Document:

Exhibit
10.2

 

PLEDGE AND SECURITY AGREEMENT

 

THIS PLEDGE AND
SECURITY AGREEMENT (as it may be amended or modified from time to time, this “Security
Agreement”) is entered into as of August 15, 2003 by and between
MAGNETEK, INC., a Delaware corporation, with an address of 10900 Wilshire
Boulevard, Suite 850, Los Angeles, California 90024-6501 (the “Grantor”),
and BANK ONE, NA, a national banking association having its principal office in
Chicago, Illinois with an address of 8044 Montgomery Road, Cincinnati, Ohio
45236 (“Lender”).

 

PRELIMINARY STATEMENT

 

The Grantor, the Lender and the Loan Parties are
entering into a Credit Agreement dated of even date herewith (as it may be
amended or modified from time to time, the “Credit Agreement”).  The Grantor is entering into this Security
Agreement in order to induce the Lender to enter into and extend credit under
the Credit Agreement.

 

ACCORDINGLY, the Grantor and the Lender hereby agree
as follows:

 

 

ARTICLE I

DEFINITIONS

 

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

 

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

 

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

 

“Accounts” shall have the meaning set forth in
Article 9 of the UCC.

 

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

 

“Assigned Contracts” means, collectively, all
of the Grantor’s rights and remedies under, and all moneys and claims for money
due or to become due to the Grantor under any contracts, and any and all
amendments, supplements, extensions, and renewals thereof including, without
limitation, all rights and claims of the Grantor now or hereafter existing: (a)
under any insurance, indemnities, warranties, and guarantees provided for or
arising out of or in connection with any of the foregoing agreements; (b) for
any damages arising out of or for breach or default under or in connection with
any of the foregoing agreements; (c) to all other amounts from time to time
paid or payable under or in connection with any of the foregoing agreements; or
(d) to exercise or enforce any and all covenants, remedies, powers and
privileges thereunder.

 

“Chattel Paper” shall have the meaning set
forth in Article 9 of the UCC.

 

“Collateral” shall have the meaning set forth
in Article II.

 

 

“Collateral Report” means any certificate,
report or other document delivered by the Grantor to the Lender with respect to
the Collateral pursuant to any Loan Document.

 

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

 

“Copyright Collateral”
has the meaning set forth in Article II.

 

“Copyright License Rights”
means all right, title and interest of Grantor as licensor or licensee under,
and with respect to, any Copyrights, including under any Licenses.

 

“Copyrights” means, with respect to any Person,
all of such Person’s right, title, and interest in and to the following:  (a) all copyrights, rights and interests in
copyrights, works protectable by copyright, copyright registrations, and
copyright applications; (b) all licenses of the foregoing, whether as licensee
or licensor; (c) all renewals of any of the foregoing; (d) all income,
royalties, damages, and payments now or hereafter due and/or payable under any
of the foregoing, including, without limitation,  damages or payments for past or future infringements for any of
the foregoing; (e) the right to sue for past, present, and future infringements
of any of the foregoing; and (f) all rights corresponding to any of the
foregoing throughout the world.

 

“Default” means an event described in Section 5.1.

 

“Deposit Accounts” shall have the meaning set
forth in Article 9 of the UCC.

 

“Documents” shall have the meaning set forth in
Article 9 of the UCC.

 

“Equipment” shall have the meaning set forth in
Article 9 of the UCC.

 

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

 

“Farm Products” shall have the meaning set
forth in Article 9 of the UCC.

 

“Fixtures” shall have the meaning set forth in
Article 9 of the UCC.

 

“General Intangibles” shall have the meaning
set forth in Article 9 of the UCC.

 

“Goods” shall have the meaning set forth in
Article 9 of the UCC.

 

“Instruments” shall have the meaning set forth
in Article 9 of the UCC.

 

“Inventory” shall have the meaning set forth in
Article 9 of the UCC.

 

“Investment Property” shall have the meaning
set forth in Article 9 of the UCC.

 

“Letter-of-Credit Rights” shall have the
meaning set forth in Article 9 of the UCC.

 

“License Rights” means, collectively, all
Copyright License Rights, Patent License Rights and Trademark License Rights.

 

“Licenses” means, with respect to any Person,
all of such Person’s right, title, and interest in and to (a)

 

2

 

any and all licensing
agreements or similar arrangements in and to any Patents, Copyrights, or Trademarks,
(b) all income, royalties, damages, claims, and payments now or hereafter due
or payable under and with respect thereto, including, without limitation,  damages and payments for past and future
breaches thereof, and (c) all rights to sue for past, present, and future
breaches thereof.

 

“Patent Collateral”
has the meaning set forth in Article II.

 

“Patent License Rights”
means all right, title and interest of Grantor as licensor or licensee under,
and with respect to, any Patent, including under any Licenses.

 

“Patents” means, with respect to any Person,
all of such Person’s right, title, and interest in and to:  (a) any and all patents and patent
applications; (b) all inventions and improvements described and claimed
therein; (c) all reissues, divisions, continuations, renewals, extensions, and
continuations-in-part thereof; (d) all licenses of the foregoing, whether as
licensee or licensor; (e) all income, royalties, damages, claims, and payments
now or hereafter due or payable under and with respect thereto, including,
without limitation,  damages and
payments for past and future infringements thereof; (f) all rights to sue for
past, present, and future infringements thereof; and (g) all rights
corresponding to any of the foregoing throughout the world.

 

“Pledged Collateral” means all Instruments,
Securities and other Investment Property physically delivered to the Lender
pursuant to this Security Agreement.

 

“Receivables” means the Accounts, Chattel
Paper, Documents, Investment Property, Instruments and any other rights or
claims to receive money which are General Intangibles or which are otherwise
included as Collateral.

 

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

 

“Security” has the meaning set forth in
Article 8 of the UCC.

 

“Stock Rights” means all dividends, instruments
or other distributions and any other right or property which the Grantor shall
receive or shall become entitled to receive for any reason whatsoever with
respect to, in substitution for or in exchange for any Capital Stock
constituting Collateral, any right to receive Capital Stock and any right to
receive earnings, in which the Grantor now has or hereafter acquires any right,
issued by an issuer of such Capital Stock.

 

“Trademark Collateral”
has the meaning set forth in Article II.

 

“Trademark License Rights”
means all right, title and interest of Grantor as licensor or licensee under,
and with respect to, any Trademark, including under any Licenses.

 

“Trademarks” means, with respect to any Person,
all of such Person’s right, title, and interest in and to the following:  (a) all trademarks (including, without
limitation, service marks), trade names, trade dress, and trade styles and the
registrations and applications for registration thereof and the goodwill of the
business symbolized by the foregoing; (b) all licenses of the foregoing,
whether as licensee or licensor; (c) all renewals of the foregoing; (d) all
income, royalties, damages, and payments now or hereafter due or payable with
respect thereto, including, without limitation,  damages, claims, and payments for past and future infringements
thereof; (e) all rights to sue for past, present, and future infringements of the
foregoing, including, without limitation, the right to settle suits involving
claims and demands for royalties
owing; and (f) all rights corresponding to any of the foregoing throughout the
world; provided
however, nothing in this Security Agreement is intended to be,

 

3

 

or
may be construed to be, an assignment of any application to register any
trademark or service mark based on any intent to use filed by, or on behalf of,
Grantor (“Intent to Use Applications”), and any Intent to Use Applications
are specifically excluded from Trademark Collateral for purposes of this
Agreement.

 

“UCC” means the Uniform Commercial Code, as in
effect from time to time, of the State of Ohio  or of any other state the
laws of which are required as a result thereof to be applied in connection with
the attachment, perfection or priority of, or remedies with respect to,
Lender’s Liens on any Collateral.

 

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

 

 

ARTICLE II

GRANT OF
SECURITY INTEREST

 

The Grantor hereby pledges, assigns and grants to the
Lender a continuing security interest in and Lien on, all of its right, title
and interest in, to and under all personal property and other assets, whether
now owned by or owing to, or hereafter acquired by or arising in favor of the
Grantor (including, without limitation, under any trade name or derivations
thereof), and whether owned or consigned by or to, or leased from or to, the
Grantor, and regardless of where located (all of which will be collectively
referred to as the “Collateral”), including, without limitation:

 

	
  (i)

  	
   

  	
  all Accounts;

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  all Chattel
  Paper;

  
	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  all Goods;

  
	
   

  	
   

  	
   

  
	
  (iv) 

  	
   

  	
  all Documents; 

  
	
   

  	
   

  	
   

  
	
  (v)

  	
   

  	
  all Equipment;

  
	
   

  	
   

  	
   

  
	
  (vi)

  	
   

  	
  all Fixtures;

  
	
   

  	
   

  	
   

  
	
  (vii)

  	
   

  	
  all General
  Intangibles;

  
	
   

  	
   

  	
   

  
	
  (viii)

  	
   

  	
  all Instruments;

  
	
   

  	
   

  	
   

  
	
  (ix)

  	
   

  	
  all Inventory;

  
	
   

  	
   

  	
   

  
	
  (x)

  	
   

  	
  all Investment
  Property;

  
	
   

  	
   

  	
   

  
	
  (xi)

  	
   

  	
  all cash or cash
  equivalents;

  
	
   

  	
   

  	
   

  
	
  (xii)

  	
   

  	
  all letters of
  credit and Letter-of-Credit Rights;

  
	
   

  	
   

  	
   

  
	
  (xiii)

  	
   

  	
  all Deposit
  Accounts with any bank or other financial institution;

  
	
   

  	
   

  	
   

  
	
  (xiv)

  	
   

  	
  all Assigned
  Contracts;

  
	
   

  	
   

  	
   

  
	
  (xv)

  	
   

  	
  all Farm
  Products;

  
	
   

  	
   

  	
   

  
	
  (xvi)

  	
   

  	
  all Copyrights,
  Licenses with respect to Copyrights and Copyright License Rights (“Copyright
  Collateral”);

  
	
   

  	
   

  	
   

  
	
  (xvii)

  	
   

  	
  all Patents,
  Licenses with respect to Patents and Patent License Rights (“Patent
  Collateral”);

  

 

4

 

	
  (xviii)

  	
   

  	
  all Trademarks,
  Licenses with respect to Trademarks and Trademark License Rights (“Trademark
  Collateral”);

  
	
   

  	
   

  	
   

  
	
  (xix)

  	
   

  	
  and all
  accessions to, substitutions for and replacements, proceeds (including,
  without limitation, Stock Rights), insurance proceeds and products of the
  foregoing, together with all books and records, customer lists, credit files,
  computer files, programs, printouts and other computer materials and records
  related thereto;

  

 

to secure the prompt and complete payment and performance of the
Secured Obligations; provided, however, the Collateral shall
not include Excluded Foreign Stock.

 

 

ARTICLE III

REPRESENTATIONS
AND WARRANTIES

 

The Grantor represents and warrants to the Lender
that:

 

3.1.                              Title,
Perfection and Priority.  The
Grantor has good and valid rights in or the power to transfer the Collateral
and title to the Collateral with respect to which it has purported to grant a
security interest in, and Lien on, hereunder, free and clear of all Liens
except for Liens permitted under Section 4.1(e), and has full power
and authority to grant to the Lender the security interest in and Lien on such
Collateral pursuant hereto.  When
financing statements have been filed in the appropriate offices against the
Grantor in the locations listed on Exhibit H, the Lender will have a
fully perfected first priority security interest in that Collateral in which a
security interest may be perfected by filing, subject only to Liens permitted
under Section 4.1(e).

 

3.2.                              Type
and Jurisdiction of Organization, Organizational and Identification Numbers.  The type of entity of the Grantor, its
jurisdiction of organization, the organizational number issued to it by its
jurisdiction of organization and its federal employer identification number are
set forth on Exhibit A.

 

3.3.                              Principal
Location.  The Grantor’s mailing
address and the location of its place of business (if it has only one) or its
chief executive office (if it has more than one place of business), is, as of
the Closing Date, disclosed in Exhibit A; as of the Closing Date, the
Grantor has no other places of business except those set forth in Exhibit A.

 

3.4.                              Collateral
Locations.  All of Grantor’s
locations where Collateral is located, as of the Closing Date, are listed on Exhibit
A.  All of said locations are owned
by the Grantor except for locations (i) which are leased by the Grantor as
lessee and designated in Part VII(b) of Exhibit A and (ii) at
which Inventory is held in a public warehouse or is otherwise held by a bailee
or on consignment as designated in Part VII(c) of Exhibit A.

 

3.5.                              Deposit
Accounts.  All of the Grantor’s
Deposit Accounts as of the Closing Date are listed on Exhibit B.

 

3.6.                              Exact
Names.  The Grantor’s name in which
it has executed this Security Agreement is the exact name as it appears in the
Grantor’s organizational documents, as amended, as filed with the Grantor’s jurisdiction
of organization.

 

3.7.                              Letter-of-Credit
Rights and Chattel Paper.  Exhibit
C lists as of the Closing Date all of Grantor’s Letter-of-Credit Rights and
Chattel Paper.  All action by the
Grantor necessary to protect and perfect the Lender’s security interest and
Liens on each item listed on Exhibit C (including, without limitation,
the

 

5

 

delivery of all
originals and the placement of a legend on all Chattel Paper as required
hereunder) has been duly taken. The Lender will have a fully perfected first
priority security interest and Lien in the Collateral listed on Exhibit C,
subject only to Liens permitted under Section 4.1(e).

 

3.8.                              Accounts
and Chattel Paper.

 

(a)                                  The
names of the obligors, amounts owing, due dates and other information with
respect to the Accounts and Chattel Paper are and will be correctly stated in
all records of the Grantor relating thereto and in all invoices and Collateral
Reports with respect thereto furnished to the Lender by the Grantor from time
to time.  As of the time when each
Account or each item of Chattel Paper arises, the Grantor shall be deemed to
have represented and warranted that such Account or Chattel Paper, as the case may
be, and all records relating thereto, are genuine and in all respects what they
purport to be.

 

(b)                                 With
respect to Accounts, except as specifically disclosed on the most recent
Collateral Report or otherwise identified in a Record transmitted to Lender by
Grantor, (i) all Accounts are Eligible Accounts; (ii) all Accounts represent
bona fide sales of Inventory or rendering of services to Account Debtors in the
ordinary course of the Grantor’s business and are not evidenced by a judgment,
Instrument or Chattel Paper; (iii) there are no setoffs, claims or disputes
existing or asserted with respect thereto and the Grantor has not made any
agreement with any Account Debtor for any extension of time for the payment
thereof, any compromise or settlement for less than the full amount thereof,
any release of any Account Debtor from liability therefor, or any deduction
therefrom except a discount or allowance allowed by Grantor in the ordinary
course of its business for prompt payment and disclosed to the Lender; (iv) to
Grantor’s knowledge, there are no facts, events or occurrences which in any way
impair the validity or enforceability thereof or could reasonably be expected
to reduce the amount payable thereunder as shown on the Grantor’s books and
records and any invoices, statements and Collateral Reports with respect
thereto; (v) the Grantor has not received any notice of proceedings or actions
which are threatened or pending against any Account Debtor which might result
in any adverse change in such Account Debtor’s financial condition; and (vi) the
Grantor has no knowledge that any Account Debtor is unable generally to pay its
debts as they become due.

 

(c)                                  In
addition, with respect to all Accounts, (i) the amounts shown on all invoices,
statements and Collateral Reports with respect thereto are actually and
absolutely owing to the Grantor as indicated thereon and are not in any way
contingent; (ii) no payments have been or shall be made thereon except payments
immediately delivered to the Lock Box or a Cash Collateral Account as required
pursuant to the Credit Agreement; and (iii) to the Grantor’s knowledge, all
Account Debtors have the capacity to contract.

 

3.9.                              Inventory.  With respect to any Inventory scheduled or
listed on the most recent Collateral Report, (a) such Inventory (other than
Inventory in transit) is located at one of the Grantor’s locations set forth on
Exhibit A as such Exhibit may be updated from time to time upon mutual
agreement of Grantor and Lender, (b) no Inventory (other than Inventory in
transit) is now, or shall at any time or times hereafter be stored at any other
location except as permitted by Section 4.1(g), (c) the Grantor has
good, indefeasible and merchantable title to such Inventory and such Inventory
is not subject to any Lien or document whatsoever except for the Liens granted
to the Lender, and except for Permitted Liens, (d) except as specifically
disclosed in the most recent Collateral Report or otherwise identified in a
Record transmitted to Lender by Grantor, such Inventory is Eligible Inventory
of good and merchantable quality, free from any defects, (e) such Inventory is
not subject to any licensing, patent, royalty, trademark, trade name or
copyright agreements with any third parties which would require any consent of
any third party upon sale or disposition of that Inventory or the payment of
any monies to any third party upon such sale or other disposition, (f) such
Inventory has been produced in accordance with the Federal Fair Labor Standards
Act of 1938, as amended, and all rules, regulations and orders thereunder and
(g) the completion of manufacture, sale or other disposition of such Inventory
by the

 

6

 

Lender following a
Default shall not require the consent of any Person and shall not constitute a
breach or default under any contract or agreement to which the Grantor is a
party or to which such property is subject.

 

3.10.                        Intellectual Property.

 

(a)                                  The
Grantor does not have any interest in, or title to, any Patent Collateral,
Trademark Collateral or Copyright Collateral except as set forth in Exhibit
D.  This Security Agreement is
effective to create a valid and continuing Lien and, upon filing of this
Security Agreement (and, in the case of Copyright Collateral described in
Section 4.7(g), any amendments hereto) with the United States Copyright
Office and the filing of appropriate financing statements in the appropriate
filing offices, fully perfected first priority security interests in favor of
the Lender on the Grantor’s Patents, Trademarks and Copyrights (subject to
Permitted Liens), and, upon completion of the foregoing actions, all action
necessary or desirable to protect and perfect the Lender’s security interest and Liens on the Patent Collateral,
Trademark Collateral or Copyright Collateral shall have been duly taken.

 

(b)                                 Each registered Patent identified in Exhibit
D is subsisting and has not been adjudged invalid, unpatentable, or
unenforceable, in whole or in part, and is enforceable, except as otherwise set forth on Exhibit D.  Grantor has not granted any license,
release, covenant not to sue, or non-assertion assurance to any Person with
respect to any part of the Patent Collateral except as otherwise disclosed in Exhibit
D.  The Patent License Rights are in
full force and effect, and Grantor is not in default under any of the Patent
License Rights, and, to Grantor’s knowledge, no event has occurred which with
notice, the passage of time, the satisfaction of any other condition, or all of
them, might constitute a default by Grantor under the Patent License Rights.

