Secured Lending Agreement

Note: The following commentary, forms and documents are prepared by the above under the laws and practice prevailing as of [Date]. Seldom is a model form or document directly suitable to a transaction without adaption to the particularities and circumstances of the matter.

FORM OF SECURITY AGREEMENT

THIS SECURITY AGREEMENT, dated as of, 20, made by, a, as borrower ("Debtor"), to, a, as lender ("Secured Party").

WITNESSETH:

WHEREAS, Secured Party has agreed to extend credit and/or make loans to Debtor; and

Although not generally regarded as a binding portion of the Security Agreement, the agreement may specifically provide that the parties acknowledge that their statements as set forth in the Recitals are true and correct, recitals typically describe the relationship between the parties which have led them to enter into the Security Agreement. They are especially useful in two instances. The first is when the credit relationship has undergone numerous amendments and adjustments, and the parties which to incorporate them all into a new, amended and restated document. In such a case the recitals can provide a useful summary of the history of the relationship, making the new document a complete reference going forward. The second is where the consideration for the grant of the security interest may not be immediately clear, for instance when the grantor is a guarantor or shareholder of the borrower. In such a case the recitals establish the mutual benefits to be derived from the grant of a security interest.

WHEREAS, Secured Party is willing to make loans to Debtor only upon the condition, among others, that Debtor shall have executed and delivered to Secured Party this Security Agreement.

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

Defined Terms.

In many cases, United States loan documents prepared for financial institutions will begin with a definitions section. This permits the operative portions of the agreement (for example the actual grant or pledge, and the remedies available to the lender following an event of default) to be stated as concisely and unambiguously as possible, with the definitions providing a glossary for the substantive text. Definitions relating to collateral will often track the parallel definitions in the Uniform Commercial Code in effect in the relevant definition. They may also be used to establish the meanings of frequently used words such as "person" or "obligations" in the context of the actual agreement.

Unless otherwise defined herein, terms defined in the preamble or recitals hereto shall have their defined meanings when used herein and the following terms shall have the following meanings, unless the context otherwise requires:

"Accounts" shall mean all "accounts", as such term is defined in Section 9-106 of the UCC (1) , in which Debtor now or hereafter has any right, title or interest and, in any event, shall mean and include, but not be limited to, [all accounts receivable, contract rights, book debts, notes, drafts, instruments, documents, acceptances and other forms of obligations now owned or hereafter received or acquired by, or belonging or owing to, Debtor (including, without limitation, under any trade names, styles or divisions thereof) whether arising out of goods leased or sold or services rendered by it or from any other transaction, whether or not the same involves the sale or lease of goods or services by Debtor] (including, without limitation, any such obligation which might be characterized as an account, contract right, general intangible or applicable chattel paper under the Uniform Commercial Code in effect in any jurisdiction), and [all of Debtor's rights in, to and under all purchase orders or receipts now owned or hereafter acquired by it for goods or services, and all of Debtor's rights to any goods represented by any of the foregoing (including unpaid seller's rights of rescission, replevin, reclamation and stopping in transit and rights to returned, reclaimed or repossessed goods), and all moneys due or to become due to Debtor under all contracts for the lease or sale of goods and/or the performance of services by it (whether or not yet earned by performance on the part of Debtor) or in connection with any other transaction now in existence or hereafter arising, including, without limitation, the right to receive the proceeds (including, without limitation, returned or rejected goods) of said purchase orders and contracts, and all collateral security and guarantees of any kind given by any Person with respect to any of the foregoing.]

Financing based on a percentage of the value of a debtor's accounts receivable will often restrict the kinds of accounts against which the Secured Party will lend. Thus, such financing may exclude foreign accounts or delinquent accounts, or put a cap on the aggregate amount accounts receivable from a single account debtor for the definition of "eligible accounts" against which the Secured Party will lend. There is no reason not to include all accounts as collateral for the debt however.

"Account Debtor" shall mean any person or party obligated on an Account.

"Books" shall mean all books, records and correspondence relating to the Collateral, including, but not limited to: all records, ledgers, leases and computer and automatic machinery software and programs, including, without limitation, programs, disc or tape files and automatic machinery printouts, runs and other computer prepared information indicating, summarizing or evidencing the Collateral.

"Business Day" shall mean any day except Saturday, Sunday or any day which shall be a legal holiday under the laws of the State of ________.

This definition, which is useful in connection with notice and cure periods among others, may provide for Business Days as in effect in any mutually agreed-upon jurisdiction.

"Chattel Paper" shall mean any and all "chattel paper", as such term is defined in Section 9-105 of the UCC, in which Debtor now or hereafter has any right, title or interest.

Chattel Paper is defined in the UCC as a "writing or writings which evidence both a monetary obligation and a security interest in or a lease of specific goods, but does not include a charter or other contract involving the use or hire of a vessel. When a transaction is evidenced by both a security agreement or lease and by an instrument or a series of instruments, the group of writings taken together constitutes chattel paper." (2)

"Collateral" shall mean all of the rights, assets, types and items of property described in Section 2 of this Security Agreement.

"Contracts" shall mean collectively, all licensing agreements and any and all other contracts, instruments, undertakings, documents or other agreements in or under which Debtor may now or hereafter have any right, title or interest and which pertain to the purchase, lease, sale or other disposition by Debtor of any Inventory, Equipment, Vehicles, Fixtures, real property or any interest in real property, as any of the same may from time to time be amended, supplemented or otherwise modified.

"Contract Rights" shall mean all rights of Debtor (including, without limitation, all rights to payment) under each Contract.

"Copyright Licenses" shall mean any of the following in which Debtor now or hereafter has any right, title or interest: (a) all written agreements naming Debtor as licensor or licensee which grant any right in and to any Copyright or Copyright registration in the United States and (b) all present and future agreements (including, without limitation, assignments and consents), as any such agreements may from time to time be amended or supplemented, pursuant to which Debtor now has or hereafter acquires any direct or beneficial interest in any Copyright, or is a grantor of rights to any third party with respect to any Copyright, whether as a party to any such agreement or as an assignee of any rights under any such agreement.

"Copyrights" shall mean all copyrights in published and unpublished works, now or hereafter existing, in the United States, and all applications, registrations and recordings relating thereto filed in the United States Copyright Office or in any other government office or agency in the United States, in each case in which Debtor now or hereafter has any right, title or interest, including, without limitation, (a) the right to print, reprint, publish, reproduce, sell, distribute, perform, display and make derivative works based on works presently or hereafter owned by or licensed to Debtor, in whole or in part, and all other rights which Debtor presently has or hereafter acquires pursuant to any Copyright License, including, without limitation, copyright assignments, exclusive and nonexclusive licenses and publishing agreements, and (b) all of Debtor's right, title and interest in all physical materials embodying works with respect to which Debtor owns or holds rights in any copyrights, including, without limitation, plates, films, color separations and mechanical art.

This Agreement contains a number of terms and provisions relating to the grant of a security interest in intellectual property (patents, copyrights, trademarks and licenses) under United States law. While extensive treatment of intellectual property is beyond the scope of this article, it should be noted that recordation of an assignment of intellectual property as security with the United States Patent and Trademark office, is necessary in addition to the filing of UCC Financing Statements, in light of conflicting United States case law on this subject. (3)

"Documents" shall mean any and all "documents" and "instruments", as such terms are defined in Section 9-105 of the UCC, in which Debtor now or hereafter has any right, title or interest.

For purposes of UCC 9-105, a document is a document of title, including a bill of lading, dock warrant, dock receipt, warehouse receipt or order for the delivery of goods and also any other document which in the regular course of business or financing is treated as adequately evidencing that the person in possession of it is entitled to receive, hold and dispose of the document and the goods it covers. To be a document of title, a document must purport to be issued by or addressed to a bailee and purport to cover goods in the bailee's possession which are either identified or are fungible portions of an identified mass. An instrument is a negotiable instrument, a certified security or any other writing which evidences a right to the payment of money and is not itself a security agreement or lease and is of a type which is in the ordinary course of business transferred by delivery with any necessary endorsement or assignment. (4)

"Equipment" shall mean all "equipment", as such term is defined in Section 9-109 of the UCC, in which Debtor now or hereafter has any right, title or interest and, in any event, shall mean and include, but not be limited to, [all machinery, equipment, furnishings, fixtures and Vehicles in which Debtor now or hereafter has any right, title or interest, and any and all additions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts (including spare parts), equipment and accessories installed thereon or affixed thereto.]

