EXHIBIT 10.3

 

AMENDED AND RESTATED SECURITY AGREEMENT

 

THIS AMENDED AND RESTATED SECURITY AGREEMENT (this “Security Agreement”), dated
as of June 16, 2006, is by and among the parties identified as “Grantors” on the
signature pages hereto and such other parties as may become Grantors hereunder
after the date hereof (individually a “Grantor”, and collectively the
“Grantors”) and BANK OF AMERICA, N.A., as collateral agent (in such capacity,
the “Collateral Agent”) for the holders of the Secured Obligations referenced
below.

 

W I T N E S S E T H

 

WHEREAS, senior credit facilities have been established in favor of RehabCare
Group, Inc., a Delaware corporation (the “Borrower”), pursuant to the terms of
that certain credit agreement, dated as of October 12, 2004 (as amended,
modified and supplemented, the “Existing Credit Agreement”), among the Borrower,
the subsidiaries and affiliates of the Borrower identified therein, as
guarantors, the lenders identified therein and Bank of America, N.A., as
administrative agent;

 

WHEREAS, the Borrower has requested certain modifications to the existing senior
credit facilities, including, among other things, an increase in the revolving
credit commitments and extension of the tenor therefore and consent to the
Symphony Acquisition and the Midland Acquisition;

 

WHEREAS, the Lenders have agreed to make the requested modifications to the
existing credit facilities pursuant to the terms of that certain Amended and
Restated Credit Agreement, dated as of the date hereof (as amended, modified and
supplemented, the “Credit Agreement”), by and among the Borrower, the
Guarantors, the Lenders and Bank of America, N.A., as Administrative Agent and
Collateral Agent; and

 

WHEREAS, this Security Agreement is given in amendment to, restatement of and
substitution for the security agreement provided in connection with the Existing
Credit Agreement.

 

NOW, THEREFORE, in consideration of these premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

 

 

1.

Definitions and Interpretive Provisions.

 

(a)           Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings provided in the Credit Agreement. In addition,
the following terms, which are defined in the UCC as in effect in the State of
North Carolina on the date hereof, are used as defined therein: Accession,
Account, As-Extracted Collateral, Chattel Paper, Commercial Tort Claim, Consumer
Goods, Deposit Account, Document, Electronic Chattel Paper, Equipment, Farm
Products, Fixtures, General Intangible, Instrument, Inventory, Investment
Property, Letter-of-Credit Right, Manufactured Home, Proceeds, Software,
Standing Timber, Supporting Obligation and Tangible Chattel Paper. As used
herein:

 

“Borrower” has the meaning provided in the recitals hereto.

 

“Collateral” has the meaning provided in Section 2 hereof.

 

 

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“Collateral Agent” has the meaning provided in the introductory paragraph
hereto, or any successor collateral agent.

 

“Copyright License” means any written agreement, naming any Grantor as licensor,
granting any right under any Copyright including any thereof referred to in
Schedule 1(a) attached hereto.

 

“Copyrights” means (a) all registered United States copyrights in all Works, now
existing or hereafter created or acquired, all registrations and recordings
thereof, and all applications in connection therewith, including registrations,
recordings and applications in the United States Copyright Office including any
thereof referred to in Schedule 1(a) attached hereto, and (b) all renewals
thereof including any thereof referred to in Schedule 1(a) attached hereto.

 

“Credit Agreement” has the meaning provided in the recitals hereto.

 

“Existing Credit Agreement” has the meaning provided in the recitals hereto.

 

“Grantors” has the meaning provided in the recitals hereto, together with their
respective successors and assigns.

 

“Indemnified Party” has the meaning provided in Section 7(b) hereof.

 

“Patent License” means any agreement, whether written or oral, providing for the
grant by or to a Grantor of any right to manufacture, use or sell any invention
covered by a Patent, including any thereof referred to in Schedule 1(a) attached
hereto.

 

“Patents” means (a) all letters patent of the United States or any other country
and all reissues and extensions thereof, including any letters patent referred
to in Schedule 1(a) attached hereto, and (b) all applications for letters patent
of the United States or any other country and all divisions, continuations and
continuations-in-part thereof, including any thereof referred to in Schedule
1(a) attached hereto.

 

“Secured Obligations” means the Obligations (as defined in the Credit Agreement)
and, without duplication, all costs and expenses incurred in connection with
enforcement and collection of such Secured Obligations, including reasonable
attorneys’ fees and disbursements.

 

“Security Agreement” has the meaning provided in the recitals hereto, as the
same may be amended and modified from time to time.

 

“Trademark License” means any agreement, written or oral, providing for the
grant by or to a Grantor of any right to use any Trademark, including any
thereof referred to in Schedule 1(a) attached hereto.

 

“Trademarks” means (a) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service marks,
logos and other source or business identifiers, and the goodwill associated
therewith, now existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all applications in connection therewith, whether in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any state thereof or any other country or any political
subdivision thereof, or otherwise, including any thereof referred to in Schedule
1(a) attached hereto, and (b) all renewals thereof.

 

 

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“UCC” means the Uniform Commercial Code.

 

“Work” means any work that is subject to copyright protection pursuant to Title
17 of the United States Code.

 

(b)          Interpretive Provisions, etc. Each of the terms and provisions of
Section 1.02 of the Credit Agreement (in each case as the same may be amended or
modified as provided therein) are incorporated herein by reference to the same
extent and with the same effect as if fully set forth herein.