 

(c)                                  Each registered Trademark identified in Exhibit
D is subsisting and has not been adjudged invalid, unregisterable or
unenforceable, in whole or in part, and each registered trademark and service
mark and, to Grantor’s knowledge, each application for trademark and service
mark registration is valid, registered or registrable and enforceable.  Grantor has notified Lender in writing of
all prior uses of any material item of Trademark Collateral of which Grantor is
aware which could lead to such item becoming invalid or unenforceable,
including prior unauthorized uses by third parties and uses which were not
supported by the goodwill of the business connected with such item.  Grantor has not granted any license,
release, covenant not to sue, or non-assertion assurance to any Person with
respect to any part of the Trademark Collateral except as otherwise disclosed
in Exhibit D.  Reasonable and
proper statutory notice has been used in connection with the use of each
registered trademark and service mark. 
The Trademark License Rights are in full force and effect, and Grantor
is not in default under any of the Trademark License Rights and, to Grantor’s
knowledge, no event has occurred which with notice, the passage of time, the
satisfaction of any other condition, or all of them, might constitute a default
by Grantor under the Trademark License Rights.

 

(d)                                 Each registered Copyright identified in Exhibit
D is subsisting and has not been adjudged invalid, unregisterable or
unenforceable, in whole or in part, and each registered Copyright and, to
Grantor’s knowledge, each application for copyright registration is valid,
registered or registrable and enforceable. 
Grantor has not granted any license, release, covenant not to sue, or
non-assertion assurance to any Person with respect to any part of the Copyright
Collateral except as otherwise disclosed in Exhibit D.  Reasonable and proper statutory notice has
been used in connection with the use of each registered copyright.  The Copyright License Rights are in full
force and effect, and Grantor is not in default under any of the Copyright
License Rights and, to Grantor’s knowledge, no event has occurred which with
notice, the passage of time, the satisfaction of any other condition, or all of
them, might constitute a default by Grantor under the Copyright License Rights.

 

3.11.                        Filing Requirements.  As of the Closing Date, none of the
Equipment is covered by any certificate of title, except for the vehicles
described in Part I of Exhibit E. 
None of the Collateral is of a type

 

7

 

for which Liens
may be perfected by filing under any federal statute except for (a) the
vehicles described in Part II of Exhibit E and (b) Patents, Trademarks
and Copyrights held by the Grantor and described in Exhibit D.  The county and street address of each
property on which any Fixtures are located is set forth in Exhibit F
together with the name and address of the record owner of each such property.

 

3.12.                        No Financing Statements,
Security Agreements.  No valid
financing statement or security agreement describing all or any portion of the
Collateral which has not lapsed or been terminated naming the Grantor as debtor
has been filed or is of record in any jurisdiction except (a) for financing
statements or security agreements naming the Lender as the secured party and
(b) as permitted by Section 4.1(e).

 

3.13.                        Pledged Collateral,
Instruments and Other Investment Property.

 

(a)                                  Exhibit
G sets forth, as of the Closing Date, a complete and accurate list of all
of the Pledged Collateral delivered to the Lender and all of the Instruments,
Securities and Investment Property owned by the Grantor.  The Grantor is the direct, sole beneficial
owner and sole holder of record of each Instrument, Security and other type of
Investment Property listed on Exhibit G as being owned by it, free and
clear of any Liens, except for the Liens granted to the Lender.  The Grantor further represents and warrants
that (i) all such Instruments, Securities or other types of Investment Property
which are Capital Stock of a Subsidiary have been (to the extent such concepts
are relevant with respect to such Instrument, Security or other type of
Investment Property) duly authorized, validly issued, are fully paid and
non-assessable, (ii) with respect to any certificates delivered to the Lender
representing Capital Stock, either such certificates are Securities as defined
in Article 8 of the UCC as a result of actions by the issuer or otherwise,
or, if such certificates are not Securities, the Grantor has so informed the
Lender so that the Lender may take steps to perfect its security interest
therein as a General Intangible, (iii) except as agreed by Lender, all such
Securities or other types of Investment Property held by a securities
intermediary are covered by a control agreement among the Grantor, the
securities intermediary and the Lender pursuant to which the Lender has Control
and (iv) all Instruments which represent Indebtedness owed to the Grantor by a
Subsidiary thereof have been duly authorized, authenticated or issued and
delivered by the issuer of such Indebtedness, are the legal, valid and binding
obligation of such issuer and such issuer is not in default thereunder.

 

(b)                                 In
addition, (i) none of the Pledged Collateral has been issued or transferred in
violation of the securities registration, securities disclosure or similar laws
of any jurisdiction to which such issuance or transfer may be subject, (ii)
there are existing no options, warrants, calls or commitments of any character
whatsoever relating to the Pledged Collateral or which obligate the issuer of
any Capital Stock included in the Pledged Collateral to issue additional
Capital Stock, and (iii) no consent, approval, authorization, or other action
by, and no giving of notice, filing with, any governmental authority or any
other Person is required for the pledge by the Grantor of the Pledged
Collateral pursuant to this Security Agreement or for the execution, delivery
and performance of this Security Agreement by the Grantor, or for the exercise
by the Lender of the voting or other rights provided for in this Security
Agreement or for the remedies in respect of the Pledged Collateral pursuant to
this Security Agreement, except as may be required in connection with such
disposition by laws affecting the offering and sale of securities generally.

 

(c)                                  Except
as set forth in Exhibit G, the Grantor owns 100% of the issued and
outstanding Capital Stock which constitutes Pledged Collateral and none of the
Pledged Collateral which represents Indebtedness owed to the Grantor is
subordinated in right of payment to other Indebtedness or subject to the terms
of an indenture.

 

8

 

ARTICLE IV

COVENANTS

 

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

 

4.1.                              General.

 

(a)                                  Collateral
Records.  The Grantor will maintain
complete and accurate books and records with respect to the Collateral, and
furnish to the Lender such reports relating to the Collateral as the Lender
shall from time to time request.

 

(b)                                 Authorization
to File Financing Statements and Recordation Form Cover Sheets; Ratification.  The Grantor hereby authorizes the Lender to
file, and if requested will deliver to the Lender, all financing statements and
other documents and take such other actions as may from time to time be
requested by the Lender in order to maintain a first perfected security
interest in, Lien on and, if applicable, Control of, the Collateral.  Any financing statement filed by the Lender
may be filed in any filing office in any UCC jurisdiction and may (i) indicate
the Collateral (1) as all assets of the Grantor or words of similar effect, regardless
of whether any particular asset comprised in the Collateral falls within the
scope of Article 9 of the UCC or such jurisdiction, or (2) by any other
description which reasonably approximates the description contained in this
Security Agreement, and (ii) contain any other information required by part 5
of Article 9 of the UCC for the sufficiency or filing office acceptance of
any financing statement or amendment, including, without limitation, (A)
whether the Grantor is an organization, the type of organization and any
organization identification number issued to the Grantor, and (B) in the case
of a financing statement filed as a fixture filing or indicating Collateral as
as-extracted collateral or timber to be cut, a sufficient description of real
property to which the Collateral relates. 
The Grantor also agrees to furnish any such information to the Lender
promptly upon request.  The Grantor also
ratifies its authorization for the Lender to have filed in any UCC jurisdiction
any initial financing statements or amendments thereto if filed prior to the
date hereof.  The Grantor hereby
authorizes the Lender to complete, execute and file any document cover sheets
and recordation form cover sheets evidencing security interests in the
Copyright Collateral, the Trademark Collateral and the Patent Collateral,
permitted or required to evidence such security interests by the United States
Copyright Office or the United States Patent and Trademark Office (and the
respective regulations and laws governing the same), and this Security
Agreement, any extracts hereof and any amendments hereto (pursuant to
Section 4.7(g)), with the United States Copyright Office and the United
States Patent and Trademark Office.

 

(c)                                  Further
Assurances.  The Grantor will, if so
requested by the Lender, furnish to the Lender, as often as the Lender
requests, statements and schedules further identifying and describing the
Collateral and such other reports and information in connection with the
Collateral as the Lender may reasonably request, all in such detail as the
Lender may specify.  The Grantor also
agrees to take any and all actions necessary to defend title to the Collateral
against all Persons and to defend the Liens of the Lender in the Collateral and
the priority thereof against any Lien not expressly permitted hereunder.

 

(d)                                 Disposition
of Collateral.  The Grantor will not
sell, lease or otherwise dispose of the Collateral except for dispositions
specifically permitted pursuant to Section 6.20 of the Credit Agreement.

 

(e)                                  Liens.  The Grantor will not create, incur, or
suffer to exist any Lien on the Collateral except (i) the Liens created by this
Security Agreement, and (ii) other Permitted Liens.

 

(f)                                    Other
Financing Statements.  The Grantor
will not authorize the filing of any financing statement naming it as debtor
covering all or any portion of the Collateral, except as permitted by Section 4.1(e).  The Grantor acknowledges that it is not
authorized to file any financing statement or amendment or termination
statement with respect to any financing statement without the prior written
consent of the Lender, subject to the Grantor’s rights under
Section 9-509(d)(2) of the UCC.

 

9

 

(g)                                 Locations.
The Grantor will not (i) maintain any Collateral at any location other than
those locations listed on Exhibit A (as the same may be updated from
time to time), (ii) otherwise change, or add to, such locations without the
Lender’s prior written consent, and if the Lender gives such consent, the
Grantor will concurrently therewith obtain, to the extent required by the
Credit Agreement, a Collateral Access Agreement for each such location, or
(iii) change the location of its place of business or chief executive office
from the location identified in Exhibit A, unless it gives the Lender at
least ten (10) days’ prior written notice thereof and executes any documents
that the Lender may reasonably request in connection therewith.

 

(h)                                 Compliance
with Terms.  The Grantor will
perform and comply with all obligations in respect of the Collateral and all
agreements to which it is a party or by which it is bound relating to the
Collateral.

 

(i)                                     Jurisdiction
of Organization.  The Grantor will
not change its jurisdiction of organization without the prior written consent
of Lender.

 

4.2.                              Receivables.

 

(a)                                  Certain
Agreements on Receivables.  The
Grantor will not make or agree to make any discount, credit, rebate or other
reduction in the original amount owing on a Receivable or accept in
satisfaction of a Receivable less than the original amount thereof, except
that, prior to the occurrence of a Default, the Grantor may reduce the amount
of Accounts arising from the sale of Inventory in accordance with its present
policies and in the ordinary course of business.

 

(b)                                 Collection
of Receivables.  Except as otherwise
provided in this Security Agreement, the Grantor will collect and enforce, at
the Grantor’s sole expense, all amounts due or hereafter due to the Grantor
under the Receivables.

 

(c)                                  Delivery
of Invoices.  The Grantor will
deliver to the Lender immediately upon its request after the occurrence and
during the continuation of a Default duplicate invoices with respect to each
Account bearing such language of assignment as the Lender shall specify.

 

(d)                                 Disclosure
of Counterclaims on Receivables.  If
(i) any discount, credit or agreement to make a rebate or to otherwise reduce
the amount owing on a Receivable exists or (ii) if, to the knowledge of the
Grantor, any dispute, setoff, claim, counterclaim or defense exists or has been
asserted or threatened with respect to a Receivable, the Grantor will promptly
disclose such fact to the Lender in writing. 
The Grantor shall send the Lender a copy of each credit memorandum in
excess of $25,000 as soon as issued, and the Grantor shall promptly report each
credit memorandum and each of the facts required to be disclosed to the Lender
in accordance with this Section 4.2(d) on the Borrowing Base
Certificates submitted by it.

 

(e)                                  Electronic
Chattel Paper.  The Grantor shall
take all steps necessary to grant the Lender Control of all electronic chattel
paper in accordance with the UCC and all “transferable records” as defined in
each of the Uniform Electronic Transactions Act and the Electronic Signatures
in Global and National Commerce Act.

 

4.3.                              Inventory
and Equipment.

 

(a)                                  Maintenance
of Goods.  The Grantor will do all
things necessary to maintain, preserve, protect and keep the Inventory and the
Equipment in good repair and working and saleable condition, except for

 

10

 

damaged or
defective goods arising in the ordinary course of the Grantor’s business and
except for ordinary wear and tear in respect of the Equipment.

 

(b)                                 Returned
Inventory.  If an Account Debtor
returns any Inventory to the Grantor when no Default exists, then the Grantor
shall promptly determine the reason for such return and shall issue a credit
memorandum to the Account Debtor in the appropriate amount.  The Grantor shall immediately report to the
Lender any return involving an amount in excess of $25,000.  Each such report shall indicate the reasons
for the returns and the locations and condition of the returned Inventory.  In the event any Account Debtor returns
Inventory to the Grantor when a Default exists, the Grantor, upon the request
of the Lender, shall: (i) hold the returned Inventory in trust for the Lender;
(ii) segregate all returned Inventory from all of its other property; (iii)
dispose of the returned Inventory solely according to the Lender’s written
instructions; and (iv) not issue any credits or allowances with respect thereto
without the Lender’s prior written consent. 
All returned Inventory shall be subject to the Lender’s Liens
thereon.  Whenever any Inventory is
returned, the related Account shall be deemed ineligible to the extent of the
amount owing by the Account Debtor with respect to such returned Inventory and
such returned Inventory shall not be Eligible Inventory.

 

(c)                                  Inventory
Count; Perpetual Inventory System. 
The Grantor will conduct a physical count of the Inventory at least once
per Fiscal Year, and after and during the continuation of a Default, at such
other times as the Lender requests.  The
Grantor will maintain a perpetual inventory reporting system at all times. The
Grantor, at its own expense, shall deliver to the Lender the results of each
physical verification, which the Grantor may in its discretion have made, or
caused any other Person to have made on its behalf, of all or any portion of
its Inventory.

 

(d)                                 Equipment.  The Grantor shall promptly inform the Lender
of any additions to or deletions from the Equipment which individually exceed
$50,000.  The Grantor shall not permit
any Equipment to become a fixture with respect to real property or to become an
accession with respect to other personal property with respect to which real or
personal property the Lender does not have a Lien.  The Grantor will not, without the Lender’s prior written consent,
alter or remove any identifying symbol or number on any of the Grantor’s
Equipment constituting Collateral.

 

(e)                                  Titled
Vehicles.  The Grantor will give the
Lender notice of its acquisition of any vehicle covered by a certificate of
title and deliver to the Lender, upon request, the original of any vehicle
title certificate and provide and/or file all other documents or instruments
necessary to have the Lien of the Lender noted on any such certificate or with
the appropriate state office.

 

4.4.                              Delivery
of Instruments, Securities, Chattel Paper and Documents. The Grantor will
(a) deliver to the Lender immediately upon execution of this Security Agreement
the originals of all Chattel Paper, Securities and Instruments constituting
Collateral (if any then exist), (b) hold in trust for the Lender upon receipt
and immediately thereafter deliver to the Lender any Chattel Paper, Securities
and Instruments constituting Collateral, (c) upon the Lender’s request, deliver
to the Lender (and thereafter hold in trust for the Lender upon receipt and
immediately deliver to the Lender) any Document evidencing or constituting
Collateral and (d) upon the Lender’s request, deliver to the Lender a duly
executed amendment to this Security Agreement, in the form of Exhibit I-1
hereto, pursuant to which the Grantor will pledge such additional
Collateral.  The Grantor hereby authorizes
the Lender to attach each such amendment to this Security Agreement and agrees
that all additional Collateral set forth in such amendments shall be considered
to be part of the Collateral.

 

4.5.                              Uncertificated
Securities and Certain Other Investment Property. The Grantor will permit
the Lender from time to time to cause the appropriate issuers (and, if held
with a securities intermediary, such securities intermediary) of uncertificated
securities or other types of Investment Property not represented by
certificates which are Collateral to mark their books and records with the
numbers and face amounts of all such

 

11

 

uncertificated
securities or other types of Investment Property not represented by certificates
and all rollovers and replacements therefor to reflect the Liens of the Lender
granted pursuant to this Security Agreement. 
The Grantor will take any actions necessary to cause (a) the issuers of
uncertificated securities which are Collateral and which are Securities and (b)
any securities intermediary which is the holder of any Investment Property, to
cause the Lender to have and retain Control over such Securities or other
Investment Property.  Without limiting
the foregoing, the Grantor will, with respect to Investment Property held with
a securities intermediary, cause such securities intermediary to enter into a
control agreement with the Lender, in form and substance satisfactory to the
Lender, giving the Lender Control.

 

4.6.                              Pledged
Collateral.

 

(a)                                  Changes
in Capital Structure of Issuers. Except as permitted by Section 6.19
of the Credit Agreement, the Grantor will not (i) permit or suffer any issuer
of Capital Stock constituting Pledged Collateral to dissolve, merge, liquidate,
retire any of its Capital Stock or other Instruments or Securities evidencing
ownership, reduce its capital, sell or encumber all or substantially all of its
assets (except for Permitted Liens and sales of assets permitted pursuant to Section 4.1(d))
or merge or consolidate with any other Person, or (ii) vote any Pledged
Collateral in favor of any of the foregoing.

 

(b)                                 Issuance
of Additional Securities.  The
Grantor will not permit or suffer the issuer of Capital Stock constituting
Pledged Collateral to issue additional Capital Stock, any right to receive the
same or any right to receive earnings, except to the Grantor.

 

(c)                                  Registration
of Pledged Collateral.  The Grantor
will permit any registerable Pledged Collateral to be registered in the name of
the Lender or its nominee at any time at the option of the Lender.

 

(d)                                 Exercise
of Rights in Pledged Collateral.

 

(i)                                     Without
in any way limiting the foregoing and subject to clause (ii) below, the Grantor
shall have the right to exercise all voting rights or other rights relating to
the Pledged Collateral for all purposes not inconsistent with this Security
Agreement, the Credit Agreement or any other Loan Document; provided
however, that no vote or other right shall be
exercised or action taken which would have the effect of impairing the rights
of the Lender in respect of the Pledged Collateral.

 

(ii)                                  The
Grantor will permit the Lender or its nominee at any time after the occurrence
of a Default, without notice, to exercise all voting rights or other rights
relating to Pledged Collateral, including, without limitation,  exchange, subscription or any other rights,
privileges, or options pertaining to any Capital Stock or Investment Property
constituting Pledged Collateral as if it were the absolute owner thereof.

 

(iii)                               The Grantor shall be
entitled to collect and receive for its own use all cash dividends and interest
paid in respect of the Pledged Collateral to the extent not in violation of the
Credit Agreement other than any of the following distributions and
payments (collectively referred to as the “Excluded Payments”): (A)
dividends and interest paid or payable other than in cash in respect of any
Pledged Collateral, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Pledged
Collateral;  (B) dividends and other
distributions paid or payable in cash in respect of any Pledged Collateral in
connection with a partial or total liquidation or dissolution or in connection
with a reduction of capital, capital surplus or paid-in capital of an issuer;
and (C) cash paid, payable or otherwise

 

12

 

distributed, in respect of principal of, or in
redemption of, or in exchange for, any Pledged Collateral; provided however, that until
actually paid, all rights to such distributions shall remain subject to the
Liens created by this Security Agreement; and

 

(iv)                              All
Excluded Payments and all other distributions in respect of any of the Pledged
Collateral, whenever paid or made, shall be delivered to the Lender to hold as
Pledged Collateral and shall, if received by the Grantor, be received in trust
for the benefit of the Lender, be segregated from the other property or funds
of the Grantor, and be forthwith delivered to the Lender as Pledged Collateral
in the same form as so received (with any necessary endorsement).

