Exhibit 10.20
SECURITY AGREEMENT
Dated May 3, 2001
From
The Grantors referred to herein
as Grantors
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to
BANK OF AMERICA, N.A.
as Collateral Agent
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T A B L E O F C O N T E N T S
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Section Page
Section 1. Grant of Security.......................................... 2
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Section 2. Security for Obligations................................... 7
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Section 3. Grantors Remain Liable..................................... 7
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Section 4. Delivery and Control of Security Collateral................ 7
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Section 5. Maintaining the L/C Collateral Account..................... 7
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Section 6. Investing of Amounts in the L/C Collateral Account......... 8
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Section 7. Release of Amounts......................................... 8
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Section 8. Representations and Warranties............................. 8
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Section 9. Further Assurances......................................... 11
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Section 10. As to Equipment and Inventory.............................. 12
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Section 11. Insurance.................................................. 12
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Section 12. Place of Perfection; Records; Collection of
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Receivables................................................ 13
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Section 13. As to Intellectual Property Collateral..................... 14
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Section 14. Voting Rights; Dividends; Etc.............................. 15
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Section 15. As to the Assigned Agreements.............................. 17
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Section 16. Transfers and Other Liens; Additional Shares............... 17
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Section 17. Collateral Agent Appointed Attorney-in-Fact................ 17
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Section 18. Collateral Agent May Perform............................... 18
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Section 19. The Collateral Agent's Duties.............................. 18
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Section 20. Remedies................................................... 19
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Section 21. Indemnity and Expenses..................................... 21
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Section 22. Amendments; Waivers; Additional Grantors; Etc.............. 21
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Section 23. Notices; Etc............................................... 22
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Section 24. Continuing Security Interest; Assignments under the
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Credit Agreement........................................... 22
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Section 25. Release; Termination....................................... 22
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Section 26. Security Interest Absolute................................. 23
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Section 27. Execution in Counterparts.................................. 24
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Section 28. Governing Law.............................................. 1
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Schedules
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Schedule I - Pledged Shares and Pledged Debt
Schedule II - Locations of Equipment and Inventory
Schedule III - Chief Executive Office and Federal Tax Identification Number
Schedule IV - Patents, Trademarks and Trade Names, Copyrights and Licenses
Schedule V - Assets Subject to Existing Contracts of Sale
Schedule VI - Receivables Evidenced by Chattel Paper
Schedule VII - Notices of Termination or Cancellation of Licenses
Exhibits
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Exhibit A - Form of Security Agreement Supplement
Exhibit B - Form of Intellectual Property Security Agreement
Exhibit C - Form of Intellectual Property Security Agreement Supplement
Appendices
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Appendix A
Appendix B
SECURITY AGREEMENT
SECURITY AGREEMENT dated May 3, 2001 made by DAVITA INC., a Delaware
corporation (the "Borrower"), the subsidiaries of the Borrower listed on the
signature pages hereof and the Additional Grantors (as hereinafter defined) (the
Borrower, the Persons so listed and the Additional Grantors being, collectively,
the "Grantors"), to Bank of America, N.A., as collateral agent (together with
any successor collateral agent appointed pursuant to Article VII of the Credit
Agreement (as hereinafter defined), the "Collateral Agent") for the Secured
Parties (as defined in the Credit Agreement).
PRELIMINARY STATEMENTS.
(1) The Borrower has entered into a Credit Agreement dated as of May
3, 2001 (said Agreement, as it may hereafter be amended, amended and restated,
supplemented or otherwise modified from time to time, being the "Credit
Agreement") with the Lender Parties and the Agents (each as defined therein).
Each Grantor (other than the Borrower) has entered into a Subsidiary Guarantee
dated May 3, 2001, pursuant to which such Grantor has guaranteed the Obligations
of the Borrower under the Credit Agreement. Capitalized terms used herein
without definition shall have the meanings assigned thereto in the Credit
Agreement.
(2) Pursuant to the Credit Agreement, the Borrower, from time to
time, may enter into interest with Hedge Agreements with counterparties that are
Lender Parties at the time such Hedge Agreements are entered into (or Affiliates
of such Lender Parties at such time) (all such Hedge Agreements being the
"Secured Hedge Agreements").
(3) Pursuant to the Credit Agreement, the Grantors are entering into
this Agreement in order to grant to the Collateral Agent for the ratable benefit
of the Secured Parties a security interest in all of their personal property and
fixtures now owned or hereafter acquired.
(4) Each Grantor is the owner of the shares (the "Initial Pledged
Shares") of stock set forth opposite such Grantor's name on and as otherwise
described in Part I of Schedule I hereto and issued by the corporations named
therein and of the indebtedness (the "Initial Pledged Debt") set forth opposite
such Grantor's name on and as otherwise described in Part II of Schedule I
hereto and issued by the obligors named therein.
(5) The Borrower has opened a collateral securities account, Account
No. ____ (the "L/C Collateral Account"), with the Collateral Agent at its office
at Charlotte, North Carolina, in the name of the Collateral Agent and under the
sole dominion of the Collateral Agent and subject to the terms of this
Agreement.
(6) It is a condition precedent to the making of Advances and the
issuance of Letters of Credit by the Lender Parties under the Credit Agreement
that the Grantors shall have granted the assignment and security interest and
made the pledge and assignment contemplated by this Agreement.
(7) Each Grantor will derive substantial direct and indirect benefit
from the transactions contemplated by the Loan Documents.
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(8) Terms defined in the Credit Agreement and not otherwise defined
in this Agreement are used in this Agreement as defined in the Credit Agreement.
Further, unless otherwise defined in this Agreement or in the Credit Agreement,
terms defined in Article 8 or 9 of the Uniform Commercial Code in effect in the
State of New York ("N.Y. Uniform Commercial Code") are used in this Agreement as
so defined.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lender Parties to make Advances and issue Letters of Credit under the
Credit Agreement, each Grantor hereby agrees with the Collateral Agent for the
ratable benefit of the Secured Parties as follows:
Section 1. Grant of Security. Each Grantor hereby pledges to the
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Collateral Agent for the ratable benefit of the Secured Parties, and hereby
grants to the Collateral Agent for the ratable benefit of the Secured Parties a
security interest in, such Grantor's right, title and interest in and to the
following, in each case, as to each type of property described below, whether
now owned or hereafter acquired by such Grantor, wherever located, and whether
now or hereafter existing or arising (collectively, the "Collateral"):
(a) all equipment in all of its forms, all fixtures and all parts
thereof and all accessions thereto (any and all such equipment, fixtures,
parts and accessions being the "Equipment");
(b) all inventory in all of its forms and all accessions thereto and
products thereof and documents therefor (any and all such inventory,
accessions, products and documents being the "Inventory");
(c) all accounts, chattel paper, instruments, general intangibles
(other than general intangibles consisting of Security Collateral,
Intellectual Property Collateral or Agreement Collateral which are included
as "Collateral" in the applicable provisions of this Section 1) and other
obligations of any kind, whether or not arising out of or in connection
with the sale or lease of goods or the rendering of services and whether or
not earned by performance, and all rights now or hereafter existing in and
to all security agreements, leases and other contracts securing or
otherwise relating to any such accounts, chattel paper, instruments,
general intangibles or obligations (any and all such accounts, chattel
paper, instruments, general intangibles and obligations, to the extent not
referred to in clause (d), (e) or (f) below, being the "Receivables", and
any and all such security agreements, leases and other contracts being the
"Related Contracts"). "Receivables" shall include, but not be limited to,
any accounts, contract rights, notes, drafts and other obligations or
rights to payment of every kind or description now or any time hereafter
arising, directly or indirectly, out of the provision of Dialysis Services
and/or the provision of Ancillary Services specifically including, but not
limited to, all accounts receivable and rights to payment through federal,
state or local governmental programs, including without limitation, all
Governmental Health Receivables, all other third-party payer programs and
health care insurance receivables and other private pay receivables. As
used herein, (i) "Governmental Health Receivables" means Medicaid
Receivables, Medicare Receivables or VA Receivables, (ii) "Medicaid
Receivable"
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means any Receivable with respect to which the obligor is a state
governmental authority (or agent thereof) obligated to pay, pursuant to
federal or state Medicaid program statutes or regulations, for services
rendered to eligible beneficiaries thereunder; (iii) "Medicare Receivable"
means any Receivable with respect to which the obligor is a federal
governmental authority (or agent thereof) obligated to pay, pursuant to
federal Medicare Program statutes or regulations, for services rendered to
eligible beneficiaries thereunder and (iv) "VA Receivable" means any
Receivable with respect to which the obligor is the Veterans'
Administration or any successor thereto (or any agent thereof);
(d) the following (the "Security Collateral"):
(i) the Initial Pledged Shares and the certificates, if any,
representing the Initial Pledged Shares, and all dividends, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all
of the Initial Pledged Shares;
(ii) the Initial Pledged Debt and the instruments, if any,
evidencing the Initial Pledged Debt, and all interest, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all
of the Initial Pledged Debt;
(iii) all additional shares of stock from time to time acquired
by such Grantor in any manner (such shares, together with the Initial
Pledged Shares, being the "Pledged Shares"), and the certificates, if
any, representing such additional shares, and all dividends, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all
of such shares; provided, that if the issuer of any of such Pledged
Shares is a controlled foreign corporation (used hereinafter as such
term is defined in Section 975(a) or a successor provision of the
Internal Revenue Code), the Pledged Shares shall not include any
shares of stock of such issuer in excess of the number of shares of
such issuer possessing up to but not exceeding 65% of the voting power
of all classes of capital stock entitled to vote of such issuer, and
all dividends, cash, warrants, rights, instruments and other property
or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
Pledged Shares;
(iv) all additional indebtedness from time to time owed to such
Grantor (such indebtedness, together with the Initial Pledged Debt,
being the "Pledged Debt") and the instruments, if any, evidencing such
indebtedness, and all interest, cash, instruments and other property
from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such indebtedness; and
(v) all other investment property in which such Grantor has now,
or acquires from time to time hereafter, any right, title or interest
in any manner, and the certificates or instruments, if any,