 

2.           Grant of Security Interest in the Collateral. To secure the prompt
payment and performance in full when due, whether by lapse of time,
acceleration, mandatory prepayment or otherwise, of the Secured Obligations,
each Grantor hereby grants to the Collateral Agent, for the benefit of the
holders of the Secured Obligations, a continuing security interest in, and a
right to set off against, any and all right, title and interest of such Grantor
in and to all personal property of the Grantors of whatever type or description,
whether now owned or existing or owned, acquired, or arising hereafter
(collectively, the “Collateral”), including the following:

 

 

(a)

all Accounts;

 

 

(b)

all cash and currency;

 

 

(c)

all Chattel Paper;

 

 

(d)

those Commercial Tort Claims identified on Schedule 2(d) attached hereto;

 

 

(e)

all Copyright Licenses;

 

 

(f)

all Copyrights;

 

 

(g)

all Deposit Accounts;

 

 

(h)

all Documents;

 

 

(i)

all Equipment;

 

 

(j)

all Fixtures;

 

 

(k)

all General Intangibles;

 

 

(l)

all Instruments;

 

 

(m)

all Inventory;

 

 

(n)

all Investment Property;

 

 

(o)

all Letter-of-Credit Rights;

 

 

(p)

all Patent Licenses;

 

 

(q)

all Patents;

 

 

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(r)

all Software;

 

 

(s)

all Supporting Obligations;

 

 

(t)

all Trademark Licenses;

 

 

(u)

all Trademarks; and

 

 

(v)

all Accessions and all Proceeds of any and all of the foregoing.

 

Notwithstanding anything to the contrary contained herein, the security
interests granted under this Security Agreement shall not extend to (i)(A) any
property that is subject to a Lien securing purchase money or sale/leaseback
Indebtedness permitted under the Credit Agreement pursuant to documents that
prohibit such Grantor from granting any other Liens in such property or (B) any
lease, license or other contract if the grant of a security interest in such
lease, license or contract in the manner contemplated by this Security
Agreement, under the terms thereof and under applicable Law, is prohibited and
would result in the termination thereof; provided in each case that any such
limitation on the security interests granted hereunder shall only apply to the
extent that (1) after reasonable efforts (which shall not include the payment of
any additional consideration), consent from the relevant party or parties has
not been obtained and (2) any such prohibition could not be rendered ineffective
pursuant to the UCC or any other applicable Law (including Debtor Relief Laws)
or principles of equity, (ii) any Pledged Collateral (as such term is defined in
the Pledge Agreement) that is expressly included in the grant of security
interests to the Collateral Agent pursuant to the Pledge Agreement, to the
extent the Collateral Agent holds a valid first-priority perfected security
interest in such Pledged Collateral thereunder and (iii) any Capital Stock of a
Foreign Subsidiary that is expressly excluded from the grant of security
interests in Pledged Collateral under the Pledge Agreement. The Grantors and the
Collateral Agent, on behalf of the holders of the Secured Obligations, hereby
acknowledge and agree that the security interest created hereby in the
Collateral (1) constitutes continuing collateral security for all of the Secured
Obligations, whether now existing or hereafter arising and (2) is not to be
construed as an assignment of any Copyrights, Copyright Licenses, Patents,
Patent Licenses, Trademarks or Trademark Licenses.

 

 

3.

Provisions Relating to Accounts.

 

(a)           Anything herein to the contrary notwithstanding, each of the
Grantors shall remain liable under each of the Accounts to observe and perform
all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise to
each such Account. Neither the Collateral Agent nor any holder of the Secured
Obligations shall have any obligation or liability under any Account (or any
agreement giving rise thereto) by reason of or arising out of this Security
Agreement or the receipt by the Collateral Agent or any holder of the Secured
Obligations of any payment relating to such Account pursuant hereto, nor shall
the Collateral Agent or any holder of the Secured Obligations be obligated in
any manner to perform any of the obligations of a Grantor under or pursuant to
any Account (or any agreement giving rise thereto), to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party under any Account (or any
agreement giving rise thereto), to present or file any claim, to take any action
to enforce any performance or to collect the payment of any amounts that may
have been assigned to it or to which it may be entitled at any time or times.

 

(b)           Once during each calendar year or at any time after the occurrence
and during the continuation of an Event of Default, the Collateral Agent shall
have the right, but not the obligation, to make test verifications of the
Accounts in any manner and through any medium that it reasonably considers
advisable, and the Grantors shall furnish all such assistance and information as
the Collateral Agent may

 

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require in connection with such test verifications. At any time and from time to
time, upon the Collateral Agent’s request and at the expense of the Grantors,
the Grantors shall furnish to the Collateral Agent reports showing
reconciliations, aging and test verifications of, and trial balances for, the
Accounts. At any time after the occurrence and during the continuation of an
Event of Default, the Collateral Agent in its own name or in the name of others
may communicate with account debtors on the Accounts to verify with them to the
Collateral Agent’s satisfaction, the existence, amount and terms of any
Accounts.

 

4.             Representations and Warranties. Each Grantor hereby represents
and warrants to the Collateral Agent, for the benefit of the holders of the
Secured Obligations, that so long as any of the Secured Obligations remains
outstanding and until all of the commitments relating thereto have been
terminated:

 

 

(a)

Legal Name; Chief Executive Office. As of the date hereof:

 

(i)            Each Grantor’s exact legal name is (and for the prior five years
has been) and state of incorporation or formation, principal place of business
and chief executive office are (and for the prior five months have been) as set
forth on Schedule 4(a)(i) attached hereto.

 

(ii)           Other than as set forth on Schedule 4(a)(ii) attached hereto, no
Grantor has been party to a merger, consolidation or other change in structure
or used any tradename in the prior five years.

