GUARANTEE AND AMENDED ANDRESTATED SECURITY AGREEMENT

G UARANTEE AND A MENDED AND R ESTATED S ECURITY A GREEMENT

made by

HC I NNOVATIONS , I NC .

and its Subsidiaries

in favor of

the Noteholders Identified Herein

and

Pacific Aerie Holding LLC

as Agent

Dated as of December 23, 2008

T ABLE OF C ONTENTS

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GUARANTEE AND AMENDED AND RESTATED SECURITY AGREEMENT

               GUARANTEE AND AMENDED AND RESTATED SECURITY AGREEMENT, dated as of December 23, 2008, among HC Innovations, Inc., a Delaware corporation (the “ Company ”), each of the Subsidiaries of the Company identified herein (the Company, such Subsidiaries and any other entity that may become a party hereto pursuant to Section 9.15 , together, the “ Grantors ”), the holders of the Amended Notes identified on Annex 1 hereto and those individuals and entities who may become holders of such Amended Notes from time to time (the “ Noteholders ”), and Pacific Aerie Holding LLC, as Collateral Agent (in such capacity, the “ Collateral Agent ”) (the Noteholders, such individuals and entities and the Collateral Agent, together, the “ Secured Parties ”).

W I T N E S S E T H:

               WHEREAS, the Company previously has issued to the Noteholders certain secured convertible promissory notes in the aggregate principal amount of $7,139,955 plus interest, pursuant to various subscription agreements (the “Existing Notes”);

               WHEREAS, the obligations of the Company under the Existing Notes were guaranteed by the Company’s Subsidiaries and Affiliates pursuant to various guarantee agreements entered into substantially contemporaneously with the issuance of the Existing Notes (the “ Existing Guarantee Agreements ”);

               WHEREAS, the Existing Notes were secured by certain collateral granted by the Company, its Subsidiaries and Affiliates pursuant to various security agreements entered into substantially contemporaneously with the issuance of the Existing Notes (the “ Existing Security Agreements ”);

               WHEREAS, the Company and the Noteholders have entered into that certain Securities Amendment and Purchase Agreement dated as of December 23, 2008 (as amended, supplemented or otherwise modified from time to time, the “ Securities Amendment and Purchase Agreement ”), pursuant to which the Noteholders have agreed, among other matters, to amend and restate their Existing Notes as Amended Notes and to purchase from the Company additional notes which are also Amended Notes upon the terms and subject to the conditions set forth therein;

               WHEREAS, it is the intention of the parties hereto that the guarantees, security interests and other benefits provided by, the Existing Guarantee Agreements and the Existing Security Agreements shall continue for the benefit of the Secured Parties hereto, and that further guarantees, security interests and other benefits shall be provided to the Secured Parties, all upon terms and subject to the conditions set forth herein;

               WHEREAS, the proceeds of the sale of the additional Amended Notes under the Securities Amendment and Purchase Agreement will be used by the Grantors solely for repayment of the principal amount of, interest on, and other amounts owing in respect of, the Existing Credit Agreement;

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               WHEREAS, the Grantors are members of an affiliated group of companies engaged in related businesses, and each Grantor will derive substantial direct and indirect benefit from the transactions contemplated by the Securities Amendment and Purchase Agreement; and

               WHEREAS, it is a condition precedent to the obligation of the Noteholders to consummate the transactions contemplated by the Securities Amendment and Purchase Agreement that the Grantors shall have executed and delivered this Agreement for the ratable benefit of the Secured Parties.

               NOW, THEREFORE, in consideration of the premises and to induce the Noteholders to enter into the Securities Amendment and Purchase Agreement and to induce the Noteholders to consummate the transactions contemplated thereby, each Grantor hereby agrees, for the ratable benefit of the Secured Parties, as follows:

ARTICLE 1

DEFINED TERMS

           1.1 Definitions

          The following terms shall have the following meanings:

                (a) “ Accounts ” means, collectively, and in each instance however and wherever arising all accounts receivable and other rights to payment arising out of the sale or lease of goods and services, whether or not such right is evidenced by an Instrument or Chattel Paper, and whether or not earned by performance, including, without limitation, all “accounts” as such term is defined in the New York UCC and all other obligations of any kind at any time due or owing to Grantors

                (b) “ Agreement ” means this Guarantee and Amended and Restated Security Agreement, as the same may be amended, supplemented or otherwise modified from time to time.