representing or evidencing such investment property, and all
dividends, interest, distributions, value, cash, instruments and
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other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
investment property;
(e) each of the agreements to which such Grantor is now or may
hereafter become a party, in each case as such agreements may be amended,
amended and restated, supplemented or otherwise modified from time to time
(collectively, the "Assigned Agreements"), including, without limitation,
(i) all rights of such Grantor to receive moneys due and to become due
under or pursuant to the Assigned Agreements, (ii) all rights of such
Grantor to receive proceeds of any insurance, indemnity, warranty or
guaranty with respect to the Assigned Agreements, (iii) claims of such
Grantor for damages arising out of or for breach of or default under the
Assigned Agreements and (iv) the right of such Grantor to terminate the
Assigned Agreements, to perform thereunder and to compel performance and
otherwise exercise all remedies thereunder (all such Collateral being the
"Agreement Collateral");
(f) the following (collectively, the "Account Collateral"):
(i) the L/C Collateral Account, all financial assets from time
to time credited to the L/C Collateral Account (including, without
limitation, all Cash Equivalents from time to time credited to the L/C
Collateral Account), and all dividends, interest, cash, instruments
and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
financial assets;
(ii) all other deposit accounts of such Grantor from time to
time, all funds held therein and all certificates and instruments, if
any, from time to time representing or evidencing such deposit
accounts;
(iii) all notes, certificates of deposit, deposit accounts, checks
and other instruments from time to time delivered to or otherwise
possessed by the Collateral Agent for or on behalf of such Grantor,
including, without limitation, those delivered or possessed in
substitution for or in addition to any or all of the then existing
Account Collateral; and
(iv) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the then
existing Account Collateral; and
(g) the following (collectively, the "Intellectual Property
Collateral"):
(i) all United States, international and foreign patents, patent
applications and statutory invention registrations, including, without
limitation, the patents and patent applications set forth in Schedule
IV hereto (as such Schedule IV may be supplemented from time to time
by supplements to this Agreement, each such supplement being in
substantially the form of Exhibit C hereto (an "IP Security Agreement
Supplement"), executed and delivered by such Grantor to the Collateral
Agent from time to time), together with all reissues, divisions,
continuations, continuations-in-part, extensions and reexaminations
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thereof, all inventions therein, all rights therein provided by
international treaties or conventions and all improvements thereto,
and all other rights of any kind whatsoever of such Grantor accruing
thereunder or pertaining thereto (the "Patents");
(ii) all trademarks (including, without limitation, service
marks), certification marks, collective marks, trade dress, logos,
domain names, product configurations, trade names, business names,
corporate names and other source identifiers, whether or not
registered, whether currently in use or not, including, without
limitation, all common law rights and registrations and applications
for registration thereof, including, without limitation, the trademark
registrations and trademark applications set forth in Schedule IV
hereto (as such Schedule IV may be supplemented from time to time by
IP Security Agreement Supplements executed and delivered by such
Grantor to the Collateral Agent from time to time), and all other
marks registered in the U.S. Patent and Trademark Office or in any
office or agency of any State or Territory of the United States or any
foreign country (but excluding any United States intent-to-use
trademark application prior to the filing and acceptance of a
Statement of Use or an Amendment to allege use in connection therewith
to the extent that a valid security interest may not be taken in such
an intent-to-use trademark application under applicable law), and all
rights therein provided by international treaties or conventions, all
reissues, extensions and renewals of any of the foregoing, together in
each case with the goodwill of the business connected therewith and
symbolized thereby, and all rights corresponding thereto throughout
the world and all other rights of any kind whatsoever of such Grantor
accruing thereunder or pertaining thereto (the "Trademarks");
(iii) all copyrights, copyright applications, copyright
registrations and like protections in each work of authorship, whether
statutory or common law, whether published or unpublished, any
renewals or extensions thereof, all copyrights of works based on,
incorporated in, derived from, or relating to works covered by such
copyrights, including, without limitation, the copyright registrations
and copyright applications set forth in Schedule IV hereto including,
without limitation, the trademark registrations and trademark
applications set forth in Schedule IV hereto (as such Schedule IV may
be supplemented from time to time by IP Security Agreement Supplements
executed and delivered by such Grantor to the Collateral Agent from
time to time), together with all rights corresponding thereto
throughout the world and all other rights of any kind whatsoever of
such Grantor accruing thereunder or pertaining thereto (the
"Copyrights");
(iv) all confidential and proprietary information, including,
without limitation, know-how, trade secrets, manufacturing and
production processes and techniques, inventions, research and
development information, technical data, financial, marketing and
business data, pricing and cost information, business and marketing
plans and customer and supplier lists and information (the "Trade
Secrets");
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(v) all computer software programs and databases (including,
without limitation, source code, object code and all related
applications and data files), firmware, and documentation and
materials relating thereto, and all rights with respect to the
foregoing, together with any and all options, warranties, service
contracts, program services, test rights, maintenance rights,
improvement rights, renewal rights and indemnifications and any
substitutions, replacements, additions or model conversions of any of
the foregoing (the "Computer Software");
(vi) all license agreements, permits, authorizations and
franchises, whether with respect to the Patents, Trademarks,
Copyrights, Trade Secrets or Computer Software, or with respect to the
patents, trademarks, copyrights, trade secrets, computer software or
other proprietary right of any other Person, including, without
limitation, the license agreements set forth in Schedule IV hereto (as
such Schedule IV may be supplemented from time to time by IP Security
Agreement Supplements executed and delivered by such Grantor to the
Collateral Agent from time to time), and all income, royalties and
other payments now or hereafter due and/or payable with respect
thereto, subject, in each case, to the terms of such license
agreements, permits, authorizations and franchises, (the "Licenses");
and
(vii) any and all claims for damages for past, present and
future infringement, misappropriation or breach with respect to the
Patents, Trademarks, Copyrights, Trade Secrets, Computer Software or
Licenses, with the right, but not the obligation, to sue for and
collect, or otherwise recover, such damages; and
(h) all proceeds of any and all of the Collateral (including, without
limitation, proceeds that constitute property of the types described in
clauses (a) through (g) of this Section 1 and this clause (h)) and, to the
extent not otherwise included, all (i) payments under insurance (whether or
not the Collateral Agent is the loss payee thereof), or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or otherwise
with respect to any of the foregoing Collateral and (ii) cash.
Notwithstanding anything herein to the contrary, in no event shall the
Collateral include, and no Grantor shall be deemed to have granted a security
interest in or pledged (i) the assets subject to existing contracts of sale
specified in Schedule V, or (ii) any of such Grantor's rights or interests in
any license, contract, or agreement to which such Grantor is a party or any
Security Collateral (other than stock issued by wholly owned Subsidiaries of the
Borrower) owned by such Grantor or any of its rights or interests thereunder to
the extent, but only to the extent, that such a grant would, under the terms of
such license, contract or agreement or otherwise, result in a breach of the
terms of, or constitute a default under any license, contract, or agreement to
which such Grantor is a party or any Security Collateral (other than stock
issued by wholly owned Subsidiaries of the Borrower) owned by such Grantor
(other than to the extent that any such term would be rendered ineffective
pursuant to Section 9-318(4) of the UCC or any other applicable law (including
the Bankruptcy Code) or principles of equity); provided, that immediately upon
the ineffectiveness, lapse or termination of any such provision, the Collateral
shall include, and such Grantor shall be deemed to have granted a security
interest in, all such rights and interests as if such provision had never been
in effect.
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In the event that any asset of a Grantor is excluded from the
Collateral by virtue of clause (ii) of the foregoing paragraph, upon request of
the Collateral Agent such Grantor agrees to use all reasonable efforts to obtain
all requisite consents to enable such Grantor to provide a security interest in
such asset pursuant hereto as promptly as practicable.
Section 2. Security for Obligations. This Agreement secures, in the
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case of each Grantor, the payment of all Obligations of such Grantor now or
hereafter existing under the Loan Documents and the secured Hedge Agreements,
whether direct or indirect, absolute or contingent, and whether for principal,
reimbursement obligations, interest, fees, premiums, penalties,
indemnifications, contract causes of action, costs, expenses or otherwise (all
such Obligations being the "Secured Obligations"). Without limiting the
generality of the foregoing, this Agreement secures, as to each Grantor, the
payment of all amounts that constitute part of the Secured Obligations and would
be owed by such Grantor to any Secured Party under the Loan Documents but for
the fact that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving a Loan Party.
Section 3. Grantors Remain Liable. Anything herein to the contrary
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notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in such Grantor's Collateral to the extent set forth therein
to perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by the Collateral Agent
of any of the rights hereunder shall not release any Grantor from any of its
duties or obligations under the contracts and agreements included in the
Collateral and (c) no Secured Party shall have any obligation or liability under
the contracts and agreements included in the Collateral by reason of this
Agreement or any other Loan Document, nor shall any Secured Party be obligated
to perform any of the obligations or duties of any Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
Section 4. Delivery and Control of Security Collateral. All
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certificates or instruments representing or evidencing Security Collateral shall
be delivered to and held by or on behalf of the Collateral Agent pursuant hereto
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Collateral Agent. The Collateral Agent shall have
the right, at any time in its discretion and without notice to any Grantor, to
transfer to or to register in the name of the Collateral Agent or any of its
nominees any or all of the Security Collateral, subject only to the revocable
rights specified in Section 14(a).
(a) With respect to any Security Collateral in which any Grantor has
any right, title or interest and that constitutes an uncertificated security, at
the request of the Collateral Agent such Grantor will cause the issuer thereof
either (i) to register the Collateral Agent as the registered owner of such
security or (ii) to agree in writing with such Grantor and the Collateral Agent
that such issuer will comply with instructions with respect to such security
originated by the Collateral Agent without further consent of such Grantor, such
agreement to be in form and substance satisfactory to the Collateral Agent.
Section 5. Maintaining the L/C Collateral Account. So long as any
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Advance or any other Obligation of any Loan Party under any Loan Document shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender shall
have any Commitment under the Credit
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Agreement the Borrower will maintain the L/C Collateral Account with the
Collateral Agent. It shall be a term and condition of the L/C Collateral
Account, notwithstanding any term or condition to the contrary in any other
agreement relating to the L/C Collateral Account, and except as otherwise
provided by the provisions of Sections 7 and 20, that no amount (including
interest on Cash Equivalents credited thereto) will be paid or released to or
for the account of, or withdrawn by or for the account of, the Borrower or any
other Person from the L/C Collateral Account.