"Event of Default" means default in the performance of or compliance with any term contained in this Agreement or any of the other Loan Documents and any Event of Default in the Loan Agreement.

If no Loan Agreement accompanies this Security Agreement, Events of Default should be spelled out in the Security Agreement itself. These customarily include payment defaults (failure to pay interest, principal or both), non-payment defaults affecting the creditworthiness of the Debtor (insolvency, etc.) and non-payment defaults relating to the Debtor's other obligations under the loan documents, such as defaults under other agreements, failure to provide required financial reports, withdrawal or insolvency of a guarantor, etc.

"Fixtures" shall mean, to the extent not otherwise included as Equipment, all machinery, apparatus, equipment, fittings, fixtures, furniture and furnishings in which Debtor now or hereafter has any right, title or interest located upon or affixed to or which becomes affixed to any real property owned or leased by Debtor, including, without limitation, any premises that may be described in any mortgage at any time made by Debtor for the benefit of Secured Party in connection with this transaction, or any part thereof, and used or usable in connection with any future occupancy or use of such premises, including, but without limiting the generality of the foregoing, all heating, lighting, laundry, incinerating, loading, unloading, garage and power equipment, tools, machine parts and supplies, engines, pipes, pumps, tanks, motors, conduits, switchboards, plumbing, lifting, cleaning, fire prevention, fire extinguishing, refrigerating, ventilating and communications apparatus, air cooling and air conditioning apparatus, elevators and escalators and related machinery and equipment, shades, awnings, blinds, curtains, drapes, attached floor coverings, including rugs and carpeting, computer, television, radio and music cable antennae and systems, storm doors and windows, stoves, refrigerators, dishwashers and other installed appliances, attached cabinets, doors, screens and windows, partitions, ducts, compressors and trees, plants and other items of landscaping in which Debtor now or hereafter has any right, title or interest, including replacements and additions thereto.

"General Intangibles" shall mean all "general intangibles", as such term is defined in Section 9-106 of the UCC, in which Debtor now or hereafter has any right, title or interest and, in any event, shall mean and include, but not be limited to, [all customer lists and other records of Debtor, Copyrights, Patents, Trademarks and goodwill associated with such Trademarks, Copyright Licenses, Patent Licenses, Trademark Licenses, rights in intellectual property, tax refunds, licenses and permits in which Debtor now or hereafter has any interest and all rights, damages and profits due or accrued, or to become due or accrued, arising out of past or future infringement of any Copyright, Patent, Trademark, Copyright License, Patent License or Trademark License, together with the right to sue for or recover the same.]

Under United States law, there is some question as to whether an interest in a partnership (or, by analogy, in a limited liability company) constitutes a general intangible, in which case a security interest is perfected by filing a UCC financing statement, or a security, in which case a security interest is perfected by possession of a certificate representing the Debtor's interest or, electronic registration of a pledge. It is prudent to file a financing statement and, in the absence of a certificate or electronic medium, to send notice to the partnership or limited liability company that a pledge has been made.

"Inventory" shall mean all "inventory", as such term is defined in Section 9-109 of the UCC, in which Debtor now or hereafter has any right, title or interest and, in any event, shall mean and include, but not be limited to, inventory, merchandise, goods and other personal property now or hereafter owned by Debtor which are held for sale or lease or are furnished or are to be furnished under a contract of service, or which constitute raw materials, work in process or materials used or consumed or to be used or consumed in Debtor's business, or the processing, packaging, delivery or shipping of the same, and all finished goods.

"Leases" shall mean all leases, subleases, assignments of lease, contracts and agreements in which Debtor is the lessor or lessee, as any of the same may from time to time be amended or supplemented.

"Licenses" and "Licensing Agreements" shall mean all licenses and permits, including but not limited to, Copyright Licenses, Patent Licenses and Trademark Licenses of which Debtor is either the licensor or licensee in the United States.

"Lien" shall mean any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement or any lease in the nature thereof), and any agreement to give or refrain from giving any lien, mortgage, pledge, assignment, security interest, charge or other encumbrance of any kind.

"Loans" shall mean the loan or loans made by Secured Party to Debtor, the repayment of which is secured by this Security Agreement.

"Loan Documents" means this Security Agreement, the Notes, any other security agreement, any loan agreements, assignments, leasehold mortgages, guaranties, pledge agreements, life insurance assignments and all appropriate financing statements and fixture filings required by Secured Party to be executed in connection herewith and all other documents or instruments executed and delivered to Secured Party in connection with the Loan or Loans.

"Notes" shall mean the promissory note or promissory notes issued by Debtor to the order of Secured Party evidencing the Obligations of Debtor to repay Loans made by Secured Party to Debtor.

"Obligations" shall mean all indebtedness, liabilities and obligations of Debtor to Secured Party, whether now existing or hereafter incurred, direct or indirect, absolute or contingent, secured or not secured, matured or not matured, joint or several, whether for principal, interest, fees, expenses or otherwise, including, without limitation, all the unpaid principal amount of, and accrued interest on, the Notes, the Loans evidenced thereby and all other amounts due to Secured Party from time to time under, arising out of or in connection with Notes or any other documents executed in connection with the Loans (including, without limitation, this Security Agreement).

It is advisable to have the Debtor's obligations (which will be secured under this Agreement) defined as broadly as possible, so that any debt of Debtor to the Second Party, as well as the costs of enforcement, legal costs, etc. in connection with the loan, are also explicitly secured by the collateral. In some cases the Debtor may negotiate to limit its obligations to the debt arising out of the single, subject transaction, but they should always include costs associated with that transaction.

"Patent Licenses" shall mean all of the following in which Debtor now or hereafter has any right, title or interest: all written agreements naming Debtor as licensor or licensee granting any right to practice any invention on which a Patent is in existence in the United States.

"Patents" shall mean all of the following in which Debtor now or hereafter has any right, title or interest: (a) all letters patent of the United States, all applications for letters patent of the United States and (b) all reissues or extensions of such letters patent and all continuations, continuations-in-part or divisions of such applications.

"Permitted Liens" means (a) Liens in favor of Secured Party; (b) Liens for taxes, assessments or governmental charges or levies not yet due or delinquent, or which can thereafter be paid without penalty, or which are being contested in good faith in accordance with this Agreement; (c) unfiled inchoate construction Liens for construction work in progress; (d) workmen's, repairmen's, warehousemen's and carrier's Liens and other similar Liens, if any, arising in the ordinary course of business; and (e) Liens set forth in Exhibit 1 hereto.

Sub-clauses (b), (c) and (d) refer to "statutory" and other liens imposed by law and which may, under certain circumstances, be superior to the liens of the Secured Party. In the United States, these will be a matter of state law (other than federal tax and ERISA liens discussed infra.) and accordingly require consultation with local counsel. Both federal tax liens, and liens for unfunded pension liabilities under the Employee Retirement Income Security Act (commonly referred to as ERISA) can in some instances, become prior in right to the liens granted under this Agreement. The implication for secured obligation documentation is threefold: (i) the Secured Party should insist on representations and warranties from the Debtor regarding payment of taxes, funding of pension liabilities, etc.; (ii) the occurrence of any of these liens and the failure to remove them within a designated period of time, should be an event of default; and (iii) the Secured Party should obtain a lien search for the appropriate jurisdiction, including federal tax liens, ERISA liens (which are filed in the same manner as federal tax liens but not necessarily searched by state or local authorities, unless specifically requested). Subsection (e) refers to Liens which the Secured Party acknowledges on an individual basis and agrees may continue to exist.