 

4.7.                              Intellectual
Property.

 

(a)                                  The
Grantor will use its best efforts to secure all consents and approvals
necessary or appropriate for the assignment to or benefit of the Lender of any
License or any License Right held by the Grantor and to enforce the security
interests granted hereunder.

 

(b)                                 The
Grantor shall notify the Lender immediately if it knows or has reason to know
that any application or registration relating to any material Patent, Trademark
or Copyright (now or hereafter existing) may become abandoned or dedicated, 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) regarding the Grantor’s ownership of any Patent, Trademark
or Copyright, its right to register the same, or to keep and maintain the same.

 

(c)                                  In
no event shall the Grantor, either directly or through any employee, licensee
or designee, file an application for the registration of any Patent, Trademark
or Copyright with the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency without giving the
Lender prior written notice thereof, and, upon request of the Lender, the
Grantor shall execute and deliver any and all security agreements as the Lender
may request to evidence the Lender’s first priority security interest on such
Patent, Trademark or Copyright, and the General Intangibles of the Grantor
relating thereto or represented thereby.

 

(d)                                 The
Grantor shall take all actions necessary or requested by the Lender to maintain
and pursue each application, to obtain the relevant registration and to
maintain the registration and enforceability of each of the Patents, Trademarks
and Copyrights (now or hereafter existing), including, without limitation, the
filing of applications for renewal, affidavits of use, affidavits of
noncontestability and opposition and interference and cancellation proceedings,
unless the Grantor, in its reasonable judgment shall determine that such
Patent, Trademark or Copyright is not material to the conduct of Grantor’s
business.

 

(e)                                  The
Grantor shall, unless it shall reasonably determine that such Patent
Collateral, Trademark Collateral or Copyright Collateral is in no way material
to the conduct of its business or operations, promptly sue for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and shall take such other actions
as the Lender shall deem appropriate under the circumstances to protect such
Patent Collateral, Trademark Collateral or Copyright Collateral.  In the event that the Grantor institutes
suit because any of the Patents Collateral, Trademark Collateral or Copyright
Collateral constituting Collateral is infringed upon, or misappropriated or
diluted by a third party, the Grantor shall comply with Section 4.8.

 

13

 

(f)                                    The Grantor shall not enter into any
Licenses, as licensor or licenses, except in the ordinary course of business
without the prior written consent of Bank. 
Grantor will continue to use, and will cause the use of, reasonable and
proper statutory notice in connection with its use of each Patent, Trademark
and Copyright.

 

(g)                                 The Grantor agrees that, should it obtain any
right, title or interest in any material Copyright Collateral, Patent
Collateral, or Trademark Collateral which is not now identified in Exhibit D,
(i) Grantor shall give prompt written notice to Lender, (ii) the provisions of Article II
will automatically apply to the Copyright Collateral, Patent Collateral, or
Trademark Collateral acquired or obtained, and (iii) each of such Copyright
Collateral, Patent Collateral, or Trademark Collateral will automatically
become part of the Collateral.  Upon
the Lender’s request, Grantor shall to deliver to the Lender a duly executed
amendment to this Security Agreement in the form of Exhibit I-2 hereto,
and Grantor authorizes Lender to modify
this Security Agreement, to amend Exhibit D to include any Copyright
Collateral, Patent Collateral, or Trademark Collateral which becomes part of
the Collateral under this Section 4.7(g). 
The Grantor hereby authorizes the Lender to attach each such
amendment to this Security Agreement and agrees that all additional Collateral
set forth in such amendments shall be considered to be part of the Collateral.

 

4.8.                              Commercial
Tort Claims.  The Grantor shall
promptly, and in any event within two Business Days after the same is acquired
by it, notify the Lender of any commercial tort claim (as defined in the UCC)
acquired by it and, unless the Lender otherwise consents, the Grantor shall
enter into a supplement to this Security Agreement, granting to Lender a first
priority security interest in such commercial tort claim.

 

4.9.                              Letter-of-Credit
Rights.  If the Grantor is or becomes
the beneficiary of a letter of credit, the Grantor shall promptly, and in any
event within two Business Days after becoming a beneficiary, notify the Lender
thereof and cause the issuer and/or confirmation bank to (i) consent to the
assignment of any Letter-of-Credit Rights to the Lender and (ii) agree to
direct all payments thereunder to a Deposit Account at the Lender or subject to
a Deposit Account Control Agreement for application to the Secured Obligations,
in accordance with Section 2.16 of the Credit Agreement, all in form and
substance reasonably satisfactory to the Lender.

 

4.10.                        Federal, State or Municipal
Claims.  The Grantor will promptly
notify the Lender of any Collateral which constitutes a claim against the
United States government or any state or local government or any
instrumentality or agency thereof, the assignment of which claim is restricted
by federal, state or municipal law.

 

4.11.                        No Interference.  The Grantor agrees that it will not
interfere with any right, power and remedy of the Lender provided for in this
Security Agreement or now or hereafter existing at law or in equity or by
statute or otherwise, or the exercise or beginning of the exercise by the
Lender of any one or more of such rights, powers or remedies.

 

4.12.                        Assigned Contracts.  The Grantor shall fully perform all of its
obligations under each of the Assigned Contracts, and shall enforce all of its
rights and remedies thereunder, in each case, as it deems appropriate in its
business judgment.  Without limiting the
generality of the foregoing, the Grantor shall take all action necessary or
appropriate to permit, and shall not take any action which would have any
materially adverse effect upon, the full enforcement of all indemnification
rights under its Assigned Contracts. The Grantor shall notify the Lender in
writing, promptly after the Grantor becomes aware thereof, of any event or fact
which could give rise to a material claim by it for indemnification under any
of its material Assigned Contracts, and shall diligently pursue such right and
report to the Lender on all further developments with respect thereto.  The Grantor shall deposit into a Deposit
Account at the Lender or subject to a Deposit Account Control Agreement for application
to the Secured Obligations, in accordance with Section 2.16 of the Credit
Agreement, all amounts received by the Grantor as indemnification or otherwise
pursuant to its Assigned

 

14

 

Contracts.  If the Grantor shall fail after the Lender’s
demand to pursue diligently any right under its material Assigned Contracts, or
if a Default then exists, the Lender may directly enforce such right in its own
or the Grantor’s name and may enter into such settlements or other agreements
with respect thereto as the Lender shall determine.  In any suit, proceeding or action brought by the Lender under any
material Assigned Contract for any sum owing thereunder or to enforce any
provision thereof, the Grantor shall indemnify and hold the Lender and Lender harmless
from and against all expense, loss or damage suffered by reason of any defense,
setoff, counterclaims, recoupment, or reduction of liability whatsoever of the
obligor thereunder arising out of a breach by the Grantor of any obligation
thereunder or arising out of any other agreement, indebtedness or liability at
any time owing from the Grantor to or in favor of such obligor or its
successors.  All such obligations of the
Grantor shall be and remain enforceable only against the Grantor and shall not
be enforceable against the Lender. 
Notwithstanding any provision hereof to the contrary, the Grantor shall
at all times remain liable to observe and perform all of its duties and
obligations under its Assigned Contracts, and the Lender’s exercise of any of
its rights with respect to the Collateral shall not release the Grantor from
any of such duties and obligations.  The
Lender shall not be obligated to perform or fulfill any of the Grantor’s duties
or obligations under its Assigned Contracts or to make any payment thereunder,
or to make any inquiry as to the nature or sufficiency of any payment or
property received by it thereunder or the sufficiency of performance by any
party thereunder, or to present or file any claim, or to take any action to
collect or enforce any performance, any payment of any amounts, or any delivery
of any property.

 

 

ARTICLE V

DEFAULT

 

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

 

(a)                                  Any
representation or warranty made by or on behalf of the Grantor under or in
connection with this Security Agreement shall be materially false as of the
date on which made.

 

(b)                                 The
breach by the Grantor of any of the terms or provisions of Article IV
or Article VII.

 

(c)                                  The
breach by the Grantor (other than a breach which constitutes a Default under
any other Section of this Article V) of any of the terms or
provisions of this Security Agreement which is not remedied within ten days
after such breach.

 

(d)                                 The
occurrence of any “Default” under, and as defined in, the Credit Agreement.

 

(e)                                  Any
Capital Stock which is included within the Collateral shall at any time
constitute a Security or the issuer of any such Capital Stock shall take any
action to have such interests treated as a Security unless (i) all certificates
or other documents constituting such Security have been delivered to the Lender
and such Security is properly defined as such under Article 8 of the UCC
of the applicable jurisdiction, whether as a result of actions by the issuer
thereof or otherwise, or (ii) the Lender has entered into a control agreement
with the issuer of such Security or with a securities intermediary relating to
such Security and such Security is defined as such under Article 8 of the
UCC of the applicable jurisdiction, whether as a result of actions by the
issuer thereof or otherwise.

 

15

 

5.2.                         Remedies.

 

(a)                                  Upon
the occurrence of a Default, the Lender may exercise any or all of the
following rights and remedies:

 

(i)                                     those
rights and remedies provided in this Security Agreement, the Credit Agreement,
or any other Loan Document; provided that this Section 5.2(a)
shall not be understood to limit any rights or remedies available to the Lender
prior to a Default;

 

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

 

(iii)                               give notice of sole
control or any other instruction under any Deposit Account Control Agreement or
and other control agreement with any securities intermediary and take any
action therein with respect to such Collateral;

 

(iv)                              without
notice (except as specifically provided in Section 8.1 or elsewhere
herein), demand or advertisement of any kind to Grantor or any other Person,
enter the premises of the Grantor where any Collateral is located (through
self-help and without judicial process) to collect, receive, assemble, process,
appropriate, sell, lease, assign, grant an option or options to purchase or
otherwise dispose of, deliver, or realize upon, the Collateral or any part
thereof in one or more parcels at public or private sale or sales (which sales
may be adjourned or continued from time to time with or without notice and may
take place at the Grantor’s premises or elsewhere), for cash, on credit or for
future delivery without assumption of any credit risk, and upon such other
terms as the Lender may deem commercially reasonable; and

 

(v)                                 concurrently
with written notice to the Grantor, transfer and register in its name or in the
name of its nominee the whole or any part of the Pledged Collateral, to
exchange certificates or instruments representing or evidencing Pledged
Collateral for certificates or instruments of smaller or larger denominations,
to exercise the voting and all other rights as a holder with respect thereto,
to collect and receive all cash dividends, interest, principal and other
distributions made thereon and to otherwise act with respect to the Pledged
Collateral as though the Lender was the outright owner thereof.

 

(b)                                 The
Lender may comply with any applicable state or federal law requirements in
connection with a disposition of the Collateral and compliance will not be
considered to adversely affect the commercial reasonableness of any sale of the
Collateral.

 

(c)                                  The
Lender 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 for
the benefit of the Lender, the whole or any part of the Collateral so sold,
free of any right of equity redemption, which equity redemption the Grantor
hereby expressly releases.

 

(d)                                 Until
the Lender is able to effect a sale, lease, or other disposition of Collateral,
the Lender shall have the right to hold or use Collateral, or any part thereof,
to the extent that it deems appropriate for the purpose of preserving
Collateral or its value or for any other purpose deemed appropriate by the
Lender. The Lender may, if it so elects, seek the appointment of a receiver or
keeper to take possession of Collateral and

 

16

 

to enforce any of
the Lender’s remedies, with respect to such appointment without prior notice or
hearing as to such appointment.

 

(e)                                  If,
after the Credit Agreement has terminated by its terms and all of the
Obligations have been paid in full, there remain Rate Management Obligations
outstanding, the Lender may exercise the remedies provided in this Section 5.2
upon the occurrence of any event which would allow or require the termination
or acceleration of any Rate Management Obligations pursuant to the terms of the
agreement governing any Rate Management Transaction.

 

(f)                                    Notwithstanding
the foregoing, the Lender shall not be required to (i) make any demand upon, or
pursue or exhaust any of its rights or remedies against, the Grantor, any other
obligor, guarantor, pledgor or any other Person with respect to the payment of
the Secured Obligations or to pursue or exhaust any of its rights or remedies
with respect to any Collateral therefor or any direct or indirect guarantee
thereof, (ii) marshal the Collateral or any guarantee of the Secured
Obligations or to resort to the Collateral or any such guarantee in any
particular order, or (iii) effect a public sale of any Collateral.

 

(g)                                 The
Grantor recognizes that the Lender may be unable to effect a public sale of any
or all the Pledged Collateral and may be compelled to resort to one or more
private sales thereof in accordance with clause (a) above.  The Grantor also acknowledges that any
private sale may result in prices and other terms less favorable to the seller
than if such sale were a public sale and, notwithstanding such circumstances,
agrees that any such private sale shall not be deemed to have been made in a
commercially unreasonable manner solely by virtue of such sale being private.  The Lender shall be under no obligation to
delay a sale of any of the Pledged Collateral for the period of time necessary
to permit the Grantor or the issuer of the Pledged Collateral to register such
securities for public sale under the Securities Act of 1933, as amended, or
under applicable state securities laws, even if the Grantor and the issuer
would agree to do so.

 

5.3.                              Grantor’s
Obligations Upon Default.  Upon the
request of the Lender after the occurrence of a Default, the Grantor will:

 

(a)                                  assemble
and make available to the Lender the Collateral and all books and records
relating thereto at any place or places specified by the Lender, whether at the
Grantor’s premises or elsewhere;

 

(b)                                 permit
the Lender, by the Lender’s representatives and agents, to enter any premises
where all or any part of the Collateral, or the books and records relating
thereto, or both, are located, to take possession of all or any part of the
Collateral or the books and records relating thereto, or both, to remove all or
any part of the Collateral or the books and records relating thereto, or both,
and to conduct sales of the Collateral;

 

(c)                                  prepare
and file, or cause an issuer of Pledged Collateral to prepare and file, with
the Securities and Exchange Commission or any other applicable government
agency, registration statements, a prospectus and such other documentation in
connection with the Pledged Collateral as the Lender may request, all in form
and substance satisfactory to the Lender, and furnish to the Lender, or cause
an issuer of Pledged Collateral to furnish to the Lender, any information
regarding the Pledged Collateral in such detail as the Lender may specify;

 

(d)                                 take,
or cause an issuer of Pledged Collateral to take, any and all actions necessary
to register or qualify the Pledged Collateral to enable the Lender to
consummate a public sale or other disposition of the Pledged Collateral; and

 

17

 

(e)                                  at
its own expense, cause the independent certified public accountants then
engaged by the Grantor to prepare and deliver to the Lender and each Lender, at
any time, and from time to time, promptly upon the Lender’s request, the
following reports with respect to the Grantor: (i) a reconciliation of all Accounts;
(ii) an aging of all Accounts; (iii) trial balances; and (iv) a test
verification of such Accounts as the Lender may request.

 

5.4.                              Grant
of Intellectual Property License. 
For the purpose of enabling the Lender to exercise the rights and
remedies under this Article V at such time as the Lender shall be
lawfully entitled to exercise such rights and remedies, the Grantor hereby (a)
grants to the Lender an irrevocable, nonexclusive license (exercisable without
payment of royalty or other compensation to the Grantor) to use, license or
sublicense any Intellectual Property Rights now owned or hereafter acquired by
the Grantor, and wherever the same may be located, and including, without
limitation, in such license access to all media in which any of the licensed
items may be recorded or stored and to all computer software and programs used
for the compilation or printout thereof and (b) irrevocably agrees that the
Lender may sell any of the Grantor’s Inventory directly to any Person,
including, without limitation, Persons who have previously purchased the
Grantor’s Inventory from the Grantor and in connection with any such sale or
other enforcement of the Lender’s rights under this Security Agreement, may
sell Inventory which bears any Trademark owned by or licensed to the Grantor
and any Inventory that is covered by any Copyright owned by or licensed to the
Grantor and the Lender may finish any work in process and affix any Trademark
owned by or licensed to the Grantor and sell such Inventory as provided herein.

 

 

ARTICLE VI

ATTORNEY
IN FACT; PROXY

 

6.1.                              Authorization
for Secured Party to Take Certain Action.

 

(a)                                  The
Grantor irrevocably authorizes the Lender at any time and from time to time in
the sole discretion of the Lender and appoints the Lender as its attorney in
fact (i) to execute on behalf of the Grantor as debtor and to file financing
statements and document cover sheets and recordation form cover sheets (and
this Security Agreement, any extracts hereof and any amendments hereto
(pursuant to Section 4.7(g)), necessary or desirable in the Lender’s sole
discretion to perfect and to maintain the perfection and priority of the
Lender’s security interest in the Collateral, (ii) to endorse and collect any
cash proceeds of the Collateral, (iii) to file a carbon, photographic or other
reproduction of this Security Agreement or any financing statement with respect
to the Collateral as a financing statement and to file any other financing
statement or amendment of a financing statement (which does not add new collateral
or add a debtor) in such offices as the Lender in its sole discretion deems
necessary or desirable to perfect and to maintain the perfection and priority
of the Lender’s security interest in the Collateral, (iv) to contact and enter
into one or more agreements with the issuers of uncertificated securities which
are Collateral and which are Securities or with securities intermediaries
holding other Investment Property as may be necessary or advisable to give the
Lender Control over such Securities or other Investment Property, (v) to apply
the proceeds of any Collateral received by the Lender to the Secured
Obligations as provided in the Credit Agreement, (vi) to discharge past due
taxes, assessments, charges, fees or Liens on the Collateral (except for such
Liens as are specifically permitted hereunder), and the Grantor agrees to
reimburse the Lender on demand for any payment made or any expense incurred by
the Lender in connection therewith; provided that, this authorization shall
not relieve the Grantor of any of its obligations under this Security Agreement
or under the Credit Agreement, (vii) to demand payment or enforce payment of
the Receivables in the name of the Lender or the Grantor and to endorse any and
all checks, drafts, and other instruments for the payment of money relating to
the Receivables, (viii) to sign the Grantor’s name on any invoice or bill of
lading relating to the Receivables, drafts against any Account Debtor of the
Grantor, assignments and verifications of Receivables, (ix) to exercise all of
the Grantor’s rights and remedies

 

18

 

with respect to
the collection of the Receivables and any other Collateral, (x) to settle,
adjust, compromise, extend or renew the Receivables, (xi) to settle, adjust or
compromise any legal proceedings brought to collect Receivables, (xii) to
prepare, file and sign the Grantor’s name on a proof of claim in bankruptcy or
similar document against any Account Debtor of the Grantor, (xiii) to prepare,
file and sign the Grantor’s name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with the Receivables,
(xiv) to change the address for delivery of mail addressed to the Grantor to
such address as the Lender may designate and to receive, open and dispose of
all mail addressed to the Grantor, and (xv) to do all other acts and things
necessary to carry out this Security Agreement.  In addition, the Lender may at any time, in the Lender’s own name
(if a Default exists), in the name of a nominee of the Lender (if a Default
exists), or in the name of the Grantor communicate (by mail, telephone,
facsimile or otherwise) with the Account Debtors of such Grantor, parties to
contracts with the Grantor and obligors in respect of Instruments of the
Grantor to verify with such Persons, to the Lender’s satisfaction, the
existence, amount, terms of, and any other matter relating to, Accounts,
Instruments, Chattel Paper, payment intangibles and/or other Receivables.

