SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is entered into as of
December 23, 2005 among PRG-SCHULTZ USA, INC., a Georgia corporation (the
"Borrower"), PRG-SCHULTZ INTERNATIONAL, INC., a Georgia corporation (the
"Parent"), certain of the Domestic Subsidiaries of the Parent (such Domestic
Subsidiaries, together with the Parent, individually a "Guarantor" and
collectively the "Guarantors"; the Guarantors together with the Borrower,
individually an "Obligor", and collectively the "Obligors") and Blum Strategic
Partners II, L.P., as the collateral agent for the Lenders referred to below (in
such capacity together with its successors and permitted assigns, the
"Collateral Agent").
RECITALS
WHEREAS, pursuant to that certain Credit Agreement, dated as of the date
hereof (as amended, modified, extended, renewed or replaced from time to time,
the "Credit Agreement"), among the Borrower, the Guarantors, the lenders from
time to time party thereto (each a "Lender" and collectively, the "Lenders") and
the Collateral Agent, each of the Lenders, severally and not jointly or jointly
and severally, has agreed to make the Loans upon the terms and subject to the
conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make the Loans under the Credit
Agreement that the Obligors shall have executed and delivered this Security
Agreement in favor of the Collateral Agent, for the benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, capitalized terms used herein
shall have the meanings ascribed to such terms in the Credit Agreement, and
the following terms which are defined in the Uniform Commercial Code in
effect in the State of New York on the date hereof (the "UCC") are used
herein as so defined: Accession, Account, As-Extracted Collateral, Chattel
Paper, Commercial Tort Claim, Commingled Goods, Consumer Goods, Deposit
Account, Document, Equipment, Farm Products, Fixtures, General Intangible,
Goods, Instrument, Inventory, Investment Property, Letter-of-Credit Right,
Manufactured Home, Proceeds, Software, Standing Timber, Supporting
Obligation and Tangible Chattel Paper.
(b) In addition, the following terms shall have the following
meanings:
"Collateral" has the meaning provided in Section 2 hereof.
"Copyright Licenses": any written agreement, naming any Obligor as
licensor, granting any right under any Copyright including, without
limitation, any thereof referred to in Schedule 6.17 to the Credit
Agreement.
"Copyrights": (a) all copyrights registered in the United States or
any other country in all Works, now existing or hereafter created or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, registrations,
recordings and applications in the United States Copyright office
including, without limitation, any thereof referred to in Schedule 6.17 to
the Credit Agreement, and (b) all renewals thereof including, without
limitation, any thereof referred to in Schedule 6.17 of the Credit
Agreement.
"Indemnified Party": has the meaning provided in Section 8(b) hereof.
"Patent License": all agreements, whether written or oral, providing
for the grant by or to an Obligor of any right to manufacture, use or sell
any invention covered by a Patent, including, without limitation, any
thereof referred to in Schedule 6.17 of the Credit Agreement.
"Patents": (a) all letters patent of the United States or any other
country and all reissues and extensions thereof, including, without
limitation, any thereof referred to in Schedule 6.17 of the Credit
Agreement, and (b) all applications for letters patent of the United States
or any other country and all divisions, continuations and
continuations-in-part thereof, including, without limitation, any thereof
referred to in Schedule 6.17 of the Credit Agreement.
"Secured Obligations": means, without duplication, (i) all of the
obligations of the Credit Parties to the Collateral Agent and the Lenders,
under the Credit Agreement or any other Credit Document (including, but not
limited to, any interest accruing after the commencement of a proceeding by
or against any Credit Party under any Debtor Relief Laws, regardless of
whether such interest is an allowed claim under such proceeding), whether
now existing or hereafter arising, due or to become due, direct or
indirect, absolute or contingent, howsoever evidenced, created, held or
acquired, whether primary, secondary, direct, contingent, or joint and
several, as such obligations may be amended, modified, increased, extended,
renewed or replaced from time to time and (ii) all costs and expenses
incurred in connection with enforcement and collection of the obligations
described in the foregoing clause (i), including Attorney Costs.
"Trademark License": means any agreement, written or oral, providing
for the grant by or to an Obligor of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule 6.17 of
the Credit Agreement.
"Trademarks": (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other
-2-
source or business identifiers, and the goodwill associated therewith, now
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, whether in the
United States Patent and Trademark Office or in any similar office or
agency of the United States, any State thereof or any other country or any
political subdivision thereof, or otherwise, including, without limitation,
any thereof referred to in Schedule 6.17 to the Credit Agreement, and (b)
all renewals thereof.
"Work": any work which is subject to copyright protection pursuant to
Title 17 of the United States Code.
2. Grant of Security Interest in the Collateral. To secure the prompt
payment and performance in full when due, whether by lapse of time,
acceleration, mandatory prepayment or otherwise, of the Secured Obligations,
each Obligor hereby grants to the Collateral Agent, for the benefit of the
Lenders, a continuing security interest in, and a right to set off against, any
and all right, title and interest of such Obligor in and to all personal
property of such Obligor of whatever type or description, whether now owned or
existing or owned, acquired, or arising hereafter, including, without
limitation, the following (collectively, the "Collateral"):
(a) all Accounts;
(b) all cash and currency;
(c) all Chattel Paper;
(d) all Commercial Tort Claims identified on Schedule 2(d) attached
hereto;
(e) all Copyrights;
(f) all Copyright Licenses;
(g) all Deposit Accounts;
(h) all Documents;
(i) all Equipment;
(j) all Fixtures;
(k) all General Intangibles;
(l) all Goods;
(m) all Instruments;
(n) all Inventory;
-3-
(o) all Investment Property;
(p) all Letter-of-Credit Rights;
(q) all Patents;
(r) all Patent Licenses;
(s) all Software;
(t) all Supporting Obligations;
(u) all Trademarks;
(v) all Trademark Licenses; and
(w) to the extent not otherwise included, all Accessions and all
Proceeds of any and all of the foregoing.
The Obligors and the Collateral Agent, hereby acknowledge and agree that
the security interest created hereby in the Collateral (i) constitutes
continuing collateral security for all of the Secured Obligations, whether now
existing or hereafter arising and (ii) is not to be construed as an assignment
of any Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks or
Trademark Licenses.
3. Provisions Relating to Accounts.
(a) Anything herein to the contrary notwithstanding, each of the
Obligors shall remain liable under each of the Accounts to observe and
perform all the conditions and obligations to be observed and performed by
it thereunder, all in accordance with the terms of any agreement giving
rise to each such Account. Neither the Collateral Agent nor any of the
Lenders shall have any obligation or liability under any Account (or any
agreement giving rise thereto) by reason of or arising out of this Security
Agreement or the receipt by the Collateral Agent or any Lender of any
payment relating to such Account pursuant hereto, nor shall the Collateral
Agent nor any Lender be obligated in any manner to perform any of the
obligations of an Obligor under or pursuant to any Account (or any
agreement giving rise thereto), to make any payment, to make any inquiry as
to the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party under any Account (or any
agreement giving rise thereto), to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts
which may have been assigned to it or to which it may be entitled at any
time or times.