 

(b)          Ownership. Each Grantor is the legal and beneficial owner of its
Collateral and has the right to pledge, sell, assign or transfer the same.

 

(c)          Security Interest/Priority. This Security Agreement creates a valid
security interest in favor of the Collateral Agent, for the benefit of the
holders of the Secured Obligations, in the Collateral of such Grantor and, when
properly perfected by filing, shall constitute a valid perfected security
interest in such Collateral, to the extent such security interest can be
perfected by filing under the UCC, free and clear of all Liens except for
Permitted Liens.

 

(d)          Types of Collateral. None of the Collateral consists of, or is the
Accessions or the Proceeds of, As-Extracted Collateral, Consumer Goods, Farm
Products, Manufactured Homes, or Standing Timber.

 

(e)          Accounts. (i) Each Account of the Grantors and the papers and
documents relating thereto are genuine and in all material respects what they
purport to be, (ii) each Account arises out of (A) a bona fide sale of goods
sold and delivered by such Grantor (or is in the process of being delivered) or
(B) services theretofore actually rendered by such Grantor to, the account
debtor named therein, (iii) no Account of a Grantor is evidenced by any
Instrument or Chattel Paper unless such Instrument or Chattel Paper has been
theretofore endorsed over and delivered to, or submitted to the control of, the
Collateral Agent and (iv) no surety bond was required or given in connection
with any Account of a Grantor or the contracts or purchase orders out of which
they arose.

 

(f)          Inventory. No Inventory of a Grantor is held by any Person other
than a Grantor pursuant to consignment, sale or return, sale on approval or
similar arrangement.

 

 

(g)

Copyrights, Patents and Trademarks.

 

(i)   Schedule 1(a) attached hereto includes all Copyrights, Copyright Licenses,
Patents, Patent Licenses, Trademarks and Trademark Licenses owned by any Grantor
in its own name, or to which any Grantor is a party, as of the date hereof.

 

 

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(ii)                To the best of each Grantor’s knowledge, each Copyright,
Patent and Trademark of such Grantor is valid, subsisting, unexpired,
enforceable and has not been abandoned.

 

(iii)             Except as set forth in Schedule 1(a) attached hereto, none of
such Copyrights, Patents and Trademarks is the subject of any licensing or
franchise agreement.

 

(iv)                To the best of each Grantor’s knowledge, no holding,
decision or judgment has been rendered by any Governmental Authority that would
limit, cancel or question the validity of any such Copyright, Patent or
Trademark.

 

(v)   No action or proceeding is pending seeking to limit, cancel or question
the validity of any Copyright, Patent or Trademark, or that, if adversely
determined, could reasonably be expected to have a material adverse effect on
the value of any Copyright, Patent or Trademark.

 

(vi)                All applications pertaining to the Copyrights, Patents and
Trademarks of each Grantor have been duly and properly filed, and all
registrations or letters pertaining to such Copyrights, Patents and Trademarks
have been duly and properly filed and issued, and all of such Copyrights,
Patents and Trademarks are valid and enforceable.

 

(vii)             No Grantor has made any assignment or agreement in conflict
with the security interest in the Copyrights, Patents or Trademarks of each
Grantor hereunder.

 

5.            Covenants. Each Grantor covenants that, so long as any of the
Secured Obligations remains outstanding and until all of the commitments
relating thereto have been terminated, such Grantor shall:

 

(a)          Other Liens. Defend the Collateral against the claims and demands
of all other parties claiming an interest therein, keep the Collateral free from
all Liens, except for Permitted Liens, and not sell, exchange, transfer, assign,
lease or otherwise dispose of the Collateral or any interest therein, except as
permitted under the Credit Agreement.

 

(b)          Preservation of Collateral. Keep the Collateral in good order,
condition and repair and not use the Collateral in violation of the provisions
of this Security Agreement or any other agreement relating to the Collateral or
any policy insuring the Collateral or any applicable statute, Law, bylaw, rule,
regulation or ordinance.

 

(c)          Instruments/Tangible Chattel Paper/Documents. If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Tangible Chattel Paper, or if any property constituting
Collateral shall be stored or shipped subject to a Document, such Grantor shall
ensure that such Instrument, Tangible Chattel Paper or Document is either in the
possession of such Grantor at all times or, if requested by the Collateral
Agent, is immediately delivered to the Collateral Agent, duly endorsed in a
manner satisfactory to the Collateral Agent. Such Grantor shall ensure that any
Collateral consisting of Tangible Chattel Paper is marked with a legend
acceptable to the Collateral Agent indicating the Collateral Agent’s security
interest in such Tangible Chattel Paper.

 

(d)          Change in Structure, Location or Type. Not, without providing ten
days prior written notice to the Collateral Agent and without filing such
financing statements and amendments to any previously filed financing statements
as the Collateral Agent may require, change its name or state of formation or be
party to a merger, consolidation or other change in structure or use any
tradename other than as set forth on Schedule 4(a)(ii) attached hereto.

 

 

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(e)          Inspection. Upon reasonable notice, and during reasonable hours, at
all times allow the Collateral Agent or its representatives to visit and inspect
the Collateral as set forth in Section 7.10 of the Credit Agreement.

 

(f)          Authorization. Authorize the Collateral Agent to prepare and file
such financing statements (including renewal statements), amendments and
supplements or such other instruments as the Collateral Agent may from time to
time reasonably deem necessary, appropriate or convenient in order to perfect
and maintain the security interests granted hereunder in accordance with the
UCC.