                (c) “ Collateral ” has the meaning set forth in Section 3.1 hereof.

                (d) “ Collateral Account ” means any collateral account established by the Collateral Agent as provided in Section 7.1 .

                (e) “ Collateral Agent ” shall have the meaning set forth in the preamble to this Agreement.

                (f) “ Collateral Party ” means the pledgor, mortgagor or grantor of a security interest for the benefit of the Collateral Agent and the Noteholders under any Security Document.

                (g) “ Company ” has the meaning set forth in the preamble to this Agreement.

                (h) “ Company Obligations ” means, collectively, the unpaid principal of and interest on the Amended Notes and all other obligations and liabilities of the Company to the Collateral Agent or any Secured Party, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with,

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the Securities Amendment and Purchase Agreement, this Agreement, the other Transaction Documents, or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, premium, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Collateral Agent or to the Secured Parties that are required to be paid by the Company pursuant to the terms of any of the foregoing agreements).

                (i) “ Copyright License ” means any written agreement, now or hereafter in effect. granting any right to any third party under any copyright now or hereafter owned by any Grantor or that such Grantor otherwise has the right to license, or granting any right to any Grantor under any copyright now or hereafter owned by any third party, and all rights of such Grantor under any such agreement.

                (j) “ Copyrights ” means all of the following now owned or hereafter acquired by any Grantor: (i) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise, and (ii) all registrations and applications for registration of any such copyright in the United States or any other country. including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office, including those listed on Schedule 1.1(i) .

                (k) “ Documents ” means, collectively, the Pledged Securities, all chattel paper, all instruments, all investment property and all documents and all payments thereunder and instruments and other property from time to time delivered in respect thereof or in exchange therefor, and all bills of lading, warehouse receipts and other documents of title and other documents, including, without limitation, all “chattel paper”, “instruments”, “investment property” and documents”, as such terms are defined in the New York UCC, in each instance whether now owned or hereafter acquired by such Grantor.

                (l) “ Equipment ” means all machinery and equipment, all manufacturing, distribution, selling, data processing and office equipment, all furniture, furnishings, appliances, tools, tooling, molds, dies, vehicles, vessels, aircraft and all other goods of every type and description, in each instance whether now owned or hereafter acquired by any Grantor and wherever located, including without limitation all “equipment”, as such term is defined in the New York UCC; provided that equipment shall not include “fixtures” as defined in Section 9-313 of the New York UCC.

                (m) “ Existing Financing Statements ” means collectively, each UCC-1 financing statement naming each individual Noteholder as the secured party and the Company as debtor filed in connection with the Existing Security Agreements.

                (n) “ Existing Guarantee Agreements ” has the meaning set forth in the recitals to this Agreement.

                (o) “ Existing Security Agreements ” has the meaning set forth in the recitals to this Agreement.

                (p) “ Financing Statement ” means, as the context may require, (i) the Existing Financing Statements; (ii) any and all UCC-3 financing statements amending the Existing

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Financing Statements and (iii) any and all UCC-1 financing statements naming the Grantors and the Secured Parties as secured party.

          (q) “ Fully Satisfied ” means, with respect to the Obligations as of any date, that, on or before such date, (i) the principal of and interest accrued to such date on such Obligations shall have been paid in full in cash, (ii) all fees, expenses and other amounts then due and payable which constituted Obligations shall have been paid in full in cash, and (iii) the New Warrants shall have expired or irrevocably been terminated; provided, however , that, on such date, none of the Collateral Agent or the Secured Parties shall have made any claims in respect of Obligations against the Company or any Guarantor under any provision of any of the Transaction Documents that has not been cash collateralized by an amount sufficient in the reasonable judgment of the Collateral Agent and such Secured Party to secure such claim.

