Party of (a) all additional financing
statements (executed if necessary for any particular filing jurisdiction) and
other instruments and documents reasonably requested by the Secured Party to
maintain the validity, perfection and priority of the Security Interests, and
(b) if applicable, a written supplement to its Perfection
Certificate:

       

      (i)        permit
any Deposit Account to be held by or at a depositary bank other than the
depositary bank that held such Deposit Account as of the date hereof as set
forth in the Perfection Certificate;

       

      (ii)       permit
any of the Inventory, Equipment or Fixtures to be kept at a location other than
those listed in the Perfection Certificate, except as otherwise permitted
hereunder;

       

      (iii)      permit
any Investment Property (other than Certificated Securities delivered to the
holder of the Senior Liens or the Secured Party pursuant to Section
4.5) to be held by a Securities Intermediary;

       

      (iv)     change
its jurisdiction of organization or the location of its chief executive office
from that identified in the Perfection Certificate; or

       

      (v)      change
its name, identity or corporate or organizational structure to such an extent
that any financing statement filed by the Secured Party in connection with this
Agreement would become misleading.

       

      Section
4.4.       Required
Notifications.  Each
Grantor shall promptly notify the Secured Party, in writing, of: (a) any Lien
(other than the Security Interests, the Senior Liens or Permitted Liens) on any
of the Collateral, (b) the occurrence of any other event which could reasonably
be expected to have a material adverse effect on the aggregate value of the
Collateral or on the Security Interests, (c) any Collateral which, to the
knowledge of such Grantor, constitutes a Government Contract, and (d) the
acquisition or ownership by such Grantor of any (i) Commercial Tort Claim, (ii)
Deposit Account, or (iii) Investment Property after
the date hereof.

       

      
        
          
          

        

        
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      Section
4.5.       Delivery
Covenants.  Each
Grantor will deliver and pledge to the Secured Party all Certificated
Securities, Partnership/LLC Interests evidenced by a certificate, negotiable
Documents, Instruments, and Tangible Chattel Paper owned or held by such
Grantor, in each case, together with an Effective Endorsement and Assignment and
all Supporting Obligations, as applicable, unless such delivery and pledge has
been made to the holder of the Senior Liens or waived in writing by the Secured
Party.

       

      Section
4.6.       Control
Covenants.

       

      (a)           Promptly
following the payment in full of the Senior Obligations and termination of all
lending commitments under the Loan Agreement, each Grantor shall instruct (and
otherwise use its reasonable efforts to cause) (i) each depositary bank holding
a Deposit Account owned by such Grantor, and (ii) each Securities Intermediary
holding any Investment Property owned by such Grantor, to execute and deliver a
control agreement, sufficient to provide the Secured Party with Control of such
Deposit Account or Investment Property, and otherwise in form and substance
reasonably satisfactory to the Secured Party (any such depositary bank executing
and delivering any such control agreement, a “Controlled
Depositary”, and any such Securities Intermediary executing and
delivering any such control agreement, a “Controlled
Intermediary”).  In the event any such depositary bank or
Securities Intermediary refuses to execute and deliver such control agreement,
the Secured Party, in its sole discretion, may require the applicable Deposit
Account and Investment Property to be transferred to the Secured Party or a
different Controlled Depositary or Controlled Intermediary, as applicable,
reasonably selected by the Grantor and reasonably satisfactory to the Secured
Party, which agrees to execute and deliver such control agreement.

       

      (b)           Promptly
following the payment in full of the Senior Obligations and termination of all
lending commitments under the Loan Agreement, each Grantor will take such
actions and deliver all such agreements as are requested by the Secured Party to
provide the Secured Party with Control of all Letter of Credit Rights and
Electronic Chattel Paper owned or held by such Grantor, including, without
limitation, with respect to any such Electronic Chattel Paper, by having the
Secured Party identified as the assignee of the Record(s) pertaining to the
single authoritative copy thereof.

       

      (c)           If
any Collateral (other than Collateral specifically subject to the provisions of
Section
4.6(a) and Section
4.6(b)) exceeding in value $5,000 in the aggregate (such Collateral
exceeding such amount, the “Excess
Collateral”) is at any time in the possession or control of any
consignee, warehouseman, bailee (other than a carrier transporting Inventory to
a purchaser in the ordinary course of business), processor, or any other third
party, such Grantor shall notify in writing such Person of the Security
Interests created hereby, and shall, if the Senior Obligations have been paid in
full and all lending commitments under the Loan Agreement have been terminated,
(i) use its reasonable efforts to obtain such Person’s written agreement in
writing to hold all such Collateral for the Secured Party’s account subject to
the Secured Party’s instructions, and (ii) cause such Person to issue and
deliver to the Secured Party warehouse receipts, bills of lading or any similar
documents relating to such Collateral to the Secured Party together with an
Effective Endorsement and Assignment; provided
that if such Grantor is not able to obtain such agreement and cause the delivery
of such items, the Secured Party, in its sole discretion, may require such
Excess Collateral to be moved to another location specified by the Secured
Party.  Further, each Grantor shall perfect and protect such Grantor’s
ownership interests in all Inventory stored with a consignee against creditors
of the consignee by filing and maintaining financing statements against the
consignee reflecting the consignment arrangement filed in all appropriate filing
offices, providing any written notices required to notify any prior creditors of
the consignee of the consignment arrangement, and taking such other actions as
may be appropriate to perfect and protect such Grantor’s interests in such
inventory under Section 2-326, Section 9-103, Section 9-324 and Section 9-505 of
the UCC or otherwise.  All such financing statements filed pursuant to
this Section
4.6(c) shall be assigned, on the face thereof, to the Secured
Party.

       

      
        
          
          

        

        
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      Section
4.7.       Filing
Covenants.  Pursuant
to Section 9-509 of the UCC and any other Applicable Law, each Grantor
authorizes the Secured Party to file or record financing statements and other
filing or recording documents or instruments with respect to the Collateral
without the signature of such Grantor in such form and in such offices as the
Secured Party determines appropriate to perfect the Security Interests of the
Secured Party under this Agreement.  Such financing statements may
describe the Collateral in the same manner as described herein or may contain an
indication or description of Collateral that describes such property in any
other manner as the Secured Party may determine, in its sole discretion, is
necessary, advisable or prudent to ensure the perfection of the Security
Interest in the Collateral granted herein, including, without limitation,
describing such property as “all assets” or “all personal
property.”  Further, a photographic or other reproduction of this
Agreement shall be sufficient as a financing statement or other filing or
recording document or instrument for filing or recording in any
jurisdiction.  Each Grantor hereby authorizes, ratifies and confirms
all financing statements and other filing or recording documents or instruments
filed by Secured Party prior to the date of this Agreement.

       

      Section
4.8.        Accounts.

       

      (a)           Other
than in the ordinary course of business consistent with its past practice, no
Grantor will (i) grant any extension of the time of payment of any Account,
(ii) compromise or settle any Account for less than the full amount
thereof, (iii) release, wholly or partially, any Account Debtor,
(iv) allow any credit or discount whatsoever on any Account, or
(v) amend, supplement or modify any Account in any manner that could
adversely affect the value thereof.