 

(g)           Perfection of Security Interest. Authorize or execute and deliver
to the Collateral Agent such agreements, assignments or instruments (including
affidavits, notices, reaffirmations and amendments and restatements of existing
documents, as the Collateral Agent may reasonably request) and do all such other
things as the Collateral Agent may reasonably deem necessary, appropriate or
convenient (i) to assure to the Collateral Agent the effectiveness and priority
of its security interests hereunder, including (A) such financing statements
(including renewal statements), amendments and supplements or such other
instruments as the Collateral Agent may from time to time reasonably request in
order to perfect and maintain the security interests granted hereunder in
accordance with the UCC, (B) with regard to Copyrights, a Notice of Grant of
Security Interest in Copyrights for filing with the United States Copyright
Office in the form of Exhibit 5(g)(i) attached hereto, (C) with regard to
Patents, a Notice of Grant of Security Interest in Patents for filing with the
United States Patent and Trademark Office in the form of Exhibit 5(g)(ii)
attached hereto and (D) with regard to Trademarks, a Notice of Grant of Security
Interest in Trademarks for filing with the United States Patent and Trademark
Office in the form of Exhibit 5(g)(iii) attached hereto, (ii) to consummate the
transactions contemplated hereby and (iii) to otherwise protect and assure the
Collateral Agent of its rights and interests hereunder. To that end, each
Grantor agrees that the Collateral Agent may file one or more financing
statements (with collateral descriptions broader and/or less specific than the
description of the Collateral contained herein) disclosing the Collateral
Agent’s security interest in any or all of the Collateral of such Grantor
without such Grantor’s signature thereon, and further each Grantor also hereby
irrevocably makes, constitutes and appoints the Collateral Agent, its nominee or
any other Person whom the Collateral Agent may designate, as such Grantor’s
attorney-in-fact with full power and for the limited purpose to sign in the name
of such Grantor any such financing statements (including renewal statements),
amendments and supplements, notices or any similar documents that in the
Collateral Agent’s reasonable discretion would be necessary, appropriate or
convenient in order to perfect and maintain perfection of the security interests
granted hereunder, such power, being coupled with an interest, being and
remaining irrevocable so long as the Secured Obligations remain unpaid and until
the commitments relating thereto shall have been terminated. Each Grantor hereby
agrees that a carbon, photographic or other reproduction of this Security
Agreement or any such financing statement is sufficient for filing as a
financing statement by the Collateral Agent without notice thereof to such
Grantor wherever the Collateral Agent may in its sole discretion desire to file
the same. In the event for any reason the Law of any jurisdiction other than the
applicable jurisdiction as of the Closing Date becomes or is applicable to the
Collateral of any Grantor or any part thereof, or to any of the Secured
Obligations, such Grantor agrees to authorize or to execute and deliver all such
instruments and to do all such other things as the Collateral Agent in its sole
discretion reasonably deems necessary, appropriate or convenient to preserve,
protect and enforce the security interests of the Collateral Agent under the Law
of such other jurisdiction (and, if a Grantor shall fail to do so promptly upon
the request of the Collateral Agent, then the Collateral Agent may authorize or
execute any and all such requested documents on behalf of such Grantor pursuant
to the power of attorney granted hereinabove). If any Collateral is in the
possession or control of a Grantor’s agents and the Collateral Agent so
requests, such Grantor agrees to notify such agents in writing of the Collateral
Agent’s security interest therein and, upon the Collateral Agent’s request,
instruct them to hold all such Collateral for the account of the holders of the
Secured Obligations and subject to the Collateral Agent’s instructions. Each
Grantor agrees to mark its books and records to reflect the security interest of
the Collateral Agent in the Collateral.

 

 

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(h)           Control. Authorize or execute and deliver all agreements,
assignments, instruments or other documents as the Collateral Agent shall
reasonably request for the purpose of obtaining and maintaining control within
the meaning of the UCC with respect to any Collateral consisting of Deposit
Accounts, Investment Property, Letter-of-Credit Rights and Electronic Chattel
Paper.

 

(i)            Collateral held by Warehouseman, Bailee, etc. If any Collateral
is at any time in the possession or control of a warehouseman, bailee, agent or
processor of such Grantor, (i) notify the Collateral Agent of such possession or
control, (ii) notify such Person of the Collateral Agent’s security interest in
such Collateral, (iii) instruct such Person to hold all such Collateral for the
Collateral Agent’s account and subject to the Collateral Agent’s instructions
and (iv) use its best efforts to obtain an acknowledgment from such Person that
it is holding such Collateral for the benefit of the Collateral Agent.

 

(j)            Treatment of Accounts. Not grant or extend the time for payment
of any Account, or compromise or settle any Account for less than the full
amount thereof, or release any Person or property, in whole or in part, from
payment thereof, or allow any credit or discount thereon, other than as normal
and customary in the ordinary course of a Grantor’s business or as required by
Law.

 

 

(k)

Covenants Relating to Copyrights.

 

(i)   Not do any act or knowingly omit to do any act whereby any material
Copyright may become invalidated and (A) not do any act, or knowingly omit to do
any act, whereby any material Copyright may become injected into the public
domain; (B) notify the Collateral Agent immediately if it knows that any
material Copyright may become injected into the public domain or of any adverse
determination or development (including the institution of, or any such
determination or development in, any court or tribunal in the United States or
any other country) regarding a Grantor’s ownership of any such Copyright or its
validity; (C) take all necessary steps as it shall deem appropriate under the
circumstances, to maintain and pursue each application (and to obtain the
relevant registration) and to maintain each registration of each material
Copyright owned by a Grantor including filing of applications for renewal where
necessary; and (D) promptly notify the Collateral Agent of any material
infringement of any material Copyright of a Grantor of which it becomes aware
and take such actions as it shall reasonably deem appropriate under the
circumstances to protect such Copyright, including, where appropriate, the
bringing of suit for infringement, seeking injunctive relief and seeking to
recover any and all damages for such infringement.