          (r) “ General Intangibles ” means, collectively, and in each instance however and wherever arising: (i) all rights, interests, choses in action, causes of action, claims and all other intangible property of any Grantor of every kind and nature, in each instance whether now owned or hereafter acquired by any Grantor, including, without limitation, all corporate and other business records; (ii) all loans, royalties, and other obligations receivable; (iii) all Trademarks, inventions, designs, patents, patent applications, (including any applications for the foregoing and whether or not registered) and the goodwill of any Grantor’s business connected with and symbolized by the same; (iv) trade secrets, computer programs, software, printouts and other computer materials, goodwill, registrations, U.S. registered copyrights, licenses relating to trademarks and U.S. registered copyrights, franchises, customer lists, credit files, correspondence and advertising materials; (v) all customer and supplier contracts, firm sale orders, rights under license and franchise agreements, and other contracts and contract rights; (vi) all interests in partnerships, joint ventures and other entities; (vii) all tax refunds and tax refund claims; (viii) all right, title and interest under leases, subleases, licenses and concessions and other agreements relating to real or personal property; (ix) all payments due or made to any Grantor in connection with any requisition, confiscation, condemnation, seizure or forfeiture of any property by any person or governmental authority; (x) all deposit accounts (general or special) with any bank or other financial institution; (xi) all credits with and other claims against carriers and shippers; (xii) all rights to indemnification; (xiii) all reversionary interests in pension and profit sharing plans and reversionary, beneficial and residual interest in trusts; (xiv) all proceeds of insurance of which any Grantor is a beneficiary; (xv) all letters of credit, guaranties, liens, security interests and other security held by or granted to any Grantor; and (xvi) all other intangible property, whether or not similar to the foregoing, including, without limitation, all “general intangibles,” as such term is defined in the New York UCC.

          (s) “ Grantors ” has the meaning set forth in the preamble to this Agreement.

          (t) “ Guarantor ” means each of the Company’s Subsidiaries.

          (u) “ Guarantor Obligations ” means, with respect to any Guarantor, the collective reference to (i) the Company Obligations and (ii) all obligations and liabilities of such Guarantor which may arise under or in connection with this Agreement or any other Transaction Document to which such Guarantor is a party, in each case whether on account of guarantee obligations, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Collateral Agent or to the Secured Parties

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that are required to be paid by such Guarantor pursuant to the terms of this Agreement or any other Transaction Document).

          (v) “ Instrument ” means a negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation, is not itself a security agreement or lease, and is of a type that in the ordinary course of business is transferred by delivery with any necessary indorsement or assignment, including, without limitation, all “instruments” as such term is defined in the New York UCC.

          (w) “ Inventory ” means, collectively, and in each instance, however and wherever arising, all inventory, finished goods, raw materials, work in process and other goods, including, without limitation, all “inventory” as such term is defined in the New York UCC.

          (x) “ License ” means any Patent License, Trademark License, Copyright License or other license or sublicense agreement to which any Grantor is a party, including those listed on Schedule 1.1(r) .

          (y) “ New York UCC ” means the Uniform Commercial Code as from time to time in effect in the State of New York.

          (z) “ Obligations ” mean (i) in the case of the Company, the Company Obligations, and (ii) in the case of each Guarantor, its Guarantor Obligations.

          (aa) “ Other Property ” means, collectively, all property or interests in property now owned or hereafter acquired by any Grantor which now may be owned or hereafter may come into the possession, custody or control of the Collateral Agent, any of the Secured Parties or any agent or Affiliate of any of them in any way or for any purpose (whether for safekeeping, deposit, custody, pledge, transmission, collection or otherwise); and all rights and interests of any Grantor, now existing or hereafter arising and however and wherever arising, in respect of any and all (i) notes, drafts, letters of credit, bank accounts, stocks, bonds, and debt and equity securities, whether or not certificated, and warrants, options, puts and calls and other rights to acquire or otherwise relating to the same; (ii) money; (iii) proceeds of loans; and (iv) insurance proceeds and books and records relating to any of the Collateral.

          (bb) “ Patent License ” means any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a patent, now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a patent, now or hereafter owned by any third party, is in existence, and all rights of any Grantor under any such agreement.

          (cc) “ Patents ” means all of the following now owned or hereafter acquired by any Grantor: (i) all letters patent of the United States or the equivalent thereof in any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or the equivalent thereof in any other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office or any similar offices in any other country, including those listed on Schedule 1(w) , and (ii) all reissues, continuations, divisions, continuations-in-past, renewals or extensions thereof. and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.