(b) Once during each calendar year or at any time after the occurrence
and during the continuation of an Event of Default, the Collateral Agent
shall have the right, but
-4-
not the obligation, to make test verifications of the Accounts in any
manner and through any medium that it reasonably considers advisable, and
the Obligors shall furnish all such assistance and information as the
Collateral Agent may require in connection with such test verifications. At
any time and from time to time, upon the Collateral Agent's reasonable
request and at the expense of the Obligors, the Obligors shall cause
independent public accountants or others satisfactory to the Collateral
Agent to furnish to the Collateral Agent reports showing reconciliations,
aging and test verifications of, and trial balances for, the Accounts. The
Collateral Agent in its own name or in the name of others may communicate
with account debtors on the Accounts to verify with them to the Collateral
Agent's reasonable satisfaction the existence, amount and terms of any
Accounts.
4. Representations and Warranties. Each Obligor hereby represents and
warrants to the Collateral Agent and each of the Lenders that so long as any of
the Secured Obligations remain outstanding or any Credit Document is in effect:
(a) Legal Name; Chief Executive Office.
(i) Each Obligor's exact legal name, taxpayer identification
number, organization identification number, state of incorporation or
formation, principal place of business and chief executive office are
(and for the four months prior to the date hereof has been) as set
forth on Schedule 4(a)(i) attached hereto.
(ii) Other than as set forth on Schedule 4(a)(ii) attached
hereto, no Obligor has been party to a merger, consolidation or other
change in structure or used any tradename in the four months prior to
the date hereof.
(b) Ownership. Each Obligor is the legal and beneficial owner of its
Collateral and has the right to pledge, sell, assign or transfer the same.
(c) Security Interest/Priority. This Security Agreement creates a
valid security interest in favor of the Collateral Agent, for the benefit
of the Lenders, in the Collateral of such Obligor and, when properly
perfected by filing, shall constitute a valid perfected security interest
in such Collateral, to the extent such security interest can be perfected
by filing under the UCC, free and clear of all Liens except for Permitted
Liens.
(d) Types of Collateral. None of the Collateral consists of, or is the
Accessions or the Proceeds of, As-Extracted Collateral, Consumer Goods,
Farm Products, Manufactured Homes or Standing Timber.
(e) Accounts. (i) Each Account of the Obligors and the papers and
documents relating thereto are genuine and in all material respects what
they purport to be, (ii) each Account arises out of (A) a bona fide sale of
goods sold and delivered by such Obligor (or is in the process of being
delivered) or (B) services theretofore actually rendered by such Obligor
to, the account debtor named therein, (iii) no Account of an Obligor is
evidenced by any Instrument or Chattel Paper unless such Instrument or
Chattel Paper has been
-5-
theretofore endorsed over and delivered to, or submitted to the control of,
the Collateral Agent or its designee and (iv) no surety bond was required
or given in connection with any Account of an Obligor or the contracts or
purchase orders out of which they arose.
(f) Inventory. No Inventory is held by an Obligor pursuant to
consignment, sale or return, sale on approval or similar arrangement.
(g) Copyrights, Patents and Trademarks.
(i) Schedule 6.17 to the Credit Agreement includes all
Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks
and Trademark Licenses owned by any Obligor in its own name, or to
which any Obligor is party, as of the date hereof.
(ii) To the best of each Obligor's knowledge, each Copyright,
Patent and Trademark of such Obligor is valid, subsisting, unexpired,
enforceable and has not been abandoned.
(iii) Except as set forth in Schedule 6.17 to the Credit
Agreement, none of such Copyrights, Patents and Trademarks is the
subject of any licensing or franchise agreement.
(iv) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the
validity of any Copyright, Patent or Trademark.
(v) No action or proceeding is pending seeking to limit, cancel
or question the validity of any Copyright, Patent or Trademark, or
which would have a material adverse effect on the value of any
Copyright, Patent or Trademark.
(vi) All applications pertaining to the Copyrights, Patents and
Trademarks of each Obligor have been duly and properly filed, and all
registrations or letters pertaining to such Copyrights, Patents and
Trademarks have been duly and properly filed and issued, and all of
such Copyrights, Patents and Trademarks are valid and enforceable.
(vii) No Obligor has made any assignment or agreement in conflict
with the security interest in the Copyrights, Patents or Trademarks of
each Obligor hereunder.
5. Covenants. Each Obligor covenants that, so long as any of the Secured
Obligations remain outstanding or any Credit Document is in effect, such Obligor
shall:
(a) Other Liens. Defend the Collateral against the claims and demands
of all other parties claiming an interest therein, keep the Collateral free
from all Liens, except for
-6-
Permitted Liens, and not sell, exchange, transfer, assign, lease or
otherwise dispose of the Collateral or any interest therein, except as
permitted under the Credit Agreement.
(b) Preservation of Collateral. Keep the Collateral in good order,
condition and repair and not use the Collateral in violation of the
provisions of this Security Agreement or any other agreement relating to
the Collateral or any policy insuring the Collateral or any applicable
statute, law, bylaw, rule, regulation or ordinance.
(c) Instruments/Tangible Chattel Paper/Documents. If any amount
payable under or in connection with any of the Collateral shall be or
become evidenced by any Instrument or Tangible Chattel Paper, or if any
property constituting Collateral shall be stored or shipped subject to a
Document, such Obligor shall ensure that (i) such Instrument, Tangible
Chattel Paper or Document is either in the possession of such Obligor at
all times or, if requested by the Collateral Agent, is immediately
delivered to the Collateral Agent or its designee, duly endorsed in a
manner satisfactory to the Collateral Agent and (ii) any Collateral
consisting of Tangible Chattel Paper is marked with a legend acceptable to
the Collateral Agent indicating the Collateral Agent's security interest in
such Tangible Chattel Paper.
(d) Change in Structure, Location or Type. Not, without providing 10
days prior written notice to the Collateral Agent and without authorizing
the Collateral Agent to file such financing statements and amendments to
any previously filed financing statements as the Collateral Agent may
require, change its name or state of formation or be party to a merger,
consolidation or other change in structure or use any tradename.
(e) Inspection. Upon reasonable notice, and during reasonable hours,
at all times allow the Collateral Agent or its representatives to visit and
inspect the Collateral as set forth in Section 7.10 of the Credit
Agreement.
(f) Authorization. Authorize the Collateral Agent to file one or more
financing statements disclosing the Collateral Agent's security interest in
the Collateral. Each Obligor agrees to execute and deliver to the
Collateral Agent such financing statements and other applicable financing
statements as may be reasonably requested by the Collateral Agent in order
to perfect and protect the security interest created hereby in the
Collateral of such Obligor.