       

      (b)           Each
Grantor will deliver to the Secured Party a copy of each material demand, notice
or document received by such Grantor that questions or calls into doubt the
validity or enforceability of any material Account.

       

      (c)           The
Secured Party shall have the right to make test verifications of the Accounts in
any manner and through any medium that it reasonably considers advisable, and
each Grantor shall furnish all such assistance and information as the Secured
Party may require in connection with such test verifications.  From
time to time following the payment in full of the Senior Obligations and the
termination of all lending commitments under the Loan Agreement (but not more
frequently than once in any six (6) month period, except for reasonable cause or
unless an Event of Default is then continuing), upon the Secured Party’s
reasonable request and at the expense of the Grantors, the Grantors shall cause
independent public accountants or others satisfactory to the Secured Party to
furnish to the Secured Party reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts.

       

      
        
          
          

        

        
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      (d)           Upon
request of the Secured Party at any time following the payment in full of the
Senior Obligations and termination of all lending commitments under the Loan
Agreement, if there shall be any Obligations then due and payable, each Grantor
shall direct its Account Debtors (including by means of appropriate direction on
all invoices) to remit all payments on such Grantor’s Accounts to a lockbox or
blocked account at a Controlled Depository, which account shall be swept by the
Secured Party on a weekly (or more frequent) basis, with collected funds in such
account applied to the outstanding Advances or made available to such
Grantor.

       

      Section
4.9.        Intellectual
Property.

       

      (a)           Within
five (5) Business Days after the last day of each fiscal quarter in which any
Grantor shall identify and/or confirm the existence of any registered
Intellectual Property owned or claimed to be owned by such Grantor, such Grantor
shall notify the Secured Party of the particulars thereof (including the name or
title of the subject Intellectual Property, the filing office in which any
filings may have been made in respect thereof, and the filing date and
registration number of each such filing), and shall execute and deliver to the
Grantor, for filing, any and all such collateral assignments as the Secured
Party may reasonably request in order to confirm and/or perfect the Security
Interests in such Intellectual Property.

       

      (b)           Except
as could not reasonably be expected to have a Material Adverse Effect, each
Grantor (either itself or through licensees) (i) will continue to use each
registered Trademark (owned by such Grantor) and Trademark for which an
application (owned by such Grantor) is pending, to the extent reasonably
necessary to maintain such Trademark in full force free from any claim of
abandonment for non-use, (ii) will maintain products and services offered
under such Trademark at a level substantially consistent with the quality of
such products and services as of the date hereof, (iii) will not (and will
not permit any licensee or sublicensee thereof to) do any act or knowingly omit
to do any act whereby such Trademark could reasonably be expected to become
invalidated or impaired in any way, (iv) will not do any act, or knowingly omit
to do any act, whereby any issued Patent owned by such Grantor would reasonably
be expected to become forfeited, abandoned or dedicated to the public, (v) will
not (and will not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby any registered Copyright owned by such
Grantor or Copyright for which an application is pending (owned by such Grantor)
could reasonably be expected to become invalidated or otherwise impaired, and
(vi) will not (either itself or through licensees) do any act whereby any
material portion of the Copyrights may fall into the public domain.

       

      (c)           Each
Grantor will notify the Secured Party promptly if it knows, or has reason to
know, that any application or registration relating to any material Intellectual
Property owned by such Grantor may become forfeited, abandoned or dedicated to
the public, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United States
Copyright Office or any court or tribunal in any country) regarding such
Grantor’s ownership of, or the validity of, any material Intellectual Property
owned by such Grantor or such Grantor’s right to register the same or to own and
maintain the same.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      (d)           Whenever
such Grantor, either by itself or through any agent, employee, licensee or
designee, shall file an application for the registration of any Intellectual
Property with the United States Patent and Trademark Office, the United States
Copyright Office or any similar office or agency in any other country or any
political subdivision thereof, such Grantor shall report such filing to the
Secured Party within five (5) Business Days after the last day of the fiscal
quarter in which such filing occurs.  Upon request of the Secured
Party, such Grantor shall execute and deliver, and have recorded, any and all
agreements, instruments, documents, and papers as the Secured Party may
reasonably request to evidence the Secured Party’s security interest in any
material Copyright, Patent or Trademark and the goodwill and General Intangibles
of such Grantor relating thereto or represented thereby.

       

      (e)           Each
Grantor will take all reasonable and necessary steps, in such Grantor’s
reasonable business judgment and at such Grantor’s sole cost and expense,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the material Intellectual Property, including,
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.

       

      (f)           In
the event that any material Intellectual Property owned by a Grantor is
infringed, misappropriated or diluted by a third party, the applicable Grantor
shall (i) at such Grantor’s sole cost and expense, take such actions as
such Grantor shall reasonably deem appropriate under the circumstances to
protect such Intellectual Property, and (ii) if such Intellectual Property
is of material economic value, promptly notify the Secured Party after it learns
of such infringement, misappropriation or dilution.

       

      Section
4.10.     Investment
Property; Partnership/LLC Interests.

       

      (a)           Without
the prior written consent of the Lender, no Grantor will (i) vote to
enable, or take any other action to permit, any Subsidiary Issuer to issue any
Investment Property or Partnership/LLC Interests, except for those additional
Investment Property or Partnership/LLC Interests that will be subject to the
Security Interest granted herein in favor of the Secured Party, or
(ii) enter into any agreement or undertaking restricting the right or
ability of such Grantor or the Secured Party to sell, assign or transfer any
Investment Property or Partnership/LLC Interests or Proceeds
thereof.  The Grantors will defend the right, title and interest of
the Secured Party in and to any Investment Property and Partnership/LLC
Interests against the claims and demands of all Persons whomsoever.

       

      (b)           If
any Grantor shall become entitled to receive or shall receive (i) any
Certificated Securities (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate issued in
connection with any reorganization), option or rights in respect of the
ownership interests of any Issuer, whether in addition to, in substitution of,
as a conversion of, or in exchange for, any Investment Property, or otherwise in
respect thereof, or (ii) any sums paid upon or in respect of any Investment
Property upon the liquidation or dissolution of any Issuer, such Grantor shall,
subject to the rights of the holder of the Senior Liens, accept the same as the
agent of the Secured Party, hold the same in trust for the Secured Party,
segregated from other funds of such Grantor, and promptly deliver the same to
the holder of the Senior Liens or the Secured Party in accordance with the terms
hereof.

       

      
        
          
          

        

        
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      Section
4.11.     Equipment.  Each
Grantor will maintain each item of Equipment in good working order and condition
(reasonable wear and tear and obsolescence excepted), and in accordance with any
manufacturer’s manual and/or recommendations, and will as quickly as practicable
provide all maintenance, service and repairs necessary for such purpose and will
promptly furnish to the Secured Party a statement respecting any material loss
or damage to any of the Equipment, except for such obsolete or worn-out
machinery or equipment which such Grantor has determined, in its reasonable
business judgment, to be no longer useful or desirable for its use in the
Business Operations.