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          (dd) “ Pledged Collateral ” has the meaning set forth in Section 4.1(f) hereof.

          (ee) “ Pledged Debt ” has the meaning set forth in Section 4.1(b) hereof.

          (ff) “ Pledged Securities ” has the meaning set forth in Section 4.1(a) hereof.

          (gg) “ Noteholders ” has the meaning set forth in the preamble to this Agreement.

          (hh) “ Securities Amendment and Purchase Agreement ” has the meaning set forth in the recitals to this Agreement.

          (ii) “ Secured Parties ” has the meaning set forth in the preamble to this Agreement.

          (jj) “ Securities Act ”: means the Securities Act of 1933, as amended.

          (kk) “ Trademark License ” means any written agreement, now or hereafter in effect, granting to any third party any right to use any trademark now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, or granting to any Grantor any right to use any trademark now or hereafter owned by any third party, and all rights of any Grantor under any such agreement.

          (ll) “ Trademarks ” means all of the following now owned or existing or hereafter adopted or acquired by any Grantor: (i) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, all registrations and recordings thereof, and all registration and recording applications filed in connections therewith, including without limitation registrations and registration applications in the United States Patent and Trademark Office or any similar offices in any state of the United States or any other country or any political subdivision thereof, and all extensions or renewals thereof, including without limitation those listed in Schedule 1.1(ff) , (ii) all goodwill associated therewith or symbolized thereby and (iii) all other assets, rights and interests that uniquely reflect or embody such goodwill.

      1.2 Other Definitional Provisions .

          (a) Unless otherwise defined herein, terms defined in the Securities Amendment and Purchase Agreement and used herein shall have the meanings given to them in the Securities Amendment and Purchase Agreement, and the following terms which are defined in the New York UCC in effect on the date hereof are used herein as so defined: Chattel Paper, Equity Interests, Instruments and Proceeds.

          (b) The words “hereof,” “herein”, “hereto” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and Schedule references are to this Agreement unless otherwise specified.

          (c) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

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ARTICLE 2

GUARANTEE

      2.1 Guarantee

          (a) Each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantees to the Collateral Agent, for the ratable benefit of the Secured Parties and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Company when due (whether at the stated maturity, by acceleration or otherwise) of the Company Obligations.

          (b) Each of the Guarantors further agrees that its guarantee hereunder constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Collateral Agent or any other Secured Party to any security held for the payment of the Obligations or to any balance of any deposit account or credit on the books of the Collateral Agent or any other Secured Party in favor of the Company or any other Person.

           (c) Anything herein or in any other Transaction Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Transaction Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws relating to the insolvency of debtors (after giving effect to the right of contribution established in Section 2.2 ).

          (d) Each Guarantor agrees that the Company Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this ARTICLE 2 or affecting the rights and remedies of the Collateral Agent or any Secured Party hereunder.

          (e) The guarantee contained in this ARTICLE 2 shall remain in full force and effect until all the Guarantor Obligations shall have been Fully Satisfied.

          (f) No payment made by the Company, any of the Guarantors, any other guarantor or any other Person or received or collected by the Collateral Agent or any Secured Party from the Company, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Company Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Company Obligations or any payment received or collected from such Guarantor in respect of the Company Obligations), remain liable for the Company Obligations up to the maximum liability of such Guarantor hereunder until the Company Obligations are paid in full.

      2.2 Right of Contribution

     Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Guarantor’s right of contribution shall be subject to the terms and conditions of Section 2.3 . The provisions of this Section 2.2 shall in no respect

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limit the obligations and liabilities of any Guarantor to the Collateral Agent and the Secured Parties, and each Guarantor shall remain liable to the Collateral Agent and the Secured Parties for the full amount guaranteed by such Guarantor hereunder.

      2.3 No Subrogation

     Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any Guarantor by the Collateral Agent or any Secured Party, no Guarantor shall be entitled to be subrogated to any of the rights of the Collateral Agent or any Secured Party against the Company or any other Guarantor or any collateral security or guarantee or right of offset held by the Collateral Agent or any Secured Party for the payment of the Company Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Company or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Collateral Agent and the Secured Parties on account of the Obligations are Fully Satisfied. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been Fully Satisfied, such amount shall be held by such Guarantor in trust for the Collateral Agent and the Secured Parties, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Collateral Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Collateral Agent, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Collateral Agent may determine.