(g) Perfection of Security Interest. Execute and deliver to the
Collateral Agent or its designee such agreements, assignments or
instruments (including affidavits, notices, reaffirmations and amendments
and restatements of existing documents, as the Collateral Agent may
reasonably request) and do all such other things as the Collateral Agent
may reasonably deem necessary or appropriate (i) to assure to the
Collateral Agent the effectiveness and priority of its security interests
hereunder, including (A) such financing statements (including renewal
statements) or amendments thereof or supplements thereto or other
instruments as the Collateral Agent may from time to time reasonably
request in order to perfect and maintain the security interests granted
hereunder in accordance with the
-7-
UCC, (B) with regard to Copyrights, a Notice of Grant of Security Interest
in Copyrights for filing with the United States Copyright Office in the
form of Schedule 5(f)(i) attached hereto, (C) with regard to Patents, a
Notice of Grant of Security Interest in Patents for filing with the United
States Patent and Trademark Office in the form of Schedule 5(f)(ii)
attached hereto and (D) with regard to Trademarks, a Notice of Grant of
Security Interest in Trademarks for filing with the United States Patent
and Trademark Office in the form of Schedule 5(f)(iii) attached hereto,
(ii) to consummate the transactions contemplated hereby and (iii) to
otherwise protect and reasonably assure the Collateral Agent of its rights
and interests hereunder. To that end, each Obligor agrees that the
Collateral Agent may file one or more financing statements (with collateral
descriptions broader, including without limitation, "all assets" and/or
"all personal property" collateral descriptions, and/or less specific than
the description of the Collateral contained herein) disclosing the
Collateral Agent's security interest in any or all of the Collateral of
such Obligor without, to the extent permitted by law, such Obligor's
signature thereon, and further each Obligor also hereby irrevocably makes,
constitutes and appoints the Collateral Agent, its nominee or any other
Person whom the Collateral Agent may designate, as such Obligor's
attorney-in-fact with full power and for the limited purpose to sign in the
name of such Obligor any such financing statements (including renewal
statements), amendments and supplements to financing statements, renewal
financing statements, notices or any similar documents which in the
Collateral Agent's reasonable discretion would be necessary, appropriate or
convenient in order to perfect and maintain perfection of the security
interests granted hereunder, such power, being coupled with an interest,
being and remaining irrevocable and in effect so long as the Credit
Agreement is in effect or any amounts payable thereunder or under any other
Credit Document is in effect. Each Obligor hereby agrees that a carbon,
photographic or other reproduction of this Security Agreement or any such
financing statement is sufficient for filing as a financing statement by
the Collateral Agent without notice thereof to such Obligor wherever the
Collateral Agent may in its reasonable discretion desire to file the same.
In the event for any reason the law of any jurisdiction other than New York
becomes or is applicable to the Collateral of any Obligor or any part
thereof, or to any of the Secured Obligations, such Obligor agrees to
execute and deliver all such instruments and to do all such other things as
the Collateral Agent in its sole discretion reasonably deems necessary or
appropriate to preserve, protect and enforce the security interests of the
Collateral Agent under the law of such other jurisdiction (and, if an
Obligor shall fail to do so promptly upon the request of the Collateral
Agent, then the Collateral Agent or its designee may execute any and all
such requested documents on behalf of such Obligor pursuant to the power of
attorney granted hereinabove). If any Collateral is in the possession or
control of an Obligor's agents and the Collateral Agent so requests, such
Obligor agrees to notify such agents in writing of the Collateral Agent's
security interest therein and, upon the Collateral Agent's request,
instruct them to hold all such Collateral for the Collateral Agent's (or
its designee's) account and subject to the Collateral Agent's (or its
designee's) instructions. Each Obligor agrees to mark its books and records
to reflect the security interest of the Collateral Agent in the Collateral.
(h) Control. Execute and deliver all agreements, assignments,
instruments or other documents as the Collateral Agent shall reasonably
request for the purpose of
-8-
obtaining and maintaining control within the meaning of the UCC with
respect to any Collateral consisting of Deposit Accounts, Investment
Property, Letter-of-Credit Rights and Electronic Chattel Paper.
(i) Collateral held by Warehouseman, Bailee, etc. If any Collateral is
at any time in the possession or control of a warehouseman, bailee, agent
or processor of such Obligor, (i) notify the Collateral Agent of such
possession or control, (ii) notify such Person of the Collateral Agent's
security interest in such Collateral, (iii) instruct such Person to hold
all such Collateral for the Collateral Agent's (or its designee's) account
and subject to the Collateral Agent's (or its designee's) instructions and
(iv) use its best efforts to obtain an acknowledgment from such Person that
it is holding such Collateral for the benefit of the Collateral Agent and
the Lenders.
(j) Treatment of Accounts. Not grant or extend the time for payment of
any Account, or compromise or settle any Account for less than the full
amount thereof, or release any Person or property, in whole or in part,
from payment thereof, or allow any credit or discount thereon, other than
as normal and customary in the ordinary course of an Obligor's business.
(k) Covenants Relating to Copyrights.
(i) Employ the Copyright for each Work with such notice of
copyright as may be required by law to secure copyright protection.
(ii) Not do any act or knowingly omit to do any act whereby any
material Copyright may become invalidated and (A) not do any act, or
knowingly omit to do any act, whereby any material Copyright may
become injected into the public domain; (B) notify the Collateral
Agent immediately if it knows that any material Copyright may become
injected into the public domain or of any adverse determination or
development (including, without limitation, the institution of, or any
such determination or development in, any court or tribunal in the
United States or any other country) regarding an Obligor's ownership
of any such Copyright or its validity; (C) take all necessary steps as
it shall deem appropriate under the circumstances, to maintain and
pursue each application (and to obtain the relevant registration) and
to maintain each registration of each material Copyright owned by an
Obligor including, without limitation, filing of applications for
renewal where necessary; and (D) promptly notify the Collateral Agent
of any material infringement of any material Copyright of an Obligor
of which it becomes aware and take such actions as it shall reasonably
deem appropriate under the circumstances to protect such Copyright,
including, where appropriate, the bringing of suit for infringement,
seeking injunctive relief and seeking to recover any and all damages
for such infringement.
-9-
(iii) Not make any assignment or agreement in conflict with the
security interest in the Copyrights of each Obligor hereunder.
(l) Covenants Relating to Patents and Trademarks.
(i) (A) Continue to use each Trademark on each and every
trademark class of goods applicable to its current line as reflected
in its current catalogs, brochures and price lists in order to
maintain such Trademark in full force free from any claim of
abandonment for non-use, (B) maintain as in the past the quality of
products and services offered under such Trademark, (C) employ such
Trademark with the appropriate notice of registration, (D) not adopt
or use any mark which is confusingly similar or a colorable imitation
of such Trademark unless the Collateral Agent shall obtain a perfected
security interest in such mark pursuant to this Security Agreement,
and (E) not (and not permit any licensee or sublicensee thereof to) do
any act or knowingly omit to do any act whereby any Trademark may
become invalidated.