Section 6. Investing of Amounts in the L/C Collateral Account. The
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Collateral Agent will, subject to the provisions of Sections 7 and 20, (a)
invest amounts received with respect to the L/C Collateral Account in such Cash
Equivalents credited to the L/C Collateral Account as the Borrower may select
and (b) invest interest paid on the Cash Equivalents referred to in clause (a)
above, and reinvest other proceeds of any such Cash Equivalents that may mature
or be sold, in each case in such Cash Equivalents credited to the L/C Collateral
Account as the Borrower may select. Interest and proceeds that are not invested
or reinvested in Cash Equivalents as provided above shall be deposited and held
in a deposit account with the Collateral Agent and under the sole control and
dominion of the Collateral Agent, such deposit account to be deemed to
constitute part of the L/C Collateral Account. In addition, the Collateral Agent
shall have the right to exchange such Cash Equivalents for similar Cash
Equivalents of smaller or larger determinations, or for other Cash Equivalents,
credited to the L/C Collateral Account.
Section 7. Release of Amounts. So long as no Default shall have
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occurred and be continuing and there are no unpaid Obligations under the Loan
Documents, the Collateral Agent will pay and release to the Borrower or at its
order such amount, if any, as is then on deposit in the L/C Collateral Account
to the extent permitted to be released under the terms of the Credit Agreement.
Section 8. Representations and Warranties. Each Grantor represents
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and warrants as follows:
(a) All of the Equipment and Inventory of such Grantor are located at
the places specified therefor in Schedule II hereto, as such Schedule II
may be amended from time to time pursuant to Section 10(a). The chief
executive office of such Grantor is located at the address specified
therefor in Schedule III hereto, as such Schedule III may be amended from
time to time pursuant to Section 12(a). Such Grantor's federal tax
identification number is set forth opposite such Grantor's name in Schedule
III hereto. All Security Collateral consisting of certificated securities
and instruments have been delivered to the Collateral Agent. Except as
disclosed on Schedule VI hereto, none of the Receivables is evidenced by
any chattel paper.
(b) Such Grantor is the legal and beneficial owner of the Collateral
of such Grantor free and clear of any Lien, claim, option or right of
others, except for Permitted Liens and the security interest created under
this Agreement. No effective financing statement or other instrument
similar in effect covering all or any part of such Collateral or listing
such Grantor or any trade name of such Grantor as debtor is on file in any
recording office, except such as may have been filed in favor of the
Collateral Agent
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relating to the Loan Documents and except for Permitted Liens. Except as
disclosed on Schedule IV hereto, no Grantor has any trade names.
(c) Such Grantor has exclusive possession and control of the
Equipment and Inventory, except as disclosed on Schedule II hereto.
(d) The Pledged Shares have been duly authorized and validly issued
and are fully paid and non-assessable. The Pledged Debt pledged by each
Grantor hereunder (i) has been duly authorized, authenticated or issued,
and (ii) is the legal, valid and binding obligation of the issuers thereof.
(e) The Initial Pledged Shares constitute the percentage of the
issued and outstanding shares of stock of the issuers thereof indicated on
Schedule I hereto as of the Closing Date. The Initial Pledged Debt
constitutes all of the outstanding indebtedness owed to such Grantor by the
issuers thereof and is outstanding, as of the Closing Date, in the
principal amount indicated on Schedule I hereto as of the Closing Date.
(f) All of the investment property owned by such Grantor as of the
Closing Date is listed on Schedule I hereto.
(g) Upon the making of the filings and other actions necessary to
perfect the security interest in the Collateral of such Grantor created
under this Agreement, this Agreement will create in favor of the Collateral
Agent for the benefit of the Secured Parties a valid perfected first
priority security interest in the Collateral of such Grantor (subject to
Permitted Liens to the extent such Liens have priority to the security
interests created hereunder), securing the payment of the Secured
Obligations.
(h) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other
third party is required for (i) the grant by such Grantor of the
assignment, pledge and security interest granted hereunder or for the
execution, delivery or performance of this Agreement by such Grantor, (ii)
the perfection or maintenance of the pledge and security interest created
hereunder on such of the Collateral located in the United States in which a
Lien may be perfected by the filing of financing statements, the
recordation of security agreements with the U.S. Patent and Trademark
Office or the U.S. Copyright Office or the delivery of Collateral
(including the first priority nature of such pledge or security interest),
except for the filing of financing and continuation statements under the
Uniform Commercial Code, the recordation of the Intellectual Property
Security Agreements referred to in Section 14(f) with the U.S. Patent and
Trademark Office and the U.S. Copyright Office (in the case of copyrights,
limited to copyrights that are recorded in the U.S. Copyright Office) and
the actions described in Section 4 with respect to Security Collateral, or
(iii) for the exercise by the Collateral Agent of its voting or other
rights provided for in this Agreement or the remedies in respect of the
Collateral pursuant to this Agreement, except as may be required in
connection with the exercise of the rights of a secured creditor by laws
affecting such rights generally, or the disposition of any portion of the
Security Collateral by laws affecting the offering and sale of securities
generally.
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(i) As to itself and its Intellectual Property Collateral:
(i) To such Grantor's knowledge, no claim has been asserted that
the use of such Intellectual Property Collateral does or may infringe
upon the intellectual property rights of any third party.
(ii) (A) With respect to Collateral owned by such Grantor, such
Grantor is the exclusive owner of the entire and unencumbered right,
title and interest in and to such Intellectual Property Collateral and
is entitled to use all such Intellectual Property Collateral, subject
to the license terms of the Licenses and (B) with respect to
Collateral consisting of licenses of Intellectual Property in favor of
such Grantor, such Grantor has the valid right to use the Collateral,
subject to the terms of the applicable License.
(iii) The Intellectual Property Collateral set forth on Schedule
IV hereto includes all of the patents, patent applications, trademark
registrations and applications, copyright registrations and
applications and Licenses owned by such Grantor.
(iv) The Intellectual Property Collateral is subsisting, and has
not been adjudged invalid or unenforceable in whole or part, and to
the best of such Grantor's knowledge, is valid and enforceable.
(v) Such Grantor has made or performed all filings, recordings
and other acts and has paid all required fees and taxes to maintain
and protect its interest in such items of Intellectual Property
Collateral in full force and effect in such jurisdictions, in each
case, as such Grantor deems necessary in its reasonable commercial
judgment, and to protect and maintain its interest therein.
(vi) No action, suit, investigation, litigation or proceeding has
been asserted or is pending against such Grantor or naming such
Grantor as a party or, to such Grantor's knowledge, threatened against
such Grantor (i) based upon or challenging or seeking to deny or
restrict the use by such Grantor of any of the Intellectual Property
Collateral, or (ii) alleging that any services provided by, processes
used by, or products manufactured or sold by, such Grantor infringe
upon or misappropriate any patent, trademark, copyright or any other
proprietary right of any third party. To such Grantor's knowledge, no
Person is engaging in any activity that infringes upon or
misappropriates the Intellectual Property Collateral or upon the
rights of such Grantor therein. Except as set forth on Schedule IV
hereto, such Grantor has not granted any license, release, covenant
not to sue, non-assertion assurance, or other right to any Person with
respect to any part of the Intellectual Property Collateral. The
consummation of the Transaction will not result in the termination or
impairment of any of the Intellectual Property Collateral in a manner
that would constitute a Material Adverse Effect.
11
(vii) With respect to each License: (A) such License will not
cease to be valid and binding and in full force and effect on terms
identical to those currently in effect as a result of the rights and
interest granted herein, nor will the grant of such rights and
interest constitute a breach or default under such License or
otherwise give the licensor or licensee a right to terminate such
License; (B) except as set forth on Schedule VII hereto, such Grantor
has not received any notice of termination or cancellation under such
License; (C) except as set forth on Schedule VII hereto, such Grantor
has not received any notice of a breach or default under such License,
which breach or default has not been cured; and (D) such Grantor has
not granted to any other third party any rights, adverse or otherwise,
under such License.
Section 9. Further Assurances. Each Grantor agrees that from time to
------------------
time, at the expense of such Grantor, such Grantor will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Collateral Agent may reasonably
request, in order to perfect and protect any pledge, assignment or security
interest granted or purported to be granted by such Grantor hereunder or to
enable the Collateral Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral of such Grantor. Without limiting the
generality of the foregoing, each Grantor will promptly with respect to
Collateral of such Grantor: (i) at the request of the Collateral Agent, mark
conspicuously each of its records pertaining to such Collateral with a legend,
in form and substance satisfactory to the Collateral Agent, indicating that
Collateral is subject to the security interest granted hereby; (ii) if any such
Collateral shall be evidenced by a promissory note or other instrument or
chattel paper, deliver and pledge to the Collateral Agent hereunder such note or
instrument or chattel paper duly indorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and substance satisfactory to
the Collateral Agent; (iii) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices, as may
be necessary or desirable, or as the Collateral Agent may reasonably request, in
order to perfect and preserve the security interest granted or purported to be
granted by such Grantor hereunder; (iv) deliver and pledge to the Collateral
Agent for the benefit of the Secured Parties certificates representing Security
Collateral that constitutes certificated securities, accompanied by undated
stock or bond powers executed in blank; and (v) deliver to the Collateral Agent
evidence that all other action that the Collateral Agent may deem reasonably
necessary or desirable in order to perfect and protect the security interest
created by such Grantor under this Agreement has been taken.
(a) Each Grantor hereby authorizes the Collateral Agent to file one
or more financing or continuation statements, and amendments thereto, relating
to all or any part of the Collateral of such Grantor without the signature of
such Grantor where permitted by law. A photocopy or other reproduction of this
Agreement or any financing statement covering the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law.
(b) Each Grantor will furnish to the Collateral Agent from time to
time statements and schedules further identifying and describing the Collateral
of such Grantor and such other reports in connection with such Collateral as the
Collateral Agent may reasonably request, all in reasonable detail.
12
Section 10. As to Equipment and Inventory. Each Grantor will keep the
Equipment and Inventory of such Grantor (other than Inventory sold in the
ordinary course of business) at the places therefor specified in Section 8(a)
or, except in circumstances governed by Section 5.01(j) of the Credit Agreement,
upon 30 days' prior written notice to the Collateral Agent, at such other places
in a jurisdiction where all action required by Section 9 shall have been taken
with respect to such Equipment and Inventory (and, upon the taking of such
action in such jurisdiction, Schedule II hereto shall be automatically amended
to include such other places). In any case governed by Section 5.01(j) of the
Credit Agreement, such Grantor will comply with the provisions of such section.