"Person" means natural persons, corporations, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, lenders, trust companies, land trusts, vehicle trusts, business trusts or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof.

"Proceeds" shall have the meaning assigned to it under the UCC and, in any event, shall include, but not be limited to, (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to Debtor from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable to Debtor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental body, authority, bureau or agency (or any person acting under color of governmental authority) and (c) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral.

"Trademark License" shall mean any written agreement, granting to the Debtor any right to use any trademark or Trademark registration including, without limitation, any thereof referred to in Exhibit hereto.

"Trademarks" means (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature, and the goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, all proceeds of infringement suits, the right to sue for past, present and future infringements and all rights corresponding thereto including, without limitation, registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, including, without limitation, those described in Exhibit hereto, (b) all renewals thereof and (c) the goodwill of the business to which each of such trademarks relates.

"UCC" means the Uniform Commercial Code as in effect in the State of ________; provided that if by reason of mandatory provisions of law, the perfection or effect of perfection or non-perfection of the security interest in any Collateral or the availability of any remedy under this Agreement is governed by the Uniform Commercial Code in effect in any other jurisdiction, "UCC" means the Uniform Commercial Code in effect in such other jurisdiction for purposes of the provisions of this Agreement relating to such perfection or effect of perfection or non-perfection or availability of such remedy.

"Vehicle" shall mean any motor vehicle or trailer now or hereafter owned by Debtor which is titled and/or registered in any state of the United States.

Note that a security interest in a Vehicle is often perfected by means of its certificate of title. In non-title jurisdictions, it would be perfected by a filing against "Equipment."

Grant of Security Interest. As security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of all of the Obligations, Debtor hereby grants to Secured Party a continuing security interest in all of Debtor's right, title and interest in all of the following property, whether now owned or hereafter acquired by Debtor:

all Accounts;

all Books;

all Chattel Paper;

all Contracts;

all Contract Rights;

all Copyright Licenses;

all Copyrights;

all Documents;

all Equipment;

all Fixtures;

all General Intangibles;

all Inventory;

all Leases;

all Licenses;

all Patent Licenses;

all Patents;

all Trademark Licenses;

all Trademarks;

all Vehicles;

all other goods and personal property in which Debtor now or hereafter has any right, title or interest, whether tangible or intangible and wherever located, including, without limitation, all deposit accounts, other accounts and certificates of deposit of Debtor with Secured Party; and

to the extent not otherwise included all Proceeds and products of any or all of the foregoing Collateral.

Rights of Secured Party; Limitations on Lender's Obligations.

Obligations. It is expressly agreed by Debtor that, anything herein to the contrary notwithstanding, Debtor shall remain liable under each Contract, Document and License to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with and pursuant to the terms and provisions of each such Contract, Document or License. Secured Party shall not have any obligation or liability under any Contract, Document, License or any other Collateral by reason of or arising out of this Security Agreement or the granting to Secured Party of a security interest therein or the receipt by Secured Party of any payment relating to any Contract, Document, License pursuant hereto or any other Collateral, nor shall Secured Party be required or obligated in any manner to (a) perform or fulfill any of the obligations of Debtor under or pursuant to any Contract, Document or License, (b) make any payment required to be made by Debtor under any Contract, Document or License, (c) make any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of any performance by any party under any Contract, Document or License, (d) present or file any claim which may be asserted by Debtor in connection with any Contract, Document or License, or (e) take any action to collect or enforce any performance or the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

This section makes clear that the Lender's security interest in the Borrower's contracts is not intended to, and does not, shift any of the Borrower's contractual obligations to the Lender.

Test Verifications. Secured Party shall have the right to make test verifications with respect to any of the Collateral in any reasonable manner and through any medium that it considers advisable, and Debtor agrees to furnish all such assistance and information as Secured Party may reasonably require in connection therewith. Debtor, at its expense, will (a) in conjunction with the preparation of Debtor's annual financial statements, cause independent public accountants satisfactory to Secured Party, and (b) at any other time as often as Secured Party shall reasonably request, cause its chief financial officer to furnish to Secured Party promptly upon Secured Party's request, the following reports in reasonable detail: (1) reconciliation of all Accounts, (2) an aging of all Accounts, (3) trial balances and (4) a test verification of such Accounts as Secured Party may reasonably request.

This section applies to cases in which Secured Party takes a security interest in Debtor's accounts receivable.

Documents; Further Information; Returned Goods. At Secured Party's request, Debtor shall deliver to Secured Party all original and other documents evidencing and relating to any of the Collateral, including, but not limited to, Inventory, Accounts, Chattel Paper, original orders, invoices, shipping documents and delivery receipts and duplicate copies of credit memoranda. [Debtor shall notify Secured Party in writing within five Business Days of any matters materially affecting the value of any of the Collateral including the enforceability or collectability of any material Account and of all material customer disputes, offsets, defenses, counterclaims, returns and rejections and all reclaimed or repossessed merchandise or goods.]

If the Security Agreement is accompanied by a free standing Loan Agreement, and the collateral secures the primary debt, rather than a guaranty, this requirement may be part of the affirmative covenants of the Borrower, so that all such reporting obligations are set out in a single document.

Collections. Prior to an Event of Default, Secured Party authorizes Debtor to collect amounts payable on the Accounts, on account of any of the Contracts, Chattel Paper, Documents, Licenses and Leases, and for any Inventory, subject to Secured Party's reasonable direction and control. After the occurrence of an Event of Default, Secured Party may, at any time and without further cause or notice, curtail or terminate, at any time, Debtor's authority to collect amounts payable on Accounts and on account of any of the Contracts, Chattel Paper, Documents, Licenses and Leases, and for any Inventory. If required by Secured Party at any time after an Event of Default, any Proceeds, when collected by Debtor, whether consisting of checks, notes, drafts, bills of exchange, money orders, commercial paper of any kind whatsoever or other documents received in payment of any Account, or in payment for any Inventory or on account of any of the Contracts, Chattel Paper, Documents, Licenses or Leases, shall be promptly deposited by Debtor in precisely the form received, except for its endorsement when required, in a special bank account maintained by Secured Party, subject to withdrawal by Secured Party, as hereinafter provided, and until so turned over, shall be deemed to be held in trust by Debtor for Secured Party, and as Secured Party's property, and shall not be commingled with Debtor's other funds. Such Proceeds, when deposited, shall continue to be collateral security for all of the Obligations and shall not constitute payment thereof until applied as hereinafter provided. If an Event of Default shall have occurred and be continuing, at any time, in Secured Party's election, Secured Party shall apply all or any part of the funds on deposit in said special account or otherwise received by Secured Party against the principal of and/or interest on any of the Obligations, and the order and method of such application shall be in the discretion of Secured Party.

A bank's financing of a borrower's accounts may take several forms. The Bank can insist that all account debtors be instructed to send remittances to a "lock box," and permit the Bank to endorse such remittances and deposit them in a special account or in the Borrower's operating account. A borrower will sometimes resist this method, arguing that it will confuse customers or cause them to doubt the Borrower's financial stability. A compromise solution, and the one presented here, is to insist on such control only after the occurrence of an event of default.

Rights After Default. After the occurrence and during the continuance of an Event of Default, Secured Party may, at any time, notify Account Debtors, parties to the Contracts, Chattel Paper, Documents, Licenses and Leases, or any of them, that the Accounts, Contracts, Chattel Paper, Documents, Licenses (to the extent not inconsistent therewith) and Leases have been assigned to Secured Party and that payments shall be made directly to Secured Party. After the occurrence and during the continuance of an Event of Default, upon the request of Secured Party at any time, Debtor will so notify such Account Debtors and parties to the Contracts, Chattel Paper, Documents, Licenses and Leases, or any of them, as Secured Party may specify. In addition to the rights set forth in Section 3.2, after the occurrence and during the continuance of an Event of Default, Secured Party may in its own name or in the name of others communicate with Account Debtors and parties to the Contracts, Chattel Paper, Documents, Licenses and Leases in order to verify with them to Secured Party's satisfaction the existence, amount and terms of any Account, Contract, Document, License or Lease.