       

      Section
4.12.     Vehicles.  Upon
the request of the Secured Party at any time and from time to time, any and all
applications for certificates of title or ownership indicating the Secured
Party’s Liens on the Vehicle covered by such certificate, and any other
necessary documentation, shall be filed in each office in each jurisdiction
which the Secured Party shall deem reasonably advisable to perfect its Liens on
the Vehicles.  Prior thereto, each certificate of title or ownership
relating to each Vehicle shall be maintained by the applicable Grantor in
accordance with Applicable Law to reflect the ownership interest of such
Grantor.

       

      Section
4.13.     Further
Assurances.  Upon
the request of the Secured Party and at the sole expense of the Grantors, each
Grantor will promptly and duly execute and deliver, and have recorded, such
further instruments and documents and take such further actions as the Secured
Party may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, (a) the collateral assignment of any
Contract, (b) with respect to Government Contracts, collateral assignment
agreements and notices of collateral assignment, in form and substance
reasonably satisfactory to the Secured Party, duly executed by the subject
Grantor in compliance with the Assignment of Claims Act (or analogous state
Applicable Law), and (c) all applications, certificates, instruments,
registration statements, and all other documents and papers the Secured Party
may reasonably request and as may be required by law in connection with the
obtaining of any consent, approval, registration, qualification, or
authorization of any Person deemed necessary or appropriate for the effective
exercise of any rights under this Agreement.

       

      ARTICLE
V

       

      REMEDIAL
PROVISIONS

       

      Section
5.1.       General
Remedies.  Subject
to Section
7.17 below, if an Event of Default shall occur and be continuing, the
Secured Party may exercise, in addition to all other rights and remedies granted
to it in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the UCC or any other Applicable Law.  Without limiting the
generality of the foregoing, the Secured Party, without demand of performance or
other demand, presentment, protest, advertisement or notice of any kind (except
any notice required by law referred to below) to or upon any Grantor or any
other Person (all and each of which demands, defenses, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, lease, assign, give option or options to purchase, or
otherwise dispose of and deliver the Collateral or any part thereof (or contract
to do any of the foregoing), in one or more parcels at public or private sale or
sales, at any exchange, broker’s board or office of the Secured Party or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk.  The Secured Party may disclaim any
warranties of title, possession and quiet enjoyment.  The Secured
Party shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption in any Grantor, which right or equity is hereby waived and
released.  Provided that the Senior Obligations have been paid in full
and all lending commitments under the Loan Agreement have terminated, upon the
occurrence and during the continuance of any Event of Default, each Grantor
further agrees, at the Secured Party’s request, to assemble the Collateral and
make it available to the Secured Party at places which the Secured Party shall
reasonably select, whether at such Grantor’s premises or
elsewhere.  To the extent permitted by Applicable Law, each Grantor
waives all claims, damages and demands it may acquire against the Secured Party
arising out of the exercise by it of any rights hereunder except to the extent
any such claims, damages, or demands result solely from the gross negligence or
willful misconduct of the Secured Party.  If any notice of a proposed
sale or other disposition of Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given at least ten (10) days before
such sale or other disposition.

       

      
        
          
          

        

        
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      Section
5.2.       Specific
Remedies.

       

      (a)           The
Secured Party hereby authorizes each Grantor to collect its Accounts; provided,
that, the Secured Party may curtail or terminate such authority at any time
after (i) the payment in full of the Senior Obligations and termination of all
lending commitments under the Loan Agreement, and (ii) the occurrence and during
the continuance of an Event of Default.

       

      (b)           Following
the payment in full of the Senior Obligations and termination of all lending
commitments under the Loan Agreement, upon the occurrence and during the
continuance of an Event of Default:

       

      (i)            
the Secured Party may communicate with Account Debtors of any Account subject to
a Security Interest and upon the request of the Secured Party, each Grantor
shall notify (such notice to be in form and substance satisfactory to the
Secured Party) its Account Debtors and parties to the Contracts subject to a
Security Interest that such Accounts and the Contracts have been assigned to the
Secured Party;

       

      (ii)          
 each Grantor shall forward to the Secured Party, on the last Business Day
of each week, deposit slips related to all cash, money, checks or any other
similar items of payment received by the Grantor during such week, and, if
requested by the Secured Party, copies of such checks or any other similar items
of payment, together with a statement showing the application of all payments on
the Collateral during such week and a collection report with regard thereto, in
form and substance satisfactory to the Secured Party.

       

      
        
          
          

        

        
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      (iii)           whenever
any Grantor shall receive any cash, money, checks or any other similar items of
payment relating to any Collateral (including any Proceeds of any Collateral),
such Grantor agrees that it will, within one (1) Business Day of such receipt,
deposit all such items of payment into the Collateral Account or in a Deposit
Account at Controlled Depositary; and until such Grantor shall deposit such
cash, money, checks or any other similar items of payment in the Collateral
Account or in a Deposit Account at a Controlled Depositary, such Grantor shall
hold such cash, money, checks or any other similar items of payment in trust for
the Secured Party and as property of the Secured Party, separate from the other
funds of such Grantor, and the Secured Party shall have the right to transfer or
direct the transfer of the balance of each Deposit Account to the Collateral
Account.  All such Collateral and Proceeds of Collateral received by
the Secured Party hereunder shall be held by the Secured Party in the Collateral
Account as collateral security for all the Obligations and shall not constitute
payment thereof until applied as provided in Section 5.4.

       

      (iv)           the
Secured Party shall have the right to receive any and all cash dividends,
payments or distributions made in respect of any Investment Property or
Partnership/LLC Interests or other Proceeds paid in respect of any Investment
Property or Partnership/LLC Interests, and any or all of any Investment Property
or Partnership/LLC Interests shall be registered in the name of the Secured
Party or its nominee, and the Secured Party or its nominee may thereafter
exercise (A) all voting, corporate and other rights pertaining to such
Investment Property or Partnership/LLC Interests, at any meeting of
shareholders, partners or members of the relevant Issuers, and (B) any and
all rights of conversion, exchange and subscription and any other rights,
privileges or options pertaining to such Investment Property or Partnership/LLC
Interests as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the
Investment Property or Partnership/LLC Interests upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate,
partnership or company structure of any Issuer or upon the exercise by any
Grantor or the Secured Party of any right, privilege or option pertaining to
such Investment Property or Partnership/LLC Interests, and in connection
therewith, the right to deposit and deliver any and all of the Investment
Property or Partnership/LLC Interests with any committee, depositary, transfer
agent, registrar or other designated agency upon such terms and conditions as
the Secured Party may determine), all without liability except to account for
property actually received by it; but the Secured Party shall have no duty to
any Grantor to exercise any such right, privilege or option and the Secured
Party shall not be responsible for any failure to do so or delay in so
doing.  In furtherance thereof, each Grantor hereby authorizes and
instructs each Issuer with respect to any Collateral consisting of Investment
Property and Partnership/LLC Interests to (i) comply with any instruction
received by it from the Secured Party in writing that (A) states that an Event
of Default has occurred and is continuing, and (B) is otherwise in accordance
with the terms of this Agreement, without any other or further instructions from
such Grantor, and each Grantor agrees that each Issuer shall be fully protected
in so complying, and (ii) except as otherwise expressly permitted hereby,
pay any dividends, distributions or other payments with respect to any
Investment Property or Partnership/LLC Interests directly to the Secured Party;
and

       

      
        
          
          

        

        
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      (v)           the
Secured Party shall be entitled to (but shall not be required
to):  (A) proceed to perform any and all obligations of the applicable
Grantor under any Contract and exercise all rights of such Grantor thereunder as
fully as such Grantor itself could, (B) do all other acts which the Secured
Party may deem necessary or proper to protect its Security Interest granted
hereunder, provided such acts are not inconsistent with or in violation of the
terms of this Agreement or Applicable Law, and (C) sell, assign or otherwise
transfer any Contract constituting Collateral, subject, however, to the prior
approval of each other party to such Contract, to the extent required under the
Contract.