(a) In all cases subject to its rights to sell or dispose of
obsolete, damaged or worn-out items, or items that are no longer useful, as
provided in Section 5.02(e)(iv) of the Credit Agreement, each Grantor will cause
the Equipment of such Grantor to be maintained and preserved in the good
condition, repair and working order, ordinary wear and tear excepted, and will
forthwith, or in the case of any loss or damage to any of such Equipment as soon
as practicable after the occurrence thereof, make or cause to be made all
repairs, replacements and other improvements in connection therewith that are
necessary or desirable to such end.
(b) Each Grantor will pay promptly when due all property and other
taxes, assessments and governmental charges or levies imposed upon, and all
claims (including, without limitation, claims for labor, materials and supplies)
against, the Equipment and Inventory of such Grantor, except to the extent
payment thereof is not required by Section 5.01(b) of the Credit Agreement.
Section 11. Insurance. Each Grantor will, at its own expense, maintain
---------
insurance with respect to the Equipment and Inventory of such Grantor in such
amounts, against such risks, in such form and with such insurers, as required
under Section 5.01(d) of the Credit Agreement. Each policy of each Grantor for
liability insurance shall provide for all losses to be paid on behalf of the
Collateral Agent and such Grantor as their interests may appear, and each policy
for property damage insurance shall provide for all losses to be paid directly
to the Collateral Agent during the continuance of a Default. Each such policy
shall in addition (i) name such Grantor and the Collateral Agent as insured
parties thereunder (without any representation or warranty by or obligation upon
the Collateral Agent) as their interests may appear, (ii) contain the agreement
by the insurer that any loss thereunder shall be payable to the Collateral Agent
notwithstanding any action, inaction or breach of representation or warranty by
such Grantor, (iii) provide that there shall be no recourse against the
Collateral Agent for payment of premiums or other amounts with respect thereto
and (iv) provide that at least 10 days' prior written notice of cancellation or
of lapse shall be given to the Collateral Agent by the insurer. Each Grantor
will, if so requested by the Collateral Agent, deliver to the Collateral Agent
original or duplicate policies of such insurance and, as often as the Collateral
Agent may reasonably request, a report of a reputable insurance broker with
respect to such insurance. Further, each Grantor will, at the request of the
Collateral Agent, duly execute and deliver instruments of assignment of such
insurance policies to comply with the requirements of Section 9 and cause the
insurers to acknowledge notice of such assignment.
(a) Reimbursement under any liability insurance maintained by any
Grantor pursuant to this Section 11 may be paid directly to the Person who shall
have incurred liability
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covered by such insurance. In case of any loss involving damage to Equipment or
Inventory when subsection (c) of this Section 11 is not applicable, the
applicable Grantor will make or cause to be made the necessary repairs to or
replacements of such Equipment or Inventory, and any proceeds of insurance
properly received by or released to such Grantor shall be used by such Grantor,
except as otherwise required or permitted hereunder or under the Credit
Agreement, to pay, or as reimbursement for, the costs of such repairs or
replacements.
(b) So long as no Default shall have occurred and be continuing, all
insurance payments received by the Collateral Agent in connection with any loss,
damage or destruction of any Inventory or Equipment will be released by the
Collateral Agent to the applicable Grantor for the repair, replacement or
restoration thereof, subject to such terms and conditions with respect to the
release thereof as the Collateral Agent may reasonably require. To the extent
that (i) the amount of any such insurance payments exceeds the cost of any such
repair, replacement or restoration, or (ii) such insurance payments are not
otherwise required by the applicable Grantor to complete any such repair,
replacement or restoration required hereunder, the Collateral Agent will release
the amount thereof to such Grantor except during the continuance of any Default
and during which period the Collateral Agent may hold or continue to hold such
amount as additional security for the Secured Obligations of such Grantor.
During the continuance of any Default, all insurance payments in respect of such
Equipment or Inventory shall be paid to the Collateral Agent and shall, in the
Collateral Agent's sole discretion, (i) be released to the applicable Grantor to
be applied as set forth in the first sentence of this subsection (c) or (ii) be
held as additional Collateral hereunder or applied as specified in Section
20(b).
Section 12. Place of Perfection; Records; Collection of Receivables.
-------------------------------------------------------
Each Grantor will keep its chief executive office at the location therefor
specified in Section 8(a) or, upon 30 days' prior written notice to the
Collateral Agent, at such other location in a jurisdiction where all actions
required by Section 9 shall have been taken with respect to the Collateral of
such Grantor (and, upon the taking of such action in such jurisdiction, Schedule
III hereto shall be automatically amended to include such other location). Each
Grantor will hold and preserve its records relating to the Collateral and will
permit representatives of the Collateral Agent at any time during normal
business hours to inspect and make abstracts from such records and other
documents.
(a) Except as otherwise provided in this subsection (b), each Grantor
will continue to collect, at its own expense, all amounts due or to become due
such Grantor under the Receivables and the Related Contracts. In connection with
such collections, such Grantor may take (and during the continuance of an Event
of Default, at the Collateral Agent's direction, will take) such action as such
Grantor or the Collateral Agent may deem necessary or advisable to enforce
collection of the Receivables and the Related Contracts; provided, however, that
the Collateral Agent shall have the right at any time, upon the occurrence and
during the continuance of an Event of Default and upon written notice to such
Grantor of its intention to do so, to notify the Obligors under any Receivables
or Related Contracts of the assignment of such Receivables or Related Contracts
to the Collateral Agent and to direct such Obligors to make payment of all
amounts due or to become due to such Grantor thereunder directly to the
Collateral Agent and, upon such notification and at the expense of such Grantor,
to enforce collection of any such Receivables or Related Contracts, and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as such Grantor might have done. After
14
receipt by any Grantor of the notice from the Collateral Agent referred to in
the proviso to the preceding sentence, (i) all amounts and proceeds (including
instruments) received by such Grantor in respect of the Receivables and the
Related Contracts of such Grantor shall be received in trust for the benefit of
the Collateral Agent hereunder, shall be segregated from other funds of such
Grantor and shall be forthwith paid over to the Collateral Agent in the same
form as so received (with any necessary endorsement) to be deposited in the
Collateral Account and either, as the Collateral Agent may in its sole
discretion determine, (A) released to such Grantor or (B) applied as provided in
Section 20(b) and (ii) such Grantor will not adjust, settle or compromise the
amount or payment of any Receivable, release wholly or partly any Obligor
thereof, or allow any credit or discount thereon. No Grantor will permit or
consent to the subordination of its right to payment under any of the
Receivables or the Related Contracts to any other indebtedness or obligations of
the Obligor thereof.
Section 13. As to Intellectual Property Collateral. With respect to
--------------------------------------
each item of its Intellectual Property Collateral, each Grantor agrees, unless
and until each Grantor, in its reasonable commercial judgment, decides
otherwise, to take, at its expense, all necessary steps, including, without
limitation, in the U.S. Patent and Trademark Office, the U.S. Copyright Office
and any other governmental authority, to (i) maintain the validity and
enforceability of each such item of Intellectual Property Collateral and
maintain each such item of Intellectual Property Collateral in full force and
effect, and (ii) pursue the registration and maintenance of each patent,
trademark, or copyright registration or application, now or hereafter included
in the Intellectual Property Collateral of such Grantor, including, without
limitation, the payment of required fees and taxes, the filing of responses to
office actions issued by the U.S. Patent and Trademark Office, the U.S.
Copyright Office or other governmental authorities, the filing of applications
for renewal or extension, the filing of affidavits under Sections 8 and 15 of
the U.S. Trademark Act, the filing of divisional, continuation, continuation-in-
part, reissue and renewal applications or extensions, the payment of maintenance
fees and the participation in interference, reexamination, opposition,
cancellation, infringement and misappropriation proceedings. No Grantor shall,
without the written consent of the Collateral Agent upon or after an Event of
Default, discontinue use of or otherwise abandon any Intellectual Property
Collateral, or abandon any right to file an application for letters patent,
trademark, or copyright, unless such Grantor shall have previously determined
that such use or the pursuit or maintenance of such Intellectual Property
Collateral is no longer desirable in the conduct of such Grantor's business and
that the loss thereof would not be reasonably likely to have a Material Adverse
Effect. In the case of any material Intellectual Property Collateral, such
Grantor will give prompt notice of any such abandonment to the Collateral Agent.
(a) Each Grantor agrees promptly to notify the Collateral Agent if
such Grantor learns (i) that any item of the Intellectual Property Collateral
may have become abandoned, placed in the public domain, invalid or
unenforceable, or of any adverse determination or development regarding such
Grantor's ownership of any of the Intellectual Property Collateral or its right
to register the same or to keep and maintain and enforce the same, or (ii) of
any adverse determination or the institution of any proceeding (including,
without limitation, the institution of any proceeding in the U.S. Patent and
Trademark Office or any court) regarding any item of the Intellectual Property
Collateral, if in any such case, such development would be reasonably likely to
have a Material Adverse Effect.
15
(b) In the event that any Grantor becomes aware that any item of the
Intellectual Property Collateral is being infringed or misappropriated by a
third party, such Grantor shall promptly notify the Collateral Agent and shall
take such actions, at its expense, as such Grantor or the Collateral Agent deems
reasonable and appropriate under the circumstances to protect such Intellectual
Property Collateral, including, without limitation, suing for infringement or
misappropriation and for an injunction against such infringement or
misappropriation, if in any such case, such development would be reasonably
likely to have a Material Adverse Effect.
(c) Each Grantor shall take all steps which it deems reasonable and
appropriate under the circumstances to preserve and protect each item of its
Intellectual Property Collateral, including, without limitation, maintaining the
quality of any and all products or services used or provided in connection with
any of the Trademarks, consistent with the quality of the products and services
as of the date hereof, and taking all steps necessary to ensure that all
licensed users of any of the Trademarks use such consistent standards of
quality.
(d) With respect to its Intellectual Property Collateral, each
Grantor agrees to execute an agreement, in substantially the form set forth in
Exhibit B hereto (an "Intellectual Property Security Agreement"), for recording
the security interest granted hereunder to the Collateral Agent in such
Intellectual Property Collateral with the U.S. Patent and Trademark Office, the
U.S. Copyright Office and any other governmental authorities necessary to
perfect the security interest hereunder in such Intellectual Property
Collateral.