As a practical matter, the Secured Party may not wish to contact account debtors, etc. immediately following default, because such notification may impair the confidence of the Debtor's customers and negatively impact the flow of business to the Debtor. This is a matter of business judgment, taking into account the nature of Debtor's business, customary credit practices in that business and the seriousness of the default.

Representations and Warranties.

Representations and warranties serve several functions. First, they force the Debtor to focus on its operations and Collateral and encourage disclosure of any irregularities. Second, the breach of a representation and warranty provides an additional cause of action under the loan documents. Typically, a loan agreement will include more extensive representations and warranties dealing with the operation and status of the Debtor. In this Agreement, they focus largely on the Collateral.

Debtor hereby represents and warrants that:

Good Title. Debtor is the sole owner of each item of Collateral in which it purports to grant a security interest hereunder and has good and marketable title thereto free and clear of any and all Liens except any Permitted Liens. No amounts payable under or in connection with any of the Accounts or Contracts are evidenced by promissory notes or other instruments that have not been delivered to Secured Party in accordance with Section 5.1 hereof.

No Competing Filings. No security agreement, financing statement or equivalent security or lien instrument or continuation statement covering all or any part of the Collateral is on file or of record in any public office, except such as may have been filed in favor of Secured Party pursuant to this Security Agreement or with respect to any Permitted Liens.

See discussion of lien searches at definition of "Permitted Liens" supra.

Perfection. The security interest granted by this Security Agreement will, upon filing of appropriate financing statements in the appropriate jurisdictions and with the appropriate public offices, constitute a valid and continuing first lien on and first priority perfected security interest in the Collateral in favor of Secured Party, prior to all other Liens except any Permitted Liens.

Locations. Debtor's chief executive office, principal place of business and the place where the Books are kept are at the locations described in Exhibit 4.4-1 hereto, and Debtor will not change such chief executive office or principal place of business, or remove the Books from such locations, without the express prior written consent of Secured Party. Debtor represents that no third party computer service provider maintains any of Borrower's Books, unless so noted on Exhibit 4.4-1 hereto. Statements for Accounts are prepared, mailed and payable at the location(s) listed on Exhibit 4.4-1 hereto. The Equipment, Fixtures and Inventory are kept at the locations listed on Exhibit 4.4-2 hereto and Debtor will not move, nor will it permit to be moved, any of the Equipment, Fixtures or Inventory to any location where Secured Party would not have a fully perfected security interest and lien with the priority stated herein on such Equipment, Fixtures and Inventory, and, in any event Debtor shall give Secured Party fifteen (15) days prior written notice of its intent to move any Equipment, Fixtures or Inventory; provided, however, that in no event shall Debtor change the location of its records or move any Equipment, Fixtures and Inventory if the effect thereof would be to cause the security interest of Secured Party therein to cease to be perfected.

Under the UCC, (9-401) the location of certain items will determine the jurisdiction in which the Secured Party must file its financing statements to perfect its security interest. In addition, an interest in inventory or other collateral which enters a new jurisdiction after being subject to a lien by virtue of a filing in the place where it was previously located, will remain perfected for a period of four months following their relocation; a new filing filed before the expiration period of such four-month period will result in a continuing lien dating from the first filing.

Accounts. The amount represented by Debtor to Secured Party from time to time as owing by each Account Debtor or by all Account Debtors in respect of the Accounts will at such time be the correct amount actually and unconditionally owing by such Account Debtors thereunder.

Copyrights, Patents and Trademarks; Generally. Exhibits 4.6-1, 4.6-2 and 4.6-3 hereto list all Copyrights, Patents and Trademarks, respectively, in which Debtor has any right, title or interest as of the date hereof. Each such Copyright, Patent and Trademark is valid and enforceable and is subsisting, unexpired and has not been abandoned nor has the goodwill associated with each such Trademark been abandoned. No holding, decision or judgment has been rendered by any court or administrative agency which would limit, cancel or question the validity of, and no action or proceeding is pending which seeks to limit, cancel or question the validity of, any such Copyright, Patent or Trademark, and no action or proceeding is pending which, if adversely determined, would have a material adverse effect on the value of any such Copyright, Patent or Trademark. In the exploitation or use of any of the Copyrights, Patents, Trademarks or Licenses or otherwise, Debtor has not infringed and is not now infringing any trade name, trademark, service mark, copyright, patent, right of privacy or publicity, and it is not competing unfairly with, or otherwise violating the rights of, any other party. Debtor owns, has the right to use and has not abandoned any of the Copyrights, Patents, Trademarks or Licenses that are material and useful to the conduct of Debtor's business.

Licenses. Exhibit 4.7-1 hereto lists all Licenses in which Debtor has any right, title or interest as of the date hereof. Except for the Licenses identified as such in Exhibit 4.7-1 hereto, none of the Copyrights, Patents or Trademarks listed in Exhibits 4.6-1, 4.6-2 and 4.6-3 hereto is the subject of any licensing or franchise agreement. No default exists by any party, including Debtor, under any of the Licenses. No consent, approval or authorization of any Person is required in connection with the assignment of any License or the granting of a security interest therein. Each License represents a bona fide, valid and legally enforceable benefit and obligation of Debtor and the other contracting parties thereto. All consents, approvals or authorizations required to be obtained, effected, given or filed in connection with the execution, delivery and performance of the Licenses by each party thereto, including Debtor, have been duly obtained, effected, given or filed, are in full force and effect and do not subject the scope of any License to any materially adverse limitation, either specific or general in nature. The right, title and interest of Debtor in each of the Licenses is not subject to any defense, offset, counterclaim or claim, nor have any of the foregoing been asserted or alleged against Debtor or its predecessor as to each of such Licenses. No notices of termination of rights have been received by Debtor with respect to any of the Licenses.

Enforceability. This Security Agreement has been duly executed and delivered by a duly authorized officer of Debtor and constitutes the legal, valid and binding obligation of Debtor, enforceable in accordance with its terms.

Exhibits. Each Exhibit hereto contains true and complete information with respect to the subject matter covered thereby.

Covenants.

Covenants are ongoing obligations of the Debtor with respect to the Collateral as opposed to representations and warranties, which speak to the status of the Collateral at the time the Security Agreement is signed.

Debtor covenants and agrees with Secured Party that until the Obligations are fully satisfied:

Further Documentation; Pledge of Instruments. At any time and from time to time, upon the written request of Secured Party, and at the sole expense of Debtor, Debtor will promptly and duly execute and deliver any and all such further documents and take such further action as Secured Party may reasonably deem desirable in obtaining the full benefits of this Security Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the UCC with respect to the liens and security interests granted hereby, transferring Collateral to Secured Party's possession, placing the interest of Secured Party as lienholder on the certificate of title of any Vehicle and using its best efforts to obtain waivers from landlords and mortgagees. Debtor also hereby authorizes Secured Party to file any financing or continuation statements without the signature of Debtor to the extent permitted by applicable law. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument (other than an instrument which constitutes Chattel Paper), such note or instrument shall be immediately pledged to Secured Party hereunder, and shall be duly endorsed in a manner satisfactory to Secured Party and delivered to Secured Party. Debtor will deliver the originals of all Chattel Paper to Secured Party or Secured Party's agent.

Maintenance of Books. Debtor will keep and maintain, at its own cost and expense, satisfactory and complete Books, including, without limitation, a record of all payments received and all credits granted with respect to the Collateral and all other dealings with the Collateral. If requested by Secured Party, Debtor will mark the Books to evidence this Security Agreement and the security interests granted hereby. All Chattel Paper shall be marked with the following legend: "This writing and the obligations evidenced or secured hereby are subject to the security interest of " or with such other language satisfactory to Secured Party. After the occurrence of an Event of Default, Debtor shall deliver and turn over the Books to Secured Party or to its representatives at any time on demand of Secured Party.