 

(b)                                 All
acts of said attorney or designee are hereby ratified and approved. The powers
granted pursuant to this Section 6.1(a) are coupled with an
interest and shall be irrevocable until the termination of this Security
Agreement pursuant to the terms of Section 8.15.  The powers conferred on the Lender under
this Section 6.1(a) are solely to protect the Lender’s interests in
the Collateral and shall not impose any duty upon the Lender to exercise any
such powers.  NONE OF THE LENDER OR ITS
AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE
RESPONSIBLE TO THE GRANTOR FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER
GRANTED HEREUNDER OR OTHERWISE, EXCEPT 
IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT
JURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL
DAMAGES.

 

6.2.                              PROXY.
THE GRANTOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS THE LENDER AS THE PROXY
AND ATTORNEY-IN-FACT OF THE GRANTOR WITH RESPECT TO THE PLEDGED COLLATERAL,
SECURITIES, INSTRUMENTS AND OTHER INVESTMENT PROPERTY, INCLUDING THE RIGHT TO
VOTE SUCH COLLATERAL, WITH FULL POWER OF SUBSTITUTION TO DO SO.  THE APPOINTMENT OF THE LENDER AS PROXY AND
ATTORNEY-IN-FACT IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE UNTIL THE
DATE ON WHICH THIS SECURITY AGREEMENT IS TERMINATED IN ACCORDANCE WITH SECTION 8.15.  IN ADDITION TO THE RIGHT TO VOTE ANY SUCH
COLLATERAL, THE APPOINTMENT OF THE LENDER AS PROXY AND ATTORNEY-IN-FACT SHALL
INCLUDE THE RIGHT TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND REMEDIES
TO WHICH A HOLDER OF SUCH COLLATERAL WOULD BE ENTITLED (INCLUDING GIVING OR
WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS, CALLING SPECIAL MEETINGS OF
SHAREHOLDERS AND VOTING AT SUCH MEETINGS). SUCH PROXY SHALL BE EFFECTIVE,
AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER
OF ANY SUCH COLLATERAL ON THE RECORD BOOKS OF THE ISSUER THEREOF) BY ANY PERSON
(INCLUDING THE ISSUER OF SUCH COLLATERAL OR ANY OFFICER OR THE AGENT THEREOF),
UPON THE OCCURRENCE OF A DEFAULT. 
NOTWITHSTANDING THE FOREGOING, THE LENDER SHALL NOT HAVE ANY DUTY TO
EXERCISE ANY SUCH RIGHT OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY
FAILURE TO DO SO OR FOR ANY DELAY IN DOING SO.

 

19

 

ARTICLE VII

DEPOSIT
ACCOUNTS

 

7.1.                              Covenant
Regarding New Deposit Accounts; Lock Boxes.  Before opening or replacing any Deposit Account, or establishing
a new lock box, the Grantor shall (a) obtain the Lender’s consent in writing to
the opening of such Deposit Account or lock box, and (b) cause each bank or
financial institution in which it seeks to open (i) a Deposit Account, to enter
into a Deposit Account Control Agreement with the Lender in order to give the
Lender Control of such Deposit Account, or (ii) a lock box, to enter into a
lock box agreement with the Lender in order to give the Lender Control of the
Lock Box.  In the case of Deposit
Accounts or the Lock Box maintained with Lender, the terms of such letter shall
be subject to the provisions of the Credit Agreement regarding setoffs.

 

 

ARTICLE VIII

GENERAL
PROVISIONS

 

8.1.                              Waivers.  The Grantor hereby waives notice of the time
and place of any public sale or the time after which any private sale or other
disposition of all or any part of the Collateral may be made.  To the extent such notice may not be waived
under applicable law, any notice made shall be deemed reasonable if sent to the
Grantor, addressed as set forth in Article IX, at least ten days
prior to (i) the date of any such public sale or (ii) the time after which any
such private sale or other disposition may be made.  To the maximum extent permitted by applicable law, the Grantor
waives all claims, damages, and demands against the Lender arising out of the
repossession, retention or sale of the Collateral, except such as arise solely
out of the gross negligence or willful misconduct of the Lender as finally
determined by a court of competent jurisdiction. To the extent it may lawfully
do so, the Grantor absolutely and irrevocably waives and relinquishes the
benefit and advantage of, and covenants not to assert against the Lender, any
valuation, stay, appraisal, extension, moratorium, redemption or similar laws
and any and all rights or defenses it may have as a surety now or hereafter
existing which, but for this provision, might be applicable to the sale of any
Collateral made under the judgment, order or decree of any court, or privately
under the power of sale conferred by this Security Agreement, or
otherwise.  Except as otherwise
specifically provided herein, the Grantor hereby waives presentment, demand,
protest or any notice (to the maximum extent permitted by applicable law) of
any kind in connection with this Security Agreement or any Collateral.

 

8.2.                              Limitation
on Lender’s Duty with Respect to the Collateral.  The Lender shall have no obligation to clean-up or otherwise
prepare the Collateral for sale. The Lender shall use reasonable care with
respect to the Collateral in its possession or under its control.  The Lender shall not have any other duty as
to any Collateral in its possession or control or in the possession or control
of any agent or nominee of the Lender, or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. To the extent that applicable law imposes duties on the Lender to
exercise remedies in a commercially reasonable manner, the Grantor acknowledges
and agrees that it is commercially reasonable for the Lender (i) to fail to
incur expenses deemed significant by the Lender to prepare Collateral for
disposition or otherwise to transform raw material or work in process into
finished goods or other finished products for disposition, (ii) to fail to obtain
third party consents for access to Collateral to be disposed of, or to obtain
or, if not required by other law, to fail to obtain governmental or third party
consents for the collection or disposition of Collateral to be collected or
disposed of, (iii) to fail to exercise collection remedies against Account
Debtors or other Persons obligated on Collateral or to remove Liens on or any
adverse claims against Collateral, (iv) to exercise collection remedies against
Account Debtors and other Persons obligated on Collateral directly or through
the use of collection agencies and other collection specialists, (v) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to
contact other Persons, whether or not in the same business as the Grantor, for
expressions of interest in

 

20

 

acquiring all or
any portion of such Collateral, (vii) to hire one or more professional auctioneers
to assist in the disposition of Collateral, whether or not the Collateral is of
a specialized nature, (viii) to dispose of Collateral by utilizing internet
sites that provide for the auction of assets of the types included in the
Collateral or that have the reasonable capacity of doing so, or that match
buyers and sellers of assets, (ix) to dispose of assets in wholesale rather
than retail markets, (x) to disclaim disposition warranties, such as title,
possession or quiet enjoyment, (xi) to purchase insurance or credit
enhancements to insure the Lender against risks of loss, collection or
disposition of Collateral or to provide to the Lender a guaranteed return from
the collection or disposition of Collateral, or (xii) to the extent deemed appropriate
by the Lender, to obtain the services of other brokers, investment bankers,
consultants and other professionals to assist the Lender in the collection or
disposition of any of the Collateral. 
The Grantor acknowledges that the purpose of this Section 8.2
is to provide non-exhaustive indications of what actions or omissions by the
Lender would  be commercially reasonable
in the Lender’s exercise of remedies against the Collateral and that other
actions or omissions by the Lender shall not be deemed commercially
unreasonable solely on account of not being indicated in this Section 8.2.  Without limitation upon the foregoing,
nothing contained in this Section 8.2 shall be construed to grant
any rights to the Grantor or to impose any duties on the Lender that would not
have been granted or imposed by this Security Agreement or by applicable law in
the absence of this Section 8.2.

 

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

 

8.4.                              Secured
Party Performance of Debtor Obligations. 
Without having any obligation to do so, the Lender may perform or pay
any obligation which the Grantor has agreed to perform or pay in this Security
Agreement and the Grantor shall reimburse the Lender for any amounts paid by
the Lender pursuant to this Section 8.4.  The Grantor’s obligation to reimburse the Lender pursuant to the
preceding sentence shall be a Secured Obligation payable on demand.

 

8.5.                              Specific
Performance of Certain Covenants. 
The Grantor acknowledges and agrees that a breach of any of the
covenants contained in Sections 4.1(d), 4.1(e), 4.4, 4.5,
4.6, 4.7, 4.8, 4.9, 4.10, 4.12, 5.3,
or 8.7 or in Article VII will cause irreparable injury to
the Lender, that the Lender and Lender have no adequate remedy at law in
respect of such breaches and therefore agrees, without limiting the right of
the Lender to seek and obtain specific performance of other obligations of the
Grantor contained in this Security Agreement, that the covenants of the Grantor
contained in the Sections referred to in this Section 8.5 shall be
specifically enforceable against the Grantor.

 

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

 

8.7.                              Dispositions
Not Authorized.  The Grantor is not
authorized to sell or otherwise dispose of the Collateral except as set forth
in Section 4.1(d) and notwithstanding any course of dealing between
the Grantor and the Lender or other conduct of the Lender, no authorization to
sell or otherwise dispose of the Collateral

 

21

 

(except as set
forth in Section 4.1(d)) shall be binding upon the Lender unless
such authorization is in writing signed by the Lender.

 

8.8.                              No
Waiver; Amendments; Cumulative Remedies. No delay or omission of the Lender
to exercise any right or remedy granted under this Security Agreement shall
impair such right or remedy or be construed to be a waiver of any Default or an
acquiescence therein, and any single or partial exercise of any such right or
remedy shall not preclude any other or further exercise thereof or the exercise
of any other right or remedy. No waiver, amendment or other variation of the
terms, conditions or provisions of this Security Agreement whatsoever shall be
valid unless in writing signed by the Lender and then only to the extent in
such writing specifically set forth. 
All rights and remedies contained in this Security Agreement or by law
afforded shall be cumulative and all shall be available to the Lender until the
Secured Obligations have been paid in full.

 

8.9.                              Limitation
by Law; Severability of Provisions. 
All rights, remedies and
powers provided in this Security Agreement may be exercised only to the extent
that the exercise thereof does not violate any applicable provision of law, and
all the provisions of this Security Agreement are intended to be subject to all
applicable mandatory provisions of law that may be controlling and to be
limited to the extent necessary so that they shall not render this Security
Agreement invalid, unenforceable or not entitled to be recorded or registered,
in whole or in part.  Any provision in
any this Security Agreement that is held to be inoperative, unenforceable, or
invalid in any jurisdiction shall, as to that jurisdiction, be inoperative,
unenforceable, or invalid without affecting the remaining provisions in that
jurisdiction or the operation, enforceability, or validity of that provision in
any other jurisdiction, and to this end the provisions of this Security
Agreement are declared to be severable.

 

8.10.                        Reinstatement.  This Security Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by
or against the Grantor for liquidation or reorganization, should the Grantor
become insolvent or make an assignment for the benefit of any creditor or
creditors or should a receiver or trustee be appointed for all or any
significant part of the Grantor’s assets, and shall continue to be effective or
be reinstated, as the case may be, if at any time payment and performance of
the Secured Obligations, or any part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by
any obligee of the Secured Obligations, whether as a “voidable preference,”
“fraudulent conveyance,” or otherwise, all as though such payment or
performance had not been made.  In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only
by such amount paid and not so rescinded, reduced, restored or returned.

 

8.11.                        Benefit of Agreement.  The terms and provisions of this Security
Agreement shall be binding upon and inure to the benefit of the Grantor, the
Lender and its successors and assigns (including, without limitation, all
Persons who become bound as a debtor to this Security Agreement), except that
the Grantor shall not have the right to assign its rights or delegate its
obligations under this Security Agreement or any interest herein, without the
prior written consent of the Lender.  No
sales of participations, assignments, transfers, or other dispositions of any
agreement governing the Secured Obligations or any portion thereof or interest
therein shall in any manner impair the Liens granted to the Lender hereunder.

 

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

 

8.13.                        Taxes and Expenses.  Any taxes (including, without limitation,
income taxes) payable or ruled payable by Federal or State authority in respect
of this Security Agreement shall be paid by the Grantor, together with interest
and penalties, if any.  The Grantor
shall reimburse the Lender for any and all out-of-pocket expenses and internal
charges (including, without limitation, reasonable attorneys’, auditors’ and
accountants’ fees and reasonable time charges of attorneys, paralegals,
auditors and accountants who may be

 

22

 

employees of the
Lender) paid or incurred by the Lender in connection with the preparation,
execution, delivery, administration, collection and enforcement of this
Security Agreement and in the audit, analysis, administration, collection,
preservation or sale of the Collateral (including, without limitation, the
expenses and charges associated with any periodic or special audit of the
Collateral).  Any and all costs and
expenses incurred by the Grantor in the performance of actions required
pursuant to the terms hereof shall be borne solely by the Grantor.

 

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

 

8.15.                        Termination.  This Security Agreement shall continue in
effect (notwithstanding the fact that from time to time there may be no Secured
Obligations outstanding) until (i) the Credit Agreement has terminated pursuant
to its express terms and (ii) all of the Secured Obligations have been
indefeasibly paid and performed in full and no commitments of the Lender which
would give rise to any Secured Obligations are outstanding.

 

8.16.                        Entire Agreement.  This Security Agreement embodies the entire
agreement and understanding between the Grantor and the Lender relating to the
Collateral and supersedes all prior agreements and understandings between the
Grantor and the Lender relating to the Collateral.

 

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

 

8.18.                        CONSENT TO JURISDICTION.  THE GRANTOR HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY U.S. FEDERAL OR OHIO STATE COURT SITTING
IN CINCINNATI, OHIO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT AND THE GRANTOR HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM.  NOTHING HEREIN
SHALL LIMIT THE RIGHT OF THE LENDER TO BRING PROCEEDINGS AGAINST THE GRANTOR IN
THE COURTS OF ANY OTHER JURISDICTION. 
ANY JUDICIAL PROCEEDING BY THE GRANTOR AGAINST THE LENDER OR ANY
AFFILIATE OF THE LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS SECURITY AGREEMENT OR
ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CINCINNATI, OHIO.

 

8.19.                        WAIVER OF JURY TRIAL. THE
GRANTOR AND THE LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE RELATIONSHIP
ESTABLISHED THEREUNDER.

 

8.20.                        Indemnity.  The Grantor hereby agrees to indemnify the
Lender and its successors, assigns, agents and employees, from and against any
and all liabilities, damages, penalties, suits, costs, and expenses of

 

23

 

any kind and
nature (including, without limitation, 
all expenses of litigation or preparation therefor (including, without
limitation, reasonable attorneys’ fees) whether or not the Lender is a party
thereto) imposed on, incurred by or asserted against the Lender, or its
successors, assigns, agents and employees, in any way relating to or arising
out of this Security Agreement, or the manufacture, purchase, acceptance,
rejection, ownership, delivery, lease, possession, use, operation, condition,
sale, return or other disposition of any Collateral (including, without
limitation, latent and other defects, whether or not discoverable by the Lender
or the Grantor, and any claim for Patent, Trademark or Copyright infringement).

 

8.21.                        Counterparts.  This Security Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one
agreement, and any of the parties hereto may execute this Security Agreement by
signing any such counterpart.

 

ARTICLE IX

NOTICES

 

9.1.                              Sending
Notices.  Any notice required or
permitted to be given under this Security Agreement shall be sent by United
States mail, telecopier, personal delivery or nationally established overnight
courier service, and shall be deemed received (a) when received, if sent by
hand or overnight courier service, or mailed by certified or registered mail
notices or (b) when sent, if sent by telecopier (except that, if not given
during normal business hours for the recipient, shall be deemed to have been
given at the opening of business on the next Business Day for the recipient),
in each case addressed to the Grantor at the address set forth on Exhibit A
as its principal place of business, and to the Lender at the address set forth
in the Credit Agreement.

 

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

 

[Signature Page Follows]

 

24

 

IN WITNESS WHEREOF, the Grantor and the Lender have
executed this Security Agreement as of the date first above written.

 

	
   

  	
  GRANTOR:

  
	
   

  	
   

  
	
   

  	
  MAGNETEK, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David P.
  Reiland

  	
   

  
	
   

  	
  Name:

  	
  David P. Reiland

  
	
   

  	
  Title:

  	
  Executive Vice
  President and

  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  BANK ONE, NA

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David L.
  Carey

  	
   

  
	
   

  	
  Name:

  	
  David L. Carey

  
	
   

  	
  Title:

  	
  Director

  
					

 

 

EXHIBIT
I-1

(See Section 4.4 of
Security Agreement)

 

AMENDMENT

 

 

This Amendment,
dated
                     ,
     is delivered pursuant to Section 4.4 of
the Security Agreement referred to below. 
All defined terms herein shall have the meanings ascribed thereto or
incorporated by reference in the Security Agreement.  The undersigned hereby certifies that the representations and
warranties in Article III of the Security Agreement are and
continue to be true and correct.  The
undersigned further agrees that this Amendment may be attached to that certain
Security Agreement, dated August 15, 2003, between the undersigned, as the
Grantor, and Bank One, NA, as the Lender, (the “Security Agreement”) and that
the Collateral listed on Schedule I to this Amendment shall be and
become a part of the Collateral referred to in said Security Agreement and
shall secure all Secured Obligations referred to in said Security Agreement.

 

	
   

  	
  MAGNETEK, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

 

SCHEDULE  I TO
AMENDMENT

 

 

EXHIBIT
I-2

(See Section 4.7(g) of Security Agreement)

 

AMENDMENT

 

 

This Amendment,
dated
                     ,
     is delivered pursuant to Section 4.7(g) of
the Security Agreement referred to below. 
All defined terms herein shall have the meanings ascribed thereto or
incorporated by reference in the Security Agreement.  The undersigned hereby certifies that the representations and
warranties in Article III of the Security Agreement are and
continue to be true and correct.  The
undersigned further agrees that this Amendment may be attached to that certain
Security Agreement, dated August 15, 2003, between the undersigned, as the
Grantor, and Bank One, NA, as the Lender, (the “Security Agreement”) and that
the Collateral listed on Schedule I to this Amendment shall be and
become a part of the Collateral referred to in said Security Agreement and
shall secure all Secured Obligations referred to in said Security Agreement.