 

(ii)                Not make any assignment or agreement in conflict with the
security interest in the Copyrights of each Grantor hereunder.

 

 

(l)

Covenants Relating to Patents and Trademarks.

 

(i)   (A) Continue to use each Trademark on each and every trademark class of
goods applicable to its current line as reflected in its current catalogs,
brochures and price lists in order to maintain such Trademark in full force free
from any claim of abandonment for non-use, (B) maintain as in the past the
quality of products and services offered under such Trademark, (C) employ such
Trademark with the appropriate notice of registration, (D) not adopt or use any
mark that is confusingly similar or a colorable imitation of such Trademark
unless the Collateral Agent, for the benefit of the holders of the Secured
Obligations, shall obtain a perfected security interest in such mark pursuant to
this Security Agreement, and (E) not (and not permit any licensee or sublicensee
thereof to) do any act or knowingly omit to do any act whereby any Trademark may
become invalidated.

 

 

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(ii)                Not do any act, or omit to do any act, whereby any Patent
may become abandoned or dedicated.

 

(iii)             Notify the Collateral Agent and the holders of the Secured
Obligations immediately if it knows that any application or registration
relating to any Patent or Trademark may become abandoned or dedicated, or of any
adverse determination or development (including the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office or any court or tribunal in any country) regarding a Grantor’s
ownership of any Patent or Trademark or its right to register the same or to
keep and maintain the same.

 

(iv)                Whenever a Grantor, either by itself or through an agent,
employee, licensee or designee, shall file an application for the registration
of any Patent or Trademark with the United States Patent and Trademark Office or
any similar office or agency in any other country or any political subdivision
thereof, a Grantor shall report such filing to the Collateral Agent and the
holders of the Secured Obligations within five Business Days after the last day
of the fiscal quarter in which such filing occurs. Upon request of the
Collateral Agent, a Grantor shall authorize or execute and deliver any and all
agreements, instruments, documents and papers as the Collateral Agent may
reasonably request to evidence the security interest of the Collateral Agent and
the holders of the Secured Obligations in any Patent or Trademark and the
goodwill and general intangibles of a Grantor relating thereto or represented
thereby.

 

(v)   Take all reasonable and necessary steps, including in any proceeding
before the United States Patent and Trademark Office, or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the Patents and Trademarks, including filing of
applications for renewal, affidavits of use and affidavits of incontestability.

 

(vi)                Promptly notify the Collateral Agent and the holders of the
Secured Obligations after it learns that any Patent or Trademark included in the
Collateral is infringed, misappropriated or diluted by a third party and
promptly sue for infringement, misappropriation or dilution, to seek injunctive
relief where appropriate and to recover any and all damages for such
infringement, misappropriation or dilution, or to take such other actions as it
shall reasonably deem appropriate under the circumstances to protect such Patent
or Trademark.

 

(vii)             Not make any assignment or agreement in conflict with the
security interest in the Patents or Trademarks of each Grantor hereunder.

 

(m)        New Patents, Copyrights and Trademarks. Promptly provide the
Collateral Agent with (i) a listing of all applications, if any, for new
Copyrights, Patents or Trademarks (together with a listing of the issuance of
registrations or letters on present applications), which new applications and
issued registrations or letters shall be subject to the terms and conditions
hereunder, and (ii) (A) with respect to Copyrights, a duly executed Notice of
Security Interest in Copyrights, (B) with respect to Patents, a duly executed
Notice of Security Interest in Patents, (C) with respect to Trademarks, a duly
executed Notice of Security Interest in Trademarks or (D) such other duly
executed documents as the Collateral Agent may reasonably request in a form
acceptable to counsel for the Collateral Agent and suitable for recording to
evidence the security interest in the Copyright, Patent or Trademark that is the
subject of such new application.

 

(n)          Insurance. Insure, repair and replace the Collateral of such
Grantor as set forth in the Credit Agreement. All insurance proceeds shall be
subject to the security interest of the Collateral Agent hereunder.

 

 

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CHAR1\887101v3

 

 

 

 

(o)

Commercial Tort Claims.

 

(i)            Promptly notify the Collateral Agent in writing of the initiation
of any Commercial Tort Claim before any Governmental Authority by or in favor of
such Grantor or any of its Subsidiaries.

 

(ii)           Authorize or execute and deliver such statements, documents and
notices and do and cause to be done all such things as the Collateral Agent may
reasonably deem necessary, appropriate or convenient, or as are required by Law,
to create, perfect and maintain the Collateral Agent’s security interest in any
Commercial Tort Claim.

 

6.            Advances and Performance by Holders of the Secured Obligations. On
failure of any Grantor to perform any of the covenants and agreements contained
herein, the Collateral Agent may, at its sole option and in its sole discretion,
perform the same and in so doing may expend such sums as the Collateral Agent
may reasonably deem advisable in the performance thereof, including the payment
of any insurance premiums, the payment of any taxes, a payment to obtain a
release of a Lien or potential Lien, expenditures made in defending against any
adverse claim and all other expenditures that the Collateral Agent or the
holders of the Secured Obligations may make for the protection of the security
hereof or that may be compelled to make by operation of Law. All such sums and
amounts so expended shall be repayable by the Grantors on a joint and several
basis (subject to Section 25 hereof) promptly upon timely notice thereof and
demand therefor, shall constitute additional Secured Obligations and shall bear
interest from the date said amounts are expended at the Default Rate for
Revolving Loans that are Base Rate Loans. No such performance of any covenant or
agreement by the Collateral Agent or the holders of the Secured Obligations on
behalf of any Grantor, and no such advance or expenditure therefor, shall
relieve the Grantors of any default under the terms of this Security Agreement,
the other Credit Documents or any other documents relating to the Secured
Obligations. The Collateral Agent may make any payment hereby authorized in
accordance with any bill, statement or estimate procured from the appropriate
public office or holder of the claim to be discharged without inquiry into the
accuracy of such bill, statement or estimate or into the validity of any tax
assessment, sale, forfeiture, tax lien, title or claim except to the extent such
payment is being contested in good faith by a Grantor in appropriate proceedings
and against which adequate reserves are being maintained in accordance with
GAAP.