       

      (c)           Unless
an Event of Default shall have occurred and be continuing and the Secured Party
shall have given notice to the relevant Grantor of the Secured Party’s intent to
exercise its corresponding rights pursuant to Section 5.2(b),
each Grantor shall be permitted to receive all cash dividends, payments or other
distributions made in respect of any Investment Property and Partnership/LLC
Interests, in each case paid in the normal course of business of the relevant
Issuer and consistent with past practice, and to exercise all voting and other
corporate, company or partnership rights with respect to any Investment Property
and Partnership/LLC Interests; provided,
that no vote shall be cast or other corporate, company or partnership right
exercised or other action taken which, in the Secured Party’s reasonable
judgment, would impair the Collateral or which would result in a breach of this
Agreement.

       

      Section
5.3.            Private
Sale.

       

      (a)           Each
Grantor recognizes that the Secured Party may be unable to effect a public sale
of any or all Collateral consisting of Securities which have not been registered
for resale under the Securities Act (“Restricted
Securities Collateral”), by reason of certain prohibitions contained in
the Securities Act and applicable state securities laws or otherwise, and may be
compelled to resort to one or more private sales thereof to a restricted group
of purchasers which will be obliged to agree, among other things, to acquire
such securities for their own account for investment and not with a view to the
distribution or resale thereof.  Each Grantor acknowledges and agrees
that any such private sale may result in prices and other terms less favorable
than if such sale were a public sale and, notwithstanding such circumstances,
agrees that any such private sale shall not by reason thereof be deemed not to
have been made in a commercially reasonable manner.  The Secured Party
shall be under no obligation to delay a sale of any of the Restricted Securities
Collateral for the period of time necessary to permit the Issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such Issuer would agree to do
so.

       

      (b)           Each
Grantor agrees to use its best efforts to do or cause to be done all such other
acts as may be necessary to make such sale or sales of all or any portion of the
Restricted Securities Collateral valid and binding and in compliance with any
and all other Applicable Laws.

       

      
        
          
          

        

        
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      Section
5.4.            Application
of Proceeds.  At
such intervals as may be agreed upon by the Borrower and the Secured Party
following the payment in full of the Senior Obligations and termination of all
lending commitments under the Loan Agreement, or, if an Event of Default shall
have occurred and be continuing following the payment in full of the Senior
Obligation and termination of all lending commitments under the Loan Agreement,
at any time at the Secured Party’s election, the Secured Party may apply all or
any part of the Collateral or any Proceeds of the Collateral in payment in whole
or in part of the Obligations then due and payable (after deducting all
reasonable costs and expenses of every kind incurred in connection therewith or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Secured Party hereunder,
including, without limitation, reasonable attorneys’ fees and
disbursements).  Any balance of such Proceeds remaining after payment
in full of the Obligations shall be paid over to the Grantors, or to whomever
else may be lawfully entitled to receive the same. Only after (a) the payment by
the Secured Party of any other amount required by any provision of law,
including, without limitation, Section 9-610 and Section 9-615 of the UCC, and
(b) the payment in full of the Obligations, shall the Secured Party account for
the surplus, if any, to any Grantor, or to whomever else may be lawfully
entitled to receive the same.

       

      Section
5.5.            Waiver,
Deficiency.  Each
Grantor hereby waives, to the extent permitted by Applicable Law, all rights of
redemption, appraisement, valuation, stay, extension or moratorium now or
hereafter in force under any Applicable Law in order to prevent or delay the
enforcement of this Agreement or the absolute sale of the Collateral or any
portion thereof.  Each Grantor shall remain liable for any deficiency
if the proceeds of any sale or other disposition of the Collateral are
insufficient to pay its Obligations and the fees and disbursements of any
attorneys employed by the Secured Party to collect such
deficiency.

       

      ARTICLE
VI

       

      THE
SECURED PARTY

       

      Section
6.1.            Secured
Party’s Appointment as Attorney-In-Fact.

       

      (a)           Each
Grantor hereby irrevocably constitutes and appoints the Secured Party and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Grantor and in the name of such Grantor or in its own name,
for the purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, each Grantor hereby gives the
Secured Party the power and right, on behalf of such Grantor, without notice to
or assent by such Grantor, to do any or all of the following after the payment
in full of the Senior Obligations and termination of all lending commitments
under the Loan Agreement and thereafter upon the occurrence and during the
continuance of an Event of Default:

       

      (i)           in
the name of such Grantor or its own name, or otherwise, take possession of and
indorse and collect any checks, drafts, notes, acceptances or other instruments
for the payment of moneys due under any Account or Contract subject to a
Security Interest or with respect to any other Collateral and file any claim or
take any other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Secured Party for the purpose of collecting any and
all such moneys due under any Account or Contract subject to a Security Interest
or with respect to any other Collateral whenever payable;

       

      
        
          
          

        

        
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      (ii)           in
the case of any Intellectual Property, execute and deliver, and have recorded,
any and all agreements, instruments, documents and papers as the Secured Party
may request to evidence the Secured Party’s security interest in such
Intellectual Property and the goodwill and General Intangibles of such Grantor
relating thereto or represented thereby;

       

      (iii)           pay
or discharge taxes and Liens levied or placed on or threatened against the
Collateral, effect any repairs or any insurance called for by the terms of this
Agreement and pay all or any part of the premiums therefor and the costs
thereof,

       

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

       

      (v)           (A) direct
any party liable for any payment under any of the Collateral to make payment of
any and all moneys due or to become due thereunder directly to the Secured Party
or as the Secured Party shall direct; (B) ask or demand for, collect, and
receive payment of and receipt for, any and all moneys, claims and other amounts
due or to become due at any time in respect of or arising out of any Collateral;
(C) sign and indorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (D) commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other right in respect of
any Collateral; (E) defend any suit, action or proceeding brought against
such Grantor with respect to any Collateral; (F) settle, compromise or
adjust any such suit, action or proceeding and, in connection therewith, give
such discharges or releases as the Secured Party may deem appropriate;
(G) assign any Copyright, Patent or Trademark (along with the goodwill of
the business to which any such Copyright, Patent or Trademark pertains), for
such term or terms, on such conditions, and in such manner, as the Secured Party
shall in its sole discretion determine; and (H) generally, sell, transfer,
pledge and make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Secured Party were the absolute
owner thereof for all purposes, and do, at the Secured Party’s option and such
Grantor’s expense, at any time, or from time to time, all acts and things which
the Secured Party deems necessary to protect, preserve or realize upon the
Collateral and the Secured Party’s Security Interests therein and to effect the
intent of this Agreement, all as fully and effectively as such Grantor might
do.