(e) Each Grantor agrees that, should it obtain an ownership interest
in any material item of the type set forth in Section 1(g) which is not on the
date hereof a part of the Intellectual Property Collateral (the "After-Acquired
Intellectual Property"), (i) the provisions of Section 1 shall automatically
apply thereto, (ii) any such After-Acquired Intellectual Property and, in the
case of trademarks, the goodwill of the business connected therewith or
symbolized thereby, shall automatically become part of the Intellectual Property
Collateral subject to the terms and conditions of this Agreement with respect
thereto, (iii) such Grantor shall give prompt written notice thereof to the
Collateral Agent in accordance herewith and (iv) such Grantor shall execute and
deliver to the Collateral Agent an IP Security Agreement Supplement covering
such After-Acquired Intellectual Property as "Additional Collateral" thereunder
and as defined therein, and shall record such IP Security Agreement Supplement
with the U.S. Patent and Trademark Office, the U.S. Copyright Office and any
other governmental authorities necessary to perfect the security interest
hereunder in such After-Acquired Intellectual Property.
Section 14. Voting Rights; Dividends; Etc. So long as no Default
------------------------------
shall have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Security Collateral of such
Grantor or any part thereof for any purpose; provided however, that such
Grantor will not exercise or refrain from exercising any such right if such
action would have a material adverse effect on the value of the Security
Collateral or any part thereof.
16
(ii) Each Grantor shall be entitled to receive and retain any and all
dividends, interest and other distributions paid in respect of the Security
Collateral of such Grantor if and to the extent that the payment thereof is
not otherwise prohibited by the terms of the Loan Documents; provided,
however, that any and all
(A) dividends, interest and other distributions paid or payable
other than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in
exchange for, any Security Collateral,
(B) dividends and other distributions paid or payable in cash in
respect of any Security Collateral (other than in respect of any
Subsidiary of the Borrower as provided in Section 5.02(e)(iii) of the
Credit Agreement) in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital
surplus or paid-in-surplus and
(C) cash paid, payable or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any Security
Collateral (other than in respect of any Subsidiary of the Borrower as
provided in Section 5.02(e)(iii) of the Credit Agreement)
shall be, and shall be forthwith delivered to the Collateral Agent to hold
as, Security Collateral and shall, if received by such Grantor, be received
in trust for the benefit of the Collateral Agent, be segregated from the
other property or funds of such Grantor and be forthwith delivered to the
Collateral Agent as Security Collateral in the same form as so received
(with any necessary endorsement).
(iii) The Collateral Agent will execute and deliver (or cause to be
executed and delivered) to each Grantor all such proxies and other
instruments as such Grantor may reasonably request for the purpose of
enabling such Grantor to exercise the voting and other rights that it is
entitled to exercise pursuant to paragraph (i) above and to receive the
dividends or interest payments that it is authorized to receive and retain
pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of a Default:
(i) All rights of each Grantor (x) to exercise or refrain from
exercising the voting and other consensual rights that it would otherwise
be entitled to exercise pursuant to Section 14(a)(i) shall, upon notice to
such Grantor by the Collateral Agent, cease and (y) to receive the
dividends, interest and other distributions that it would otherwise be
authorized to receive and retain pursuant to Section 14(a)(ii) shall
automatically cease, and all such rights shall thereupon become vested in
the Collateral Agent, which shall thereupon have the sole right to exercise
or refrain from exercising such voting and other consensual rights and to
receive and hold as Security Collateral such dividends, interest and other
distributions; and
(ii) All dividends, interest and other distributions that are received
by any Grantor contrary to the provisions of paragraph (i) of this Section
14(b) shall be received in trust for the benefit of the Collateral Agent,
shall be segregated from other funds of
17
such Grantor and shall be forthwith paid over to the Collateral Agent as
Security Collateral in the same form as so received (with any necessary
endorsement).
Section 15. As to the Assigned Agreements. Each Grantor will at its
------------------------------
expense:
(i) from time to time (A) furnish to the Collateral Agent such
information and reports regarding the Assigned Agreements and such other
Collateral of such Grantor as the Collateral Agent may reasonably request
and (B) upon request of the Collateral Agent make to each other party to
any Assigned Agreement to which it is a party such demands and requests for
information and reports or for action as such Grantor is entitled to make
thereunder.
(b) Each Grantor agrees after the occurrence and during the
continuance of an Event of Default, not to:
(i) cancel or terminate any Assigned Agreement to which it is a
party or consent to or accept any cancellation or termination thereof;
(ii) amend, amend and restate, supplement or otherwise modify any
such Assigned Agreement or give any consent, waiver or approval thereunder;
(iii) waive any default under or breach of any such Assigned
Agreement; or
(iv) take any other action in connection with any such Assigned
Agreement that would impair the value of the interests or rights of such
Grantor thereunder or that would impair the interests or rights of any
Secured Party.
(c) Each Grantor hereby consents on its behalf and on behalf of its
Subsidiaries to the assignment and pledge to the Collateral Agent for benefit of
the Secured Parties of each Assigned Agreement to which it is a party by any
other Grantor hereunder.
Section 16. Transfers and Other Liens; Additional Share. Each
--------------------------------------------
Grantor agrees that it will not (i) sell, assign or otherwise dispose of, or
grant any option with respect to, any of the Collateral, other than sales,
assignments and other dispositions of Collateral, and options relating to
Collateral, permitted under the terms of the Credit Agreement, or (ii) create or
suffer to exist any Lien upon or with respect to any of the Collateral of such
Grantor except for the pledge, assignment and security interest created under
this Agreement and Liens permitted under the Credit Agreement.
(a) Each Grantor agrees that it will (i) cause each issuer of the
Pledged Shares pledged by such Grantor not to issue any stock or other
securities in addition to or in substitution for the Pledged Shares issued by
such issuer, except to such Grantor, and (ii) pledge hereunder, immediately upon
its acquisition (directly or indirectly) thereof, any and all additional shares
of stock or other securities.
Section 17. Collateral Agent Appointed Attorney-in-Fact. Each
--------------------------------------------
Grantor hereby irrevocably appoints the Collateral Agent such Grantor's attorney
- -in-fact, with full authority in the place and stead of such Grantor and in the
name of such Grantor or otherwise,
18
from time to time in the Collateral Agent's discretion, to take any action and
to execute any instrument that the Collateral Agent may deem necessary or
advisable to accomplish the purposes of this Agreement, including, without
limitation:
(a) to obtain and adjust insurance required to be paid to the
Collateral Agent pursuant to Section 11,
(b) to ask for, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral,
(c) to receive, indorse and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) or (b) above,
and
(d) to file any claims or take any action or institute any
proceedings that the Collateral Agent may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce compliance
with the terms and conditions of any Assigned Agreement or the rights of
the Collateral Agent with respect to any of the Collateral;
provided however, that the Collateral Agent shall not exercise any rights
referred to above unless an Event of Default has occurred and is continuing.
Section 18. Collateral Agent May Perform. If any Grantor fails to
-----------------------------
perform any agreement contained herein, within the time provided or allowed, the
Collateral Agent may, but without any obligation to do so and without notice,
itself perform, or cause performance of, such agreement, and the expense of the
Collateral Agent incurred in connection therewith shall be payable by such
Grantor under Section 21(b).
Section 19. The Collateral Agent's Duties. The powers conferred
------------------------------
on the Collateral Agent hereunder are solely to protect the Secured Parties'
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the safe custody of any Collateral in its possession and
the accounting for moneys actually received by it hereunder, the Collateral
Agent shall have no duty as to any Collateral, as to ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relative to any Collateral, whether or not any Secured Party has
or is deemed to have knowledge of such matters, or as to the taking of any
necessary steps to preserve rights against any parties or any other rights
pertaining to any Collateral. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any Collateral in
its possession if such Collateral is accorded treatment substantially equal to
that which it accords its own property.
(a) Anything contained herein to the contrary notwithstanding, the
Collateral Agent may from time to time, when the Collateral Agent deems it to be
necessary, appoint one or more subagents (each a "Subagent") for the Collateral
Agent hereunder with respect to all or any part of the Collateral. In the event
that the Collateral Agent so appoints any Subagent with respect to any
Collateral, (i) the assignment and pledge of such Collateral and the security
interest granted in such Collateral by each Grantor hereunder shall be deemed
for purposes of this Security Agreement to have been made to such Subagent, in
addition to the Collateral Agent,
19
for the ratable benefit of the Secured Parties, as security for the Secured
Obligations of such Grantor, (ii) such Subagent shall automatically be vested,
in addition to the Collateral Agent, with all rights, powers, privileges,
interests and remedies of the Collateral Agent hereunder with respect to such
Collateral, and (iii) the term "Collateral Agent," when used herein in relation
to any rights, powers, privileges, interests and remedies of the Collateral
Agent with respect to such Collateral, shall include such Subagent; provided,
however, that no such Subagent shall be authorized to take any action with
respect to any such Collateral unless and except to the extent expressly
authorized in writing by the Collateral Agent.
Section 20. Remedies. If any Event of Default shall have occurred
---------
and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party upon
default under the N.Y. Uniform Commercial Code (whether or not the N.Y.
Uniform Commercial Code applies to the affected Collateral) and also may:
(i) require each Grantor to, and each Grantor hereby agrees that it will at
its expense and upon request of the Collateral Agent forthwith, assemble
all or part of the Collateral as directed by the Collateral Agent and make
it available to the Collateral Agent at a place and time to be designated
by the Collateral Agent that is reasonably convenient to both parties; (ii)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the
Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Collateral Agent may deem
commercially reasonable; (iii) occupy any premises owned or leased by any
of the Grantors where the Collateral or any part thereof is assembled or
located for a reasonable period in order to effectuate its rights and
remedies hereunder or under law, without obligation to such Grantor in
respect of such occupation; and (iv) exercise any and all rights and
remedies of any of the Grantors under or in connection with the Assigned
Agreements, the Receivables and the Related Contracts or otherwise in
respect of the Collateral, including, without limitation, any and all
rights of such Grantor to demand or otherwise require payment of any amount
under, or performance of any provision of, the Assigned Agreements, the
Receivables and the Related Contracts. Each Grantor agrees that, to the
extent notice of sale shall be required by law, at least ten days' notice
to such Grantor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. The Collateral Agent shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. The
Collateral Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(b) Any cash held by or on behalf of the Collateral Agent and all
cash proceeds received by or on behalf of the Collateral Agent in respect
of any sale of, collection from, or other realization upon all or any part
of the Collateral may, in the discretion of the Collateral Agent, be held
by the Collateral Agent as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to the Collateral
Agent pursuant to Section 21) in whole or in part by the Collateral Agent
for
20
the ratable benefit of the Secured Parties against, all or any part of
the Secured Obligations, in the following manner:
(i) first, to the Agents for any amounts owing to the Agents
pursuant to Section 8.04 of the Credit Agreement or otherwise under
the Loan Documents, ratably in accordance with such respective amounts
then owing to the Agents;
(ii) second, deposited as Collateral in the L/C Collateral
Account up to an amount equal to 100% of the aggregate Available
Amount of all outstanding Letters of Credit, provided that in the
event that any such Letter of Credit is drawn, the Collateral Agent
shall pay to the Issuing Bank that issued such Letter of Credit the
amount held in the L/C Collateral Account in respect of such Letter of
Credit, provided further that, to the extent that any such Letter of
Credit shall expire or terminate undrawn and as a result thereof the
amount of the Collateral in the L/C Collateral Account shall exceed
the aggregate Available Amount of all then outstanding Letters of
Credit, such excess amount of such Collateral shall be applied in
accordance with the order of priority set out in this Section 20(b);
(iii) third, to the Issuing Bank and the Swing Line Bank for any
amounts then owing to them, in their capacities as such, under the
Loan Documents ratably in accordance with such respective amounts then
owing to the Issuing Bank and the Swing Line Bank; and
(iv) fourth, to the Lender Parties for any amount then owing to
them under the Loan Documents ratably in accordance with such
respective amounts then owing to the Lender Parties.
