Exhibit (b)(ii)
SECURITY AGREEMENT
Dated April 26, 2002
From
The Grantors referred to herein
as Grantors
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to
CREDIT SUISSE FIRST BOSTON, CAYMAN ISLANDS BRANCH
as Collateral Agent
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Table of Contents
Section Page
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Section 1. Grant of Security .............................................................................. 2
Section 2. Security for Obligations ....................................................................... 7
Section 3. Grantors Remain Liable ......................................................................... 7
Section 4. Delivery and Control of Security Collateral .................................................... 8
Section 5. Maintaining the L/C Collateral Account ......................................................... 8
Section 6. Investing of Amounts in the L/C Collateral Account ............................................. 8
Section 7. Release of Amounts ............................................................................. 8
Section 8. Representations and Warranties ................................................................. 9
Section 9. Further Assurances ............................................................................. 12
Section 10. As to Equipment and Inventory .................................................................. 13
Section 11. Insurance ...................................................................................... 13
Section 12. Post-Closing Changes; Bailees; Collections on Receivables and Related Contracts ................ 14
Section 13. As to Intellectual Property Collateral ......................................................... 15
Section 14. Voting Rights; Dividends; Etc. ................................................................. 17
Section 15. As to the Assigned Agreements .................................................................. 18
Section 16. Transfers and Other Liens; Additional Shares ................................................... 19
Section 17. Collateral Agent Appointed Attorney-in-Fact .................................................... 19
Section 18. Collateral Agent May Perform ................................................................... 19
Section 19. The Collateral Agent's Duties .................................................................. 20
Section 20. Remedies ....................................................................................... 20
Section 21. Indemnity and Expenses ......................................................................... 22
Section 22. Amendments; Waivers; Additional Grantors; Etc. ................................................. 23
Section 23. Notices; Etc. .................................................................................. 23
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Section Page
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Section 24. Continuing Security Interest; Assignments under the Credit Agreement ........................... 23
Section 25. Release; Termination ........................................................................... 24
Section 26. Security Interest Absolute ..................................................................... 25
Section 27. Execution in Counterparts ...................................................................... 26
Section 28. Governing Law .................................................................................. 26
Schedules
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Schedule I - Pledged Shares and Pledged Debt
Schedule II - Location, Chief Executive Office, Place Where
Agreements Are Maintained, Type Of Organization,
Jurisdiction Of Organization And Organizational
Identification Number
Schedule III - Trade Names
Schedule IV - Intellectual Property Collateral
Schedule V - Assets Subject to Existing Contracts of Sale
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
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SECURITY AGREEMENT
SECURITY AGREEMENT dated April 26, 2002 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 Credit Suisse First Boston, Cayman Islands Branch ("CSFB"),
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 April 26,
2002 (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 April 26, 2002, 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 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 the Collateral (as hereinafter
defined).
(4) Each Grantor is the owner of the shares (the "Initial Pledged Shares")
of stock or other interests set forth opposite such Grantor's name on and as
otherwise described in Part I of Schedule I hereto and issued by the
corporations or other entities 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 deposit account, Account No. ____
(the "L/C Collateral Account"), with the Collateral Agent at The Bank of New
York, in the name of the Collateral Agent and under the sole control and
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 and the
entry of the Hedge Banks into the Secured Hedge Agreements 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.
(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 UCC (as defined below) are used in this
Agreement as such terms are defined in such Article 8 or 9. "UCC" means the
Uniform Commercial Code as in effect, from time to time, in the State of New
York; provided that, if perfection or the effect of perfection or non-perfection
or the priority of any security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of
New York, "UCC" means the Uniform Commercial Code as in effect from time to time
in such other jurisdiction for purposes of the provisions hereof relating to
such perfection, effect of perfection or non-perfection or priority.