 

 

7.

Remedies.

 

(a)          General Remedies. Upon the occurrence of an Event of Default and
during the continuation thereof, the Collateral Agent and the holders of the
Secured Obligations shall have, in addition to the rights and remedies provided
herein, in the Credit Documents, in any other documents relating to the Secured
Obligations, or by Law (including levy of attachment and garnishment), the
rights and remedies of a secured party under the UCC of the jurisdiction
applicable to the affected Collateral and, further, the Collateral Agent may,
with or without judicial process or the aid and assistance of others, (i) enter
on any premises on which any of the Collateral may be located and, without
resistance or interference by the Grantors, take possession of the Collateral,
(ii) dispose of any Collateral on any such premises, (iii) require the Grantors
to assemble and make available to the Collateral Agent at the expense of the
Grantors any Collateral at any place and time designated by the Collateral Agent
that is reasonably convenient to both parties, (iv) remove any Collateral from
any such premises for the purpose of effecting sale or other disposition
thereof, and/or (v) without demand and without advertisement, notice, hearing or
process of Law, all of which each of the Grantors hereby waives to the fullest
extent permitted by Law, at any place and time or times, sell and deliver any or
all Collateral held by or for it at public or private sale, by one or more
contracts, in one or more parcels, for cash, upon credit or otherwise, at such
prices and upon such terms as the Collateral Agent deems advisable, in its sole
discretion (subject to any and all mandatory legal requirements). Each of the
Grantors acknowledges that any private sale referenced above may be at prices
and on terms less favorable to the seller than the

 

10

CHAR1\887101v3

 

 

prices and terms that might have been obtained at a public sale and agrees that
such private sale shall be deemed to have been made in a commercially reasonable
manner. Neither the Collateral Agent’s compliance with applicable Law nor its
disclaimer of warranties relating to the Collateral shall be considered to
adversely affect the commercial reasonableness of any sale. In addition to all
other sums due the Collateral Agent and the holders of the Secured Obligations
with respect to the Secured Obligations, the Grantors shall pay the Collateral
Agent and each of the holders of the Secured Obligations all reasonable
documented costs and expenses incurred by the Collateral Agent or any such
holder of the Secured Obligations (including reasonable attorneys’ fees and
disbursements and court costs) in obtaining or liquidating the Collateral, in
enforcing payment of the Secured Obligations, or in the prosecution or defense
of any action or proceeding by or against the Collateral Agent or the holders of
the Secured Obligations or the Grantors concerning any matter arising out of or
connected with this Security Agreement, any Collateral or the Secured
Obligations, including any of the foregoing arising in, arising under or related
to a case under Debtor Relief Laws. To the extent the rights of notice cannot be
legally waived hereunder, each Grantor agrees that any requirement of reasonable
notice shall be met if such notice is personally served on or mailed, postage
prepaid, to the Borrower in accordance with the notice provisions of Section
11.02 of the Credit Agreement at least ten Business Days before the time of sale
or other event giving rise to the requirement of such notice. The Collateral
Agent and the holders of the Secured Obligations shall not be obligated to make
any sale or other disposition of the Collateral regardless of notice having been
given. To the extent permitted by Law, any holder of the Secured Obligations may
be a purchaser at any such sale. To the extent permitted by applicable Law, each
of the Grantors hereby waives all of its rights of redemption with respect to
any such sale. Subject to the provisions of applicable Law, the Collateral Agent
and the holders of the Secured Obligations may postpone or cause the
postponement of the sale of all or any portion of the Collateral by announcement
at the time and place of such sale, and such sale may, without further notice,
to the extent permitted by Law, be made at the time and place to which the sale
was postponed, or the Collateral Agent and the holders of the Secured
Obligations may further postpone such sale by announcement made at such time and
place.

 

(b)          Remedies relating to Accounts. Upon the occurrence of an Event of
Default and during the continuation thereof, whether or not the Collateral Agent
has exercised any or all of its rights and remedies hereunder, each Grantor will
promptly upon request of the Collateral Agent instruct all account debtors to
remit all payments in respect of Accounts to a mailing location selected by the
Collateral Agent. In addition, the Collateral Agent shall have the right to
enforce any Grantor’s rights against its customers and account debtors, and the
Collateral Agent or its designee may notify any Grantor’s customers and account
debtors that the Accounts of such Grantor have been assigned to the Collateral
Agent or of the Collateral Agent’s security interest therein, and may (either in
its own name or in the name of a Grantor or both) demand, collect (including by
way of a lockbox arrangement), receive, take receipt for, sell, sue for,
compound, settle, compromise and give acquittance for any and all amounts due or
to become due on any Account, and, in the Collateral Agent’s discretion, file
any claim or take any other action or proceeding to protect and realize upon the
security interest of the holders of the Secured Obligations in the Accounts.
Each Grantor acknowledges and agrees that the Proceeds of its Accounts remitted
to or on behalf of the Collateral Agent in accordance with the provisions hereof
shall be solely for the Collateral Agent’s own convenience and that such Grantor
shall not have any right, title or interest in such Accounts or in any such
other amounts except as expressly provided herein. The Collateral Agent and the
holders of the Secured Obligations shall have no liability or responsibility to
any Grantor for acceptance of a check, draft or other order for payment of money
bearing the legend “payment in full” or words of similar import or any other
restrictive legend or endorsement or be responsible for determining the
correctness of any remittance. Each Grantor hereby agrees to indemnify the
Collateral Agent and the holders of the Secured Obligations from and against all
liabilities, damages, losses, actions, claims, judgments, costs, expenses,
charges and reasonable attorneys’ fees and disbursements suffered or incurred by
the Collateral Agent or the holders of the Secured Obligations (each, an
“Indemnified Party”) because of the maintenance of the foregoing arrangements
except as relating to or arising out of the gross negligence or willful
misconduct of an Indemnified Party or its officers, employees or agents. In the
case of any investigation, litigation or other proceeding, the foregoing
indemnity shall be effective whether or