 

	
   

  	
  MAGNETEK, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

 

SCHEDULE I TO
AMENDMENTExhibit
10.3

 

PLEDGE AND SECURITY AGREEMENT

 

THIS PLEDGE AND
SECURITY AGREEMENT (as it may be amended or modified from time to time, this “Security
Agreement”) is entered into as of August 15, 2003 by and between
MAGNETEK ADS POWER, INC., a Delaware corporation, with an address of 2025 Royal
Lane, Dallas, Texas 75229 (the “Grantor”), and BANK ONE, NA, a national
banking association having its principal office in Chicago, Illinois with an
address of 8044 Montgomery Road, Cincinnati, Ohio 45236 (“Lender”).

 

PRELIMINARY STATEMENT

 

The Grantor, the Lender and the Loan Parties are entering into a Credit
Agreement dated of even date herewith (as it may be amended or modified from
time to time, the “Credit Agreement”). 
The Grantor is entering into this Security Agreement in order to induce
the Lender to enter into and extend credit under the Credit Agreement.

 

ACCORDINGLY, the Grantor and the Lender hereby agree as follows:

 

 

ARTICLE I

DEFINITIONS

 

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

 

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

 

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

 

“Accounts” shall have the meaning set forth in
Article 9 of the UCC.

 

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

 

“Assigned Contracts” means, collectively, all
of the Grantor’s rights and remedies under, and all moneys and claims for money
due or to become due to the Grantor under any contracts, and any and all
amendments, supplements, extensions, and renewals thereof including, without
limitation, all rights and claims of the Grantor now or hereafter existing: (a)
under any insurance, indemnities, warranties, and guarantees provided for or
arising out of or in connection with any of the foregoing agreements; (b) for
any damages arising out of or for breach or default under or in connection with
any of the foregoing agreements; (c) to all other amounts from time to time
paid or payable under or in connection with any of the foregoing agreements; or
(d) to exercise or enforce any and all covenants, remedies, powers and
privileges thereunder.

 

“Chattel Paper” shall have the meaning set forth
in Article 9 of the UCC.

 

“Collateral” shall have the meaning set forth
in Article II.

 

 

“Collateral Report” means any certificate,
report or other document delivered by the Grantor to the Lender with respect to
the Collateral pursuant to any Loan Document.

 

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

 

“Copyright
Collateral” has the meaning set forth in Article II.

 

“Copyright
License Rights” means all right, title and interest of Grantor as licensor
or licensee under, and with respect to, any Copyrights, including under any
Licenses.

 

“Copyrights” means, with respect to any Person,
all of such Person’s right, title, and interest in and to the following:  (a) all copyrights, rights and interests in
copyrights, works protectable by copyright, copyright registrations, and
copyright applications; (b) all licenses of the foregoing, whether as licensee
or licensor; (c) all renewals of any of the foregoing; (d) all income,
royalties, damages, and payments now or hereafter due and/or payable under any
of the foregoing, including, without limitation,  damages or payments for past or future infringements for any of
the foregoing; (e) the right to sue for past, present, and future infringements
of any of the foregoing; and (f) all rights corresponding to any of the
foregoing throughout the world.

 

“Default” means an event described in Section 5.1.

 

“Deposit Accounts” shall have the meaning set
forth in Article 9 of the UCC.

 

“Documents” shall have the meaning set forth in
Article 9 of the UCC.

 

“Equipment” shall have the meaning set forth in
Article 9 of the UCC.

 

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

 

“Farm Products” shall have the meaning set
forth in Article 9 of the UCC.

 

“Fixtures” shall have the meaning set forth in
Article 9 of the UCC.

 

“General Intangibles” shall have the meaning
set forth in Article 9 of the UCC.

 

“Goods” shall have the meaning set forth in
Article 9 of the UCC.

 

“Instruments” shall have the meaning set forth
in Article 9 of the UCC.

 

“Inventory” shall have the meaning set forth in
Article 9 of the UCC.

 

“Investment Property” shall have the meaning
set forth in Article 9 of the UCC.

 

“Letter-of-Credit Rights” shall have the
meaning set forth in Article 9 of the UCC.

 

“License Rights” means, collectively, all
Copyright License Rights, Patent License Rights and Trademark License Rights.

 

“Licenses” means, with respect to any Person,
all of such Person’s right, title, and interest in and to (a)

 

2

 

any and all licensing
agreements or similar arrangements in and to any Patents, Copyrights, or
Trademarks, (b) all income, royalties, damages, claims, and payments now or
hereafter due or payable under and with respect thereto, including, without
limitation,  damages and payments for
past and future breaches thereof, and (c) all rights to sue for past, present,
and future breaches thereof.

 

“Patent
Collateral” has the meaning set forth in Article II.

 

“Patent
License Rights” means all right, title and interest of Grantor as licensor
or licensee under, and with respect to, any Patent, including under any
Licenses.

 

“Patents” means, with respect to any Person,
all of such Person’s right, title, and interest in and to:  (a) any and all patents and patent
applications; (b) all inventions and improvements described and claimed
therein; (c) all reissues, divisions, continuations, renewals, extensions, and
continuations-in-part thereof; (d) all licenses of the foregoing, whether as
licensee or licensor; (e) all income, royalties, damages, claims, and payments
now or hereafter due or payable under and with respect thereto, including, without
limitation,  damages and payments for
past and future infringements thereof; (f) all rights to sue for past, present,
and future infringements thereof; and (g) all rights corresponding to any of
the foregoing throughout the world.

 

“Pledged Collateral” means all Instruments,
Securities and other Investment Property physically delivered to the Lender
pursuant to this Security Agreement.

 

“Receivables” means the Accounts, Chattel
Paper, Documents, Investment Property, Instruments and any other rights or claims
to receive money which are General Intangibles or which are otherwise included
as Collateral.

 

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

 

“Security” has the meaning set forth in Article 8
of the UCC.

 

“Stock Rights” means all dividends, instruments
or other distributions and any other right or property which the Grantor shall
receive or shall become entitled to receive for any reason whatsoever with
respect to, in substitution for or in exchange for any Capital Stock
constituting Collateral, any right to receive Capital Stock and any right to
receive earnings, in which the Grantor now has or hereafter acquires any right,
issued by an issuer of such Capital Stock.

 

“Trademark
Collateral” has the meaning set forth in Article II.

 

“Trademark
License Rights” means all right, title and interest of Grantor as licensor
or licensee under, and with respect to, any Trademark, including under any
Licenses.

 

“Trademarks” means, with respect to any Person,
all of such Person’s right, title, and interest in and to the following:  (a) all trademarks (including, without
limitation, service marks), trade names, trade dress, and trade styles and the
registrations and applications for registration thereof and the goodwill of the
business symbolized by the foregoing; (b) all licenses of the foregoing,
whether as licensee or licensor; (c) all renewals of the foregoing; (d) all
income, royalties, damages, and payments now or hereafter due or payable with respect
thereto, including, without limitation, 
damages, claims, and payments for past and future infringements thereof;
(e) all rights to sue for past, present, and future infringements of the
foregoing, including, without limitation, the right to settle suits involving
claims and demands for royalties
owing; and (f) all rights corresponding to any of the foregoing throughout the
world; provided
however, nothing in this Security Agreement is intended to be,

 

3

 

or
may be construed to be, an assignment of any application to register any
trademark or service mark based on any intent to use filed by, or on behalf of,
Grantor (“Intent to Use Applications”), and any Intent to Use
Applications are specifically excluded from Trademark Collateral for purposes
of this Agreement.

 

“UCC” means the Uniform Commercial Code, as in
effect from time to time, of the State of Ohio  or of any other state the
laws of which are required as a result thereof to be applied in connection with
the attachment, perfection or priority of, or remedies with respect to,
Lender’s Liens on any Collateral.

 

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

 

 

ARTICLE II

GRANT OF SECURITY INTEREST

 

The Grantor hereby pledges, assigns and grants to the
Lender a continuing security interest in and Lien on, all of its right, title
and interest in, to and under all personal property and other assets, whether
now owned by or owing to, or hereafter acquired by or arising in favor of the
Grantor (including, without limitation, under any trade name or derivations
thereof), and whether owned or consigned by or to, or leased from or to, the
Grantor, and regardless of where located (all of which will be collectively
referred to as the “Collateral”), including, without limitation:

 

	
  (i)

  	
   

  	
  all Accounts;

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  all Chattel
  Paper;

  
	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  all Goods;

  
	
   

  	
   

  	
   

  
	
  (iv)

  	
   

  	
  all Documents;

  
	
   

  	
   

  	
   

  
	
  (v)

  	
   

  	
  all Equipment;

  
	
   

  	
   

  	
   

  
	
  (vi)

  	
   

  	
  all Fixtures;

  
	
   

  	
   

  	
   

  
	
  (vii)

  	
   

  	
  all General
  Intangibles;

  
	
   

  	
   

  	
   

  
	
  (viii)

  	
   

  	
  all Instruments;

  
	
   

  	
   

  	
   

  
	
  (ix)

  	
   

  	
  all Inventory;

  
	
   

  	
   

  	
   

  
	
  (x)

  	
   

  	
  all Investment
  Property;

  
	
   

  	
   

  	
   

  
	
  (xi)

  	
   

  	
  all cash or cash
  equivalents;

  
	
   

  	
   

  	
   

  
	
  (xii)

  	
   

  	
  all letters of
  credit and Letter-of-Credit Rights;

  
	
   

  	
   

  	
   

  
	
  (xiii)

  	
   

  	
  all Deposit
  Accounts with any bank or other financial institution;

  
	
   

  	
   

  	
   

  
	
  (xiv)

  	
   

  	
  all Assigned
  Contracts;

  
	
   

  	
   

  	
   

  
	
  (xv)

  	
   

  	
  all Farm
  Products;

  
	
   

  	
   

  	
   

  
	
  (xvi)

  	
   

  	
  all Copyrights,
  Licenses with respect to Copyrights and Copyright License Rights (“Copyright
  Collateral”);

  
	
   

  	
   

  	
   

  
	
  (xvii)

  	
   

  	
  all Patents,
  Licenses with respect to Patents and Patent License Rights (“Patent
  Collateral”);

  

 

4

 

	
  (xviii)

  	
   

  	
  all Trademarks,
  Licenses with respect to Trademarks and Trademark License Rights (“Trademark
  Collateral”);

  
	
   

  	
   

  	
   

  
	
  (xix)

  	
   

  	
  and all
  accessions to, substitutions for and replacements, proceeds (including,
  without limitation, Stock Rights), insurance proceeds and products of the
  foregoing, together with all books and records, customer lists, credit files,
  computer files, programs, printouts and other computer materials and records
  related thereto;

  

 

to secure the prompt and complete payment and performance of the
Secured Obligations; provided, however, the Collateral shall
not include Excluded Foreign Stock.

 

 

ARTICLE III

REPRESENTATIONS
AND WARRANTIES

 

The Grantor represents and warrants to the Lender that:

 

3.1.                              Title,
Perfection and Priority.  The
Grantor has good and valid rights in or the power to transfer the Collateral
and title to the Collateral with respect to which it has purported to grant a
security interest in, and Lien on, hereunder, free and clear of all Liens
except for Liens permitted under Section 4.1(e), and has full power
and authority to grant to the Lender the security interest in and Lien on such
Collateral pursuant hereto.  When
financing statements have been filed in the appropriate offices against the
Grantor in the locations listed on Exhibit H, the Lender will have a
fully perfected first priority security interest in that Collateral in which a
security interest may be perfected by filing, subject only to Liens permitted
under Section 4.1(e).

 

3.2.                              Type
and Jurisdiction of Organization, Organizational and Identification Numbers.  The type of entity of the Grantor, its
jurisdiction of organization, the organizational number issued to it by its
jurisdiction of organization and its federal employer identification number are
set forth on Exhibit A.

 

3.3.                              Principal
Location.  The Grantor’s mailing
address and the location of its place of business (if it has only one) or its
chief executive office (if it has more than one place of business), is, as of
the Closing Date, disclosed in Exhibit A; as of the Closing Date, the
Grantor has no other places of business except those set forth in Exhibit A.

 

3.4.                              Collateral
Locations.  All of Grantor’s
locations where Collateral is located, as of the Closing Date, are listed on Exhibit
A.  All of said locations are owned
by the Grantor except for locations (i) which are leased by the Grantor as
lessee and designated in Part VII(b) of Exhibit A and (ii) at
which Inventory is held in a public warehouse or is otherwise held by a bailee
or on consignment as designated in Part VII(c) of Exhibit A.

 

3.5.                              Deposit
Accounts.  All of the Grantor’s
Deposit Accounts as of the Closing Date are listed on Exhibit B.

 

3.6.                              Exact
Names.  The Grantor’s name in which
it has executed this Security Agreement is the exact name as it appears in the
Grantor’s organizational documents, as amended, as filed with the Grantor’s
jurisdiction of organization.

 

3.7.                              Letter-of-Credit
Rights and Chattel Paper.  Exhibit
C lists as of the Closing Date all of Grantor’s Letter-of-Credit Rights and
Chattel Paper.  All action by the
Grantor necessary to protect and perfect the Lender’s security interest and
Liens on each item listed on Exhibit C (including, without limitation,
the

 

5

 

delivery of all
originals and the placement of a legend on all Chattel Paper as required
hereunder) has been duly taken. The Lender will have a fully perfected first
priority security interest and Lien in the Collateral listed on Exhibit C,
subject only to Liens permitted under Section 4.1(e).

 

3.8.                              Accounts
and Chattel Paper.

 

(a)                                  The
names of the obligors, amounts owing, due dates and other information with
respect to the Accounts and Chattel Paper are and will be correctly stated in
all records of the Grantor relating thereto and in all invoices and Collateral
Reports with respect thereto furnished to the Lender by the Grantor from time
to time.  As of the time when each
Account or each item of Chattel Paper arises, the Grantor shall be deemed to
have represented and warranted that such Account or Chattel Paper, as the case
may be, and all records relating thereto, are genuine and in all respects what
they purport to be.

 

(b)                                 With
respect to Accounts, except as specifically disclosed on the most recent
Collateral Report or otherwise identified in a Record transmitted to Lender by
Grantor, (i) all Accounts are Eligible Accounts; (ii) all Accounts represent
bona fide sales of Inventory or rendering of services to Account Debtors in the
ordinary course of the Grantor’s business and are not evidenced by a judgment,
Instrument or Chattel Paper; (iii) there are no setoffs, claims or disputes
existing or asserted with respect thereto and the Grantor has not made any
agreement with any Account Debtor for any extension of time for the payment
thereof, any compromise or settlement for less than the full amount thereof,
any release of any Account Debtor from liability therefor, or any deduction
therefrom except a discount or allowance allowed by Grantor in the ordinary
course of its business for prompt payment and disclosed to the Lender; (iv) to
Grantor’s knowledge, there are no facts, events or occurrences which in any way
impair the validity or enforceability thereof or could reasonably be expected
to reduce the amount payable thereunder as shown on the Grantor’s books and
records and any invoices, statements and Collateral Reports with respect
thereto; (v) the Grantor has not received any notice of proceedings or actions
which are threatened or pending against any Account Debtor which might result
in any adverse change in such Account Debtor’s financial condition; and (vi)
the Grantor has no knowledge that any Account Debtor is unable generally to pay
its debts as they become due.

 

(c)                                  In
addition, with respect to all Accounts, (i) the amounts shown on all invoices,
statements and Collateral Reports with respect thereto are actually and
absolutely owing to the Grantor as indicated thereon and are not in any way
contingent; (ii) no payments have been or shall be made thereon except payments
immediately delivered to the Lock Box or a Cash Collateral Account as required
pursuant to the Credit Agreement; and (iii) to the Grantor’s knowledge, all
Account Debtors have the capacity to contract.

 

3.9.                              Inventory.  With respect to any Inventory scheduled or
listed on the most recent Collateral Report, (a) such Inventory (other than
Inventory in transit) is located at one of the Grantor’s locations set forth on
Exhibit A as such Exhibit may be updated from time to time upon mutual
agreement of Grantor and Lender, (b) no Inventory (other than Inventory in
transit) is now, or shall at any time or times hereafter be stored at any other
location except as permitted by Section 4.1(g), (c) the Grantor has
good, indefeasible and merchantable title to such Inventory and such Inventory
is not subject to any Lien or document whatsoever except for the Liens granted
to the Lender, and except for Permitted Liens, (d) except as specifically
disclosed in the most recent Collateral Report or otherwise identified in a
Record transmitted to Lender by Grantor, such Inventory is Eligible Inventory
of good and merchantable quality, free from any defects, (e) such Inventory is
not subject to any licensing, patent, royalty, trademark, trade name or
copyright agreements with any third parties which would require any consent of
any third party upon sale or disposition of that Inventory or the payment of
any monies to any third party upon such sale or other disposition, (f) such
Inventory has been produced in accordance with the Federal Fair Labor Standards
Act of 1938, as amended, and all rules, regulations and orders thereunder and
(g) the completion of manufacture, sale or other disposition of such Inventory
by the

 

6

 

Lender following a Default shall not require the consent of any Person
and shall not constitute a breach or default under any contract or agreement to
which the Grantor is a party or to which such property is subject.

 

3.10.                        Intellectual Property.

 

(a)                                  The
Grantor does not have any interest in, or title to, any Patent Collateral,
Trademark Collateral or Copyright Collateral except as set forth in Exhibit
D.  This Security Agreement is
effective to create a valid and continuing Lien and, upon filing of this
Security Agreement (and, in the case of Copyright Collateral described in
Section 4.7(g), any amendments hereto) with the United States Copyright
Office and the filing of appropriate financing statements in the appropriate
filing offices, fully perfected first priority security interests in favor of
the Lender on the Grantor’s Patents, Trademarks and Copyrights (subject to
Permitted Liens), and, upon completion of the foregoing actions, all action
necessary or desirable to protect and perfect the Lender’s security interest and Liens on the Patent Collateral,
Trademark Collateral or Copyright Collateral shall have been duly taken.

 

(b)                                 Each registered Patent
identified in Exhibit D is subsisting and has not been adjudged invalid,
unpatentable, or unenforceable, in whole or in part, and is enforceable, except
as otherwise set forth on Exhibit D. 
Grantor has not granted any license, release, covenant not to sue, or
non-assertion assurance to any Person with respect to any part of the Patent
Collateral except as otherwise disclosed in Exhibit D.  The Patent License Rights are in full force
and effect, and Grantor is not in default under any of the Patent License
Rights, and, to Grantor’s knowledge, no event has occurred which with notice,
the passage of time, the satisfaction of any other condition, or all of them,
might constitute a default by Grantor under the Patent License Rights.