Indemnification. In any suit, proceeding or action brought by Secured Party relating to the Collateral, including, without limitation, any License, Account, Document, Chattel Paper, Contract or Lease, for any sum owing thereunder, or to enforce any provisions of any License, Account, Document, Chattel Paper, Contract or Lease, Debtor will save, indemnify, defend and keep Secured Party harmless from and against all expense, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction of liability whatsoever of the obligee thereunder arising out of a breach by Debtor of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such obligee or its successors from Debtor, and all such obligations of Debtor shall be and remain enforceable against and only against Debtor and shall not be enforceable against Secured Party.

Under this provision, the Debtor is responsible for expenses associated with claims of third parties for the Debtor's breach, when such claims are made against the Secured Party which has exercised or is exercising its rights with respect to the Collateral.

Compliance with Laws, Etc. Debtor will comply, in all material respects, with all material acts, rules, regulations, orders, judgments, decrees and directions of any governmental authority applicable to the Collateral or any part thereof or to the operation of Debtor's business; provided, however, that Debtor may contest any act, rule, regulation, order, judgment, decree or direction in any reasonable manner, including making appropriate reserves in accordance with GAAP, (5) which shall not in the reasonable opinion of Secured Party adversely affect Secured Party's rights or the priority of its security interest in the Collateral.

Payment of Taxes, Etc. Debtor will pay promptly when due all taxes, assessments and governmental charges or levies imposed upon the Collateral or in respect of its income or profits therefrom, as well as all material claims of any kind (including claims for labor, materials and supplies), except that no such tax, assessment or governmental charge or levy need be paid if (a) the validity thereof is being contested in good faith by appropriate proceedings, (b) such proceedings do not involve any danger of the sale, forfeiture or loss of any of the Collateral or any interest therein and (c) such tax, assessment or governmental charge or levy is adequately reserved against by Debtor in accordance with GAAP.

Compliance with Terms of Licenses, Accounts, Contracts, Etc. Debtor will perform and comply in all material respects with all material obligations in respect of the Licenses, Accounts, Documents, Chattel Paper, Contracts, Leases and all other agreements to which it is a party or by which it is bound relating to the Collateral.

Limitation on Liens on Collateral. Debtor will not create, permit or suffer to exist, and will defend the Collateral against and take such other action as is necessary to remove, any Lien on the Collateral except any Permitted Liens and Liens claimed from, through or under Secured Party, and will defend the right, title and interest of Secured Party in and to any of Debtor's rights under the Licenses, Copyrights, Patents, Trademarks, Contracts and Leases and to the other Collateral and in and to the Proceeds and products thereof against the claims and demands of any person or party.

Limitations on Modifications of Licenses, Contracts, Accounts; No Waivers, Extensions. Without Secured Party's prior written consent, Debtor will not (a) amend, modify, terminate or waive any provision of any License, Account, Document, Chattel Paper, Contract or Lease in any manner which might materially adversely affect the value of such License, Account, Document, Chattel Paper, Contract or Lease as Collateral, (b) fail to exercise promptly and diligently each and every material right which it may have under each License, Account, Document, Chattel Paper, Contract and Lease, (c) fail to deliver to Secured Party a copy of each material demand, notice or document received by it relating in any way to any License, Account, Document, Chattel Paper, Contract or Lease or (d) other than in the ordinary course of business, grant any extension of the time of payment of any of the Accounts, Chattel Paper, Documents or any amounts due under any License or Lease, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any person liable or who may become liable for the payment thereof, or allow any credit, discount or allowance whatsoever thereon other than trade discounts and allowances granted in the normal course of business; provided, however, that notwithstanding the above, Debtor may, in its reasonable business judgment, take or fail to take any of the above actions so long as such action or failure to act does not materially adversely affect the value of any Collateral or type of Collateral which is material in relation to the aggregate value of the Collateral.

Maintenance of Insurance. Debtor shall maintain adequate fire and extended risk coverage, business interruption, workers compensation, public liability and such other insurance coverages as are usually carried by companies which are engaged in the same or similar business to the business of Debtor or as may be required by Secured Party. All insurance policies shall be in such amounts, upon such terms, and be in form acceptable to Secured Party, and shall be carried with insurers acceptable to Secured Party. Debtor shall provide evidence satisfactory to Secured Party of all insurance coverages and that the policies are in full force and effect, and all insurance coverages upon the Collateral shall name Secured Party as a loss payee under a standard non-contributory "mortgagee", "lender" or "secured party" clause, shall (a) contain a clause which provides that Secured Party's interest under the policy will not be invalidated by any act or omission of, or any breach of warranty by, the insured, or by any change in the title, ownership or possession of the insured property, or by the use of the property for purposes more hazardous than is permitted in the policy, and (b) provide that no cancellation, reduction in amount or change in coverage thereto shall be effective until at least thirty (30) days after receipt by Secured Party of written notice thereof and shall be endorsed to require thirty (30) days advance written notice to Secured Party of any cancellation of coverage. If Debtor fails to maintain insurance as provided in this Agreement, Secured Party may obtain insurance but shall have no obligation to do so; all amounts so expended by Secured Party shall be added to the Obligations or shall be payable on demand, at Secured Party's option.

Limitations on Disposition. Debtor will not sell, transfer, lease or otherwise dispose of any Collateral, or attempt, offer or contract to do so except in the ordinary course of business or with the prior written consent of Secured Party.

Further Identification of Collateral. Debtor will furnish to Secured Party from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Secured Party may reasonably request, all in reasonable detail.

Notices. Debtor will advise Secured Party promptly, in reasonable detail, (a) of any Lien (other than Permitted Liens) or material claim made or asserted against any of the Collateral, (b) of any material change in the composition of the Collateral, and (c) of the occurrence of any other event which would have a material effect on the aggregate value of the Collateral or on the security interests created hereunder. Debtor will also, within 25 days after the end of each calendar month except December, deliver to Secured Party a certificate of an executive officer setting forth the total value of Vehicles (a) sold, exchanged or otherwise disposed of during such month and to date during the then current fiscal year and (b) acquired by Debtor during such month and to date during the then current fiscal year.

Performance by Secured Party of Debtor's Obligations. If Debtor fails to perform or comply with any of its agreements contained herein and Secured Party, as provided for by the terms of this Security Agreement, shall itself perform or comply, or otherwise cause performance or compliance, with such agreement, the expenses of Secured Party incurred in connection with such performance or compliance, together with interest thereon at a rate per annum two percent (2%) (200 basis points) above the highest non-default interest rate set forth in the Notes, shall be payable by Debtor to Secured Party on demand and shall constitute Obligations secured hereby.

Right of Inspection. Secured Party shall at all times have full and free access during normal business hours to the Books, and Secured Party or its representatives may examine the same, take extracts therefrom and make photocopies thereof, and Debtor agrees to render to Secured Party such clerical and other assistance as may be reasonably requested with regard thereto, all at Debtor's cost and expense. Secured Party and its representatives shall at all times also have the right to enter into and upon any premises where any of the Inventory, Fixtures or Equipment is located for the purpose of inspecting the same, observing its use or otherwise protecting its interests therein.

Maintenance of Equipment and Fixtures. Debtor will keep and maintain each material item of Equipment and Fixtures in good operating condition, ordinary wear and tear excepted, and Debtor will provide all maintenance, service and repairs necessary for such purpose.

Continuous Perfection. Debtor will not change its name, identity or corporate structure in any manner unless Debtor shall have given Secured Party at least 30 days prior written notice thereof and shall have taken all action (or made arrangements to take such action substantially simultaneously with such change if it is impossible to take such action in advance) necessary or reasonably requested by Secured Party to amend any financing statements, continuation statements or other documents so that such statements or documents are not seriously misleading.

Patents, Patent Licensee, Trademarks and Trademark Licenses.