      2.4 Amendments, Etc. With Respect to the Obligations

     Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Obligations made by the Collateral Agent or any Secured Party may be rescinded by the Collateral Agent or such Secured Party and any of the Obligations continued, and the Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, extended, accelerated, compromised, waived, surrendered or released by the Collateral Agent or any Secured Party, and the Securities Amendment and Purchase Agreement and the other Transaction Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Collateral Agent (or the Required Noteholders or all Secured Parties, as the case may be) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Collateral Agent or any Secured Party for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Collateral Agent nor any Secured Party shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations or for the guarantee contained in this ARTICLE 2 or any property subject thereto.

      2.5 Guarantee Absolute and Unconditional

     Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Collateral Agent or any Secured Party upon the guarantee contained in this ARTICLE 2 or acceptance of the guarantee contained

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in this ARTICLE 2 ; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this ARTICLE 2 ; and all dealings between the Company and any of the Guarantors, on the one hand, and the Collateral Agent and the Secured Parties, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this ARTICLE 2 . Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Company or any of the Guarantors with respect to the Obligations. Each Guarantor understands and agrees that the guarantee contained in this ARTICLE 2 shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity or enforceability of the Securities Amendment and Purchase Agreement or any other Transaction Document, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Collateral Agent or any Secured Party, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Company or any other Person against the Collateral Agent or any Secured Party, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Company or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Company for the Company Obligations, or of such Guarantor under the guarantee contained in this ARTICLE 2 , in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, the Collateral Agent or any Secured Party may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against the Company, any other Guarantor or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Collateral Agent or any Secured Party to make any such demand, to pursue such other rights or remedies or to collect any payments from the Company, any other Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Company, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Collateral Agent or any Secured Party against any Guarantor. For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.

      2.6 Reinstatement

     The guarantee contained in this ARTICLE 2 shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Company Obligations is rescinded or must otherwise be restored or returned by the Collateral Agent or any Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made.

      2.7 Payments

     Each Guarantor hereby guarantees that payments hereunder will be paid to the Collateral Agent without set-off or counterclaim in United States Dollars at the office of the Collateral

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Agent located at 8813 S. Blue Jay Circle, Salt Lake City, Utah 84121, Attention: Kenneth D. Lame.

ARTICLE 3

GRANT OF SECURITY INTEREST

      3.1 Grant of Security Interest

     Each Grantor hereby assigns and transfers to the Collateral Agent, and hereby grants to the Collateral Agent, for the ratable benefit of the Secured Parties, a first priority security interest (the “ Security Interest ”) in all of the following property now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest, in each instance, with all accessions and additions thereto, substitutions therefor, and replacements, proceeds and products thereof (collectively, the “ Collateral ”), as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of such Grantor’s Obligations:

          (a) all Accounts;

          (b) all Equipment;

          (c) all General Intangibles;

          (d) all Pledged Collateral;

           (e) all Inventory;

           (f) all Documents; and

          (g) all Other Property.

     Each Grantor hereby reaffirms the grant of security interests made pursuant to the Existing Security Agreements.

      3.2 Perfection: Authorization to File Financing Statements

     Each Grantor hereby irrevocably authorizes the Collateral Agent at any time and from time to time to file in any filing office in any Uniform Commercial Code jurisdiction any initial financing statements and/or “in lieu of” financing statements and/or amendments of any financing statements filed at any time and from time to time that (a) indicate the Collateral (i) as all assets of each 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 Uniform Commercial Code of the State or such jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (b) provide any other information required by Part 5 of Article 9 of the Uniform Commercial Code of the State or such other jurisdiction for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor and, (ii) 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. Each Grantor agrees to furnish any such information to the Collateral Agent promptly

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upon request. Each Grantor also ratifies its authorization for the Collateral Agent to file in any relevant jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof. The Collateral Agent is further authorized to file with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) such documents as may be necessary or advisable for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by each Grantor, without the signature of any Grantor, and naming any Grantor or the Grantors as debtors and the Collateral Agent as secured party. The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Collateral. Without limiting the foregoing, the Collateral Agent will file the Financing Statements.