 

11

CHAR1\887101v3

 

 

not such investigation, litigation or proceeding is brought by a Grantor, its
directors, shareholders or creditors or an Indemnified Party or any other Person
or any other Indemnified Party is otherwise a party thereto.

 

(c)          Access. In addition to the rights and remedies hereunder, upon the
occurrence of an Event of Default and during the continuation thereof, the
Collateral Agent shall have the right to enter and remain upon the various
premises of the Grantors without cost or charge to the Collateral Agent, and use
the same, together with materials, supplies, books and records of the Grantors
for the purpose of collecting and liquidating the Collateral, or for preparing
for sale and conducting the sale of the Collateral, whether by foreclosure,
auction or otherwise. In addition, the Collateral Agent may remove Collateral,
or any part thereof, from such premises and/or any records with respect thereto,
in order to effectively collect or liquidate such Collateral.

 

(d)          Nonexclusive Nature of Remedies. Failure by the Collateral Agent or
the holders of the Secured Obligations to exercise any right, remedy or option
under this Security Agreement, any other Credit Document, any other documents
relating to the Secured Obligations, or as provided by Law, or any delay by the
Collateral Agent or the holders of the Secured Obligations in exercising the
same, shall not operate as a waiver of any such right, remedy or option. No
waiver hereunder shall be effective unless it is in writing, signed by the party
against whom such waiver is sought to be enforced and then only to the extent
specifically stated, which in the case of the Collateral Agent or the holders of
the Secured Obligations shall only be granted as provided herein. To the extent
permitted by Law, neither the Collateral Agent, the holders of the Secured
Obligations, nor any party acting as attorney for the Collateral Agent or the
holders of the Secured Obligations, shall be liable hereunder for any acts or
omissions or for any error of judgment or mistake of fact or Law other than
their gross negligence or willful misconduct hereunder. The rights and remedies
of the Collateral Agent and the holders of the Secured Obligations under this
Security Agreement shall be cumulative and not exclusive of any other right or
remedy that the Collateral Agent or the holders of the Secured Obligations may
have.

 

(e)          Retention of Collateral. To the extent permitted under applicable
Law, in addition to the rights and remedies hereunder, upon the occurrence of an
Event of Default, the Collateral Agent may, after providing the notices required
by Sections 9-620 and 9-621 of the UCC or otherwise complying with the
requirements of applicable Law of the relevant jurisdiction, accept or retain
all or any portion of the Collateral in satisfaction of the Secured Obligations.
Unless and until the Collateral Agent shall have provided such notices, however,
the Collateral Agent shall not be deemed to have accepted or retained any
Collateral in satisfaction of any Secured Obligations for any reason.

 

(f)          Deficiency. In the event that the proceeds of any sale, collection
or realization are insufficient to pay all amounts to which the Collateral Agent
or the holders of the Secured Obligations are legally entitled, the Grantors
shall be jointly and severally liable for the deficiency (subject to Section 25
hereof), together with interest thereon at the Default Rate for Revolving Loans
that are Base Rate Loans, together with the costs of collection and reasonable
attorneys’ fees and disbursements. Any surplus remaining after the full payment
and satisfaction of the Secured Obligations shall be returned to the Grantors or
to whomsoever a court of competent jurisdiction shall determine to be entitled
thereto.

 

 

8.

Rights of the Collateral Agent.

 

(a)          Power of Attorney. In addition to other powers of attorney
contained herein, each Grantor hereby designates and appoints the Collateral
Agent, on behalf of the holders of the Secured Obligations, and each of its
designees or agents, as attorney-in-fact of such Grantor, irrevocably and with
power of substitution, with authority to take any or all of the following
actions upon the occurrence and during the continuation of an Event of Default:

 

 

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CHAR1\887101v3

 

 

 

(i)           to demand, collect, settle, compromise and adjust, and give
discharges and releases concerning the Collateral, all as the Collateral Agent
may reasonably deem appropriate;

 

(ii)         to commence and prosecute any actions at any court for the purposes
of collecting any of the Collateral and enforcing any other right in respect
thereof;

 

(iii)        to defend, settle or compromise any action brought and, in
connection therewith, give such discharge or release as the Collateral Agent may
reasonably deem appropriate;

 

(iv)        to receive, open and dispose of mail addressed to a Grantor and
endorse checks, notes, drafts, acceptances, money orders, bills of lading,
warehouse receipts or other instruments or documents evidencing payment,
shipment or storage of the goods giving rise to the Collateral on behalf of and
in the name of such Grantor, or securing, or relating to such Collateral;