       

      (b)           If
any Grantor fails to perform or comply with any of its agreements contained
herein, the Secured Party, at its option, but without any obligation so to do,
may perform or comply, or otherwise cause performance or compliance, with such
agreement in accordance with the provisions of Section
6.1(a).

       

      (c)           The
expenses of the Secured Party incurred in connection with actions taken pursuant
to the terms of this Agreement shall be payable by the Grantors (jointly and
severally) to the Secured Party on demand.

       

      
        
          
          

        

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

       

      Section
6.2.            Duty
of Secured Party.  The
Secured Party’s sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the UCC
or otherwise, shall be to deal with it in the same manner as the Secured Party
deals with similar property for its own account.  Neither the Secured
Party nor any of its officers, directors, employees or agents shall be liable
for failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of any Grantor or any other Person or to take
any other action whatsoever with regard to the Collateral or any part
thereof.  The powers conferred on the Secured Party hereunder are
solely to protect the Secured Party’s interests in the Collateral and shall not
impose any duty upon the Secured Party to exercise any such
powers.  The Secured Party shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers, and neither it
nor any of its officers, directors, employees or agents shall be responsible to
any Grantor for any act or failure to act hereunder, except for their own gross
negligence or willful misconduct.

       

      ARTICLE
VII

       

      MISCELLANEOUS

       

      Section
7.1.            Amendments
in Writing.  None
of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except pursuant to a written agreement signed
by the party to be charged therewith and consented to in writing by the holder
of the Senior Liens.

       

      Section
7.2.             Notices

       

      .  All
notices, requests and demands to or upon the Secured Party or any Grantor
hereunder shall be effected in the manner provided for in the Purchase
Agreement.

       

      Section
7.3.            No
Waiver by Course of Conduct, Cumulative Remedies.  The
Secured Party shall not by any act (except by a written instrument pursuant to
Section 7.1),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Event of Default.  No
failure to exercise, nor any delay in exercising on the part of the Secured
Party, any right, power or privilege hereunder shall operate as a waiver
thereof.  No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.  A waiver by the
Secured Party of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Secured Party would
otherwise have on any future occasion.  The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any other rights or remedies provided by law.

       

      
        
          
          

        

        
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      Section
7.4.             Enforcement
Expenses, Indemnification.

       

      (a)           The
Grantors agree (jointly and severally) to pay or reimburse the Secured Party on
demand for all of its reasonable costs and expenses incurred in connection with
enforcing or preserving any rights under this Agreement, including, without
limitation, the reasonable fees and disbursements of counsel to the Secured
Party.

       

      (b)           The
Grantors agree (jointly and severally) to pay, and to save the Secured Party
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all stamp, excise, sales or other similar taxes which
may be payable or determined to be payable with respect to any of the Collateral
or in connection with any of the transactions contemplated by this
Agreement.  For clarity, the foregoing does not include net income
taxes, or franchise taxes imposed in lieu of net income taxes, imposed by
federal, state or local taxing authorities with respect to interest or
commitment fees or other fees payable hereunder or changes in the rate of tax on
the overall net income of the Lender or its members.

       

      (c)           The
Grantors agree (jointly and severally) to pay, and to save the Secured Party
harmless from any and all liabilities, obligations, losses, damages, penalties,
costs and expenses in connection with actions, judgments, suits, costs, expenses
or disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this
Agreement.

       

      (d)           The
agreements in this Section
7.4 shall survive repayment of the Obligations and the termination of
this Agreement.

       

      Section
7.5.            Preservation
of Remedies.  The
parties hereto preserve, without diminution, certain remedies that such Persons
may employ or exercise freely, either alone, in conjunction with or during a
dispute.  Each such Person shall have and hereby reserves the right to
proceed in any court of proper jurisdiction or by self-help to exercise or
prosecute the following remedies, as applicable:  (a) all rights to
foreclose against any real or personal property or other security by exercising
a power of sale under Applicable Law or by judicial foreclosure and sale,
including a proceeding to confirm the sale, (b) all rights of self-help
including peaceful occupation of property and collection of rents, set-off, and
peaceful possession of property, (c) obtaining provisional or ancillary remedies
including injunctive relief, sequestration, garnishment, attachment, appointment
of receiver and in filing an involuntary bankruptcy proceeding, and (d) when
applicable, a judgment by confession of judgment.  Preservation of
these remedies does not limit the power of an arbitrator to grant similar
remedies that may be requested by a party in a dispute.

       

      Section
7.6.            Successors
and Assigns

       

      .  This
Agreement shall be binding upon the successors and assigns of each Grantor and
shall inure to the benefit of each Grantor (and shall bind all Persons who
become bound as a Grantor to this Agreement), the Secured Party and their
successors and assigns; provided,
that no Grantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Secured Party.

       

      Section
7.7.            [Reserved].

       

      
        
          
          

        

        
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      Section
7.8.            Counterparts.  This
Agreement may be executed by one or more of the parties to this Agreement on any
number of separate counterparts (including by telecopy and PDF), and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.

       

      Section
7.9.            Severability.  Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other
jurisdiction.

       

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

       

      Section
7.11.          Integration.  This
Agreement and the other agreements, instruments and documents referred to herein
represent the agreement of the Grantors and the Secured Party with respect to
the subject matter hereof and thereof, and there are no promises, undertakings,
representations or warranties by the Secured Party relative to subject matter
hereof and thereof not expressly set forth or referred to herein or in the other
agreements, instruments and documents referred to herein.

       

      Section
7.12.          Governing
Law.  This
Agreement shall be governed by, construed, interpreted and enforced in
accordance with, the laws of the State of California, without giving effect to
principles of conflicts of law.

       

      Section
7.13.          Consent
to Jurisdiction.  Each
Grantor hereby irrevocably consents to the personal jurisdiction of all courts
(state and/or federal) located or sitting in the State of California, as well as
to the jurisdiction of all courts to which an appeal may be taken from such
courts, in any action, claim or other proceeding arising out of any dispute in
connection with this Agreement, any rights or obligations hereunder, or the
performance of such rights and obligations.  Each Grantor hereby
irrevocably consents to the service of a summons and complaint and other process
in any action, claim or proceeding brought by the Secured Party in connection
with this Agreement, any rights or obligations hereunder, or the performance of
such rights and obligations, on behalf of itself or its property, by registered
or certified mail, return receipt requested, in the manner specified in the
Purchase Agreement.  Nothing in this Section
7.13 shall affect the right of the Secured Party to serve legal process
in any other manner permitted by Applicable Law or affect the right of the
Secured Party to bring any action or proceeding against any Grantor or its
properties in the courts of any other jurisdictions.