(ii) Not do any act, or omit to do any act, whereby any Patent
may become abandoned or dedicated.
(iii) Notify the Collateral Agent immediately if it knows that
any application or registration relating to any Patent or Trademark
may become abandoned or dedicated, or of any adverse determination or
development (including, without limitation, the institution of, or any
such determination or development in, any proceeding in the United
States Patent and Trademark Office or any court or tribunal in any
country) regarding an Obligor's ownership of any Patent or Trademark
or its right to register the same or to keep and maintain the same.
(iv) Whenever an Obligor, either by itself or through an agent,
employee, licensee or designee, shall file an application for the
registration of any Patent or Trademark with the United States Patent
and Trademark Office or any similar office or agency in any other
country or any political subdivision thereof, such Obligor shall
report such filing to the Collateral Agent within five Business Days
after the last day of the fiscal quarter in which such filing occurs.
Upon request of the Collateral Agent, an Obligor shall execute and
deliver any and all agreements, instruments, documents and papers as
the Collateral Agent may reasonably request to evidence the Collateral
Agent's security interest in any Patent or Trademark and the goodwill
and general intangibles of an Obligor relating thereto or represented
thereby.
-10-
(v) Take all reasonable and necessary steps, including, without
limitation, in any proceeding before the United States Patent and
Trademark Office, or any similar office or agency in any other country
or any political subdivision thereof, to maintain and pursue each
application (and to obtain the relevant registration) and to maintain
each registration of the Patents and Trademarks, including, without
limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(vi) Promptly notify the Collateral Agent after it learns that
any Patent or Trademark included in the Collateral is infringed,
misappropriated or diluted by a third party and promptly sue for
infringement, misappropriation or dilution, to seek injunctive relief
where appropriate and to recover any and all damages for such
infringement, misappropriation or dilution, or take such other actions
as it shall reasonably deem appropriate under the circumstances to
protect such Patent or Trademark.
(vii) Not make any assignment or agreement in conflict with the
security interest in the Patents or Trademarks of each Obligor
hereunder.
(m) New Patents, Copyrights and Trademarks. Promptly provide the
Collateral Agent with (i) a listing of all applications, if any, for new
Copyrights, Patents or Trademarks (together with a listing of the issuance
of registrations or letters on present applications), which new
applications and issued registrations or letters shall be subject to the
terms and conditions hereunder, and (ii) (A) with respect to Copyrights, a
duly executed Notice of Security Interest in Copyrights, (B) with respect
to Patents, a duly executed Notice of Security Interest in Patents, (C)
with respect to Trademarks, a duly executed Notice of Security Interest in
Trademarks or (D) such other duly executed documents as the Collateral
Agent may reasonably request in a form acceptable to counsel for the
Collateral Agent and suitable for recording to evidence the security
interest in the Copyright, Patent or Trademark which is the subject of such
new application.
(n) Insurance. Insure, repair and replace the Collateral of such
Obligor as set forth in the Credit Agreement. All insurance proceeds shall
be subject to the security interest of the Collateral Agent hereunder.
(o) Commercial Tort Claims.
(i) Promptly notify the Collateral Agent in writing of the
initiation of any Commercial Tort Claim before any Governmental
Authority by or in favor of such Obligor or any of its Subsidiaries.
(ii) Execute and deliver such statements, documents and notices
and do and cause to be done all such things as the Collateral Agent
may reasonably deem necessary, appropriate or convenient, or as are
required by law, to create, perfect and maintain the Collateral
Agent's security interest in any Commercial Tort Claim.
-11-
6. Advances by the Collateral Agent. On failure of any Obligor to perform
any of the covenants and agreements contained herein, the Collateral Agent may,
at its sole option and in its sole discretion, perform the same and in so doing
may expend such sums as the Collateral Agent may reasonably deem advisable in
the performance thereof, including, without limitation, the payment of any
insurance premiums, the payment of any taxes, a payment to obtain a release of a
Lien or potential Lien, expenditures made in defending against any adverse claim
and all other expenditures which the Collateral Agent may make for the
protection of the security hereof or which may be compelled to make by operation
of law. All such sums and amounts so expended shall be repayable by the Obligors
on a joint and several basis promptly upon timely notice thereof and demand
therefor, shall constitute additional Secured Obligations and shall bear
interest from the date said amounts are expended at the Default Rate specified
in Section 3.1 of the Credit Agreement. No such performance of any covenant or
agreement by the Collateral Agent on behalf of any Obligor, and no such advance
or expenditure therefor, shall relieve the Obligors of any default under the
terms of this Security Agreement, the other Credit Documents or any other
documents relating to the Secured Obligations. The Collateral Agent may make any
payment hereby authorized in accordance with any bill, statement or estimate
procured from the appropriate public office or holder of the claim to be
discharged without inquiry into the accuracy of such bill, statement or estimate
or into the validity of any tax assessment, sale, forfeiture, tax lien, title or
claim except to the extent such payment is being contested in good faith by an
Obligor in appropriate proceedings and against which adequate reserves are being
maintained in accordance with GAAP.
7. Events of Default.
The occurrence of an event which under the Credit Agreement would
constitute an Event of Default shall be an Event of Default hereunder (an "Event
of Default").