Any surplus of such cash or cash proceeds held by or on the behalf of the
Collateral Agent and remaining after payment in full of all the Secured
Obligations shall be paid over to the applicable Grantor or to whomsoever
may be lawfully entitled to receive such surplus.
(c) All payments received by any Grantor under or in connection with
any Assigned Agreement or otherwise in respect of the Collateral shall be
received in trust for the benefit of the Collateral Agent, shall be
segregated from other funds of such Grantor and shall be forthwith paid
over to the Collateral Agent in the same form as so received (with any
necessary endorsement).
(d) The Collateral Agent may, without notice to any Grantor except
as required by law and at any time or from time to time, charge, set-off
and otherwise apply all or any part of the Secured Obligations against any
funds held in the L/C Collateral Account or in any other deposit account.
(e) In the event of any sale or other disposition of any of the
Intellectual Property Collateral of any Grantor, the goodwill of the
business connected with and symbolized by any Trademarks subject to such
sale or other disposition shall be included therein, and such Grantor shall
supply to the Collateral Agent or its designee such Grantor's know-how and
expertise, and documents and things relating to any Intellectual
21
Property Collateral subject to such sale or other disposition, and such
Grantor's customer lists and other records and documents relating to such
Intellectual Property Collateral and to the manufacture, distribution,
advertising and sale of products and services of such Grantor.
Section 21. Indemnity and Expenses. Each Grantor agrees to
-----------------------
indemnify, defend and save and hold harmless each Secured Party and each of
their Affiliates and their respective officers, directors, employees, agents and
advisors (each, an "Indemnified Party") from and against, and shall pay on
demand, any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel) that
may be incurred by or asserted or awarded against any Indemnified Party, in each
case arising out of or in connection with or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), except to the
extent such claim, damage, loss, liability or expense is found in a final, non-
appealable judgment by a court of competent jurisdiction to have resulted from
such Indemnified Party's gross negligence or willful misconduct.
(a) Each Grantor will upon demand pay to the Collateral Agent the
amount of any and all reasonable expenses, including, without limitation, the
reasonable fees and expenses of its counsel and of any experts and agents, that
the Collateral Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale of,
collection from or other realization upon, any of the Collateral of such
Grantor, (iii) the exercise or enforcement of any of the rights of the
Collateral Agent or the other Secured Parties hereunder or (iv) the failure by
such Grantor to perform or observe any of the provisions hereof.
Section 22. Amendments; Waivers; Additional Grantors; Etc. No
----------------------------------------------
amendment or waiver of any provision of this Agreement, and no consent to any
departure by any Grantor herefrom, shall in any event be effective unless the
same shall be in writing and signed by the Collateral Agent, and, in the case of
amendments, the Grantors, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given. No
failure on the part of the Collateral Agent or any other Secured Party to
exercise, and no delay in exercising any right hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right.
(a) Upon the execution and delivery by any Person of a security
agreement supplement in substantially the form of Exhibit A hereto (each a
"Security Agreement Supplement"), (i) such Person shall be referred to as an
"Additional Grantor" and shall be and become a Grantor hereunder and each
reference in this Agreement and the other Loan Documents to "Grantor" shall also
mean and be a reference to such Additional Grantor, and (ii) the supplemental
Schedules I through VII attached to each Security Agreement Supplement shall be
incorporated into and become a part of and supplement Schedules I through VII,
respectively, hereto, and the Collateral Agent may attach such supplemental
schedules to such Schedules; and each reference to such Schedules shall mean and
be a reference to such Schedules as supplemented pursuant to each Security
Agreement Supplement.
22
Section 23. Notices; Etc. All notices and other communications
-------------
provided for hereunder shall be in writing (including telecopier communication)
and mailed, telecopied, or delivered to, in the case of the Borrower or the
Collateral Agent, addressed to it at its address specified in the Credit
Agreement and, in the case of each Grantor other than the Borrower, addressed to
it at the Borrower's address; or, as to any party, at such other address as
shall be designated by such party in a written notice to the other parties. All
such notices and other communications shall, be effective three Business Days
after deposit in the mails, or when telecopied or delivered, respectively,
addressed as aforesaid; except that notices and other communications to the
Collateral Agent shall not be effective until received by the Collateral Agent.
Delivery by telecopier of an executed counterpart of any amendment or waiver of
any provision of this Agreement or of any Security Agreement Supplement or
Schedule hereto shall be effective as delivery of an original executed
counterpart thereof.
Section 24. Continuing Security Interest; Assignments under the
---------------------------------------------------
Credit Agreement. This Agreement shall create a continuing security interest
- -----------------
in the Collateral and shall (a) remain in full force and effect until the latest
of (i) the payment in full in cash of the Secured Obligations (other than
inchoate reimbursement or indemnification Obligations), (ii) the Termination
Date and (iii) the termination or expiration of all Letters of Credit, (b) be
binding upon each Grantor, its successors and assigns and (c) inure, together
with the rights and remedies of the Collateral Agent hereunder, to the benefit
of the Secured Parties and their respective successors, transferees and assigns.
Without limiting the generality of the foregoing clause (c), any Lender Party
may assign or otherwise transfer all or any portion of its rights and
obligations under the Credit Agreement (including, without limitation, all or
any portion of its Commitments, the Advances owing to it and the Note or Notes,
if any, held by it) to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to such Lender
Party herein or otherwise, in each case as provided in Section 8.07 of the
Credit Agreement.
Section 25. Release; Termination. Upon any sale, lease, transfer or
---------------------
other disposition of any item of Collateral of any Grantor in accordance with
the terms of the Loan Documents, the Collateral Agent will, at such Grantor's
expense, execute and deliver to such Grantor such documents as such Grantor
shall reasonably request to evidence the release of such item of Collateral from
the security interest granted hereby; provided, however, that (i) in the case of
a transaction effected under Section 5.02(e)(vi) or (vii) of the Credit
Agreement, at the time of such request and such release no Default shall have
occurred and be continuing, (ii) such Grantor shall have delivered to the
Collateral Agent, at least six Business Days prior to the date of the proposed
release, a written request for release describing the item of Collateral and the
terms of the sale, lease, transfer or other disposition in reasonable detail,
including, without limitation, the price thereof and any expenses in connection
therewith, together with a form of release for execution by the Collateral Agent
and a certificate of such Grantor to the effect that the transaction is in
compliance with the Loan Documents and as to such other matters as the
Collateral Agent may request and (iii) the proceeds of any such sale, lease,
transfer or other disposition required to be applied, or any payment to be made
in connection therewith, in accordance with Section 2.06 of the Credit Agreement
shall, to the extent so required, be paid or made to, or in accordance with the
instructions of, the Collateral Agent when and as required under Section 2.06 of
the Credit Agreement.
23
(a) Upon the sale of any Equity Interests in any Grantor in
accordance with the provisions of Section 5.02(m)(iii) of the Credit Agreement,
the Collateral Agent will, at such Grantor's expense, execute and deliver to
such Grantor such documents as such Grantor shall reasonably request to evidence
the release of all items of Collateral owned by such Grantor or in which such
Grantor has an interest from the security interest granted hereby; provided,
however, that (i) at the time of such request and such release no Default shall
have occurred and be continuing and (ii) such Grantor shall have delivered to
the Collateral Agent, at least six Business Days prior to the date of the
proposed release, a written request describing the items of Collateral and
together with a form of release for execution by the Collateral Agent and a
certificate of such Grantor to the effect that the transaction is in compliance
with the Loan Documents and as to such other matters as the Collateral Agent may
request.
(b) In connection with the granting of a Lien permitted by Section
5.02(a)(iv) of the Credit Agreement in any real estate or equipment owned by a
Grantor, the Collateral Agent shall, at such Grantor's request if required by
the lender or lessor providing Debt to be secured by such Lien, at such
Grantor's expense, either (i) subordinate the security interest granted hereby
in the applicable item or items of Collateral owned by such Grantor to the Debt
to be secured by such Lien on terms reasonably acceptable to the lender or
lessor providing such Debt, or (ii) if such lender or lessor is not willing to
accept a subordination of the security interest granted hereby, execute and
deliver such documents as such Grantor shall reasonably request to evidence the
release of such item or items of Collateral from the security interest granted
hereby; provided, however, that such Grantor shall have delivered to the
Collateral Agent, at least six Business Days prior to the date of the proposed
subordination or release, a written request describing the items of Collateral
and together with a form of subordination or release for execution by the
Collateral Agent and a certificate of such Grantor to the effect that the
transaction is in compliance with the Loan Documents and as to such other
matters as the Collateral Agent may request.
(c) Upon the latest of (i) the payment in full in cash of the
Secured Obligations (other than inchoate indemnification and reimbursement
Obligations), (ii) the Termination Date and (iii) the termination or expiration
of all Letters of Credit, the pledge, assignment and security interest granted
hereby shall terminate and all rights to the Collateral shall revert to the
applicable Grantor. Upon any such termination, the Collateral Agent will, at the
applicable Grantor's expense, execute and deliver to such Grantor such documents
as such Grantor shall reasonably request to evidence such termination.