Debtor (either itself or through licensees) will, unless Debtor shall reasonably determine that a Trademark or Trademark License is of immaterial economic value to Debtor, (1) continue to use each Trademark or Trademark License on each and every trademark class of goods applicable to its current line as reflected in its current catalogs, brochures, price lists or otherwise in order to maintain each Trademark or Trademark License in full force free from any claim of abandonment for non-use, (2) maintain as in the past the quality of products and services offered under each Trademark or Trademark License, (3) employ each registered Trademark or Trademark License with the appropriate notice of registration consistent with present practices, and (4) not, and not permit any licensee or sub-license thereof to, do any act, or knowingly omit to do any act, whereby any Trademark or Trademark License may become invalidated.

Debtor will not, unless Debtor shall reasonably determine that a Patent or Patent License is of immaterial economic value to Debtor, do any act, or omit to do any act, whereby any Patent or Patent License may become abandoned or dedicated.

Debtor shall notify Secured Party immediately if it knows, or has reason to know, that any application or registration relating to any material Patent, Patent License, Trademark or Trademark License 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 or any court or tribunal in the United States) regarding Debtor's ownership of any such Patent, Patent License, Trademark or Trademark License, its right to register the same, or to keep and maintain the same.

Whenever Debtor, either itself or through any agent, employee, licensee or designee, shall file an application for the registration of any Patent, Patent License, Trademark or Trademark License owned by Debtor with the United States Patent and Trademark Office, Debtor shall promptly (and in any event within 10 days after such filing) report such filing to Secured Party. Upon the request of Secured Party, Debtor shall execute and deliver any and all agreements, instruments, documents and papers as Secured Party may request to evidence Secured Party's security interest in such Patent, Patent License, Trademark or Trademark License and the goodwill and general intangibles of Debtor relating thereto or represented thereby, and Debtor hereby constitutes Secured Party its attorney-in-fact to execute and file all such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed and such power being coupled with an interest and irrevocable until the Obligations are paid in full.

Debtor will take all necessary steps, including, without limitation, steps in any proceeding before the United States Patent and Trademark Office, to maintain and pursue each application (and to obtain the relevant registration unless Debtor shall determine that it is not in the best interest of Debtor to do so) and to maintain each Patent and Patent License and each registration of the Trademarks and Trademark Licenses owned by Debtor, including, without limitation, paying maintenance fees and filing applications for renewal, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings (except to the extent that dedication, abandonment or invalidation is permitted under Sections 5.17(a) and (b).

In the event that any Patent, Patent License, Trademark or Trademark License owned by Debtor is infringed, misappropriated or diluted by any third party, Debtor shall notify Secured Party promptly after it learns thereof and shall, unless Debtor reasonably determines that such Patent, Patent License, Trademark or Trademark License is of immaterial economic value to Debtor, promptly sue for infringement, misappropriation or dilution, seek injunctive relief where appropriate and seek to recover any and all damages for such infringement, misappropriation or dilution, or take such other actions as Debtor shall reasonably deem appropriate under the circumstances to protect such Patent, Patent License, Trademark or Trademark License, unless Debtor shall determine, in its reasonable business judgment, that it would be in the best interests of Debtor to take no such action. Notwithstanding the foregoing, Debtor shall take appropriate action at its expense to halt the infringement, misappropriation or dilution of any of the Patents, Patent Licenses, Trademarks or Trademark Licenses if such infringement, misappropriation or dilution could have a material adverse effect on the value of the Collateral taken on a whole or Debtor's ability to use the Collateral taken as a whole.

Copyrights and Copyright Licenses. Debtor will not do or omit to do any act which it has the right to do (including, without limitation, the filing of copyright renewals and the placement of appropriate notices of copyright), or authorize any licensee or third party to do or omit to do any act, whereby any of the Copyrights or Copyright Licenses that are material and useful to the business of Debtor may become abandoned, invalidated, unenforceable, avoided or avoidable, or which would otherwise diminish the value of any of the Copyrights or Copyright Licenses that are material and useful to the business of Debtor, and Debtor shall notify Secured Party immediately if it knows of any reason or has reason to know of any ground under which this result may occur. Without in any way limiting the foregoing, Debtor shall take appropriate action at its expense to halt the infringement of any of the Copyrights or Copyright Licenses if such infringement could have a material adverse effect on the value of the Collateral taken as a whole or Debtor's ability to use the Collateral taken as a whole.

5.19 Uncertificated Securities. Debtor will, or will permit Secured Party, from time to time to (i) cause the appropriate issuers of uncertificated securities owned by Debtor or other appropriate parties under Sections 8-313 and 8-321 of the UCC to mark their books and records with the numbers and face amounts of all uncertificated securities and all rollovers and replacements therefor to reflect Secured Party's security interests, (ii) obtain from such issuers and other parties, for the benefit of Secured Party, written confirmation of the security interests in such uncertificated securities, and (iii) take or cause such parties to take all action necessary or appropriate to create, perfect and maintain a first perfected priority lien in such uncertificated securities in favor of Secured Party.

5.20 Bailees. No Collateral shall at any time be in the possession or control of any warehouseman, bailee or any of Debtor's agents or processors without Secured Party's prior written consent and unless the Secured Party, if the Secured Party has so requested, has received warehouse receipts or bailee letters satisfactory to Secured Party prior to the commencement of such storage. Debtor's shall, upon the request of Secured Party, notify any such warehouseman, bailee, agent or processor of the security interests created hereby and shall instruct such party to hold all such Collateral for Secured Party's account subject to Secured Party's instructions.

5.21 Federal Claims. Debtor shall notify Secured Party of any Collateral which, to its best knowledge, constitutes a claim against the United States government or any instrumentality or agency thereof, the assignment of which claim is restricted by federal law. Upon the request of Secured Party, Debtor shall take such steps as may be necessary to comply with any applicable federal assignment of claims laws.

5.22 Hot Goods. None of the Inventory of Debtor has been or will be produced in violation of any provision of the Fair Labor Standards Act of 1938, as amended, or in violation of any other similar law.

5.23 Certificate of Title; Equipment. None of the Equipment is covered by any certificate of title. Upon request of Secured Party, Debtor shall promptly deliver to Secured Party any and all certificates of title, applications for title or similar evidence of ownership of all Equipment and shall cause Secured Party to be named as lienholder on any such certificate of title or other evidence of ownership. Debtor shall not permit Equipment to become Fixtures to real estate other than real estate mortgaged to Secured Party.

Secured Party's Appointment as Attorney-in-Fact.

Appointment; Powers. Debtor hereby irrevocably constitutes and appoints Secured Party and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Debtor and in the name of Debtor or in its own name, from time to time in Secured Party's discretion, for the purpose of carrying out the terms of this Security Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Security Agreement and, without limiting the generality of the foregoing, hereby gives Secured Party the power and right, on behalf of Debtor, without notice to or assent by Debtor to do the following:

(a) pay or discharge taxes, liens, security interests or other encumbrances levied, placed on or threatened against the Collateral, to effect any repairs or any insurance called for by the terms of this Security Agreement and to pay all or any part of the costs thereof and the premiums therefor; and

(b) sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, assignments, verifications and notices in connection with Accounts and other documents (including without limitation financing or continuation statements, and amendments thereto, and other documents necessary or advisable to create, perfect, protect and maintain the perfection and priority of Secured Party's security interests) relating to the Collateral;

(c) upon the occurrence and during the continuance of any Event of Default, (1) ask direct and demand any party liable for any payment under any of the Collateral to make payment of any and all monies due and to become due thereunder directly to Secured Party or as Secured Party shall direct; (2) collect and receive payment of and receipt for any and all moneys, claims and other amounts due and to become due at any time in respect of or arising out of any Collateral; (3) in the name of Debtor or its own name or otherwise, take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Collateral; (4) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction for the purpose of collecting any moneys due under any Collateral or any part thereof or enforcing any other right in respect of any Collateral; (5) defend any suit, action or proceeding brought against Debtor with respect to any Collateral; (6) settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as Secured Party may deem appropriate; (7) assign any Copyright, Patent or Trademark owned by Debtor (along with the goodwill of the business to which such Trademark pertains), for such term or terms, on such conditions and in such manner, as Secured Party shall in its sole discretion determine; (8) direct the appropriate United States Postal Service office or offices to deliver all mail addressed to Debtor with respect to Accounts to Secured Party at such place or places as Secured Party may indicate; and (9) generally sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral in such manner as is consistent with the UCC and as fully and completely as though Secured Party were the absolute owner thereof for all purposes, and do, at Secured Party's option and Debtor's expense, at any time or from time to time, all acts and things which Secured Party deems necessary to protect, preserve or realize upon the Collateral and Secured Party's security interest therein in order to effect the intent of this Security Agreement, all as fully and effectively as Debtor might do. Debtor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable.