8. Remedies.
(a) General Remedies. Upon the occurrence of an Event of Default and
during continuation thereof, the Collateral Agent shall have, in addition
to the rights and remedies provided herein, in the Credit Documents, in any
other documents relating to the Secured Obligations or by law (including,
but not limited to, levy of attachment, garnishment, and the rights and
remedies set forth in the Uniform Commercial Code of the jurisdiction
applicable to the affected Collateral), the rights and remedies of a
secured party under the UCC (regardless of whether the UCC is the law of
the jurisdiction where the rights and remedies are asserted and regardless
of whether the UCC applies to the affected Collateral), and further, the
Collateral Agent may, with or without judicial process or the aid and
assistance of others, (i) enter on any premises on which any of the
Collateral may be located and, without resistance or interference by the
Obligors, take possession of the Collateral, (ii) dispose of any Collateral
on any such premises, (iii) require the Obligors to assemble and make
available to the Collateral Agent at the expense of the Obligors any
Collateral at any place and time designated by the Collateral Agent which
is reasonably convenient to both parties, (iv) remove any Collateral from
any such premises for the purpose of effecting sale
-12-
or other disposition thereof, and/or (v) without demand and without
advertisement, notice, hearing or process of law, all of which each of the
Obligors hereby waives to the fullest extent permitted by law, at any place
and time or times, sell and deliver any or all Collateral held by or for it
at public or private sale, by one or more contracts, in one or more
parcels, for cash, upon credit or otherwise, at such prices and upon such
terms as the Collateral Agent deems advisable, in its sole discretion
(subject to any and all mandatory legal requirements). Each of the Obligors
acknowledges that any private sale referenced above may be at prices and on
terms less favorable to the seller than the prices and terms that might
have been obtained at a public sale and agrees that such private sale shall
be deemed to have been made in a commercially reasonable manner. Neither
the Collateral Agent's compliance with applicable law nor its disclaimer of
warranties relating to the Collateral shall be considered to adversely
affect the commercial reasonableness of any sale. In addition to all other
sums due to the Collateral Agent and the Lenders with respect to the
Secured Obligations, the Obligors shall pay the Collateral Agent and the
Lenders all reasonable documented costs and expenses incurred by the
Collateral Agent and the Lenders, including, but not limited to, reasonable
attorneys' fees and court costs, in obtaining or liquidating the
Collateral, in enforcing payment of the Secured Obligations, or in the
prosecution or defense of any action or proceeding by or against the
Collateral Agent, any Lender or the Obligors concerning any matter arising
out of or connected with this Security Agreement, any Collateral or the
Secured Obligations, including, without limitation, any of the foregoing
arising in, arising under or related to a case under the Debtor Relief
Laws. To the extent the rights of notice cannot be legally waived
hereunder, each Obligor agrees that any requirement of reasonable notice
shall be met if such notice is personally served on or mailed, postage
prepaid, to the Borrower in accordance with the notice provisions of
Section 10.1 of the Credit Agreement at least 10 days before the time of
sale or other event giving rise to the requirement of such notice. The
Collateral Agent shall not be obligated to make any sale or other
disposition of the Collateral regardless of notice having been given. To
the extent permitted by law, the Collateral Agent and any Lender may be a
purchaser at any such sale. To the extent permitted by applicable law, each
of the Obligors hereby waives all of its rights of redemption with respect
to any such sale. Subject to the provisions of applicable law, the
Collateral Agent may postpone or cause the postponement of the sale of all
or any portion of the Collateral by announcement at the time and place of
such sale, and such sale may, without further notice, to the extent
permitted by law, be made at the time and place to which the sale was
postponed, or the Collateral Agent may further postpone such sale by
announcement made at such time and place.
(b) Remedies Relating to Accounts. Upon the occurrence of an Event of
Default and during the continuation thereof, whether or not the Collateral
Agent has exercised any or all of its rights and remedies hereunder, each
Obligor will, promptly upon request of the Collateral Agent, instruct all
account debtors to remit all payments in respect of Accounts to a mailing
location selected by the Collateral Agent (or its designee). In addition,
the Collateral Agent or its designee shall have the right to enforce any
Obligor's rights against its customers and account debtors and may notify
any of Obligor's customers and account debtors that the Accounts of such
Obligor have been assigned to the Collateral Agent or of the Collateral
Agent's security interest therein, and may (either in its own name
-13-
or in the name of an Obligor or both) demand, collect (including without
limitation by way of a lockbox arrangement), receive, take receipt for,
sell, sue for, compound, settle, compromise and give acquittance for any
and all amounts due or to become due on any Account, and, in the Collateral
Agent's discretion, file any claim or take any other action or proceeding
to protect and realize upon the security interest of the Collateral Agent
in the Accounts. Each Obligor acknowledges and agrees that the Proceeds of
its Accounts remitted to or on behalf of the Collateral Agent in accordance
with the provisions hereof shall be solely for the Collateral Agent's own
convenience and that such Obligor shall not have any right, title or
interest in such Accounts or in any such other amounts except as expressly
provided herein. The Collateral Agent shall have no liability or
responsibility to any Obligor for acceptance in good faith of a check,
draft or other order for payment of money bearing the legend "payment in
full" or words of similar import or any other restrictive legend or
endorsement or be responsible for determining the correctness of any
remittance. Each Obligor hereby agrees to indemnify the Collateral Agent
and each Lender from and against all liabilities, damages, losses, actions,
claims, judgments, costs, expenses, charges and reasonable attorneys' fees
suffered or incurred by the Collateral Agent or such Lender (each, an
"Indemnified Party") because of the maintenance of the foregoing
arrangements except as relating to or arising out of the gross negligence
or willful misconduct of an Indemnified Party or its officers, employees or
agents. In the case of any investigation, litigation or other proceeding,
the foregoing indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by an Obligor, its
directors, shareholders or creditors or an Indemnified Party or any other
Person or any other Indemnified Party is otherwise a party thereto.
(c) Access. In addition to the rights and remedies hereunder, upon the
occurrence of an Event of Default and during the continuance thereof, the
Collateral Agent shall have the right to enter and remain upon the various
premises of the Obligors without cost or charge to the Collateral Agent,
and use the same, together with materials, supplies, books and records of
the Obligors for the purpose of collecting and liquidating the Collateral,
or for preparing for sale and conducting the sale of the Collateral,
whether by foreclosure, auction or otherwise. In addition, the Collateral
Agent may remove Collateral, or any part thereof, from such premises and/or
any records with respect thereto, in order to effectively collect or
liquidate such Collateral.
(d) Nonexclusive Nature of Remedies. Failure by the Collateral Agent
or any Lender to exercise any right, remedy or option under this Security
Agreement, any other Credit Document, any other document relating to the
Secured Obligations or as provided by law, or any delay by the Collateral
Agent or any Lender in exercising the same, shall not operate as a waiver
of any such right, remedy or option. No waiver hereunder shall be effective
unless it is in writing, signed by the party against whom such waiver is
sought to be enforced and then only to the extent specifically stated,
which in the case of the Collateral Agent shall only be granted as provided
herein. To the extent permitted by law, neither the Collateral Agent, any
Lender nor any party acting as attorney for the Collateral Agent or any
Lender, shall be liable hereunder for any acts or omissions or for any
error of judgment or mistake of fact or law other than their gross
negligence or willful misconduct
-14-
hereunder. The rights and remedies of the Collateral Agent and the Lenders
under this Security Agreement shall be cumulative and not exclusive of any
other right or remedy which the Collateral Agent or any Lender may have.
(e) Retention of Collateral. The Collateral Agent (for the ratable
benefit of the Lenders) may, after providing the notices required by
Sections 9-620 and 9-621 of the UCC or otherwise complying with the
requirements of applicable law of the relevant jurisdiction, accept or
retain all or any portion of the Collateral in satisfaction of the Secured
Obligations. Unless and until the Collateral Agent shall have provided such
notices, however, the Collateral Agent shall not be deemed to have accepted
or retained any Collateral in satisfaction of any Secured Obligations for
any reason.
(f) Deficiency. In the event that the proceeds of any sale, collection
or realization are insufficient to pay all amounts to which the Collateral
Agent and each Lender is legally entitled, the Obligors shall be jointly
and severally liable for the deficiency, together with interest thereon at
the Default Rate specified in Section 3.1 of the Credit Agreement, together
with the costs of collection and the reasonable fees of any attorneys
employed by the Collateral Agent or any Lender to collect such deficiency.