Section 26. Security Interest Absolute. The obligations of each
---------------------------
Grantor under this Agreement are independent of the Secured Obligations or any
other Obligations of any other Loan Party under or in respect of the Loan
Documents, and a separate action or actions may be brought and prosecuted
against each Grantor to enforce this Agreement, irrespective of whether any
action is brought against such Grantor or any other Loan Party or whether such
Grantor or any other Loan Party is joined in any such action or actions. All
rights of the Collateral Agent and the other Secured Parties and the pledge and
security interest hereunder, and all obligations of each Grantor hereunder,
shall be irrevocable, absolute and unconditional irrespective of, and each
Grantor hereby irrevocably waives (to the maximum extent permitted by applicable
law) any defenses it may now have or may hereafter acquire in any way relating
to, any or all of the following:
24
(a) any lack of validity or enforceability of any Loan Document or
any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
Obligations of any other Loan Party under or in respect of the Loan
Documents or any other amendment or waiver of or any consent to any
departure from any Loan Document, including, without limitation, any
increase in the Secured Obligations resulting from the extension of
additional credit to any Loan Party or any of its Subsidiaries or
otherwise;
(c) any taking, exchange, release or non-perfection of any
Collateral or any other collateral, or any taking, release or amendment or
waiver of or consent to departure from any guaranty, for all or any of the
Secured Obligations ;
(d) any manner of application of any Collateral or any other
collateral, or proceeds thereof, to all or any of the Secured Obligations,
or any manner of sale or other disposition of any Collateral or any other
collateral for all or any of the Secured Obligations or any other
Obligations of any other Loan Party under or in respect of the Loan
Documents or any other assets of any Loan Party or any of its Subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of any Loan Party or any of its Subsidiaries;
(f) any failure of any Secured Party to disclose to any Loan Party
any information relating to the business, condition (financial or
otherwise), operations, performance, assets, nature of assets, liabilities
or prospects of any other Loan Party now or hereafter known to such Secured
Party (each Grantor waiving any duty on the part of the Secured Parties to
disclose such information);
(g) the failure of any other Person to execute this Agreement or any
other Collateral Document, guaranty or agreement or the release or
reduction of liability of any Grantor or other grantor or surety with
respect to the Secured Obligations; or
(h) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by any Secured Party that might otherwise constitute a
defense available to, or a discharge of, such Grantor or any other Grantor
or a third party grantor of a security interest.
This Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Secured Obligations is rescinded or
must otherwise be returned by any Secured Party or by any other Person upon the
insolvency, bankruptcy or reorganization of any Loan Party or otherwise, all as
though such payment had not been made.
Section 27. Execution in Counterparts. This Agreement may be
--------------------------
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement. Delivery of an executed counterpart of a signature page
to this Agreement by telecopier shall be effective as delivery of an original
executed counterpart of this Agreement.
Section 28. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
DAVITA INC.
By _____________________________________
Name: Marshal Salomon
Title: Vice President
S-1
By _____________________________________
Name: Marshal Salomon
Title: Vice President
on behalf of each of the entities
listed on Appendix A attached hereto
S-2
TOTAL RENAL CARE, INC., on behalf of each of
the entities listed on Appendix B attached
hereto
By _____________________________________
Name: Marshal Salomon
Title: Vice President
S-3
TRC WEST, INC.
By _____________________________________
Name: Marshal Salomon
Title: Vice President
S-4
TRC OF NEW YORK, INC., on behalf of each of
the entities listed on Appendix C attached
hereto
By _____________________________________
Name: Marshal Salomon
Title: Vice President
S-5
Appendix A to the
Security Agreement
Carroll County Dialysis Facility, Inc.
Continental Dialysis Centers, Inc.
Continental Dialysis Center of Springfield-Fairfax, Inc.
Dialysis Specialists of Dallas, Inc.
East End Dialysis Center, Inc.
Elberton Dialysis Facility, Inc.
Flamingo Park Kidney Center, Inc.
Lincoln Park Dialysis Services, Inc.
Mason-Dixon Dialysis Facilities, Inc.
Open Access Sonography, Inc.
Peninsula Dialysis Center, Inc.
Renal Treatment Centers, Inc.
Renal Treatment Centers - California, Inc.
Renal Treatment Centers - Hawaii, Inc.
Renal Treatment Centers - Illinois, Inc.
Renal Treatment Centers - Mid-Atlantic,Inc.
Renal Treatment Centers - Northeast, Inc.
Renal Treatment Centers - Southeast, Inc.
Renal Treatment Centers - West, Inc.
RTC Holdings, Inc.
RTC - Texas Acquisition, Inc.
RTC TN, Inc.
Total Acute Kidney Care, Inc.
Total Renal Care, Inc.
Total Renal Care of Colorado, Inc.
Total Renal Care of Puerto Rico, Inc.
Total Renal Laboratories, Inc.
Total Renal Research, Inc.
Total Renal Support Services, Inc.
TRC of New York, Inc.
Tri-City Dialysis Center, Inc.
Appendix B to the
Security Agreement
Beverly Hills Dialysis Partnership
Houston Kidney Center/Total Renal Care Integrated Service Network Limited
Partnership
Sunrise Dialysis Partnership
Total Renal Care/Peralta Renal Center Partnership
Total Renal Care/Piedmont Dialysis Partnership
Total Renal Care Texas Limited Partnership
Total Renal Care of Utah, L.L.C.
TRC - Indiana, LLC
Appendix C to the
Security Agreement
MHS-I, LLC
MHS-III, LLC
MHS-IV, LLC
MHS-V, LLC
MHS-VI, LLC
MHS-VII, LLC
MHS-VIII, LLC
MHS-IX, LLC
MHS-X, LLC
MHS-XI, LLC
MHS-XII, LLC
Schedule I to the
Security Agreement
PLEDGED SHARES AND PLEDGED DEBT
Part I
===============================================================================================
Percentage
Stock of
Certificate Number Outstanding
Grantor Stock Issuer Class of Stock Par Value No(s) of Shares Shares
===============================================================================================
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
================================================================================================
Part II
===============================================================================================
Outstanding
Debt Description of Debt Certificate Final Principal
Grantor Issuer Debt No (s). Maturity Amount
===============================================================================================
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
================================================================================================
Schedule II to the
Security Agreement
LOCATIONS OF EQUIPMENT AND INVENTORY
[Name of Grantor]
---------------
Locations of Equipment:
Locations of Inventory:
[Name of Grantor]
---------------
Locations of Equipment:
Locations of Inventory:
[Etc.]
Schedule III to the
Security Agreement
CHIEF EXECUTIVE OFFICE
AND FEDERAL TAX IDENTIFICATION NUMBER
Federal Tax
Grantor Chief Executive Office Identification Number
- ------- ---------------------- ---------------------
Schedule IV to the
Security Agreement
PATENTS, TRADEMARKS AND
TRADE NAMES, COPYRIGHTS AND LICENSES
Applic.
-------
Grantor Patents Country Patent No. No. Filing Date Issue Date
- ------- ------- ------- --------- --- ----------- ----------
Trademarks
----------
and Trade Applic. Filing Issue
--------- ------ ------ -----
Grantor Names Country Mark Reg. No. No. Date Date
- ------ ----- ------- ---- ------- -- ---- ----
Applic. Filing Issue
------- ------ -----
Grantor Copyrights Country Title Reg. No. No. Date Date
- ------- ---------- ------- ----- -------- --- ---- ----
Grantor Licenses Title Date Parties
- ------- -------- ----- ---- -------
Schedule V to the
Security Agreement
ASSETS SUBJECT TO EXISTING CONTRACTS OF SALE
Schedule VI to the
Security Agreement
RECEIVABLES EVIDENCED BY CHATTEL PAPER
Schedule VII to the
Security Agreement
NOTICES OF TERMINATION
OR CANCELLATION OF LICENSES
Exhibit A to the
Security Agreement
FORM OF SECURITY AGREEMENT SUPPLEMENT
[Date of Security Agreement Supplement]
Bank of America, N.A.
as the Collateral Agent for the
Secured Parties referred to in the
Credit Agreement referred to below
__________________________
__________________________
Attn: ____________________
DaVita Inc.
----------
Ladies and Gentlemen:
Reference is made to (i) the Credit Agreement dated as of May 3, 2001
(as amended, amended and restated, supplemented or otherwise modified from time
to time, the "Credit Agreement"), among DaVita Inc., a Delaware corporation, as
the Borrower, the Lender Parties party thereto, Bank of America, N.A., as
collateral agent (together with any successor collateral agent appointed
pursuant to Article VII of the Credit Agreement, the "Collateral Agent"), and as
administrative agent for the Lender Parties, and (ii) the Security Agreement
dated May 3, 2001 (as amended, amended and restated, supplemented or otherwise
modified from time to time, the "Security Agreement") made by the Grantors from
time to time party thereto in favor of the Collateral Agent for the Secured
Parties. Terms defined in the Credit Agreement or the Security Agreement and not
otherwise defined herein are used herein as defined in the Credit Agreement or
the Security Agreement.
Section 1. Grant of Security. The undersigned hereby pledges to the
----------------
Collateral Agent for the ratable benefit of the Secured Parties, and hereby
grants to the Collateral Agent for the ratable benefit of the Secured Parties, a
security interest in, all of its right, title and interest in and to all of the
Collateral of the undersigned, whether now owned or hereafter acquired by the
undersigned, wherever located and whether now or hereafter existing or arising,
including, without limitation, the property and assets of the undersigned set
forth on the attached supplemental schedules to the Schedules to the Security
Agreement.
Section 2. Security for Obligations. The pledge and assignment of,
------------------------
and the grant of a security interest in, the Collateral by the undersigned under
this Security Agreement Supplement and the Security Agreement secures the
payment of all Obligations of the undersigned now or hereafter existing under or
in respect of the Loan Documents, whether direct or indirect, absolute or
contingent, and whether for principal, reimbursement obligations,
interest, premiums, penalties, fees, indemnifications, contract causes of
action, costs, expenses or otherwise. Without limiting the generality of the
foregoing, this Security Agreement Supplement and the Security Agreement secures
the payment of all amounts that constitute part of the Secured Obligations and
that would be owed by the undersigned to any Secured Party under the Loan
Documents but for the fact that such Secured Obligations are unenforceable or
not allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving a Loan Party.
Section 3. Supplements to Security Agreement Schedules. The
-------------------------------------------
undersigned has attached hereto supplemental Schedules I through VII to
Schedules I through VII, respectively, to the Security Agreement, and the
undersigned hereby certifies, as of the date first above written, that such
supplemental schedules have been prepared by the undersigned in substantially
the form of the equivalent Schedules to the Security Agreement and are complete
and correct in all material respects.