 

(c)                                  Each registered Trademark identified in Exhibit
D is subsisting and has not been adjudged invalid, unregisterable or
unenforceable, in whole or in part, and each registered trademark and service
mark and, to Grantor’s knowledge, each application for trademark and service
mark registration is valid, registered or registrable and enforceable.  Grantor has notified Lender in writing of
all prior uses of any material item of Trademark Collateral of which Grantor is
aware which could lead to such item becoming invalid or unenforceable,
including prior unauthorized uses by third parties and uses which were not
supported by the goodwill of the business connected with such item.  Grantor has not granted any license,
release, covenant not to sue, or non-assertion assurance to any Person with
respect to any part of the Trademark Collateral except as otherwise disclosed
in Exhibit D.  Reasonable and
proper statutory notice has been used in connection with the use of each
registered trademark and service mark. 
The Trademark License Rights are in full force and effect, and Grantor
is not in default under any of the Trademark License Rights and, to Grantor’s
knowledge, no event has occurred which with notice, the passage of time, the
satisfaction of any other condition, or all of them, might constitute a default
by Grantor under the Trademark License Rights.

 

(d)                                 Each registered Copyright identified in Exhibit
D is subsisting and has not been adjudged invalid, unregisterable or
unenforceable, in whole or in part, and each registered Copyright and, to
Grantor’s knowledge, each application for copyright registration is valid,
registered or registrable and enforceable. 
Grantor has not granted any license,
release, covenant not to sue, or non-assertion assurance to any Person with respect
to any part of the Copyright Collateral except as otherwise disclosed in Exhibit
D.  Reasonable and proper
statutory notice has been used in connection with the use of each registered
copyright.  The Copyright License Rights
are in full force and effect, and Grantor is not in default under any of the
Copyright License Rights and, to Grantor’s knowledge, no event has occurred
which with notice, the passage of time, the satisfaction of any other
condition, or all of them, might constitute a default by Grantor under the
Copyright License Rights.

 

3.11.                        Filing Requirements.  As of the Closing Date, none of the
Equipment is covered by any certificate of title, except for the vehicles
described in Part I of Exhibit E. 
None of the Collateral is of a type

 

7

 

for which Liens
may be perfected by filing under any federal statute except for (a) the
vehicles described in Part II of Exhibit E and (b) Patents, Trademarks
and Copyrights held by the Grantor and described in Exhibit D.  The county and street address of each
property on which any Fixtures are located is set forth in Exhibit F
together with the name and address of the record owner of each such property.

 

3.12.                        No Financing Statements,
Security Agreements.  No valid
financing statement or security agreement describing all or any portion of the
Collateral which has not lapsed or been terminated naming the Grantor as debtor
has been filed or is of record in any jurisdiction except (a) for financing
statements or security agreements naming the Lender as the secured party and
(b) as permitted by Section 4.1(e).

 

3.13.                        Pledged Collateral,
Instruments and Other Investment Property.

 

(a)                                  Exhibit
G sets forth, as of the Closing Date, a complete and accurate list of all
of the Pledged Collateral delivered to the Lender and all of the Instruments,
Securities and Investment Property owned by the Grantor.  The Grantor is the direct, sole beneficial
owner and sole holder of record of each Instrument, Security and other type of
Investment Property listed on Exhibit G as being owned by it, free and
clear of any Liens, except for the Liens granted to the Lender.  The Grantor further represents and warrants
that (i) all such Instruments, Securities or other types of Investment Property
which are Capital Stock of a Subsidiary have been (to the extent such concepts
are relevant with respect to such Instrument, Security or other type of
Investment Property) duly authorized, validly issued, are fully paid and
non-assessable, (ii) with respect to any certificates delivered to the Lender
representing Capital Stock, either such certificates are Securities as defined
in Article 8 of the UCC as a result of actions by the issuer or otherwise,
or, if such certificates are not Securities, the Grantor has so informed the
Lender so that the Lender may take steps to perfect its security interest
therein as a General Intangible, (iii) except as agreed by Lender, all such
Securities or other types of Investment Property held by a securities intermediary
are covered by a control agreement among the Grantor, the securities
intermediary and the Lender pursuant to which the Lender has Control and (iv)
all Instruments which represent Indebtedness owed to the Grantor by a
Subsidiary thereof have been duly authorized, authenticated or issued and
delivered by the issuer of such Indebtedness, are the legal, valid and binding
obligation of such issuer and such issuer is not in default thereunder.

 

(b)                                 In
addition, (i) none of the Pledged Collateral has been issued or transferred in
violation of the securities registration, securities disclosure or similar laws
of any jurisdiction to which such issuance or transfer may be subject, (ii)
there are existing no options, warrants, calls or commitments of any character
whatsoever relating to the Pledged Collateral or which obligate the issuer of
any Capital Stock included in the Pledged Collateral to issue additional
Capital Stock, and (iii) no consent, approval, authorization, or other action
by, and no giving of notice, filing with, any governmental authority or any
other Person is required for the pledge by the Grantor of the Pledged
Collateral pursuant to this Security Agreement or for the execution, delivery
and performance of this Security Agreement by the Grantor, or for the exercise
by the Lender of the voting or other rights provided for in this Security
Agreement or for the remedies in respect of the Pledged Collateral pursuant to
this Security Agreement, except as may be required in connection with such disposition
by laws affecting the offering and sale of securities generally.

 

(c)                                  Except
as set forth in Exhibit G, the Grantor owns 100% of the issued and
outstanding Capital Stock which constitutes Pledged Collateral and none of the
Pledged Collateral which represents Indebtedness owed to the Grantor is
subordinated in right of payment to other Indebtedness or subject to the terms
of an indenture.

 

8

 

ARTICLE IV

COVENANTS

 

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

 

4.1.                              General.

 

(a)                                  Collateral
Records.  The Grantor will maintain
complete and accurate books and records with respect to the Collateral, and
furnish to the Lender such reports relating to the Collateral as the Lender
shall from time to time request.

 

(b)                                 Authorization
to File Financing Statements and Recordation Form Cover Sheets; Ratification.  The Grantor hereby authorizes the Lender to
file, and if requested will deliver to the Lender, all financing statements and
other documents and take such other actions as may from time to time be
requested by the Lender in order to maintain a first perfected security
interest in, Lien on and, if applicable, Control of, the Collateral.  Any financing statement filed by the Lender
may be filed in any filing office in any UCC jurisdiction and may (i) indicate
the Collateral (1) as all assets of the Grantor or words of similar effect,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the UCC or such jurisdiction, or (2) by
any other description which reasonably approximates the description contained
in this Security Agreement, and (ii) contain any other information required by
part 5 of Article 9 of the UCC for the sufficiency or filing office
acceptance of any financing statement or amendment, including, without
limitation, (A) whether the Grantor is an organization, the type of
organization and any organization identification number issued to the Grantor,
and (B) in the case of a financing statement filed as a fixture filing or
indicating Collateral as as-extracted collateral or timber to be cut, a
sufficient description of real property to which the Collateral relates.  The Grantor also agrees to furnish any such
information to the Lender promptly upon request.  The Grantor also ratifies its authorization for the Lender to
have filed in any UCC jurisdiction any initial financing statements or
amendments thereto if filed prior to the date hereof.  The Grantor hereby authorizes the Lender to complete, execute and
file any document cover sheets and recordation form cover sheets evidencing
security interests in the Copyright Collateral, the Trademark Collateral and
the Patent Collateral, permitted or required to evidence such security
interests by the United States Copyright Office or the United States Patent and
Trademark Office (and the respective regulations and laws governing the same),
and this Security Agreement, any extracts hereof and any amendments hereto
(pursuant to Section 4.7(g)), with the United States Copyright Office and
the United States Patent and Trademark Office.

 

(c)                                  Further
Assurances.  The Grantor will, if so
requested by the Lender, furnish to the Lender, as often as the Lender requests,
statements and schedules further identifying and describing the Collateral and
such other reports and information in connection with the Collateral as the
Lender may reasonably request, all in such detail as the Lender may specify.  The Grantor also agrees to take any and all
actions necessary to defend title to the Collateral against all Persons and to
defend the Liens of the Lender in the Collateral and the priority thereof
against any Lien not expressly permitted hereunder.

 

(d)                                 Disposition
of Collateral.  The Grantor will not
sell, lease or otherwise dispose of the Collateral except for dispositions
specifically permitted pursuant to Section 6.20 of the Credit Agreement.

 

(e)                                  Liens.  The Grantor will not create, incur, or
suffer to exist any Lien on the Collateral except (i) the Liens created by this
Security Agreement, and (ii) other Permitted Liens.

 

(f)                                    Other
Financing Statements.  The Grantor
will not authorize the filing of any financing statement naming it as debtor
covering all or any portion of the Collateral, except as permitted by Section 4.1(e).  The Grantor acknowledges that it is not
authorized to file any financing statement or amendment or termination
statement with respect to any financing statement without the prior written
consent of the Lender, subject to the Grantor’s rights under
Section 9-509(d)(2) of the UCC.

 

9

 

(g)                                 Locations.
The Grantor will not (i) maintain any Collateral at any location other than
those locations listed on Exhibit A (as the same may be updated from
time to time), (ii) otherwise change, or add to, such locations without the
Lender’s prior written consent, and if the Lender gives such consent, the
Grantor will concurrently therewith obtain, to the extent required by the
Credit Agreement, a Collateral Access Agreement for each such location, or
(iii) change the location of its place of business or chief executive office
from the location identified in Exhibit A, unless it gives the Lender at
least ten (10) days’ prior written notice thereof and executes any documents
that the Lender may reasonably request in connection therewith.

 

(h)                                 Compliance
with Terms.  The Grantor will
perform and comply with all obligations in respect of the Collateral and all
agreements to which it is a party or by which it is bound relating to the
Collateral.

 

(i)                                     Jurisdiction
of Organization.  The Grantor will
not change its jurisdiction of organization without the prior written consent
of Lender.

 

4.2.                              Receivables.

 

(a)                                  Certain
Agreements on Receivables.  The
Grantor will not make or agree to make any discount, credit, rebate or other
reduction in the original amount owing on a Receivable or accept in
satisfaction of a Receivable less than the original amount thereof, except
that, prior to the occurrence of a Default, the Grantor may reduce the amount
of Accounts arising from the sale of Inventory in accordance with its present
policies and in the ordinary course of business.

 

(b)                                 Collection
of Receivables.  Except as otherwise
provided in this Security Agreement, the Grantor will collect and enforce, at
the Grantor’s sole expense, all amounts due or hereafter due to the Grantor
under the Receivables.

 

(c)                                  Delivery
of Invoices.  The Grantor will
deliver to the Lender immediately upon its request after the occurrence and
during the continuation of a Default duplicate invoices with respect to each
Account bearing such language of assignment as the Lender shall specify.

 

(d)                                 Disclosure
of Counterclaims on Receivables.  If
(i) any discount, credit or agreement to make a rebate or to otherwise reduce
the amount owing on a Receivable exists or (ii) if, to the knowledge of the
Grantor, any dispute, setoff, claim, counterclaim or defense exists or has been
asserted or threatened with respect to a Receivable, the Grantor will promptly
disclose such fact to the Lender in writing. 
The Grantor shall send the Lender a copy of each credit memorandum in
excess of $25,000 as soon as issued, and the Grantor shall promptly report each
credit memorandum and each of the facts required to be disclosed to the Lender
in accordance with this Section 4.2(d) on the Borrowing Base
Certificates submitted by it.

 

(e)                                  Electronic
Chattel Paper.  The Grantor shall
take all steps necessary to grant the Lender Control of all electronic chattel
paper in accordance with the UCC and all “transferable records” as defined in
each of the Uniform Electronic Transactions Act and the Electronic Signatures
in Global and National Commerce Act.

 

4.3.                              Inventory
and Equipment.

 

(a)                                  Maintenance
of Goods.  The Grantor will do all
things necessary to maintain, preserve, protect and keep the Inventory and the
Equipment in good repair and working and saleable condition, except for

 

10

 

damaged or defective
goods arising in the ordinary course of the Grantor’s business and except for
ordinary wear and tear in respect of the Equipment.

 

(b)                                 Returned
Inventory.  If an Account Debtor
returns any Inventory to the Grantor when no Default exists, then the Grantor
shall promptly determine the reason for such return and shall issue a credit
memorandum to the Account Debtor in the appropriate amount.  The Grantor shall immediately report to the
Lender any return involving an amount in excess of $25,000.  Each such report shall indicate the reasons
for the returns and the locations and condition of the returned Inventory.  In the event any Account Debtor returns
Inventory to the Grantor when a Default exists, the Grantor, upon the request
of the Lender, shall: (i) hold the returned Inventory in trust for the Lender;
(ii) segregate all returned Inventory from all of its other property; (iii)
dispose of the returned Inventory solely according to the Lender’s written
instructions; and (iv) not issue any credits or allowances with respect thereto
without the Lender’s prior written consent. 
All returned Inventory shall be subject to the Lender’s Liens
thereon.  Whenever any Inventory is
returned, the related Account shall be deemed ineligible to the extent of the
amount owing by the Account Debtor with respect to such returned Inventory and
such returned Inventory shall not be Eligible Inventory.

 

(c)                                  Inventory
Count; Perpetual Inventory System. 
The Grantor will conduct a physical count of the Inventory at least once
per Fiscal Year, and after and during the continuation of a Default, at such
other times as the Lender requests.  The
Grantor will maintain a perpetual inventory reporting system at all times. The
Grantor, at its own expense, shall deliver to the Lender the results of each
physical verification, which the Grantor may in its discretion have made, or
caused any other Person to have made on its behalf, of all or any portion of
its Inventory.

 

(d)                                 Equipment.  The Grantor shall promptly inform the Lender
of any additions to or deletions from the Equipment which individually exceed
$50,000.  The Grantor shall not permit
any Equipment to become a fixture with respect to real property or to become an
accession with respect to other personal property with respect to which real or
personal property the Lender does not have a Lien.  The Grantor will not, without the Lender’s prior written consent,
alter or remove any identifying symbol or number on any of the Grantor’s
Equipment constituting Collateral.

 

(e)                                  Titled
Vehicles.  The Grantor will give the
Lender notice of its acquisition of any vehicle covered by a certificate of
title and deliver to the Lender, upon request, the original of any vehicle
title certificate and provide and/or file all other documents or instruments
necessary to have the Lien of the Lender noted on any such certificate or with
the appropriate state office.

 

4.4.                              Delivery
of Instruments, Securities, Chattel Paper and Documents. The Grantor will
(a) deliver to the Lender immediately upon execution of this Security Agreement
the originals of all Chattel Paper, Securities and Instruments constituting
Collateral (if any then exist), (b) hold in trust for the Lender upon receipt
and immediately thereafter deliver to the Lender any Chattel Paper, Securities
and Instruments constituting Collateral, (c) upon the Lender’s request, deliver
to the Lender (and thereafter hold in trust for the Lender upon receipt and
immediately deliver to the Lender) any Document evidencing or constituting
Collateral and (d) upon the Lender’s request, deliver to the Lender a duly
executed amendment to this Security Agreement, in the form of Exhibit I-1
hereto, pursuant to which the Grantor will pledge such additional
Collateral.  The Grantor hereby
authorizes the Lender to attach each such amendment to this Security Agreement
and agrees that all additional Collateral set forth in such amendments shall be
considered to be part of the Collateral.

 

4.5.                              Uncertificated
Securities and Certain Other Investment Property. The Grantor will permit
the Lender from time to time to cause the appropriate issuers (and, if held
with a securities intermediary, such securities intermediary) of uncertificated
securities or other types of Investment Property not represented by
certificates which are Collateral to mark their books and records with the
numbers and face amounts of all such

 

11

 

uncertificated
securities or other types of Investment Property not represented by
certificates and all rollovers and replacements therefor to reflect the Liens
of the Lender granted pursuant to this Security Agreement.  The Grantor will take any actions necessary
to cause (a) the issuers of uncertificated securities which are Collateral and
which are Securities and (b) any securities intermediary which is the holder of
any Investment Property, to cause the Lender to have and retain Control over
such Securities or other Investment Property. 
Without limiting the foregoing, the Grantor will, with respect to
Investment Property held with a securities intermediary, cause such securities
intermediary to enter into a control agreement with the Lender, in form and
substance satisfactory to the Lender, giving the Lender Control.

 

4.6.                              Pledged
Collateral.

 

(a)                                  Changes
in Capital Structure of Issuers. Except as permitted by Section 6.19
of the Credit Agreement, the Grantor will not (i) permit or suffer any issuer
of Capital Stock constituting Pledged Collateral to dissolve, merge, liquidate,
retire any of its Capital Stock or other Instruments or Securities evidencing
ownership, reduce its capital, sell or encumber all or substantially all of its
assets (except for Permitted Liens and sales of assets permitted pursuant to Section 4.1(d))
or merge or consolidate with any other Person, or (ii) vote any Pledged
Collateral in favor of any of the foregoing.

 

(b)                                 Issuance
of Additional Securities.  The
Grantor will not permit or suffer the issuer of Capital Stock constituting
Pledged Collateral to issue additional Capital Stock, any right to receive the
same or any right to receive earnings, except to the Grantor.

 

(c)                                  Registration
of Pledged Collateral.  The Grantor
will permit any registerable Pledged Collateral to be registered in the name of
the Lender or its nominee at any time at the option of the Lender.

 

(d)                                 Exercise
of Rights in Pledged Collateral.

 

(i)                                     Without
in any way limiting the foregoing and subject to clause (ii) below, the Grantor
shall have the right to exercise all voting rights or other rights relating to
the Pledged Collateral for all purposes not inconsistent with this Security
Agreement, the Credit Agreement or any other Loan Document; provided
however, that no vote or other right shall be
exercised or action taken which would have the effect of impairing the rights
of the Lender in respect of the Pledged Collateral.

 

(ii)                                  The
Grantor will permit the Lender or its nominee at any time after the occurrence
of a Default, without notice, to exercise all voting rights or other rights
relating to Pledged Collateral, including, without limitation,  exchange, subscription or any other rights,
privileges, or options pertaining to any Capital Stock or Investment Property
constituting Pledged Collateral as if it were the absolute owner thereof.

 

(iii)                               The Grantor shall be
entitled to collect and receive for its own use all cash dividends and interest
paid in respect of the Pledged Collateral to the extent not in violation of the
Credit Agreement other than any of the following distributions and
payments (collectively referred to as the “Excluded Payments”): (A)
dividends and interest paid or payable other than in cash in respect of any
Pledged Collateral, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Pledged Collateral;  (B) dividends and other distributions paid
or payable in cash in respect of any Pledged Collateral in connection with a
partial or total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in capital of an issuer; and (C) cash paid,
payable or otherwise

 

12

 

distributed, in respect of principal of, or in
redemption of, or in exchange for, any Pledged Collateral; provided however, that until
actually paid, all rights to such distributions shall remain subject to the
Liens created by this Security Agreement; and

 

(iv)                              All
Excluded Payments and all other distributions in respect of any of the Pledged
Collateral, whenever paid or made, shall be delivered to the Lender to hold as
Pledged Collateral and shall, if received by the Grantor, be received in trust
for the benefit of the Lender, be segregated from the other property or funds
of the Grantor, and be forthwith delivered to the Lender as Pledged Collateral
in the same form as so received (with any necessary endorsement).