Any surplus remaining after the full payment and satisfaction of the
Secured Obligations shall be returned to the Obligors or to whomsoever a
court of competent jurisdiction shall determine to be entitled thereto.
9. Rights of the Collateral Agent.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Obligor hereby designates and appoints the
Collateral Agent and each of its designees or agents, as attorney-in-fact
of such Obligor, irrevocably and with power of substitution, with authority
to take any or all of the following actions upon the occurrence and during
the continuance of an Event of Default:
(i) to demand, collect, settle, compromise, adjust, give
discharges and releases, all as the Collateral Agent may reasonably
determine;
(ii) to commence and prosecute any actions at any court for the
purposes of collecting any Collateral and enforcing any other right in
respect thereof;
(iii) to defend, settle or compromise any action brought and, in
connection therewith, give such discharge or release as the Collateral
Agent may deem reasonably appropriate;
(iv) to receive, open and dispose of mail addressed to an Obligor
and endorse checks, notes, drafts, acceptances, money orders, bills of
lading, warehouse receipts or other instruments or documents
evidencing payment,
-15-
shipment or storage of the goods giving rise to the Collateral of such
Obligor on behalf of and in the name of such Obligor, or securing, or
relating to such Collateral;
(iii) to pay or discharge taxes, liens, security interests or
other encumbrances levied or placed on or threatened against the
Collateral;
(iv) to direct any parties liable for any payment in connection
with any of the Collateral to make payment of any and all monies due
and to become due thereunder directly to the Collateral Agent or as
the Collateral Agent shall direct;
(v) to receive payment of and receipt for any and all monies,
claims, and other amounts due and to become due at any time in respect
of or arising out of any Collateral;
(viii) to sell, assign, transfer, make any agreement in respect
of, or otherwise deal with or exercise rights in respect of, any
Collateral or the goods or services which have given rise thereto, as
fully and completely as though the Collateral Agent were the absolute
owner thereof for all purposes;
(ix) to adjust and settle claims under any insurance policy
relating to the Collateral;
(x) to execute and deliver all assignments, conveyances,
statements, financing statements, renewal financing statements,
security and pledge agreements, affidavits, notices and other
agreements, instruments and documents that the Collateral Agent may
reasonably determine necessary in order to perfect and maintain the
security interests and liens granted in this Security Agreement and in
order to fully consummate all of the transactions contemplated
therein;
(xi) to institute any foreclosure proceedings that the Collateral
Agent may deem appropriate; and
(xii) to do and perform all such other acts and things as the
Collateral Agent may reasonably deem to be necessary, proper or
convenient in connection with the Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable for so long as any of the Secured Obligations remain
outstanding or any Credit Document is in effect. The Collateral Agent shall
be under no duty to exercise or withhold the exercise of any of the rights,
powers, privileges and options expressly or implicitly granted to the
Collateral Agent in this Security Agreement, and shall not be liable for
any failure to do so
-16-
or any delay in doing so. The Collateral Agent shall not be liable for any
act or omission or for any error of judgment or any mistake of fact or law
in its individual capacity or its capacity as attorney-in-fact except acts
or omissions resulting from its gross negligence or willful misconduct.
This power of attorney is conferred on the Collateral Agent solely to
protect, preserve and realize upon its security interest in the Collateral.
(b) Performance by the Collateral Agent of Obligations. If any Obligor
fails to perform any agreement or obligation contained herein, the
Collateral Agent itself may perform, or cause performance of, such
agreement or obligation, and the reasonable expenses of the Collateral
Agent incurred in connection therewith shall be payable by the Obligors on
a joint and several basis pursuant to Section 24 hereof.
(c) Assignment by the Collateral Agent and the Lenders. The Collateral
Agent and each Lender may from time to time assign the Secured Obligations
and any portion thereof and/or the Collateral and any portion thereof, and
the assignee shall be entitled to all of the rights and remedies of the
Collateral Agent or such Lender under this Security Agreement in relation
thereto.
(d) The Collateral Agent's Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Collateral while being
held by the Collateral Agent hereunder, the Collateral Agent shall have no
duty or liability to preserve rights pertaining thereto, it being
understood and agreed that the Obligors shall be responsible for
preservation of all rights in the Collateral, and the Collateral Agent
shall be relieved of all responsibility for the Collateral upon
surrendering it or tendering the surrender of it to the Obligors. The
Collateral Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which the
Collateral Agent accords its own property, which shall be no less than the
treatment employed by a reasonable and prudent agent in the industry, it
being understood that the Collateral Agent shall not have responsibility
for taking any necessary steps to preserve rights against any parties with
respect to any of the Collateral.
10. Application of Proceeds. Upon the occurrence and during the continuance
of an Event of Default, any payments in respect of the Secured Obligations and
any proceeds of the Collateral, when received by the Collateral Agent or the
Lenders in cash or its equivalent, will be applied in reduction of the Secured
Obligations in the order set forth in Section 9.3 of the Credit Agreement or
other document relating to the Secured Obligations, and each Obligor irrevocably
waives the right to direct the application of such payments and proceeds and
acknowledges and agrees that the Collateral Agent and the Lenders shall have the
continuing and exclusive right to apply and reapply any and all such payments
and proceeds in the Collateral Agent's and the Lenders' sole discretion,
notwithstanding any entry to the contrary upon any of its books and records.
-17-
11. Costs of Counsel. If at any time hereafter, whether upon the occurrence
of an Event of Default or not, the Collateral Agent [or any Lender employs](1)
[and Lenders employ](1) counsel to prepare or consider amendments, waivers or
consents with respect to this Security Agreement, or to take action or make a
response in or with respect to any legal or arbitral proceeding relating to this
Security Agreement or relating to the Collateral, or to protect the Collateral
or exercise any rights or remedies under this Security Agreement or with respect
to the Collateral, then the Obligors agree to promptly pay upon demand any and
all such reasonable documented costs and expenses of such Person, all of which
costs and expenses shall constitute Secured Obligations hereunder.
12. Continuing Agreement.
(a) This Security Agreement shall be a continuing agreement in every
respect and shall remain in full force and effect so long as any of the
Secured Obligations remain outstanding and the Credit Document shall have
not been terminated (other than any obligations with respect to the
indemnities and the representations and warranties set forth in the Credit
Documents). Upon such payment and termination, this Security Agreement
shall be automatically terminated and the Collateral Agent shall, upon the
request and at the expense of the Obligors, forthwith release all of its
liens and security interests hereunder and shall execute and deliver all
UCC termination statements and/or other documents reasonably requested by
the Obligors evidencing such termination. Notwithstanding the foregoing all
releases and indemnities provided hereunder shall survive termination of
this Security Agreement.