Section 4. Representations and Warranties. The undersigned hereby
------------------------------
makes each representation and warranty set forth in Section 8 of the Security
Agreement (as supplemented by the attached supplemental schedules) to the same
extent as each other Grantor.
Section 5. Obligations Under the Security Agreement. The undersigned
----------------------------------------
hereby agrees, as of the date first above written, to be bound as a Grantor by
all of the terms and provisions of the Security Agreement to the same extent as
each of the other Grantors. The undersigned further agrees, as of the date first
above written, that each reference in the Security Agreement to an "Additional
Grantor" or a "Grantor" shall also mean and be a reference to the undersigned.
Section 6. Governing Law. This Security Agreement Supplement shall be
-------------
governed by, and construed in accordance with, the laws of the State of New
York.
Very truly yours,
[NAME OF ADDITIONAL GRANTOR]
By_______________________________
Title:
Address for notices:
_______________________
_______________________
_______________________
Exhibit B to the
Security Agreement
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT
This INTELLECTUAL PROPERTY SECURITY AGREEMENT (as amended, amended and
restated, supplemented or otherwise modified from time to time, the "IP Security
Agreement") dated ________, ____, is made by the Persons listed on the signature
pages hereof (collectively, the "Grantors") in favor of Bank of America, N.A.
("Bank of America"), as collateral agent (the "Collateral Agent") for the
Secured Parties (as defined in the Credit Agreement referred to below).
WHEREAS, DaVita Inc., a Delaware corporation, has entered into a
Credit Agreement dated as of May 3, 2001 (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
with Bank of America, as Administrative Agent and as Collateral Agent, and the
Lender Parties party thereto. Terms defined in the Credit Agreement and not
otherwise defined herein are used herein as defined in the Credit Agreement.
WHEREAS, as a condition precedent to the making of Advances and the
issuance of Letters of Credit by the Lender Parties under the Credit Agreement
and the entry into Secured Hedge Agreements by the Hedge Banks from time to
time, each Grantor has executed and delivered that certain Security Agreement
dated May 3, 2001 made by the Grantors to the Collateral Agent (as amended,
amended and restated, supplemented or otherwise modified from time to time, the
"Security Agreement").
WHEREAS, under the terms of the Security Agreement, Grantors have
granted a security interest in, among other property, certain intellectual
property of the Grantors to the Collateral Agent for the ratable benefit of the
Secured Parties, and have agreed as a condition thereof to execute this IP
Security Agreement covering such intellectual property for recording with the
U.S. Patent and Trademark Office, the United States Copyright Office and other
governmental authorities.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each Grantor agrees as follows:
SECTION 1. Grant of Security. Each Grantor hereby grants to the
-----------------
Collateral Agent for the ratable benefit of the Secured Parties a security
interest in and to all of such Grantor's right, title and interest in and to the
following (the "Collateral"):
(i) the United States, international, and foreign patents,
patent applications and patent licenses set forth in Schedule A hereto
(as such Schedule A may be supplemented from time to time by
supplements to the Security Agreement and this IP Security Agreement,
each such supplement being in substantially the form of Exhibit C to
the Security Agreement (an "IP Security Agreement Supplement"),
executed and delivered by such Grantor to the
Collateral Agent from time to time), together with all reissues,
divisions, continuations, continuations-in-part, extensions and
reexaminations thereof, and all rights therein provided by
international treaties or conventions (the "Patents");
(ii) the United States and foreign trademark and service mark
registrations, applications, and licenses set forth in Schedule B
hereto (as such Schedule B may be supplemented from time to time by IP
Security Agreement Supplements executed and delivered by such Grantor
to the Collateral Agent from time to time) (the "Trademarks");
(iii) the copyrights, United States and foreign copyright
registrations and applications and copyright licenses set forth in
Schedule C hereto (as such Schedule C may be supplemented from time to
time by IP Security Agreement Supplements executed and delivered by
such Grantor to the Collateral Agent from time to time) (the
"Copyrights");
(iv) any and all claims for damages for past, present and future
infringement, misappropriation or breach with respect to the Patents,
Trademarks and Copyrights, with the right, but not the obligation, to
sue for and collect, or otherwise recover, such damages; and
(v) any and all proceeds of the foregoing.
SECTION 2. Security for Obligations. The pledge and assignment of, and
------------------------
the grant of a security interest in, the Collateral by each Grantor under this
IP Security Agreement secures the payment of all Obligations of such Grantor now
or hereafter existing under or in respect of the Loan Documents, whether direct
or indirect, absolute or contingent, and whether for principal, reimbursement
obligations, interest, premiums, penalties, fees, indemnifications, contract
causes of action, costs, expenses or otherwise. Without limiting the generality
of the foregoing, this IP Security Agreement secures, as to each Grantor, the
payment of all amounts that constitute part of the Secured Obligations and that
would be owed by such Grantor to any Secured Party under the Loan Documents but
for the fact that such Secured Obligations are unenforceable or not allowable
due to the existence of a bankruptcy, reorganization or similar proceeding
involving a Loan Party.
SECTION 3. Recordation. Each Grantor authorizes and requests that the
-----------
Register of Copyrights, the Commissioner of Patents and Trademarks and any other
applicable government officer record this IP Security Agreement.
SECTION 4. Execution in Counterparts. This Agreement may be executed
-------------------------
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute one and the same
agreement.
SECTION 5. Grants, Rights and Remedies. This IP Security Agreement
---------------------------
has been entered into in conjunction with the provisions of the Security
Agreement. Each Grantor does hereby acknowledge and confirm that the grant of
the security interest hereunder to, and the rights and remedies of, the
Collateral Agent with respect to the Collateral are more fully set forth
in the Security Agreement, the terms and provisions of which are incorporated
herein by reference as if fully set forth herein.
SECTION 6. Governing Law. This IP Security Agreement shall be
-------------
governed by, and construed in accordance with, the laws of the State of New
York.
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
DAVITA INC.
By_________________________________
Name:
Title:
Address for Notices:
____________________________________
____________________________________
____________________________________
[NAME OF GRANTOR]
By__________________________________
Name:
Title:
Address for Notices:
____________________________________
____________________________________
____________________________________
[NAME OF GRANTOR]
By__________________________________
Name:
Title:
Address for Notices:
____________________________________
____________________________________
____________________________________
[ETC.]
[ADD ACKNOWLEDGMENT FORM IF NEEDED]
Exhibit C to the
Security Agreement
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT SUPPLEMENT
This INTELLECTUAL PROPERTY SECURITY AGREEMENT SUPPLEMENT (this
"IP Security Agreement Supplement") dated ________, ____, is made by the Person
listed on the signature page hereof (the "Grantor") in favor of Bank of America,
N.A. ("Bank of America"), as collateral agent (the "Collateral Agent") for the
Secured Parties (as defined in the Credit Agreement referred to below).
WHEREAS, DaVita Inc., a Delaware corporation, has entered into a
Credit Agreement dated as of May 3, 2001 (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
with Bank of America, as Administrative Agent, and as Collateral Agent, and the
Lender Parties party thereto. Terms defined in the Credit Agreement and not
otherwise defined herein are used herein as defined in the Credit Agreement.
WHEREAS, pursuant to the Credit Agreement, the Grantor and
certain other Persons have executed and delivered that certain Security
Agreement dated May 3, 2001 made by the Grantor and such other Persons to the
Collateral Agent (as amended, amended and restated, supplemented or otherwise
modified from time to time, the "Security Agreement"). To create a short form
version of the Security Agreement covering certain intellectual property of the
Grantor and such other Persons for recording with the U.S. Patent and Trademark
Office, the United States Copyright Office and other governmental authorities,
the Grantor and such other Persons have executed and delivered that certain
Intellectual Property Security Agreement made by the Grantor and such other
Persons to the Collateral Agent dated ________, ______ (as amended, amended and
restated, supplemented or otherwise modified from time to time, the "IP Security
Agreement").
WHEREAS, under the terms of the Security Agreement and the IP
Security Agreement, the Grantor has granted a security interest in the
Additional Collateral (as defined in Section 1 below) of the Grantor to the
Collateral Agent for the ratable benefit of the Secured Parties and has agreed
as a condition thereof to execute this IP Security Agreement Supplement for
recording with the U.S. Patent and Trademark Office, the United States Copyright
Office and other governmental authorities.
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Grantor agrees as follows:
SECTION 1. Confirmation of Grant of Security. The Grantor hereby
---------------------------------
acknowledges and confirms the grant of a security interest to the Collateral
Agent for the ratable benefit of the Secured Parties under the Security
Agreement and the IP Security Agreement in and to all of the Grantor's right,
title and interest in and to the following (the "Additional Collateral"):
(i) The United States, international, and foreign patents, patent
applications, and patent licenses set forth in Schedule A hereto, together
with all reissues, divisions, continuations, continuations-in-part,
extensions and reexaminations thereof, and all rights therein provided by
international treaties or conventions (the "Patents");
(ii) The United States and foreign trademark and service mark
registrations, applications, and licenses set forth in Schedule B hereto
(the "Trademarks");
(iii) The copyrights, United States and foreign copyright
registrations and applications and copyright licenses set forth in Schedule
C hereto (the "Copyrights");
(iv) any and all claims for damages for past, present and future
infringement, misappropriation or breach with respect to the Patents,
Trademarks and Copyrights, with the right, but not the obligation, to sue
for and collect, or otherwise recover, such damages; and
(v) any and all proceeds of the foregoing.
SECTION 2. Supplement to Security Agreement and IP Security Agreement.
----------------------------------------------------------
Schedule V to the Security Agreement and Schedules A, B and C to the IP Security
Agreement are each, effective as of the date hereof, hereby supplemented to add
to such Schedules the Additional Collateral.
SECTION 3. Recordation. The Grantor authorizes and requests that the
-----------
Register of Copyrights, the Commissioner of Patents and Trademarks and any other
applicable government officer to record this IP Security Agreement Supplement.
SECTION 4. Governing Law. This IP Security Agreement Supplement shall be
-------------
governed by, and construed in accordance with, the laws of the State of New
York.
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
[NAME OF GRANTOR]
By__________________________________
Name:
Title:
Address for Notices:
__________________________
__________________________
__________________________
[ADD ACKNOWLEDGMENT FORM IF NEEDED]