Limitation on Liability. The powers conferred on Secured Party hereunder are solely to protect its interests in the Collateral and shall not impose any duty upon it to exercise any such powers. Secured Party shall be accountable only for amounts that it actually receives as a result of the exercise of such powers and neither it nor any of its officers, directors, employees or agents shall be responsible to Debtor for any act or failure to act, except for its own gross negligence or willful misconduct.

Rights After Default. Debtor also authorizes Secured Party, at any time and from time to time, (a) upon an Event of Default, to communicate in its own name with any party to any Contract with regard to the assignment of the Contracts hereunder and other matters relating thereto and (b) to execute, in connection with the sale provided for in Section 8.2 of this Security Agreement, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral.

Powers Coupled With An Interest. All authorizations and agencies herein contained in this Security Agreement or the Loan Documents with respect to the Collateral are irrevocable and powers coupled with an interest.

It is important to have a section appointing the Secured Party the Debtor's attorney-in-fact both for ministerial purposes (subsections (a) and (b)) and for post-default actions (subsection (c)). The presence of this appointment may permit the Secured Party to act at a time when its relationship with the Debtor has deteriorated to the point where it will not cooperate with the Secured Party.

Performance by Secured Party of Debtor's Obligations. If Debtor fails to perform or comply with any of its agreements contained herein and the same continues after notice of Secured Party's intention to do so, and Secured Party, as provided for by the terms of this Security Agreement, shall itself perform or comply or otherwise cause performance or compliance with such agreement, all fees and expenses of Secured Party incurred in connection with such performance or compliance, together with interest thereon at the default rate provided for in respect of the Loans made under the Notes, shall be payable by Debtor to Secured Party on demand and shall constitute Obligations secured hereby.

Remedies, Rights Upon Default.

Rights Upon Default. In addition to any other rights given to Secured Party hereunder, if any Event of Default shall occur and be continuing:

All payments received by Debtor under or in connection with any of the Collateral shall be held by Debtor in trust for Secured Party, shall be segregated from other funds of Debtor and shall forthwith upon receipt by Debtor be turned over to Secured Party in the same form as received by Debtor (duly endorsed by Debtor to Secured Party, if required); and

Any and all such payments so received by Secured Party (whether from Debtor or otherwise) may, in the sole discretion of Secured Party, be held by Secured Party as collateral security for, and/or then or within a reasonable time thereafter applied in whole or in part by Secured Party against, all or any part of the Obligations in such order as Secured Party shall elect. Any balance of such payments held by Secured Party and remaining after payment in full of all of the Obligations shall be paid over to Debtor or to whomsoever may be lawfully entitled to receive the same.

Remedies

(a) If any Event of Default shall occur and be continuing, Secured Party may exercise, in addition to all other rights and remedies granted to it in this Security Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the UCC (whether or not the UCC applies to the affected Collateral). Without limiting the generality of the foregoing, Debtor expressly agrees that in any such event Secured Party, without demand of performance or other demand, advertisement or notice of any kind (except the notice specified below of time and place of public or private sale) to or upon Debtor or any other Person (all and each of which demands, advertisements and/or notices are hereby expressly waived), may forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give an option or options to purchase or sell or otherwise dispose of and deliver said Collateral (or contract to do so), or any part thereof, in one or more parcels at public or private sale or sales, at any exchange broker's board or at any of Secured Party's offices or elsewhere at such prices as Secured Party may deem best, for cash or on credit or for future delivery without assumption of any credit risk. Secured Party shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of said Collateral so sold, free of any right or equity of redemption, which equity of redemption Debtor hereby releases. Debtor further agrees, at Secured Party's request, to assemble the Collateral and make it available to Secured Party at places which Secured Party shall reasonably select, whether at Debtor's premises or elsewhere, and Debtor shall at its own expense forthwith cause the Collateral to be moved to the place or places designated by Secured Party and there delivered to Secured Party, store and keep any Collateral so delivered to Secured Party at such place or places pending further action by Secured Party, and while the Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain the Collateral in good condition. Secured Party shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale after deducting all reasonable costs and expenses of every kind incurred therein or incidental to the care, safe keeping or otherwise of any or all of the Collateral or in any way relating to the rights of Secured Party hereunder, including reasonable attorneys' fees and legal expenses, to the payment in whole or in part of the Obligations, in such order as Secured Party may elect, Debtor remaining liable for any deficiency remaining unpaid after such application, and only after so paying over such net proceeds and after the payment by Secured Party of any other amount required by any provision of law, including Section 9-504(1)(c) of the UCC, (6) need Secured Party account for the surplus, if any, to Debtor. To the extent permitted by applicable law, Debtor waives all claims, damages and demands against Secured Party arising out of the repossession, retention or sale of the Collateral. Debtor agrees that Secured Party need not give more than 10 days notice (which notification shall be deemed given when mailed, postage prepaid, addressed to Debtor at its address set forth in Section 11 hereof) of the time and place of any public sale or of the time after which a private sale may take place and that such notice is reasonable notification of such matters. No notification need be given to Debtor if Debtor, after the occurrence of an Event of Default, has signed a statement renouncing or modifying any right to notification of sale or other intended disposition. Debtor shall remain liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all amounts to which Secured Party is entitled, Debtor also being liable for the fees and expenses of any attorneys employed by Secured Party to collect such deficiency.

(b) Upon the occurrence of an Event of Default, Secured Party or its agents or attorneys shall have the right to enter upon, occupy and use any premises owned or leased by Debtor where the Collateral is located (or is believed to be located) until the Obligations are paid in full without any obligation to pay rent to Debtor, to render the Collateral useable or salable and to remove the Collateral therefrom to the premises of Secured Party or any agent of Secured Party for such time as Secured Party may desire in order to effectively collect or liquidate the Collateral, and to take possession of Debtor's Books, to obtain access to Debtor's data processing equipment, computer hardware and software relating to the Collateral and to use all of the foregoing and the information contained therein in any manner Secured Party deems appropriate.

(c)Debtor acknowledges and agrees that a breach of any of the covenants contained in Sections 3.3, 3.4, 5.1, 5.7, 5.10, 5.11, 5.13, 6.3 and 8 of this Agreement will cause irreparable injury to Secured Party and that Secured Party has no adequate remedy at law in respect of such breaches and therefore agrees, without limiting the right of Secured Party to seek and obtain specific performance of other obligations of Debtor contained in this Agreement, that the covenants of Debtor contained in the Sections referred to in this Section shall be specifically enforceable against Debtor.

8.3 Costs and Expenses. Borrower shall pay all insurance expenses and all expenses of protecting, storing, warehousing, appraising, insuring, handling, maintaining and shipping the Collateral, all costs, fees and expenses of perfecting and maintaining Secured Party's security interest in the Collateral, and any and all excise, property, sales and use taxes imposed by any state, federal or local authority on any of the Collateral, or with respect to periodic appraisals and inspections of the Collateral as may be required under the terms of the Loan Agreement, or with respect to the sale or other disposition thereof. If Debtor fails promptly to pay any portion of the above expenses when due or to perform any other obligation of Debtor under this Agreement, Secured Party may, at its option, but shall not be required to, pay or perform the same and charge Debtor's account for all costs and expenses incurred therefor, and Debtor agrees to reimburse Secured Party therefor on demand. All sums so paid or incurred by Secured Party for any of the foregoing, any and all other sums for which Debtor may become liable hereunder and all costs and expenses (including reasonable attorneys' fees, legal expenses and court costs) incurred by Secured Party in enforcing or protecting the security interest of Secured Party in the Collateral or any of its rights or remedies under this Agreement shall be payable on demand, shall constitute Obligations, shall bear interest until paid at the highest rate provided in the Loan Agreement and shall be secured by the Collateral.