     3.3 Ranking

     Notwithstanding the date, manner or order of grant, attachment or perfection of any Secured Party and notwithstanding any provision of the UCC, or any other applicable law, including, without limitation, the laws of the State of New York, the Collateral Agent and the Secured Parties hereby agree that, as among themselves, any and all security interests created by the Existing Security Agreements and the security interests granted by Section 3.1 and Section 4.1 of this Agreement, will rank pari passu one with the other.

ARTICLE 4

PLEDGE OF SECURITIES

      4.1 Pledge

     As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in, all of such Grantor’s right, title and interest in, to and under

          (a) the shares of capital stock and other Equity Interests owned by it and listed on Schedule 4.1 and any other Equity Interests obtained in the future by such Grantor and the certificates representing all such Equity Interests (the “ Pledged Securities ”); provided that the Pledged Securities shall not include more than 65% of the issued and outstanding voting Equity Interests of any Foreign Subsidiary,

          (b) (i) the debt securities listed opposite the name of such Grantor on Schedule 4.1 , (ii) any debt securities in the future issued to such Grantor and (iii) the promissory notes and any other instruments evidencing such debt securities (the “ Pledged Debt “),

          (c) all other property that may be delivered to and held by the Collateral Agent pursuant to the terms of this Section 4.1 ,

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          (d) subject to Section 4.6 , all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities referred to in clauses (a) and (b) above,

          (e) subject to Section 4.6 , all rights and privileges of such Grantor with respect to the securities and other property referred to in clauses (a), (b), (c) and (d) above, and

          (f) all Proceeds of any of the foregoing (the items referred to in clauses (a) through (f) above being collectively referred to as the “ Pledged Collateral ”).

          TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, forever; subject, however, to the terms, covenants and conditions hereinafter set forth.

      4.2 Delivery of the Pledged Collateral

          (a) Each Grantor agrees promptly to deliver or cause to be delivered to the Collateral Agent any and all Pledged Collateral.

          (b) Each Grantor will cause any Indebtedness for borrowed money owed to such Grantor by any Person to be evidenced by a duly executed promissory note that is pledged and delivered to the Collateral Agent pursuant to the terms hereof.

          (c) Upon delivery to the Collateral Agent, (i) any Pledged Securities shall be accompanied by stock powers duly executed in blank or other instruments of transfer satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request and (ii) all other property comprising part of the Pledged Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Grantor and such other instruments or documents as the Collateral Agent may reasonably request. Each delivery of Pledged Collateral shall be accompanied by a schedule describing the securities, which schedule shall be attached hereto as Schedule 4.1 and made a part hereof; provided that failure to attach any such schedule hereto shall not affect the validity of such pledge of such Pledged Collateral. Each schedule so delivered shall supplement any prior schedules so delivered.

      4.3 Representations, Warranties and Covenants

     The Grantors jointly and severally represent, warrant and covenant to and with the Collateral Agent, for the benefit of the Secured Parties, that:

          (a) Schedule 4.1 correctly sets forth the percentage of the issued and outstanding units of each class of the Equity Interests of the issuer thereof represented by the Pledged Securities and includes all Equity Interests, debt securities and promissory notes legally or beneficially owned by Grantor;

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          (b) the Pledged Securities and Pledged Debt have been duly and validly authorized and issued by the issuers thereof and (i) in the case of Pledged Securities, are fully paid and nonassessable and (ii) in the case of Pledged Debt are legal, valid and binding obligations of the issuers thereof;

          (c) except for the security interests granted hereunder, each of the Grantors (i) is and will continue to be the direct owner, beneficially and of record, of the Pledged Collateral indicated on Schedule 4.1 as owned by such Grantor, (ii) holds the same free and clear of all Liens, other than Liens created by this Agreement or Permitted Liens, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged Collateral, other than Liens created by this Agreement or Permitted Liens and (iv) will defend its title or interest thereto or therein against any and all Liens (other than the Lien created by this Agreement and Permitted Liens), however, arising, of all Persons whomsoever;