 

4.7.                              Intellectual
Property.

 

(a)                                  The
Grantor will use its best efforts to secure all consents and approvals
necessary or appropriate for the assignment to or benefit of the Lender of any
License or any License Right held by the Grantor and to enforce the security
interests granted hereunder.

 

(b)                                 The
Grantor shall notify the Lender immediately if it knows or has reason to know
that any application or registration relating to any material Patent, Trademark
or Copyright (now or hereafter existing) may become abandoned or dedicated, 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) regarding the Grantor’s ownership of any Patent, Trademark or
Copyright, its right to register the same, or to keep and maintain the same.

 

(c)                                  In
no event shall the Grantor, either directly or through any employee, licensee
or designee, file an application for the registration of any Patent, Trademark
or Copyright with the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency without giving the
Lender prior written notice thereof, and, upon request of the Lender, the
Grantor shall execute and deliver any and all security agreements as the Lender
may request to evidence the Lender’s first priority security interest on such
Patent, Trademark or Copyright, and the General Intangibles of the Grantor
relating thereto or represented thereby.

 

(d)                                 The
Grantor shall take all actions necessary or requested by the Lender to maintain
and pursue each application, to obtain the relevant registration and to
maintain the registration and enforceability of each of the Patents, Trademarks
and Copyrights (now or hereafter existing), including, without limitation, the
filing of applications for renewal, affidavits of use, affidavits of
noncontestability and opposition and interference and cancellation proceedings,
unless the Grantor, in its reasonable judgment shall determine that such
Patent, Trademark or Copyright is not material to the conduct of Grantor’s
business.

 

(e)                                  The
Grantor shall, unless it shall reasonably determine that such Patent
Collateral, Trademark Collateral or Copyright Collateral is in no way material
to the conduct of its business or operations, promptly sue for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and shall take such other actions
as the Lender shall deem appropriate under the circumstances to protect such
Patent Collateral, Trademark Collateral or Copyright Collateral.  In the event that the Grantor institutes
suit because any of the Patents Collateral, Trademark Collateral or Copyright
Collateral constituting Collateral is infringed upon, or misappropriated or
diluted by a third party, the Grantor shall comply with Section 4.8.

 

13

 

(f)                                    The Grantor shall not enter into any Licenses, as licensor or licenses, except in the
ordinary course of business without the prior written consent of Bank.  Grantor will continue to use, and
will cause the use of, reasonable and proper statutory notice in connection
with its use of each Patent, Trademark and Copyright.

 

(g)                                 The Grantor agrees that,
should it obtain any right, title or interest in any material Copyright
Collateral, Patent Collateral, or Trademark Collateral which is not now
identified in Exhibit D, (i) Grantor shall give prompt written notice to
Lender, (ii) the provisions of Article II will automatically apply
to the Copyright Collateral, Patent Collateral, or Trademark Collateral
acquired or obtained, and (iii) each of such Copyright Collateral, Patent
Collateral, or Trademark Collateral will automatically become part of the
Collateral.  Upon the Lender’s
request, Grantor shall to deliver to the Lender a duly executed amendment to
this Security Agreement in the form of Exhibit I-2 hereto, and Grantor authorizes
Lender to modify this Security Agreement, to amend Exhibit D to include
any Copyright Collateral, Patent Collateral, or Trademark Collateral which
becomes part of the Collateral under this Section 4.7(g).  The Grantor hereby authorizes the
Lender to attach each such amendment to this Security Agreement and agrees that
all additional Collateral set forth in such amendments shall be considered to
be part of the Collateral.

 

4.8.                              Commercial
Tort Claims.  The Grantor shall
promptly, and in any event within two Business Days after the same is acquired
by it, notify the Lender of any commercial tort claim (as defined in the UCC)
acquired by it and, unless the Lender otherwise consents, the Grantor shall
enter into a supplement to this Security Agreement, granting to Lender a first
priority security interest in such commercial tort claim.

 

4.9.                              Letter-of-Credit
Rights.  If the Grantor is or
becomes the beneficiary of a letter of credit, the Grantor shall promptly, and
in any event within two Business Days after becoming a beneficiary, notify the
Lender thereof and cause the issuer and/or confirmation bank to (i) consent to
the assignment of any Letter-of-Credit Rights to the Lender and (ii) agree to
direct all payments thereunder to a Deposit Account at the Lender or subject to
a Deposit Account Control Agreement for application to the Secured Obligations,
in accordance with Section 2.16 of the Credit Agreement, all in form and
substance reasonably satisfactory to the Lender.

 

4.10.                        Federal, State or Municipal
Claims.  The Grantor will promptly
notify the Lender of any Collateral which constitutes a claim against the
United States government or any state or local government or any
instrumentality or agency thereof, the assignment of which claim is restricted
by federal, state or municipal law.

 

4.11.                        No Interference.  The Grantor agrees that it will not
interfere with any right, power and remedy of the Lender provided for in this
Security Agreement or now or hereafter existing at law or in equity or by
statute or otherwise, or the exercise or beginning of the exercise by the
Lender of any one or more of such rights, powers or remedies.

 

4.12.                        Assigned Contracts.  The Grantor shall fully perform all of its
obligations under each of the Assigned Contracts, and shall enforce all of its
rights and remedies thereunder, in each case, as it deems appropriate in its
business judgment.  Without limiting the
generality of the foregoing, the Grantor shall take all action necessary or
appropriate to permit, and shall not take any action which would have any
materially adverse effect upon, the full enforcement of all indemnification
rights under its Assigned Contracts. The Grantor shall notify the Lender in
writing, promptly after the Grantor becomes aware thereof, of any event or fact
which could give rise to a material claim by it for indemnification under any
of its material Assigned Contracts, and shall diligently pursue such right and
report to the Lender on all further developments with respect thereto.  The Grantor shall deposit into a Deposit
Account at the Lender or subject to a Deposit Account Control Agreement for
application to the Secured Obligations, in accordance with Section 2.16 of
the Credit Agreement, all amounts received by the Grantor as indemnification or
otherwise pursuant to its Assigned

 

14

 

Contracts.  If the Grantor shall fail after the Lender’s
demand to pursue diligently any right under its material Assigned Contracts, or
if a Default then exists, the Lender may directly enforce such right in its own
or the Grantor’s name and may enter into such settlements or other agreements
with respect thereto as the Lender shall determine.  In any suit, proceeding or action brought by the Lender under any
material Assigned Contract for any sum owing thereunder or to enforce any
provision thereof, the Grantor shall indemnify and hold the Lender and Lender
harmless from and against all expense, loss or damage suffered by reason of any
defense, setoff, counterclaims, recoupment, or reduction of liability
whatsoever of the obligor thereunder arising out of a breach by the Grantor of
any obligation thereunder or arising out of any other agreement, indebtedness
or liability at any time owing from the Grantor to or in favor of such obligor
or its successors.  All such obligations
of the Grantor shall be and remain enforceable only against the Grantor and
shall not be enforceable against the Lender. 
Notwithstanding any provision hereof to the contrary, the Grantor shall
at all times remain liable to observe and perform all of its duties and
obligations under its Assigned Contracts, and the Lender’s exercise of any of
its rights with respect to the Collateral shall not release the Grantor from
any of such duties and obligations.  The
Lender shall not be obligated to perform or fulfill any of the Grantor’s duties
or obligations under its Assigned Contracts or to make any payment thereunder,
or to make any inquiry as to the nature or sufficiency of any payment or
property received by it thereunder or the sufficiency of performance by any
party thereunder, or to present or file any claim, or to take any action to
collect or enforce any performance, any payment of any amounts, or any delivery
of any property.

 

 

ARTICLE V

DEFAULT

 

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

 

(a)                                  Any
representation or warranty made by or on behalf of the Grantor under or in
connection with this Security Agreement shall be materially false as of the
date on which made.

 

(b)                                 The
breach by the Grantor of any of the terms or provisions of Article IV
or Article VII.

 

(c)                                  The
breach by the Grantor (other than a breach which constitutes a Default under
any other Section of this Article V) of any of the terms or
provisions of this Security Agreement which is not remedied within ten days
after such breach.

 

(d)                                 The
occurrence of any “Default” under, and as defined in, the Credit Agreement.

 

(e)                                  Any
Capital Stock which is included within the Collateral shall at any time
constitute a Security or the issuer of any such Capital Stock shall take any
action to have such interests treated as a Security unless (i) all certificates
or other documents constituting such Security have been delivered to the Lender
and such Security is properly defined as such under Article 8 of the UCC
of the applicable jurisdiction, whether as a result of actions by the issuer
thereof or otherwise, or (ii) the Lender has entered into a control agreement
with the issuer of such Security or with a securities intermediary relating to
such Security and such Security is defined as such under Article 8 of the
UCC of the applicable jurisdiction, whether as a result of actions by the
issuer thereof or otherwise.

 

15

 

5.2.             Remedies.

 

(a)                                  Upon
the occurrence of a Default, the Lender may exercise any or all of the
following rights and remedies:

 

(i)                                     those
rights and remedies provided in this Security Agreement, the Credit Agreement,
or any other Loan Document; provided that this Section 5.2(a)
shall not be understood to limit any rights or remedies available to the Lender
prior to a Default;

 

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

 

(iii)                               give notice of sole
control or any other instruction under any Deposit Account Control Agreement or
and other control agreement with any securities intermediary and take any
action therein with respect to such Collateral;

 

(iv)                              without
notice (except as specifically provided in Section 8.1 or elsewhere
herein), demand or advertisement of any kind to Grantor or any other Person,
enter the premises of the Grantor where any Collateral is located (through
self-help and without judicial process) to collect, receive, assemble, process,
appropriate, sell, lease, assign, grant an option or options to purchase or
otherwise dispose of, deliver, or realize upon, the Collateral or any part
thereof in one or more parcels at public or private sale or sales (which sales
may be adjourned or continued from time to time with or without notice and may
take place at the Grantor’s premises or elsewhere), for cash, on credit or for
future delivery without assumption of any credit risk, and upon such other
terms as the Lender may deem commercially reasonable; and

 

(v)                                 concurrently
with written notice to the Grantor, transfer and register in its name or in the
name of its nominee the whole or any part of the Pledged Collateral, to
exchange certificates or instruments representing or evidencing Pledged
Collateral for certificates or instruments of smaller or larger denominations,
to exercise the voting and all other rights as a holder with respect thereto,
to collect and receive all cash dividends, interest, principal and other
distributions made thereon and to otherwise act with respect to the Pledged
Collateral as though the Lender was the outright owner thereof.

 

(b)                                 The
Lender may comply with any applicable state or federal law requirements in
connection with a disposition of the Collateral and compliance will not be
considered to adversely affect the commercial reasonableness of any sale of the
Collateral.

 

(c)                                  The
Lender 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 for
the benefit of the Lender, the whole or any part of the Collateral so sold,
free of any right of equity redemption, which equity redemption the Grantor
hereby expressly releases.

 

(d)                                 Until
the Lender is able to effect a sale, lease, or other disposition of Collateral,
the Lender shall have the right to hold or use Collateral, or any part thereof,
to the extent that it deems appropriate for the purpose of preserving Collateral
or its value or for any other purpose deemed appropriate by the Lender. The
Lender may, if it so elects, seek the appointment of a receiver or keeper to
take possession of Collateral and

 

16

 

to enforce any of
the Lender’s remedies, with respect to such appointment without prior notice or
hearing as to such appointment.

 

(e)                                  If,
after the Credit Agreement has terminated by its terms and all of the
Obligations have been paid in full, there remain Rate Management Obligations
outstanding, the Lender may exercise the remedies provided in this Section 5.2
upon the occurrence of any event which would allow or require the termination
or acceleration of any Rate Management Obligations pursuant to the terms of the
agreement governing any Rate Management Transaction.

 

(f)                                    Notwithstanding
the foregoing, the Lender shall not be required to (i) make any demand upon, or
pursue or exhaust any of its rights or remedies against, the Grantor, any other
obligor, guarantor, pledgor or any other Person with respect to the payment of
the Secured Obligations or to pursue or exhaust any of its rights or remedies
with respect to any Collateral therefor or any direct or indirect guarantee
thereof, (ii) marshal the Collateral or any guarantee of the Secured
Obligations or to resort to the Collateral or any such guarantee in any
particular order, or (iii) effect a public sale of any Collateral.

 

(g)                                 The
Grantor recognizes that the Lender may be unable to effect a public sale of any
or all the Pledged Collateral and may be compelled to resort to one or more
private sales thereof in accordance with clause (a) above.  The Grantor also acknowledges that any
private sale may result in prices and other terms less favorable to the seller than
if such sale were a public sale and, notwithstanding such circumstances, agrees
that any such private sale shall not be deemed to have been made in a
commercially unreasonable manner solely by virtue of such sale being private.  The Lender shall be under no obligation to
delay a sale of any of the Pledged Collateral for the period of time necessary
to permit the Grantor or the issuer of the Pledged Collateral to register such
securities for public sale under the Securities Act of 1933, as amended, or under
applicable state securities laws, even if the Grantor and the issuer would
agree to do so.

 

5.3.                              Grantor’s
Obligations Upon Default.  Upon the
request of the Lender after the occurrence of a Default, the Grantor will:

 

(a)                                  assemble
and make available to the Lender the Collateral and all books and records
relating thereto at any place or places specified by the Lender, whether at the
Grantor’s premises or elsewhere;

 

(b)                                 permit
the Lender, by the Lender’s representatives and agents, to enter any premises
where all or any part of the Collateral, or the books and records relating
thereto, or both, are located, to take possession of all or any part of the
Collateral or the books and records relating thereto, or both, to remove all or
any part of the Collateral or the books and records relating thereto, or both,
and to conduct sales of the Collateral;

 

(c)                                  prepare
and file, or cause an issuer of Pledged Collateral to prepare and file, with
the Securities and Exchange Commission or any other applicable government
agency, registration statements, a prospectus and such other documentation in
connection with the Pledged Collateral as the Lender may request, all in form
and substance satisfactory to the Lender, and furnish to the Lender, or cause
an issuer of Pledged Collateral to furnish to the Lender, any information
regarding the Pledged Collateral in such detail as the Lender may specify;

 

(d)                                 take,
or cause an issuer of Pledged Collateral to take, any and all actions necessary
to register or qualify the Pledged Collateral to enable the Lender to
consummate a public sale or other disposition of the Pledged Collateral; and

 

17

 

(e)                                  at
its own expense, cause the independent certified public accountants then
engaged by the Grantor to prepare and deliver to the Lender and each Lender, at
any time, and from time to time, promptly upon the Lender’s request, the
following reports with respect to the Grantor: (i) a reconciliation of all
Accounts; (ii) an aging of all Accounts; (iii) trial balances; and (iv) a test
verification of such Accounts as the Lender may request.

 

5.4.                              Grant
of Intellectual Property License. 
For the purpose of enabling the Lender to exercise the rights and
remedies under this Article V at such time as the Lender shall be
lawfully entitled to exercise such rights and remedies, the Grantor hereby (a)
grants to the Lender an irrevocable, nonexclusive license (exercisable without
payment of royalty or other compensation to the Grantor) to use, license or sublicense
any Intellectual Property Rights now owned or hereafter acquired by the
Grantor, and wherever the same may be located, and including, without
limitation, in such license access to all media in which any of the licensed
items may be recorded or stored and to all computer software and programs used
for the compilation or printout thereof and (b) irrevocably agrees that the
Lender may sell any of the Grantor’s Inventory directly to any Person,
including, without limitation, Persons who have previously purchased the
Grantor’s Inventory from the Grantor and in connection with any such sale or
other enforcement of the Lender’s rights under this Security Agreement, may
sell Inventory which bears any Trademark owned by or licensed to the Grantor
and any Inventory that is covered by any Copyright owned by or licensed to the
Grantor and the Lender may finish any work in process and affix any Trademark
owned by or licensed to the Grantor and sell such Inventory as provided herein.

 

 

ARTICLE VI

ATTORNEY IN FACT; PROXY

 

6.1.                              Authorization
for Secured Party to Take Certain Action.

 

(a)                                  The
Grantor irrevocably authorizes the Lender at any time and from time to time in
the sole discretion of the Lender and appoints the Lender as its attorney in
fact (i) to execute on behalf of the Grantor as debtor and to file financing
statements and document cover sheets and recordation form cover sheets (and
this Security Agreement, any extracts hereof and any amendments hereto
(pursuant to Section 4.7(g)), necessary or desirable in the Lender’s sole
discretion to perfect and to maintain the perfection and priority of the
Lender’s security interest in the Collateral, (ii) to endorse and collect any
cash proceeds of the Collateral, (iii) to file a carbon, photographic or other
reproduction of this Security Agreement or any financing statement with respect
to the Collateral as a financing statement and to file any other financing
statement or amendment of a financing statement (which does not add new
collateral or add a debtor) in such offices as the Lender in its sole
discretion deems necessary or desirable to perfect and to maintain the
perfection and priority of the Lender’s security interest in the Collateral,
(iv) to contact and enter into one or more agreements with the issuers of
uncertificated securities which are Collateral and which are Securities or with
securities intermediaries holding other Investment Property as may be necessary
or advisable to give the Lender Control over such Securities or other
Investment Property, (v) to apply the proceeds of any Collateral received by
the Lender to the Secured Obligations as provided in the Credit Agreement, (vi)
to discharge past due taxes, assessments, charges, fees or Liens on the
Collateral (except for such Liens as are specifically permitted hereunder), and
the Grantor agrees to reimburse the Lender on demand for any payment made or
any expense incurred by the Lender in connection therewith; provided
that, this authorization shall not relieve the Grantor of any of its
obligations under this Security Agreement or under the Credit Agreement, (vii)
to demand payment or enforce payment of the Receivables in the name of the
Lender or the Grantor and to endorse any and all checks, drafts, and other
instruments for the payment of money relating to the Receivables, (viii) to
sign the Grantor’s name on any invoice or bill of lading relating to the
Receivables, drafts against any Account Debtor of the Grantor, assignments and
verifications of Receivables, (ix) to exercise all of the Grantor’s rights and
remedies

 

18

 

with respect to
the collection of the Receivables and any other Collateral, (x) to settle,
adjust, compromise, extend or renew the Receivables, (xi) to settle, adjust or
compromise any legal proceedings brought to collect Receivables, (xii) to
prepare, file and sign the Grantor’s name on a proof of claim in bankruptcy or
similar document against any Account Debtor of the Grantor, (xiii) to prepare,
file and sign the Grantor’s name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with the Receivables,
(xiv) to change the address for delivery of mail addressed to the Grantor to
such address as the Lender may designate and to receive, open and dispose of
all mail addressed to the Grantor, and (xv) to do all other acts and things
necessary to carry out this Security Agreement.  In addition, the Lender may at any time, in the Lender’s own name
(if a Default exists), in the name of a nominee of the Lender (if a Default
exists), or in the name of the Grantor communicate (by mail, telephone,
facsimile or otherwise) with the Account Debtors of such Grantor, parties to
contracts with the Grantor and obligors in respect of Instruments of the
Grantor to verify with such Persons, to the Lender’s satisfaction, the
existence, amount, terms of, and any other matter relating to, Accounts,
Instruments, Chattel Paper, payment intangibles and/or other Receivables.