8.4 Waiver. Debtor hereby waives presentment, demand, protest or any notice (to the extent permitted by applicable law) of any kind in connection with this Security Agreement or any Collateral. Debtor also expressly waives and releases all right to direct the order in which any of the Collateral shall be sold in the event of any sale or sales pursuant hereto and to have any of the Collateral marshaled upon any foreclosure of any of the security interests granted in this Security Agreement.

Use and Protection of Copyrights, Patents and Trademarks. Notwithstanding anything to the contrary contained herein, unless an Event of Default has occurred and is continuing, Secured Party shall from time to time execute and deliver, upon the written request of Debtor, any and all instruments, certificates or other documents, in the form reasonably requested, necessary or appropriate in the judgment of Debtor to permit Debtor to continue to exploit, license, use, enjoy and protect the Copyrights, Patents and Trademarks.

Limitation on Secured Party's Duty in Respect of Collateral. Beyond the use of reasonable care in the custody thereof, Secured Party shall not have any duty as to any Collateral in its possession or control or in the possession or control of any agent or nominee of it or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto.

Notices. All notices, demands, instructions and other communications required or permitted to be given to or made upon any party hereto shall be in writing and shall be personally delivered or sent by first class mail, postage prepaid and, if mailed, shall be deemed to be received for purposes of this Agreement three days after mailing by the sender. Unless otherwise specified in a notice sent or delivered in accordance with the foregoing provisions of this Section 10, notices, demands, instruments and other communications in writing shall be given to or made upon the parties hereto at the following addresses:

Debtor:

Attention:

Secured Party:

Attention:

With Copies

to: Jaffe, Raitt, Heuer & Weiss

Professional Corporation

One Woodward Avenue

Suite 2400

Detroit, Michigan 48226

Attention:

Severability. Any provision of this Security Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

No Waiver; Cumulative Remedies. Secured Party shall not by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder and no waiver shall be valid unless in writing, signed by Secured Party, and then only to the extent therein set forth. A waiver by Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which Secured Party would otherwise have had on any future occasion. No failure to exercise, nor any delay in exercising, on the part of Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or future exercise thereof or the exercise of any other right, power or privilege. The rights and remedies hereunder provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights and remedies provided by law. None of the terms or provisions of this Security Agreement may be waived, altered, modified or amended except by an instrument in writing, duly executed by Secured Party and Debtor.

Successors and Assigns. This Security Agreement and all obligations of Debtor hereunder shall be binding upon the successors and assigns of Debtor, and shall, together with the rights and remedies of Secured Party hereunder, inure to the benefit of Secured Party and its successors and assigns; provided, however, that Debtor may not assign any of its rights or obligations hereunder without the prior written consent of Secured Party.

Further Indemnification. Debtor agrees to pay, and to save Secured Party harmless from, any and all liabilities with respect to, or resulting from, any delay in paying any and all excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Security Agreement.

Counterparts. This Security Agreement may be executed by the parties hereto in any number of separate counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

Survival of Agreements, Representations, and Warranties. All agreements, representations and warranties, and indemnities made herein shall survive the execution and delivery of this Security Agreement, the making of the Loans secured hereunder.

Complete Agreement. This Security Agreement, together with the exhibits to this Security Agreement, the Notes and the Collateral Documents, and the other agreements referred to herein or by their terms referring hereto, is intended by the parties as a final expression of their agreement and is intended as a complete statement of the terms and conditions of their agreement.

Construction. Neither this Security Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Secured Party, whether under any rule of construction or otherwise. On the contrary, this Security Agreement has been reviewed by each of the parties and their counsel and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties hereto.

Headings. Headings used in this Security Agreement are for convenience of reference only and shall not constitute a part of this Security Agreement for any other purpose or affect the construction of this Security Agreement.

Choice of Law. The validity of this Security Agreement, its construction, interpretation and enforcement and the rights of the parties hereto shall be determined under, governed by and construed in accordance with the internal laws of the State of Michigan, without regard to principles of conflicts of law.

Venue; Jurisdiction; Waiver of Jury Trial; Other Waivers.

Venue; Jurisdiction. The parties agree that all actions or proceedings arising in connection with this Security Agreement shall be tried and litigated only in the courts of the State of ___________ and of the United States for the Eastern District of Michigan. Debtor hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of such courts. Debtor hereby irrevocably designates, appoints and empowers with offices on the date hereof at , as its designee, appointee and agent to receive, accept and acknowledge for and on its behalf, and in respect of its property, service of any and all legal process, summons, notices and documents which may be served in any such action or proceeding. If for any reason such designee, appointee and agent shall cease to be available to act as such, Debtor agrees to designate a new designee, appointee and agent on the terms and for the purposes of this provision satisfactory to Secured Party. Debtor irrevocably consents to the service of process out of any such courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Debtor, at its address set forth for notices in this Security Agreement, such service to become effective ten (10) days after such mailing. Nothing herein shall affect the right of Secured Party to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against Debtor in any other jurisdiction. Debtor irrevocable waives any right it may have to assert the doctrine of forum non conveniens or to object to venue to the extent any proceeding is brought in accordance with this Section 22.

Waiver of Jury Trial. Debtor knowingly, voluntarily and intelligently waives its constitutional right to a trial by jury with respect to any claim, dispute, conflict or contention, if any, as may arise under any of the Loan Documents, including this Security Agreement and agrees that any litigation between the parties hereto shall be heard by a court of competent jurisdiction sitting without a jury. Debtor hereby confirms to Secured Party that it has reviewed the effect of this waiver of jury trial with competent legal counsel of its choice prior to executing this Security Agreement, and acknowledges and agrees that Secured Party is relying upon this waiver in entering into the loan transactions described herein.

The thought here is that a jury will tend to favor a business proprietor or other debtor against a large institution such as a bank. While it is not clear that such a waiver is enforceable, it is customary to insert one emphasizing the understanding and access to advice of the waiving party.

Other Waivers. [Insert waivers relevant to local court rules, bonding requirements, etc. if applicable.]

Waivers Voluntary. The waivers contained in this Agreement are freely, knowingly and voluntarily given by each party, without any duress or coercion, after each party has consulted with its counsel and has carefully and completely read all of the terms and provisions of this Agreement, specifically including the waivers contained in this Section 23. Neither Secured Party nor Debtor shall be deemed to have relinquished the waivers contained herein except by a writing signed by the party to be charged with having relinquished any such waiver.

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

DEBTOR:

ATTEST:

By:

Its:

SECURED PARTY:

By:

Its:

EXHIBIT 4.4-1

Location of Debtor's chief executive office and principal place of business:

Location where Debtor maintains its Books (for other than Accounts):

Locations with respect to Debtor's Accounts statements prepared and mailed from:

requesting payment at:

Books at:

If applicable, Location of Debtor's computer service provider:

EXHIBIT 4.4-2

LOCATION OF DEBTOR'S EQUIPMENT, FIXTURES AND INVENTORY

Notes:

1. Terms defined by reference to the Uniform Commercial Code ("UCC") are obviously useful only in the context of an agreement governed by the laws of one of the United States. Text within paragraphs referencing the UCC which is in bold and brackets may be used independently.

2. Uniform Commercial Code 9-105(b).

3. H. Ruda, Asset Based Financing: A Transactional Guide 31.03[3] (1991).

4. UCC 9-105(f) citing 1-201 and 7-201(2).

5. Generally accepted accounting principles, a term of art.

6. Refers to subordinated security interests with respect to which the Secured Party has received a demand prior to the complete disposition of proceeds and, if the Secured Party so requests, evidence of such subordinate interest.

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