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 and to induce the Hedge Banks to enter into Secured Hedge Agreements
from time to time, 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 grants to the Collateral
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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
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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) "Dialysis Services" means
hemodialysis services and peritoneal dialysis services, hemoperfusion,
plasmapheresis, continuous arteriovenous hemofiltration and bio-medical services
related to the foregoing; (ii) "Ancillary Services" means services relating to
the needs of patients with "End Stage Renal Disease" and ancillary to the
provision of Dialysis Services, including, but not limited to, the
administration of erythropoietin, intradialytic parenteral nutrition, bone
densitometry studies, EKGs, nerve conduction studies, Doppler Flow Testing,
blood transfusions, pharmacy and laboratory services, technical services with
respect to equipment used in connection with the provision of Dialysis Services
and management services with respect to the provision of Dialysis Services;
(iii) "Governmental Health Receivables" means Medicaid Receivables, Medicare
Receivables or VA Receivables, (iv) "Medicaid Receivable" 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; (v) "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 (vi) "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
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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 (other
than investment property set forth opposite such Grantor's name on and
otherwise described in Part III of Schedule I hereto), 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 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
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(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 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 to the extent that, and solely during the period in which, the
grant of a security interest therein impairs the validity or enforceability
of such intent-to-use trademark applications under applicable federal 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
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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 (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");
(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 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 in which a Grantor is a party or a beneficiary, 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 and injunctive relief for past,
present and future infringement, dilution, misappropriation, misuse or
breach with respect to the Patents, Trademarks, Copyrights, Trade Secrets,
Computer Software or Licenses, with the right, but not the obligation, to
xxx 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
6
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 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 9-406(d) 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.
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 case of
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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
----------------------
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.
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Section 4. Delivery and Control of Security Collateral. (a) 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). In addition, so long as no Default shall have
occurred and be continuing, the Collateral Agent shall have the right at any
time to exchange certificates or instruments representing or evidencing Security
Collateral for certificates or instruments of smaller or larger denominations.
(b) 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 an authenticated record 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 authenticated record to be in form and substance satisfactory to
the Collateral Agent.
Section 5. Maintaining the L/C Collateral Account. So long as any Advance
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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 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 occurred
------------------
and be continuing and there are no unpaid Obligations under the Loan Documents,
the Collateral
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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 and
------------------------------
warrants as follows:
(a) Such Grantor's exact legal name, as defined in Section 9-503(a) of the
UCC, is correctly set forth in Schedule II hereto (as such Schedule may be
updated as provided herein). Such Grantor is located (within the meaning of
Section 9-307 of the UCC) and has its chief executive office and the office in
which it maintains the original copies of each Assigned Agreement and Related
Contract to which such Grantor is a party and all originals of all chattel paper
that evidence Receivables of such Grantor, in the states or jurisdictions set
forth in Schedule II hereto. Such Grantor has not previously changed its name,
location, chief executive office, place where it maintains its agreements, type
of organization, jurisdiction of organization or organizational identification
number from those set forth in Schedule II hereto except as disclosed in
Schedule II hereto.
(b) All Security Collateral consisting of certificated securities and
instruments have been delivered to the Collateral Agent. None of the Receivables
or Agreement Collateral is evidenced by any chattel paper, a promissory note or
other instrument that has not been delivered to the Collateral Agent.
(c) 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 Liens permitted under Section 5.02(a) of the Credit Agreement 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 relating to the Loan Documents, in favor of the
collateral agent pursuant to the security agreement in connection with the
Existing Credit Agreement (which filings will be terminated as soon as
practicable after the date hereof) or in connection with Permitted Liens. Such
Grantor has only the trade names listed on Schedule III hereto as domain names
and marks.
(d) The Pledged Shares pledged by such Grantor hereunder have been duly
authorized and validly issued and, in the case of corporate issuers, are fully
paid and non-assessable. The Pledged Debt evidenced by one or more promissory
notes (which notes have been delivered to the Collateral Agent) and pledged by
such Grantor hereunder has been duly authorized, authenticated or issued and
delivered, is the legal, valid and binding obligation of the issuers thereof and
is not in default.
(e) The Initial Pledged Shares pledged by such Grantor constitute the
percentage of the issued and outstanding Equity Interests of the issuers thereof
indicated on Schedule I hereto. The Initial Pledged Debt constitutes all of the
outstanding
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indebtedness owed to such Grantor by the issuers thereof and is outstanding in
the principal amount indicated on Schedule I hereto.
(f) All of the investment property owned by such Grantor as of the Closing
Date is listed on Schedule I hereto or Schedule 4.01(r) of the Credit Agreement.
(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 as a matter of law 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.
(i) As to itself and its Intellectual Property Collateral:
(i) To such Grantor's knowledge, use of such Intellectual
Property Collateral in Grantor's business as currently conducted or
contemplated to be conducted does not infringe upon, conflict with,
misappropriate, dilute, misuse or otherwise violate 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
(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.
10
(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. Such
Grantor is not aware of any uses of any item of Intellectual Property
Collateral that could be expected to lead to such item becoming
invalid or unenforceable.