(b) This Security Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in
whole or in part, of any of the Secured Obligations is rescinded or must
otherwise be restored or returned by the Collateral Agent or any Lender as
a preference, fraudulent conveyance or otherwise under any bankruptcy,
insolvency or similar law, all as though such payment had not been made;
provided that in the event payment of all or any part of the Secured
Obligations is rescinded or must be restored or returned, all reasonable
costs and expenses (including without limitation any reasonable legal fees
and disbursements) incurred by the Collateral Agent or any lender in
defending and enforcing such reinstatement shall be deemed to be included
as a part of the Secured Obligations.
13. Amendments; Waivers; Modifications. This Security Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing entered into by, or approved in writing by, the Collateral Agent and
each of the Obligors.
14. Successors in Interest. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Obligor, its successors and assigns and shall inure, together with the rights
and remedies of the Collateral Agent hereunder, to the Collateral Agent, for the
ratable benefit of the Lenders and each of their successors and permitted
- ----------
(1) To be confirmed.
-18-
assigns; provided, however, that none of the Obligors may assign its rights or
delegate its duties hereunder without the prior written consent of the Required
Lenders. To the fullest extent permitted by law, each Obligor hereby releases
the Collateral Agent and each Lender, and their respective successors and
assigns and their respective officers, attorneys, employees and agents, from any
liability for any act or omission or any error of judgment or mistake of fact or
of law relating to this Security Agreement or the Collateral, except as set
forth in Section 8(d) hereof and except for any liability arising from the gross
negligence or willful misconduct of the Collateral Agent or any Lender,
respectively, or its officers, employees or agents.
15. Notices. All notices required or permitted to be given under this
Security Agreement shall be in conformance with Section 10.1 of the Credit
Agreement.
16. Counterparts. This Security Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.
17. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.
18. Governing Law; Submission to Jurisdiction; Venue.
(a) THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT THE
COLLATERAL AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY
AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK SITTING IN NEW YORK COUNTY, NEW YORK OR OF THE UNITED
STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND
DELIVERY OF THIS SECURITY AGREEMENT, EACH CREDIT PARTY, EACH LENDER AND THE
COLLATERAL AGENT CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO
THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH CREDIT PARTY, EACH
LENDER AND THE COLLATERAL AGENT IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY CREDIT DOCUMENT
OR OTHER DOCUMENT RELATED THERETO. EACH CREDIT PARTY, EACH LENDER AND THE
COLLATERAL AGENT
-19-
WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH
MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.
19. Waiver of Jury Trial. EACH PARTY TO THIS SECURITY AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER THIS SECURITY AGREEMENT OR ANY OTHER CREDIT
DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS
OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS SECURITY AGREEMENT OR
ANY OTHER CREDIT DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR
TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS SECURITY AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
20. Severability. If any provision of this Security Agreement is determined
to be illegal, invalid or unenforceable, such provision shall be fully severable
and the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
21. Entirety. This Security Agreement, the other Credit Documents and the
other documents relating to the Secured Obligations represent the entire
agreement of the parties hereto and thereto, and supersede all prior agreements
and understandings, oral or written, if any, including any commitment letters or
correspondence relating to the Credit Documents, any other documents relating to
the Secured Obligations or the transactions contemplated herein and therein.
22. Survival. All representations and warranties of the Obligors hereunder
shall survive the execution and delivery of this Security Agreement, the other
Credit Documents and the other documents relating to the Secured Obligations,
the delivery of the Notes and the making of the Loans under the Credit
Agreement.
23. Other Security. To the extent that any of the Secured Obligations are
now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by an Obligor), or by a
guarantee, endorsement or property of any other Person, then the Collateral
Agent shall have the right to proceed against such other property, guarantee or
endorsement upon the occurrence of any Event of Default, and the Collateral
Agent has the right, in its sole discretion, to determine which rights,
security, liens, security interests or remedies the Collateral Agent shall at
any time pursue, relinquish, subordinate, modify or take with respect thereto,
without in any way modifying or affecting any of them or any of the Collateral
-20-
Agent's rights or the Secured Obligations under this Security Agreement, under
any other of the Credit Documents or under any other documents relating to the
Secured Obligations.
24. Joint and Several Obligations of Obligors.
(a) Each of the Obligors is accepting joint and several liability
hereunder in consideration of the financial accommodation to be provided by
the Collateral Agent and the Lenders under the Credit Agreement, for the
mutual benefit, directly and indirectly, of each of the Obligors and in
consideration of the undertakings of each of the Obligors to accept joint
and several liability for the obligations of each of them.
(b) Each of the Obligors jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor,
joint and several liability with the other Obligors with respect to the
payment and performance of all of the Secured Obligations arising under
this Security Agreement and the other Credit Documents and any other
documents relating to the Secured Obligations, it being the intention of
the parties hereto that all the Secured Obligations shall be the joint and
several obligations of each of the Obligors without preferences or
distinction among them.
(c) Notwithstanding any provision to the contrary contained herein, in
any other of the Credit Documents or in any other documents relating to the
Secured Obligations, the obligations of each Guarantor under the Credit
Agreement, the other Credit Documents and the other documents relating to
the Secured Obligations shall be limited to an aggregate amount equal to
the largest amount that would not render such obligations subject to
avoidance under Section 548 of the United States Bankruptcy Code or any
comparable provisions of any applicable state law.
25. Intercreditor Agreement. Notwithstanding anything to the contrary in
this Security Agreement, (i) the rights of the Obligors, the Collateral Agent
and the Lenders under this Security Agreement are subject to the terms of the
Intercreditor Agreement, (ii) any obligation of the Obligors in this Security
Agreement that requires delivery of Collateral to, possession or control of
Collateral with, the pledge, assignment, endorsement or transfer of Collateral
to or the registration of Collateral in the name of, the Collateral Agent shall
be deemed complied with and satisfied if such delivery of Collateral is made to,
such possession or control of Collateral is with, or such Collateral be
assigned, endorsed or transferred to or registered in the name of, the Working
Capital Lender, and (iii) in the event of a direct conflict between the terms
and provisions of this Security Agreement and the terms and provisions of the
Intercreditor Agreement, it is the intention of the Obligors, the Collateral
Agent and the Lenders that such provisions shall be read together and construed,
to the fullest extent possible, to be in concert with each other; however, in
the event of any actual, irreconcilable conflict that cannot be resolved as
aforesaid, the terms and provisions of the Intercreditor Agreement shall control
and, in such case, the Obligors shall not be in breach of their obligations
under this Security Agreement as a result of complying with the terms and
provisions of the Intercreditor Agreement; provided that, notwithstanding the
foregoing, nothing contained in this Section 25
-21-
shall limit or otherwise adversely effect the grant of a lien on or a security
interest in any Collateral under Section 2 of this Security Agreement.
[remainder of page intentionally left blank]
-22-
Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.
OBLIGORS: PRG-SCHULTZ USA, INC.,
a Georgia corporation
By: s/
------------------------------------
Name: James E. Moylan, Jr.
Title: Executive Vice President -
Finance, Chief Financial Officer
and Treasurer
PRG-SCHULTZ INTERNATIONAL, INC.,
a Georgia corporation
By: s/
------------------------------------
Name: James E. Moylan, Jr.