       

      
        
          
          

        

        
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      Section
7.14.          Acknowledgements.

       

      (a)           Each
Grantor hereby acknowledges that:  (i) it has been advised by counsel
in the negotiation, execution and delivery of this Agreement, (ii) the Secured
Party has no fiduciary relationship with or duty to any Grantor arising out of
or in connection with this Agreement, and the relationship between the Grantors
(on the one hand) and the Secured Party (on the other hand) in connection
herewith or therewith is solely that of debtor and creditor, and (iii) no joint
venture is created hereby or otherwise exists by virtue of the transactions
contemplated hereby.

       

      (b)           Each
Issuer party to this Agreement acknowledges receipt of a copy of this Agreement
and agrees to be bound thereby and to comply with the terms thereof insofar as
such terms are applicable to it.  Each Issuer agrees to provide such
notices to the Secured Party as may be necessary to give full effect to the
provisions of this Agreement.

       

      Section
7.15.          Additional
Grantors.  Each
Domestic Subsidiary of the Borrower hereafter created or acquired shall become a
Grantor for all purposes of this Agreement upon execution and delivery by such
Subsidiary of a joinder agreement (with a Perfection Certificate and/or other
appropriate disclosure schedules respecting such Additional Grantor) in form and
substance satisfactory to the Secured Party.

       

      Section
7.16.          Releases.

       

      (a)           At
such time as any outstanding Obligations shall have been indefeasibly paid in
full and the covenants under Article IV above shall cease to be in effect, or,
if at the time the covenants under Article IV above would cease to be in effect
but for the existence of outstanding Obligations or the pendency of any
indemnification claims at such time, the Grantors otherwise collateralize such
pending claims to the reasonable satisfaction of the Secured Party, the
Collateral shall be released from the Liens created hereby, and this Agreement
and all obligations (other than those expressly stated to survive such
termination) of the Secured Party and each Grantor hereunder shall terminate,
all without delivery of any instrument or performance of any act by any party,
and all rights to the Collateral shall revert to the Grantors.  In
addition, the Grantors may, at their option, at any time replace the Collateral
by depositing into an escrow account under the control of an escrow agent
reasonably satisfactory to the Grantors and the Secured Party (the parties
hereby agreeing that First American Title Insurance Company is a satisfactory
escrow agent for these purposes), pursuant to an escrow agreement reasonably
satisfactory to the Grantors and the Secured Party and satisfactory to the
escrow agent, a cash amount equal to the sum of (i) all royalties theretofore
paid under Section 2.2 of the Purchase Agreement, plus (ii) the royalties that
would thereafter be payable under such Section 2.2 for periods through September
30, 2011 if Gross Sales (as such term is defined in Section 2.2 of the Purchase
Agreement) for such periods were exactly as set forth in the projections
attached hereto as Exhibit
A; and upon such escrow deposit, the funds in such escrow account shall
secure the Obligations, the Collateral shall be released from the Liens created
hereby, and this Agreement and all obligations hereunder (other than those
expressly stated to survive such termination) shall terminate as
aforesaid.  At the request and sole expense of any Grantor following
any such termination, the Secured Party shall deliver to such Grantor any
Collateral held by the Secured Party hereunder, and execute and deliver to such
Grantor such documents as such Grantor shall reasonably request to evidence such
termination.

       

      
        
          
          

        

        
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      (b)           If
any of the Collateral shall be sold, transferred or otherwise disposed of by any
Grantor in a transaction permitted by the Loan Agreement, then the Secured
Party, at the request and sole expense of such Grantor, shall execute and
deliver to such Grantor all releases or other documents reasonably necessary or
desirable for the release of the Liens created hereby on such
Collateral.

       

      Section
7.17.          Priorities
in Collateral and Remedies.

       

      (a)           Notwithstanding
anything to the contrary contained in this Agreement or in any other agreement
between any Grantor and the Secured Party, and notwithstanding the time, order
or method of attachment or perfection as between the Senior Liens and the
Security Interests, or the time or order of filing or recording of financing
statements or other evidences of liens or security interests, the Secured Party
acknowledges and agrees that all Senior Liens shall have absolute and
unconditional priority over any and all Security Interests, to the full extent
of all Senior Obligations.

       

      (b)           The
Secured Party hereby agrees that, unless and until all of the Senior Obligations
have been indefeasibly paid and satisfied in full and all lending commitments
under the Loan Agreement have terminated, the Secured Party shall not, without
the prior written consent of the holder of the Senior Liens, seek to foreclose
or exercise any collection or enforcement remedies with respect to any
Collateral or Security Interests, or institute any legal proceedings with
respect to any Collateral or Security Interests, or take any other action,
directly or indirectly, that would interfere in any manner with the rights of
the holder of the Senior Liens, including but not limited to the exclusive right
to foreclose upon and effect the sale or disposition of
Collateral.

       

      (c)           The
Secured Party hereby agrees, if, as and when so requested by the holder of
Senior Liens, (i) to immediately release or otherwise terminate the Security
Interests in connection with and/or to facilitate the sale, realization upon or
other disposition of Collateral by the holder of Senior Liens, or by a Grantor
with the prior written consent of the holder of the Senior Liens, (A) in the
ordinary course of the Grantors’ business, (B) prior to the declaration of an
“Event of Default” under the Loan Agreement if the holder of the Senior Liens in
good faith believes that such sale, realization or disposition would realize an
appropriate value for the subject Collateral, or (C) at any time on or after the
declaration of an “Event of Default” under the Loan Agreement, and (ii) to
immediately deliver such other release documents as the holder of the Senior
Liens may reasonably require in connection therewith; provided,
however,
that notwithstanding any such release or termination of the Security Interests,
or any liquidation or disposition of Collateral as aforesaid, the Security
Interests shall nonetheless attach to the proceeds of such Collateral in the
same priority as existed prior to such action.

       

      
        
          
          

        

        
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      (d)           The
holders of the Senior Obligations and Senior Liens shall at all times, without
in any way impairing or affecting the provisions of this Section
7.17, continue to administer their relationships with the Grantors in
accordance with customary business practice and in such manner as such holders
may determine in good faith, including entering into such agreements or
amendments to agreements as such holders may determine.  The holder of
the Senior Liens shall be under no duty to marshal any assets for the benefit of
the Secured Party, or to obtain any advise or consent from the Secured Party
with respect to any handling or disposition of Collateral.  So long as
the holder of the Senior Liens proceeds and acts in a commercially reasonable
manner, the holder of the Senior Liens shall not incur any liability to the
Secured Party with respect to any action taken by the holder of the Senior Liens
in respect of any Collateral.  The holders of the Senior Obligations
and Senior Liens shall have no duty to advise the Secured Party of any
information regarding the Grantors or bearing upon the risk of non-payment of
any of the Senior Obligations, and the provision of any such information in any
one instance shall not create any commitment to share any such information on
any other occasion.