(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 the Grantor's rights in or use of
the Intellectual Property Collateral or that any services provided by,
processes used by, or products manufactured or sold by, such Grantor
infringes upon, dilutes, violates, misuses upon or misappropriates 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, dilutes, violates, misuses 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 xxx, 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.
(vii) With respect to each License: (A) such License is valid and
binding and in full force and effect and 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 IV hereto, such Grantor has not received any notice of
termination or cancellation under such License; (C) except as set
forth on Schedule IV hereto, such Grantor has not received any notice
of a breach or default under such License, which breach or default has
not been cured; (D) such Grantor has not granted to any other third
party any rights, adverse or otherwise, under such License; and (E)
neither such Grantor nor to such Grantor's knowledge, any other party
to such
11
License is in breach or default thereof in any material respect, and
no event has occurred that, with notice or lapse of time or both,
would constitute such a breach or default or permit termination,
modification or acceleration under such License.
(viii) No Grantor or Intellectual Property Collateral is subject
to any outstanding covenant, settlement, decree, order, injunction,
judgment or ruling restricting the use of any Intellectual Property
Collateral or that would impair the validity or enforceability of such
Intellectual Property Collateral.
Each Grantor, any time after the date hereof, shall have the right, upon 10
days' notice to the Collateral Agent, to amend any of the Schedules referred to
in this Section 8.
Section 9. Further Assurances. (a) Each Grantor agrees that from time to
------------------
time, at the expense of such Grantor, such Grantor will promptly execute and
deliver, or otherwise authenticate, 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, xxxx 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 or authenticate
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; (v) at the request of the Collateral Agent, take all action to ensure
that the Collateral Agent's security interest is noted on any certificate of
ownership related to any Collateral evidenced by a certificate of ownership;
(vi) at the request of the Collateral Agent, cause the Collateral Agent to be
the beneficiary under all letters of credit that constitute Collateral, with the
exclusive right to make all draws under such letters of credit, and with all
rights of a transferee under Section 5-114(e) of the UCC; and (vii) 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.
(b) Each Grantor hereby authorizes the Collateral Agent to file one or more
financing or continuation statements, and amendments thereto, including, without
limitation, one or more financing statements indicating that such financing
statements cover the assets or personal property (or words of similar effect) of
such Grantor constituting Collateral, in each case without the signature of such
Grantor. A photocopy or other reproduction of this
12
Agreement or any financing statement covering the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law.
(c) 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.
Section 10. As to Equipment and Inventory. (a) 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.
(b) 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.
(c) 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. (a) 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
13
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.
(b) 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 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.
(c) 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. Post-Closing Changes; Bailees; Collections of Receivables and
-------------------------------------------------------------
Related Contracts. (a) No Grantor will change its name, type of organization,
-----------------
jurisdiction of organization, organizational identification number or location
from those set forth in Section 8(a) of this Agreement without first giving at
least 30 days' prior written notice to the Collateral Agent and taking all
action required by the Collateral Agent for the purpose of perfecting or
protecting the security interest granted by this Agreement (and, upon the taking
of such action in such jurisdiction, Schedule II hereto shall be automatically
amended to include such other information). No Grantor will become bound by a
security agreement in respect of any of the Collateral authenticated by another
Person (other than a Grantor) (determined as provided in Section 9-203(d) of the
UCC) without giving the Collateral Agent 30 days' prior written notice thereof
and taking all action required by the Collateral Agent to ensure that the
perfection and first priority nature of the Collateral Agent's security interest
in the Collateral will be maintained. 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. If the Grantor does not have
14
an organizational identification number and later obtains one, it will forthwith
notify the Collateral Agent of such organizational identification number.
(b) 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, and to otherwise
exercise all rights with respect to such Receivables and Related Contracts,
including without limitation those set forth in Section 9-607 of the UCC. After
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 or amount due on any Related Contract,
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. (a) 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.
15
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.
(b) 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.
(c) 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.
(d) 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.
(e) 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.
(f) 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
16
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. (a) 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.
(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).
17
(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 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(i). (b) Each Grantor will at its
--------------------------------
expense and from time to time: (i) furnish to the Collateral Agent such
information, reports or other documents regarding the Assigned Agreements and
such other Collateral of such Grantor as the Collateral Agent may reasonably
request, and (ii) 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.
(c) 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.
18
(d) 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 Shares. (a) 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.
(b) 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, 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, xxx 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
19
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. (a) 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.