Title: Executive Vice President -
Finance, Chief Financial Officer
and Treasurer
PRGFS, INC.,
PRGLS, INC.,
each a Delaware corporation
By: s/
------------------------------------
Name: James E. Moylan, Jr.
Title: Executive Vice President -
Finance
PRGRS, INC., a Delaware corporation
By: s/
------------------------------------
Name: James B. McCurry
Title: President
PRG HOLDING CO. (FRANCE) NO. 1, LLC,
PRG HOLDING CO. (FRANCE) NO. 2, LLC,
each a Delaware limited liability
company
By: s/
------------------------------------
Name: James E. Moylan, Jr.
Title: Executive Vice President -
Finance, Chief Financial Officer
and Treasurer
OBLIGORS: THE PROFIT RECOVERY GROUP ASIA, INC.,
PRG-SCHULTZ CANADA, INC.,
THE PROFIT RECOVERY GROUP NEW ZEALAND,
INC.,
THE PROFIT RECOVERY GROUP NETHERLANDS,
INC.,
THE PROFIT RECOVERY GROUP MEXICO, INC.
PRG-SCHULTZ FRANCE, INC.,
PRG-SCHULTZ AUSTRALIA, INC.,
PRG-SCHULTZ BELGIUM, INC.,
PRG-SCHULTZ CHILE, INC.,
THE PROFIT RECOVERY GROUP GERMANY, INC.,
PRG INTERNATIONAL, INC.,
PRG-SCHULTZ SWITZERLAND, INC.,
THE PROFIT RECOVERY GROUP SOUTH AFRICA,
INC.,
THE PROFIT RECOVERY GROUP SPAIN, INC.,
THE PROFIT RECOVERY GROUP ITALY, INC.,
PRG-SCHULTZ SCANDINAVIA, INC.,
PRG-SCHULTZ PORTUGAL, INC.,
PRG-SCHULTZ JAPAN, INC.,
THE PROFIT RECOVERY GROUP COSTA RICA,
INC.,
PRG-SCHULTZ PUERTO RICO, INC.,
PRG USA, INC.,
PRG-SCHULTZ EUROPE, INC.,
EACH A GEORGIA CORPORATION
By: s/
------------------------------------
Name: James E. Moylan, Jr.
Title: Executive Vice President -
Finance, Chief Financial Officer
and Treasurer
HS&A ACQUISITION - UK, INC.,
a Texas corporation
By: s/
------------------------------------
Name: James E. Moylan, Jr.
Title: Executive Vice President -
Finance, Chief Financial Officer
and Treasurer
COLLATERAL AGENT: BLUM STRATEGIC PARTNERS II, L.P.
By: s/
------------------------------------
Name: Jose Medeiros
Title: Partner
SCHEDULES
Schedule 2(d) Commercial Tort Claims
Schedule 4(a) Mergers, Consolidations, Changes in Structure, Use of
Tradenames
Schedule 5(f)(i) Notice of Grant of Security Interest in Copyrights
Schedule 5(f)(ii) Notice of Grant of Security Interest in Patents
Schedule 5(f)(iii) Notice of Grant of Security Interest in Trademarks
SCHEDULE 5(f)(i)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
COPYRIGHTS
United States Copyright Office
Ladies and Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of
December ___, 2005 (as the same may be amended, modified, extended or restated
from time to time, the "Security Agreement") by and among the Obligors party
thereto (each an "Obligor" and collectively, the "Obligors") and Blum Strategic
Partners II, L.P. (the "Collateral Agent"), the undersigned Obligor has granted
a continuing security interest in and continuing lien upon, the copyrights and
copyright applications shown below to the Collateral Agent, for the benefit of
the Lenders:
COPYRIGHTS
Date of
Copyright No. Description of Copyright Copyright
- ------------- ------------------------ ---------
Copyright Applications
Copyright Description of Copyright Date of Copyright
Applications No. Applied For Applications
- ---------------- ------------------------ -----------------
The Obligors and the Collateral Agent hereby acknowledge and agree that the
security interest in the foregoing copyrights and copyright applications (i) may
only be terminated in accordance with the terms of the Security Agreement and
(ii) is not to be construed as an assignment of any copyright or copyright
application.
Very truly yours,
_______________________________________,
a _________________ corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Obligor's Address:
----------------------------------------
----------------------------------------
Acknowledged and Accepted:
Blum Strategic Partners II, L.P., as Collateral Agent
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
SCHEDULE 5(f)(ii)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
PATENTS
United States Patent and Trademark Office
Ladies and Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of
December ___, 2005 (the "Security Agreement") by and among the Obligors party
thereto (each an "Obligor" and collectively, the "Obligors") and Blum Strategic
Partners II, L.P. (the "Collateral Agent"), the undersigned Obligor has granted
a continuing security interest in and continuing lien upon, the patents and
patent applications shown below to the Collateral Agent, for the benefit of the
Lenders:
PATENTS
Description of Patent Date of
Patent No. Item Patent
- ---------- --------------------- -------
Patent Applications
Patent Description of Patent Date of Patent
Applications No. Applied For Applications
- ---------------- --------------------- --------------
The Obligors and the Collateral Agent hereby acknowledge and agree that the
security interest in the foregoing patents and patent applications (i) may only
be terminated in accordance with the terms of the Security Agreement and (ii) is
not to be construed as an assignment of any patent or patent application.
Very truly yours,
_______________________________________,
a _________________ corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Obligor's Address:
----------------------------------------
----------------------------------------
Acknowledged and Accepted:
Blum Strategic Partners II, L.P., as Collateral Agent
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
SCHEDULE 5(f)(iii)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
TRADEMARKS
United States Patent and Trademark Office
Ladies and Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of
December ___, 2005 (the "Security Agreement") by and among the Obligors party
thereto (each an "Obligor" and collectively, the "Obligors") and Blum Strategic
Partners II, L.P. (the "Collateral Agent"), the undersigned Obligor has granted
a continuing security interest in and continuing lien upon, the trademarks and
trademark applications shown below to the Collateral Agent, for the benefit of
the Lenders:
TRADEMARKS
Description of Trademark Date of
Trademark No. Item Trademark
- ------------- ------------------------ ---------
Trademark Applications
Trademark Description of Trademark Date of Trademark
Applications No. Applied For Applications
- ---------------- ------------------------ -----------------
The Obligors and the Collateral Agent hereby acknowledge and agree that the
security interest in the foregoing trademarks and trademark applications (i) may
only be terminated in accordance with the terms of the Security Agreement and
(ii) is not to be construed as an assignment of any trademark or trademark
application.
Very truly yours,
_______________________________________,
a ___________ corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Obligor's Address:
----------------------------------------
----------------------------------------
Acknowledged and Accepted:
Blum Strategic Partners II, L.P., as
Collateral Agent
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------