 

(b)                                 All
acts of said attorney or designee are hereby ratified and approved. The powers
granted pursuant to this Section 6.1(a) are coupled with an
interest and shall be irrevocable until the termination of this Security
Agreement pursuant to the terms of Section 8.15.  The powers conferred on the Lender under
this Section 6.1(a) are solely to protect the Lender’s interests in
the Collateral and shall not impose any duty upon the Lender to exercise any
such powers.  NONE OF THE LENDER OR ITS
AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE
RESPONSIBLE TO THE GRANTOR FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER
GRANTED HEREUNDER OR OTHERWISE, EXCEPT 
IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT
JURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL
DAMAGES.

 

6.2.                              PROXY.
THE GRANTOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS THE LENDER AS THE PROXY
AND ATTORNEY-IN-FACT OF THE GRANTOR WITH RESPECT TO THE PLEDGED COLLATERAL,
SECURITIES, INSTRUMENTS AND OTHER INVESTMENT PROPERTY, INCLUDING THE RIGHT TO
VOTE SUCH COLLATERAL, WITH FULL POWER OF SUBSTITUTION TO DO SO.  THE APPOINTMENT OF THE LENDER AS PROXY AND
ATTORNEY-IN-FACT IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE UNTIL THE
DATE ON WHICH THIS SECURITY AGREEMENT IS TERMINATED IN ACCORDANCE WITH SECTION 8.15.  IN ADDITION TO THE RIGHT TO VOTE ANY SUCH
COLLATERAL, THE APPOINTMENT OF THE LENDER AS PROXY AND ATTORNEY-IN-FACT SHALL
INCLUDE THE RIGHT TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND REMEDIES
TO WHICH A HOLDER OF SUCH COLLATERAL WOULD BE ENTITLED (INCLUDING GIVING OR
WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS, CALLING SPECIAL MEETINGS OF
SHAREHOLDERS AND VOTING AT SUCH MEETINGS). SUCH PROXY SHALL BE EFFECTIVE,
AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER
OF ANY SUCH COLLATERAL ON THE RECORD BOOKS OF THE ISSUER THEREOF) BY ANY PERSON
(INCLUDING THE ISSUER OF SUCH COLLATERAL OR ANY OFFICER OR THE AGENT THEREOF),
UPON THE OCCURRENCE OF A DEFAULT. 
NOTWITHSTANDING THE FOREGOING, THE LENDER SHALL NOT HAVE ANY DUTY TO
EXERCISE ANY SUCH RIGHT OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY
FAILURE TO DO SO OR FOR ANY DELAY IN DOING SO.

 

19

 

ARTICLE VII

DEPOSIT
ACCOUNTS

 

7.1.                              Covenant
Regarding New Deposit Accounts; Lock Boxes.  Before opening or replacing any Deposit Account, or establishing
a new lock box, the Grantor shall (a) obtain the Lender’s consent in writing to
the opening of such Deposit Account or lock box, and (b) cause each bank or
financial institution in which it seeks to open (i) a Deposit Account, to enter
into a Deposit Account Control Agreement with the Lender in order to give the
Lender Control of such Deposit Account, or (ii) a lock box, to enter into a
lock box agreement with the Lender in order to give the Lender Control of the
Lock Box.  In the case of Deposit
Accounts or the Lock Box maintained with Lender, the terms of such letter shall
be subject to the provisions of the Credit Agreement regarding setoffs.

 

 

ARTICLE VIII

GENERAL PROVISIONS

 

8.1.                              Waivers.  The Grantor hereby waives notice of the time
and place of any public sale or the time after which any private sale or other
disposition of all or any part of the Collateral may be made.  To the extent such notice may not be waived
under applicable law, any notice made shall be deemed reasonable if sent to the
Grantor, addressed as set forth in Article IX, at least ten days
prior to (i) the date of any such public sale or (ii) the time after which any
such private sale or other disposition may be made.  To the maximum extent permitted by applicable law, the Grantor
waives all claims, damages, and demands against the Lender arising out of the
repossession, retention or sale of the Collateral, except such as arise solely
out of the gross negligence or willful misconduct of the Lender as finally
determined by a court of competent jurisdiction. To the extent it may lawfully
do so, the Grantor absolutely and irrevocably waives and relinquishes the
benefit and advantage of, and covenants not to assert against the Lender, any
valuation, stay, appraisal, extension, moratorium, redemption or similar laws
and any and all rights or defenses it may have as a surety now or hereafter
existing which, but for this provision, might be applicable to the sale of any
Collateral made under the judgment, order or decree of any court, or privately
under the power of sale conferred by this Security Agreement, or otherwise.  Except as otherwise specifically provided
herein, the Grantor hereby waives presentment, demand, protest or any notice
(to the maximum extent permitted by applicable law) of any kind in connection
with this Security Agreement or any Collateral.

 

8.2.                              Limitation
on Lender’s Duty with Respect to the Collateral.  The Lender shall have no obligation to clean-up or otherwise
prepare the Collateral for sale. The Lender shall use reasonable care with
respect to the Collateral in its possession or under its control.  The Lender shall not have any other duty as
to any Collateral in its possession or control or in the possession or control
of any agent or nominee of the Lender, or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. To the extent that applicable law imposes duties on the Lender to
exercise remedies in a commercially reasonable manner, the Grantor acknowledges
and agrees that it is commercially reasonable for the Lender (i) to fail to incur
expenses deemed significant by the Lender to prepare Collateral for disposition
or otherwise to transform raw material or work in process into finished goods
or other finished products for disposition, (ii) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not
required by other law, to fail to obtain governmental or third party consents
for the collection or disposition of Collateral to be collected or disposed of,
(iii) to fail to exercise collection remedies against Account Debtors or other
Persons obligated on Collateral or to remove Liens on or any adverse claims
against Collateral, (iv) to exercise collection remedies against Account
Debtors and other Persons obligated on Collateral directly or through the use
of collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to
contact other Persons, whether or not in the same business as the Grantor, for
expressions of interest in

 

20

 

acquiring all or
any portion of such Collateral, (vii) to hire one or more professional
auctioneers to assist in the disposition of Collateral, whether or not the
Collateral is of a specialized nature, (viii) to dispose of Collateral by
utilizing internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capacity of doing so, or
that match buyers and sellers of assets, (ix) to dispose of assets in wholesale
rather than retail markets, (x) to disclaim disposition warranties, such as
title, possession or quiet enjoyment, (xi) to purchase insurance or credit enhancements
to insure the Lender against risks of loss, collection or disposition of
Collateral or to provide to the Lender a guaranteed return from the collection
or disposition of Collateral, or (xii) to the extent deemed appropriate by the
Lender, to obtain the services of other brokers, investment bankers,
consultants and other professionals to assist the Lender in the collection or
disposition of any of the Collateral. 
The Grantor acknowledges that the purpose of this Section 8.2
is to provide non-exhaustive indications of what actions or omissions by the
Lender would  be commercially reasonable
in the Lender’s exercise of remedies against the Collateral and that other
actions or omissions by the Lender shall not be deemed commercially
unreasonable solely on account of not being indicated in this Section 8.2.  Without limitation upon the foregoing,
nothing contained in this Section 8.2 shall be construed to grant
any rights to the Grantor or to impose any duties on the Lender that would not
have been granted or imposed by this Security Agreement or by applicable law in
the absence of this Section 8.2.

 

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

 

8.4.                              Secured
Party Performance of Debtor Obligations. 
Without having any obligation to do so, the Lender may perform or pay
any obligation which the Grantor has agreed to perform or pay in this Security
Agreement and the Grantor shall reimburse the Lender for any amounts paid by
the Lender pursuant to this Section 8.4.  The Grantor’s obligation to reimburse the Lender pursuant to the
preceding sentence shall be a Secured Obligation payable on demand.

 

8.5.                              Specific
Performance of Certain Covenants. 
The Grantor acknowledges and agrees that a breach of any of the
covenants contained in Sections 4.1(d), 4.1(e), 4.4, 4.5,
4.6, 4.7, 4.8, 4.9, 4.10, 4.12, 5.3,
or 8.7 or in Article VII will cause irreparable injury to
the Lender, that the Lender and Lender have no adequate remedy at law in
respect of such breaches and therefore agrees, without limiting the right of
the Lender to seek and obtain specific performance of other obligations of the
Grantor contained in this Security Agreement, that the covenants of the Grantor
contained in the Sections referred to in this Section 8.5 shall be
specifically enforceable against the Grantor.

 

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

 

8.7.                              Dispositions
Not Authorized.  The Grantor is not
authorized to sell or otherwise dispose of the Collateral except as set forth
in Section 4.1(d) and notwithstanding any course of dealing between
the Grantor and the Lender or other conduct of the Lender, no authorization to
sell or otherwise dispose of the Collateral

 

21

 

(except as set forth in Section 4.1(d))
shall be binding upon the Lender unless such authorization is in writing signed
by the Lender.

 

8.8.                              No
Waiver; Amendments; Cumulative Remedies. No delay or omission of the Lender
to exercise any right or remedy granted under this Security Agreement shall impair
such right or remedy or be construed to be a waiver of any Default or an
acquiescence therein, and any single or partial exercise of any such right or
remedy shall not preclude any other or further exercise thereof or the exercise
of any other right or remedy. No waiver, amendment or other variation of the
terms, conditions or provisions of this Security Agreement whatsoever shall be
valid unless in writing signed by the Lender and then only to the extent in
such writing specifically set forth. 
All rights and remedies contained in this Security Agreement or by law
afforded shall be cumulative and all shall be available to the Lender until the
Secured Obligations have been paid in full.

 

8.9.                              Limitation
by Law; Severability of Provisions. 
All rights, remedies and
powers provided in this Security Agreement may be exercised only to the extent
that the exercise thereof does not violate any applicable provision of law, and
all the provisions of this Security Agreement are intended to be subject to all
applicable mandatory provisions of law that may be controlling and to be
limited to the extent necessary so that they shall not render this Security
Agreement invalid, unenforceable or not entitled to be recorded or registered,
in whole or in part.  Any provision in
any this Security Agreement that is held to be inoperative, unenforceable, or
invalid in any jurisdiction shall, as to that jurisdiction, be inoperative,
unenforceable, or invalid without affecting the remaining provisions in that
jurisdiction or the operation, enforceability, or validity of that provision in
any other jurisdiction, and to this end the provisions of this Security
Agreement are declared to be severable.

 

8.10.                        Reinstatement.  This Security Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by
or against the Grantor for liquidation or reorganization, should the Grantor
become insolvent or make an assignment for the benefit of any creditor or
creditors or should a receiver or trustee be appointed for all or any
significant part of the Grantor’s assets, and shall continue to be effective or
be reinstated, as the case may be, if at any time payment and performance of
the Secured Obligations, or any part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by
any obligee of the Secured Obligations, whether as a “voidable preference,”
“fraudulent conveyance,” or otherwise, all as though such payment or
performance had not been made.  In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only
by such amount paid and not so rescinded, reduced, restored or returned.

 

8.11.                        Benefit of Agreement.  The terms and provisions of this Security
Agreement shall be binding upon and inure to the benefit of the Grantor, the
Lender and its successors and assigns (including, without limitation, all
Persons who become bound as a debtor to this Security Agreement), except that
the Grantor shall not have the right to assign its rights or delegate its
obligations under this Security Agreement or any interest herein, without the
prior written consent of the Lender.  No
sales of participations, assignments, transfers, or other dispositions of any
agreement governing the Secured Obligations or any portion thereof or interest
therein shall in any manner impair the Liens granted to the Lender hereunder.

 

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

 

8.13.                        Taxes and Expenses.  Any taxes (including, without limitation,
income taxes) payable or ruled payable by Federal or State authority in respect
of this Security Agreement shall be paid by the Grantor, together with interest
and penalties, if any.  The Grantor
shall reimburse the Lender for any and all out-of-pocket expenses and internal
charges (including, without limitation, reasonable attorneys’, auditors’ and
accountants’ fees and reasonable time charges of attorneys, paralegals,
auditors and accountants who may be

 

22

 

employees of the
Lender) paid or incurred by the Lender in connection with the preparation,
execution, delivery, administration, collection and enforcement of this
Security Agreement and in the audit, analysis, administration, collection,
preservation or sale of the Collateral (including, without limitation, the
expenses and charges associated with any periodic or special audit of the
Collateral).  Any and all costs and
expenses incurred by the Grantor in the performance of actions required
pursuant to the terms hereof shall be borne solely by the Grantor.

 

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

 

8.15.                        Termination.  This Security Agreement shall continue in
effect (notwithstanding the fact that from time to time there may be no Secured
Obligations outstanding) until (i) the Credit Agreement has terminated pursuant
to its express terms and (ii) all of the Secured Obligations have been
indefeasibly paid and performed in full and no commitments of the Lender which
would give rise to any Secured Obligations are outstanding.

 

8.16.                        Entire Agreement.  This Security Agreement embodies the entire
agreement and understanding between the Grantor and the Lender relating to the
Collateral and supersedes all prior agreements and understandings between the
Grantor and the Lender relating to the Collateral.

 

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

 

8.18.                        CONSENT TO JURISDICTION.  THE GRANTOR HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY U.S. FEDERAL OR OHIO STATE COURT SITTING
IN CINCINNATI, OHIO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT AND THE GRANTOR HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE
HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT
MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT
FORUM.  NOTHING HEREIN SHALL LIMIT THE
RIGHT OF THE LENDER TO BRING PROCEEDINGS AGAINST THE GRANTOR IN THE COURTS OF
ANY OTHER JURISDICTION.  ANY JUDICIAL
PROCEEDING BY THE GRANTOR AGAINST THE LENDER OR ANY AFFILIATE OF THE LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS SECURITY AGREEMENT OR ANY OTHER LOAN
DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CINCINNATI, OHIO.

 

8.19.                        WAIVER OF JURY TRIAL. THE
GRANTOR AND THE LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE RELATIONSHIP
ESTABLISHED THEREUNDER.

 

8.20.                        Indemnity.  The Grantor hereby agrees to indemnify the
Lender and its successors, assigns, agents and employees, from and against any
and all liabilities, damages, penalties, suits, costs, and expenses of

 

23

 

any kind and
nature (including, without limitation, 
all expenses of litigation or preparation therefor (including, without
limitation, reasonable attorneys’ fees) whether or not the Lender is a party
thereto) imposed on, incurred by or asserted against the Lender, or its
successors, assigns, agents and employees, in any way relating to or arising
out of this Security Agreement, or the manufacture, purchase, acceptance, rejection,
ownership, delivery, lease, possession, use, operation, condition, sale, return
or other disposition of any Collateral (including, without limitation, latent
and other defects, whether or not discoverable by the Lender or the Grantor,
and any claim for Patent, Trademark or Copyright infringement).

 

8.21.                        Counterparts.  This Security Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one
agreement, and any of the parties hereto may execute this Security Agreement by
signing any such counterpart.

 

ARTICLE IX

NOTICES

 

9.1.                              Sending
Notices.  Any notice required or
permitted to be given under this Security Agreement shall be sent by United
States mail, telecopier, personal delivery or nationally established overnight
courier service, and shall be deemed received (a) when received, if sent by
hand or overnight courier service, or mailed by certified or registered mail
notices or (b) when sent, if sent by telecopier (except that, if not given
during normal business hours for the recipient, shall be deemed to have been
given at the opening of business on the next Business Day for the recipient),
in each case addressed to the Grantor at the address set forth on Exhibit A
as its principal place of business, and to the Lender at the address set forth
in the Credit Agreement.

 

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

 

 

[Signature Page Follows]

 

24

 

IN WITNESS WHEREOF, the Grantor and the Lender have executed this
Security Agreement as of the date first above written.

 

	
   

  	
  GRANTOR:

  
	
   

  	
   

  
	
   

  	
  MAGNETEK ADS POWER, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David P.
  Reiland

  	
   

  
	
   

  	
  Name:

  	
  David P. Reiland

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  BANK ONE, NA

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David L.
  Carey

  	
   

  
	
   

  	
  Name:

  	
  David L. Carey

  
	
   

  	
  Title:

  	
  Director

  
						

 

 

EXHIBIT I-1

(See Section 4.4 of Security Agreement)

 

AMENDMENT

 

 

This Amendment, dated
                           ,
         is delivered pursuant to Section 4.4
of the Security Agreement referred to below. 
All defined terms herein shall have the meanings ascribed thereto or
incorporated by reference in the Security Agreement.  The undersigned hereby certifies that the representations and
warranties in Article III of the Security Agreement are and
continue to be true and correct.  The
undersigned further agrees that this Amendment may be attached to that certain
Security Agreement, dated August 15, 2003, between the undersigned, as the
Grantor, and Bank One, NA, as the Lender, (the “Security Agreement”) and that
the Collateral listed on Schedule I to this Amendment shall be and
become a part of the Collateral referred to in said Security Agreement and
shall secure all Secured Obligations referred to in said Security Agreement.

 

	
   

  	
  MAGNETEK ADS POWER, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

 

SCHEDULE  I TO
AMENDMENT

 

 

EXHIBIT I-2

(See Section 4.7(g) of Security Agreement)

 

AMENDMENT

 

 

This Amendment, dated                            ,
         is delivered pursuant to Section 4.7(g)
of the Security Agreement referred to below. 
All defined terms herein shall have the meanings ascribed thereto or
incorporated by reference in the Security Agreement.  The undersigned hereby certifies that the representations and
warranties in Article III of the Security Agreement are and
continue to be true and correct.  The
undersigned further agrees that this Amendment may be attached to that certain
Security Agreement, dated August 15, 2003, between the undersigned, as the
Grantor, and Bank One, NA, as the Lender, (the “Security Agreement”) and that
the Collateral listed on Schedule I to this Amendment shall be and
become a part of the Collateral referred to in said Security Agreement and
shall secure all Secured Obligations referred to in said Security Agreement.

 

	
   

  	
  MAGNETEK ADS POWER, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

 

SCHEDULE I TO
AMENDMENT

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00057-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00057-of-00352.parquet"}]]