(b) 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, 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
20
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 Collateral,
including, without limitation, (A) 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
and the other Collateral, (B) withdraw, or cause or direct the withdrawal, of
all funds with respect to the L/C Collateral Account, and (C) exercise all other
rights and remedies with respect to the Assigned Agreements, the Receivables,
the Related Contracts and the other Collateral, including, without limitation,
those set forth in Section 9-607 of the UCC. 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 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; and
(ii) second, ratably (A) paid to the Lender Parties and the Hedge
Banks, respectively, 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 such Lender Parties and the Hedge
Banks, provided that, for purposes of this Section 20, the amount owing to
any such Hedge Bank pursuant to any Secured Hedge Agreement to which it is
a party (other than any amount therefore accrued and unpaid) shall be
deemed to be equal to the Agreement Value therefor and (B) 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
21
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).
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 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. (a) 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.
(b) 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
22
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. (a) 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.
(b) 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 V attached to each Security Agreement Supplement shall be incorporated
into and become a part of and supplement Schedules I through V, 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.
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 and all Secured
Hedge Agreements, (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
23
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. (a) 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.
(b) 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.
(c) 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
24
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.
(d) 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, (iii) the termination or expiration of all Letters of
Credit, and (iv) the expiration or termination of all Secured Hedge Agreements,
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:
(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;
25
(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.
26
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: Xxx Xxxx
Title: Vice President
S-1
By
--------------------------------------------
Name: Xxx Xxxx
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: Xxx Xxxx
Title: Vice President
S-3
TRC WEST, INC.
By
--------------------------------------------
Name: Xxx Xxxx
Title: Vice President
S-4
Appendix A to the
Security Agreement
Xxxxxxx 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.
Xxxxx-Xxxxx 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 - 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
Xxxxxxx Hills Dialysis Partnership
DaVita - West, LLC
Houston Kidney Center/Total Renal Care Integrated Service Network
Limited Partnership
Nephrology Medical Associates of Georgia, LLC
Renal Treatment Centers - Southeast, LP
Total Renal Care/Xxxxxxx 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
Schedule I to the
Security Agreement
PLEDGED SHARES AND PLEDGED DEBT
Part I
=================================================================================================================================
Percentage
Stock of
Certificate Number Outstanding
Grantor Issuer Class of Stock Par Value No(s) of Shares Shares
================ ============== ======================= ================== ==================== ============== ==================
---------------- -------------- ----------------------- ------------------ -------------------- -------------- ------------------
---------------- -------------- ----------------------- ------------------ -------------------- -------------- ------------------
---------------- -------------- ----------------------- ------------------ -------------------- -------------- ------------------
---------------- -------------- ----------------------- ------------------ -------------------- -------------- ------------------
---------------- -------------- ----------------------- ------------------ -------------------- -------------- ------------------
---------------- -------------- ----------------------- ------------------ -------------------- -------------- ------------------
================ ============== ======================= ================== ==================== ============== ==================
Part II
===================================================================================================================
Outstanding
Debt Description of Final Principal
Grantor Issuer Debt Debt Certificate No(s). Maturity Amount
================ ============== ======================= =========================== ============== ==================
---------------- -------------- ----------------------- --------------------------- -------------- ------------------
---------------- -------------- ----------------------- --------------------------- -------------- ------------------
---------------- -------------- ----------------------- --------------------------- -------------- ------------------
---------------- -------------- ----------------------- --------------------------- -------------- ------------------
---------------- -------------- ----------------------- --------------------------- -------------- ------------------
---------------- -------------- ----------------------- --------------------------- -------------- ------------------
================ ============== ======================= =========================== ============== ==================
Sch. I - Page 1
Schedule II to the
Security Agreement
LOCATION, CHIEF EXECUTIVE OFFICE, PLACE WHERE AGREEMENTS ARE
MAINTAINED, TYPE OF ORGANIZATION, JURISDICTION OF ORGANIZATION
AND ORGANIZATIONAL IDENTIFICATION NUMBER
Chief Place Where
Executive Agreements are Type of Jurisdiction Organizational
Grantor Location Office Maintained Organization of Organization I.D. No.