       

      (e)           Nothing
contained in this Section
7.17 shall be deemed to limit or impair the Secured Party’s rights to
bring legal action against GEM-NV and/or GEM-DE to enforce such parties’
indemnification obligations under the Purchase Agreement, and to obtain judgment
against such parties in respect of such indemnification claims; provided,
however,
that the Secured Party shall not take any action with respect to any Collateral
to collect upon any such claims or judgments (i) unless the Senior Obligations
have been paid in full and all lending commitments under the Loan Agreement have
terminated, or (ii) except to the extent otherwise consented to in writing by
the holder of the Senior Liens.

       

      (f)           The
provisions of Section
7.2 above and this Section
7.17 are intended for the express benefit of, and may be relied upon by,
the holders of the Senior Obligations and the Senior Liens, as if an express
party to this Agreement.

       

      [Signature
Page to Follow]

       

      
        
          
          

        

        
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      IN
WITNESS WHEREOF, the parties hereto have caused this Collateral Agreement to be
executed by their duly authorized officers, all as of the day and year first
written above.

       

      
        
          
            
              
                	 	 	 	GENERAL ENVIRONMENTAL MANAGEMENT, INC., a Nevada
    corporation	 
	 	 	 	 	 
	
                         

                      	 	 	
                        
                          By:

                        

                      	 
	
                         

                      	 	 	
                        
                          Name:

                          
                            Title:

                          

                        

                      	 

              

            

          

        

      

       

      
        
          
            
              
                
                  	 	 	 	GENERAL ENVIRONMENTAL
      MANAGEMENT,     INC., a Delaware
      corporation	 
	 	 	 	 	 
	
                           

                        	 	 	
                          
                            By:

                          

                        	 
	
                           

                        	 	 	
                          
                            Name:

                            
                              Title:

                            

                          

                        	 

                

              

            

          

        

        
           

          
            
              
                
                  
                    	 	 	 	GENERAL ENVIRONMENTAL MANAGEMENT, OF RANCHO CORDOVA LLC	 
	 	 	 	 	 
	
                             

                          	 	 	
                            
                              By:

                            

                          	 
	
                             

                          	 	 	
                            
                              Name:

                              
                                Title:

                              

                            

                          	 

                  

                   

                

              

            

          

          
            
              
                
                  
                    
                      	 	 	 	GEM 6 ACQUISITIONS CORPORATION	 
	 	 	 	 	 
	
                               

                            	 	 	
                              
                                By:

                              

                            	 
	
                               

                            	 	 	
                              
                                Name:

                                
                                  Title:

                                

                              

                            	 

                    

                     

                  

                

              

            

            
              
                
                  
                    
                      
                        	 	 	 	ISLAND ENVIRONMENTAL SERVICES, INC.	 
	 	 	 	 	 
	
                                 

                              	 	 	
                                
                                  By:

                                

                              	 
	
                                 

                              	 	 	
                                
                                  Name:

                                  
                                    Title:

                                  

                                

                              	 

                      

                       

                    

                  

                

              

              
                
                  
                    
                      
                        
                          	 	 	 	MTS ACQUISITION COMPANY, INC.	 
	 	 	 	 	 
	
                                   

                                	 	 	
                                  
                                    By:

                                  

                                	 
	
                                   

                                	 	 	
                                  
                                    Name:

                                    
                                      Title:

                                    

                                  

                                	 

                        

                         

                      

                    

                  

                

              

            

          

        

      

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
A

       

      Projections

       

      See
attached.

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
A

      to

      Collateral
Agreement

       

      Form
of Perfection Certificate

       

      Dated as
of August __, 2009

       

      This
Perfection Certificate is being rendered to the Secured Party by the Borrower,
pursuant to that certain Collateral Agreement dated as of August __, 2009 by and
among General Environmental Management, Inc. (a Nevada corporation), General
Environmental Management, Inc. (a Delaware corporation), General Environmental
Management of Rancho Cordova, LLC, GEM 6 Acquisitions Corporation, Island
Environmental Services, Inc., and MTS Acquisition Company, Inc. (as amended,
modified, supplemented and/or restated from time to time, the “Collateral
Agreement”).  Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to them in the Collateral
Agreement.

       

      The
Grantors hereby certify to the Secured Party that as of the Closing
Date:

       

      SECTION
1.           Identification
Information.

       

      (a)           The
jurisdiction of incorporation, organization or formation of each Grantor and the
date of such incorporation, organization or formation is as
follows:

       

      (b)           The
location of the chief executive office of each Grantor is as
follows:

       

      (c)           The
exact legal name of each Grantor as it appears in its Articles of Incorporation
is as follows:

       

      (d)           Except
as set forth herein, (i) no Grantor has changed its identity or organizational
structure in any way within the past five years, and (ii) no Person has merged
or consolidated with or into any Grantor and no Person has liquidated into or
transferred all or substantially all of its assets to any Grantor in any way
within the past year.

       

      (e)           The
following is a list of all other names (including trade names or similar
appellations) used by any Grantor at any time during the past five
years:

       

      (f)          
 The taxpayer identification number of each Grantor is as
follows:

       

      (g)           The
registered organization identification number of each Grantor is as
follows:

       

      SECTION
2.           Current
Locations.

       

      (a)           The
following are the only locations at which any Grantor maintains any books or
records relating to any Accounts:

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

       

      Grantor                                           Mailing
Address                                           County
and State

       

      (b)           The
following are all the locations not identified above where any Grantor maintains
any Inventory or Equipment:

       

      Grantor                                           Mailing
Address                                           County
and State

       

      SECTION
3.           Deposit
Accounts and Securities Accounts:  The Grantors maintain the
following Deposit Accounts:

       

      
        
          	
                  Grantor

                	
                  Financial
      Institution

                	
                  Account
      Number

                	
                  Address
      of Financial Institution

                	
                  Account
      Purpose

                
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      

        

      

       

      SECTION
4.           Securities
and Investment Property.  The Grantors hold the following
securities (including shares or equity interests in Subsidiaries) and Investment
Property:

       

      
        
          
            	
                    Issuer

                  	
                    Grantor
      Owner

                  	
                    Number
      and Type of Securities

                  	
                    Percentage
      Ownership of Issuer

                  
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      

          

        

      

       

      SECTION
5.           Patents.  The
Grantors are the registered owner of the following Patents:

       

      
        
          	
                  Grantor

                	
                  Description

                	
                  Registration/Application
      No.

                	
                  Date

                
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      

        

      

       

       

      SECTION
6.           Trademarks.  The
Grantors are the registered owner of the following Trademarks:

       

      
        
          	
                  Grantor

                	
                  Description

                	
                  Registration/Application
      No.

                	
                  Date

                
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      

        

         

        
          
            
            

          

          
            32

            
              

            

          

          
            
            

          

        

      

       

      SECTION
7.           Copyrights.  The
Grantors are the registered owners of the following Copyrights:

       

      
        
          	
                  Grantor

                	
                  Description

                	
                  Registration/Application
      No.