          (d) except for restrictions and limitations imposed by the Transaction Documents or securities laws generally, the Pledged Collateral is and will continue to be freely transferable and assignable, and none of the Pledged Collateral is or will be subject to any option, right of first refusal, shareholders agreement, charter or bylaw provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledge of such Pledged Collateral hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Collateral Agent of rights and remedies hereunder;

          (e) each of the Grantors has the power and authority to pledge the Pledged Collateral pledged by it hereunder in the manner hereby done or contemplated;

          (f) no consent or approval of any Governmental Authority, any securities exchange or any other Person was or is necessary to the validity of the pledge effected hereby (other than such as have been obtained and are in full force and effect);

          (g) by virtue of the execution and delivery by the Grantors of this Agreement, when any Pledged Collateral is delivered to the Collateral Agent in accordance with this Agreement, the Collateral Agent will obtain a legal, valid and perfected lien upon and security interest in such Pledged Collateral as security for the payment and performance of the Obligations; and

          (h) the pledge effected hereby is effective to vest in the Collateral Agent, for the benefit of the Secured Parties, the rights of the Collateral Agent in the Pledged Collateral as set forth herein.

      4.4 Certification of Limited Liability Company and Limited Partnership Interests

     Each interest in any limited liability company or limited partnership controlled by any Grantor and pledged hereunder shall be represented by a certificate, shall be a “security” within the meaning of Article 8 of the New York UCC and shall be governed by Article 8 of the New York UCC.

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      4.5 Registration in Nominee Name; Denominations

     The Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Collateral in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the applicable Grantor, indorsed or assigned in blank or in favor of the Collateral Agent. Each Grantor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Collateral registered in the name of such Grantor. The Collateral Agent shall at all times have the right to exchange the certificates representing Pledged Collateral for certificates of smaller or larger denominations for any purpose consistent with this Agreement.

      4.6 Voting Rights; Dividends and Interest

           (a) Unless and until an Event of Default shall have occurred and be continuing and the Collateral Agent shall have notified the Grantors that their rights under this Section 4.6 are being suspended:

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           (b) Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified the Grantors of the suspension of their rights under paragraph (a)(iii) of this Section 4.6 , then all rights of any Grantor to dividends, interest. principal or other distributions that such Grantor is authorized to receive pursuant to paragraph (a)(iii) of this Section 4.6 shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions. All dividends, interest, principal or other distributions received by any Grantor contrary to the provisions of this Section 4.6 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Grantor and shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary indorsement). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 7.4 . After all Events of Default have been cured or waived and the Company has delivered to the Collateral Agent a certificate to that effect, the Collateral Agent shall promptly repay to each Grantor (without interest) all dividends, interest, principal or other distributions that such Grantor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 4.6 and that remain in such account.

           (c) Upon the occurrence and during the continuance of an Event of Default, after the Collateral Agent shall have notified the Grantors of the suspension of their rights under paragraph (a)(i) of this Section 4.6 , then all rights of any Grantor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 4.6 , and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 4.6 . shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided, however, that, unless otherwise directed by the Required Noteholders, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Grantors to exercise such rights.

           (d) Any notice given by the Collateral Agent to the Grantors suspending their rights under paragraph (a) of this Section 4.6 (i) may be given to one or more of the Grantors at the same or different times and (ii) may suspend the rights of the Grantors under paragraph (a)(i) or paragraph (a)(iii) in part without suspending all such rights (as specified by the Collateral Agent in its sole and absolute discretion) and without waiving or otherwise affecting the Collateral Agent’s rights to give additional notices from time to time suspending other rights so long as an Event of Default has occurred and is continuing.

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ARTICLE 5

REPRESENTATIONS AND WARRANTIES

          To induce the Collateral Agent and the Noteholders to enter into the Securities Amendment and Purchase Agreement and to induce the Noteholders to make their respective purchases and exchanges of or for the Amended Notes and New Warrants from the Company thereunder, the Company and each Guarantor hereby represents and warrants to the Collateral Agent and each Secured Party that:

      5.1 Representations in Securities Amendment and Purchase Agreement

     In the case of each Guarantor, the representations and warranties of the Company set forth in the Securities Amendment and Purchase Agreement as they relate to such Guarantor or to the Transaction Documents to which such Guarantor is a party, each of which is hereby incorporated herein by reference, are true and correct, and the Collateral Agent and each Secured Party shall be entitled to rely on each of them as if they were fully set forth herein, provided that each reference in each such representation and warranty to the Company’s knowledge shall, for the purposes of this Section 5.1 , be deemed to be a reference to such Guarantor’s knowledge.