------- -------- ---------- ------------- ------------ --------------- --------------
Sch. III - Page 1
Schedule III to the
Security Agreement
TRADE NAMES
Sch. III - Page 1
Schedule IV to the
Security Agreement
INTELLECTUAL PROPERTY COLLATERAL
I. PATENTS
Patent
------
Grantor Titles Country Patent No. Applic. No. Filing Date Issue Date
------- ------ ------- ---------- ----------- ----------- ----------
II. DOMAIN NAMES AND TRADEMARKS
Domain Applic. Filing
------ ------- ------
Grantor Name/Xxxx Country Xxxx Reg. No. No. Date Issue Date
------- ---------- ------- ---- -------- --- ---- ----------
III. COPYRIGHTS
Title of Filing Issue
-------- ------ -----
Grantor Work Country Title Reg. No. Applic. No. Date Date
------- ---- ------- ----- -------- ----------- ---- ----
IV. LICENSES
Grantor Licenses
------- --------
Sch. IV - Page 1
Schedule V to the
Security Agreement
ASSETS SUBJECT TO EXISTING CONTRACTS OF SALE
Sch. V - Page 1
Exhibit A to the
Security Agreement
FORM OF SECURITY AGREEMENT SUPPLEMENT
[Date of Security Agreement Supplement]
Credit Suisse First Boston, Cayman Islands Branch
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 April 26, 2002
(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, Credit Suisse First Boston,
Cayman Islands Branch, 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 April 26, 2002 (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 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.
Exh. A - Page 1
Section 2. Security for Obligations. 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.]/1/
Section 3. Supplements to Security Agreement Schedules. The undersigned has
-------------------------------------------
attached hereto supplemental Schedules I through V to Schedules I through V,
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.
--------
1 Include this sentence only if the Additional Grantor delivering this
Security Agreement Supplement will not be required under the Loan Documents
to become a Guarantor. Also, in that case, the first sentence of this
Section 2 should be revised to reflect that this pledge and grant secures
the payment of all Obligations of each Loan Party.
Exh. A - Page 2
Very truly yours,
[NAME OF ADDITIONAL GRANTOR]
By
----------------------------------------
Title:
Address for notices:
-----------------------
-----------------------
-----------------------
Exh. A - Page 3
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 April 26, 2002, is made by the Persons listed on the signature
pages hereof (collectively, the "Grantors") in favor of Credit Suisse First
Boston, Cayman Islands Branch ("CSFB"), 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 April 26, 2002 (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
with CSFB 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 April 26, 2002 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
to the Collateral Agent, for the ratable benefit of the Secured Parties, 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
Exh. B - Page 1
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 xxxx
registrations, applications, and licenses set forth in Schedule B hereto
(but excluding any United States intent-to-use trademark application to the
extent that, and solely during the period in which, the grant of a security
interest therein impairs the validity or enforceability of such
intent-to-use trademark applications under applicable federal law),
together with the goodwill symbolized thereby and renewals and extensions
of the foregoing, and all rights therein provided by international treaties
or conventions (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) all copyrights, whether registered or unregistered, including,
without limitation, the 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, violation, misuse or breach with respect to
any of the foregoing, with the right, but not the obligation, to xxx 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.
Exh. B - Page 2
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
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Name:
Title:
Address for Notices:
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[NAME OF GRANTOR]
By
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Name:
Title:
Address for Notices:
----------------------------------------------
----------------------------------------------
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Exh. B - Page 3
[NAME OF GRANTOR]
By
------------------------------------------
Name:
Title:
Address for Notices:
----------------------------------------------
----------------------------------------------
----------------------------------------------
[NAME OF GRANTOR]
By
------------------------------------------
Name:
Title:
Address for Notices:
----------------------------------------------
----------------------------------------------
----------------------------------------------
[ETC.]
[ADD ACKNOWLEDGMENT FORM IF NEEDED]
Exh. B - Page 4
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 April 26, 2002, is made by the Person listed on the
signature page hereof (the "Grantor") in favor of Credit Suisse First Boston,
Cayman Islands Branch ("CSFB"), 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 April 26, 2002 (as amended, amended and restated,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
with CSFB, 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 April
26, 2002 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 April 26, 2002 (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 to the Collateral Agent for the ratable
benefit of the Secured Parties, 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"):
Exh. C - Page 1
(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 xxxx
registrations, applications, and licenses set forth in Schedule B
hereto (but excluding any United States intent-to-use trademark
application to the extent that, and solely during the period in which,
the grant of a security interest therein impairs the validity or
enforceability of such intent-to-use trademark applications under
applicable federal law), together with the goodwill symbolized thereby
and renewals and extensions of the foregoing, and all rights therein
provided by international treaties or conventions (the "Trademarks");
(iii) all copyrights, whether registered or unregistered,
including, without limitation, the 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, violation, misuse or breach with
respect to any of the foregoing, with the right, but not the
obligation, to xxx 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 IV 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:
------------------------------------------
Exh. C - Page 2