                	
                  Date

                
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      

        

      

       

      SECTION
8.           Commercial
Tort Claims.  On the date hereof, the Grantors hold the
following Commercial Tort Claims:

       

      SECTION
9.           Unusual
Transactions.  Other than as set forth below, all
Accounts have been originated by the Grantors and all Inventory and Equipment
have been acquired by the Grantors in the ordinary course of business from
Persons in the business of selling goods of such
kind.

       

      SECTION
10.         Reliance.  The
Grantors acknowledge that the Secured Party is entitled to rely and has, in
fact, relied on the information contained herein, and any successor or assign of
the Secured Party is entitled to rely on the information contained
herein.

       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

       

      IN
WITNESS WHEREOF, the Grantors have executed this Perfection Certificate as of
the date first above written.

       

      
        
          
            
              
                
                  	 	 	 	GENERAL ENVIRONMENTAL MANAGEMENT, INC., a Nevada
    corporation	 
	 	 	 	 	 
	
                           

                        	 	 	
                          
                            By:

                          

                        	 
	
                           

                        	 	 	
                          
                            Name:

                            
                              Title:

                            

                          

                        	 

                

              

            

          

        

         

        
          
            
              
                
                  
                    	 	 	 	GENERAL ENVIRONMENTAL
      MANAGEMENT,     INC., a Delaware
      corporation	 
	 	 	 	 	 
	
                             

                          	 	 	
                            
                              By:

                            

                          	 
	
                             

                          	 	 	
                            
                              Name:

                              
                                Title:

                              

                            

                          	 

                  

                

              

            

          

          
             

            
              
                
                  
                    
                      	 	 	 	GENERAL ENVIRONMENTAL MANAGEMENT, OF RANCHO CORDOVA LLC	 
	 	 	 	 	 
	
                               

                            	 	 	
                              
                                By:

                              

                            	 
	
                               

                            	 	 	
                              
                                Name:

                                
                                  Title:

                                

                              

                            	 

                    

                     

                  

                

              

            

            
              
                
                  
                    
                      
                        	 	 	 	GEM 6 ACQUISITIONS CORPORATION	 
	 	 	 	 	 
	
                                 

                              	 	 	
                                
                                  By:

                                

                              	 
	
                                 

                              	 	 	
                                
                                  Name:

                                  
                                    Title:

                                  

                                

                              	 

                      

                       

                    

                  

                

              

              
                
                  
                    
                      
                        
                          	 	 	 	ISLAND ENVIRONMENTAL SERVICES, INC.	 
	 	 	 	 	 
	
                                   

                                	 	 	
                                  
                                    By:

                                  

                                	 
	
                                   

                                	 	 	
                                  
                                    Name:

                                    
                                      Title:ex_10-37.htm

    
      

      

    

    Exhibit
10.37

     

    ASSIGNMENT
AND ASSUMPTION OF LOAN DOCUMENTS

    
       

      This
Assignment and Assumption of Loan Documents (this “Assignment”)
is dated as of
the 17th day of August, 2009 (the “Effective
Date”), by General Environmental Management, Inc., a Delaware corporation
having an address at 3191 Temple Avenue, Suite 250, Pomona, California 91768
(“Assignor”),
for the benefit of CVC California, LLC, a Delaware limited liability company
having an address at 525 Okeechobee Boulevard, Suite 1050, West Palm Beach,
Florida 33401 (“Assignee”).

       

       

      WHEREAS,
Assignor and MTS Acquisition Company, Inc. (“Borrower”)
are parties to that certain Revolving Credit Agreement of even date herewith (as
amended, modified, supplemented and/or restated from time to time, the “Loan
Agreement”), pursuant to which the Assignor may from time to time make
certain working capital advances to the Borrower in the aggregate principal
amount of up to $700,000 at any time outstanding; and

       

      WHEREAS,
Assignor desires to assign, transfer and convey to Assignee all of Assignor’s
rights and obligations arising on and after the Effective Date in, to and under
the Loan Agreement and the Revolving Credit Note, the Collateral Agreement, and
the other Loan Documents descried in and made pursuant to the Loan Agreement
(collectively the “Loan
Documents”), and all liens and security interests securing Borrower’s
obligations thereunder, and Assignee desires to acquire and assume all of
Assignor’s rights and obligations arising on and after the Effective Date in, to
and under the Loan Documents.

       

      NOW,
THEREFORE in consideration of the recitals stated above and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Assignor and Assignee agree as follows:

       

      1.           Assignor
hereby assigns, transfers, conveys and delegates to Assignee, WITH FULL RECOURSE
AND FULL REPRESENTATION AND WARRANTY OF TITLE AND OWNERSHIP, all of Assignor’s
rights, title and interests in and to, and obligations with respect to, the Loan
Documents, in each case arising on or after the Effective Date, and all liens
and security interests securing Borrower’s obligations thereunder.

       

      2.           Assignee
hereby accepts and assumes all of Assignor’s right, title and interest in and
to, and obligations with respect to, the Loan Documents, in each case first
arising on or after the Effective Date.

       

      3.           Assignor
hereby represents and warrants to Assignee that Assignor has the full right,
power and authority to assign the Loan Documents free and clear of all liens,
claims and encumbrances.

       

      4.           Assignor
represents that there are no outstanding Advances under and as defined in the
Loan Agreement, and thus the sole consideration for the foregoing assignment is
the foregoing assumption.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      5.           The
terms and provisions of this Assignment shall inure to the benefit of, and shall
be binding upon, the successors and assigns of the parties hereto.

       

      6.           This
Assignment shall be construed and enforced according to the laws of the State of
New York.

       

      7.           Assignor
and Assignee agree to execute and deliver to one another such other documents as
may be reasonably necessary in order to effectuate the transaction contemplated
hereby.

       

      8.           This
Assignment may be executed in any number of counterparts (which may be delivered
by fax or PDF with full binding legal effect), each of which when so executed
and delivered shall be an original, but all of which shall together constitute
one and the same instrument.

       

       

      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURE COUNTERPARTS FOLLOW ON SUBSEQUENT
PAGE]

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      IN
WITNESS WHEREOF, Assignor and Assignee have executed this Assignment as of the
day and year first above written.

       

      
        
          
            
              
                	 	 	 	
                        ASSIGNOR:

                         

                        GENERAL
      ENVIRONMENTAL MANAGEMENT, INC.,

                        a
      Delaware corporation

                      	 
	 	 	 	 	 
	
                         

                      	 	 	
                        By:

                      	 
	
                         

                      	 	 	
                        
                          Name:

                          Title:

                        

                      	 

              

            

          

        

      

      
         

        
          
            
              
                
                  	 	 	 	
                          
                            ASSIGNEE:

                             

                            CVC
      CALIFORNIA, LLC,

                            a
      Delaware limited liability company

                          

                        	 
	 	 	 	 	 
	
                           

                        	 	 	
                          By:

                        	 
	
                           

                        	 	 	
                          
                            
                              
                                Name:

                                Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00162-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00162-of-00352.parquet"}]]