      5.2 Title; No Other Liens

           (a) No financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except (i) those created by the Existing Credit Agreement, which liens shall be extinguished within 30 days after the Closing and (ii) such as have been filed in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, pursuant to this Agreement or as are permitted by the Securities Amendment and Purchase Agreement.

           (b) Each Grantor is the legal and beneficial owner of the Collateral free and clear of all liens, security interests or other encumbrances, except as expressly permitted by the Securities Amendment and Purchase Agreement.

           (c) For the past five years, each Grantor has conducted business only under its own corporate name and not under any trade name or other name.

           (d) Each Grantor has exclusive possession and control of the Inventory (other than raw materials and work in process) and Equipment, except for (i) Inventory and Equipment in the possession and control of such Grantor’s lessees and licensees under written lease and license agreements entered into in the ordinary course of business and consistent with past practice and (ii) Inventory and Equipment in transit with common or other carriers.

           (e) The Pledged Securities have been duly authorized and validly issued and are fully paid and non-assessable. The Pledged Debt of each Grantor’s Subsidiaries (if any), and, to the best of each Grantor’s knowledge, all other Pledged Debt, has been duly authorized, issued and delivered, and is the legal, valid, binding and enforceable obligation of the issuers thereof.

           (f) The Pledged Securities indicated on Schedule 4.1 hereto constitute all of the shares held by each Grantor of the respective issuers thereof and constitute 100% of all of the shares of stock of the respective issuers who are Subsidiaries of such Grantor.

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           (g) Other than filings with the United States Patent and Trademark Office, filings and registrations with the United States Copyright Office and filings under the Uniform Commercial Code in effect in each relevant jurisdiction, no authorization, approval or other action by, and no notice to or filing with, any federal, state or local governmental authority in the United States that have not already been taken or made and which are in full force and effect, is required (i) for the pledge by each Grantor of the Pledged Collateral or for the grant by each Grantor of the security interest in the Collateral granted hereby or for the execution, delivery or performance of this Agreement by such Grantor, (ii) for the exercise by the Collateral Agent of the voting or other rights provided in this Agreement with respect to the Pledged Collateral or the remedies in respect of the Pledged Collateral pursuant to this Agreement (except as may be required in connection with the disposition thereof by laws affecting the offering and sale of securities generally), or (iii) for the exercise by the Collateral Agent of any of its other rights or remedies hereunder.

      5.3 Perfected First Priority Liens

     In the case of each Grantor, the security interests granted pursuant to this Agreement (a) upon completion of the filings and other actions specified in Section 6.2 (which, in the case of all filings and other documents referred to in Section 6.2 , have been delivered to the Collateral Agent in completed and duly executed form) will constitute valid perfected security interests in all of the Collateral in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, as collateral security for such Grantor’s Obligations, enforceable in accordance with the terms hereof against all creditors of such Grantor and any Persons purporting to purchase any Collateral from such Grantor (except as to the ability of the Collateral Agent, for the ratable benefit of the Secured Parties, to have the U.S. federal government make payments directly to the Collateral Agent, for the ratable benefit of the Secured Parties, in respect of Accounts arising under contracts with the U.S. federal government as to which no filing has been or will be made under the Federal Assignment of Claims Act) and (b) are prior to all other Liens on the Collateral in existence on the date hereof, except for such liens created by the Existing Credit Agreement, which liens shall be extinguished within 30 days after the Closing.

      5.4 Chief Executive Office; Inventory and Equipment

     On the date hereof, each Grantor’s jurisdiction of organization, the location of such Grantor’s chief executive office and principal place of business are specified on Schedule 5.4 . As of the date of this Agreement, the locations listed on Schedule 5.4 to this Agreement constitute all locations at which its Inventory (other than raw materials and work in process) or Equipment is located, except for (a) Inventory or Equipment temporarily in transit from one location listed on Schedule 5.4 to another location listed on Schedule 5.4 or (b) Inv