 

(v)          to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral;

 

(vi)        to direct any parties liable for any payment in connection with any
of the Collateral to make payment of any and all monies due and to become due
thereunder directly to the Collateral Agent or as the Collateral Agent shall
direct;

 

(vii)         to receive payment of and receipt for any and all monies, claims,
and other amounts due and to become due at any time in respect of or arising out
of any Collateral;

 

(viii)        to sell, assign, transfer, make any agreement in respect of, or
otherwise deal with or exercise rights in respect of, any Collateral or the
goods or services that have given rise thereto, as fully and completely as
though the Collateral Agent were the absolute owner thereof for all purposes;

 

 

(ix)

to adjust and settle claims under any insurance policy relating thereto;

 

(x)           to authorize or to execute and deliver all assignments,
conveyances, statements, financing statements, renewal financing statements,
security and pledge agreements, affidavits, notices and other agreements,
instruments and documents that the Collateral Agent may reasonably deem
appropriate in order to perfect and maintain the security interests and liens
granted in this Security Agreement and in order to fully consummate all of the
transactions contemplated therein;

 

(xi)          to institute any foreclosure proceedings that the Collateral Agent
may reasonably deem appropriate; and

 

(xii)         to do and perform all such other acts and things as the Collateral
Agent may reasonably deem appropriate or convenient in connection with the
Collateral.

 

This power of attorney is a power coupled with an interest and shall be
irrevocable for so long as any of the Secured Obligations shall remain
outstanding and until all of the commitments relating thereto shall have been
terminated. The Collateral Agent shall be under no duty to exercise or withhold
the exercise of any of the rights, powers, privileges and options expressly or
implicitly

 

13

CHAR1\887101v3

 

 

granted to the Collateral Agent in this Security Agreement, and shall not be
liable for any failure to do so or any delay in doing so. The Collateral Agent
shall not be liable for any act or omission or for any error of judgment or any
mistake of fact or Law in its individual capacity or its capacity as
attorney-in-fact except acts or omissions resulting from its gross negligence or
willful misconduct. This power of attorney is conferred on the Collateral Agent
solely to protect, preserve and realize upon its security interest in the
Collateral.

 

(b)          Assignment by the Collateral Agent. The Collateral Agent may from
time to time assign the Secured Obligations and any portion thereof and/or the
Collateral and any portion thereof in connection with its resignation as
Collateral Agent pursuant to Article X of the Credit Agreement, and the assignee
shall be entitled to all of the rights and remedies of the Collateral Agent
under this Security Agreement in relation thereto.

 

(c)          The Collateral Agent’s Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Collateral while being held by
the Collateral Agent hereunder, the Collateral Agent shall have no duty or
liability to preserve rights pertaining thereto, it being understood and agreed
that the Grantors shall be responsible for preservation of all rights in the
Collateral, and the Collateral Agent shall be relieved of all responsibility for
the Collateral upon surrendering it or tendering the surrender of it to the
Grantors. The Collateral Agent shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral in its possession if such
Collateral is accorded treatment substantially equal to that which the
Collateral Agent accords its own property, which shall be no less than the
treatment employed by a reasonable and prudent agent in the industry, it being
understood that the Collateral Agent shall not have responsibility for taking
any necessary steps to preserve rights against any parties with respect to any
of the Collateral. In the event of a public or private sale of Collateral
pursuant to Section 7 hereof, the Collateral Agent shall have no obligation to
clean, repair or otherwise prepare the Collateral for sale.

 

9.            Rights of Required Lenders. All rights of the Collateral Agent
hereunder, if not exercised by the Collateral Agent, may be exercised by the
Required Lenders.

 

10.         Application of Proceeds. Upon the occurrence and during the
continuation of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral, when received by the Collateral
Agent or any of the holders of the Secured Obligations in cash or its
equivalent, will be applied in reduction of the Secured Obligations in the order
set forth in the Credit Agreement or other document relating to the Secured
Obligations, and each Grantor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Collateral Agent shall have the continuing and exclusive right to apply and
reapply any and all such payments and proceeds in the Collateral Agent’s sole
discretion, notwithstanding any entry to the contrary upon any of its books and
records.

 

11.         Release of Collateral. Upon request, the Collateral Agent shall
promptly deliver to the Borrower (at the Borrower’s expense) appropriate release
documentation to the extent the release of Collateral is permitted under, and on
the terms and conditions set forth in, the Credit Agreement; provided that any
such release, or the substitution of any of the Collateral for other Collateral,
will not alter, vary or diminish in any way the force, effect, lien, pledge or
security interest of this Security Agreement as to any and all Collateral not
expressly released or substituted, and this Security Agreement shall continue as
a first priority lien (subject to Permitted Liens) on any and all Collateral not
expressly released or substituted.

 

12.         Costs and Expenses. At all times hereafter, whether or not upon the
occurrence of an Event of Default, the Grantors agree to promptly pay upon
demand any and all reasonable costs and expenses (including reasonable
attorneys’ fees and disbursements) of the Collateral Agent and the holders of
the Secured Obligations (a) as required under Section 11.04 of the Credit
Agreement and (b) as necessary to

 

14

CHAR1\887101v3

 

 

protect the Collateral or to exercise any rights or remedies under this Security
Agreement or with respect to any of the Collateral. All of the foregoing costs
and expenses shall constitute Secured Obligations hereunder.

 

 

13.

Continuing Agreement.

 

(a)          This Security Agreement shall be a continuing agreement in every
respect and shall remain in full force and effect so long as any of the Secured
Obligations remains outstanding and until all of the commitments relating
thereto have been terminated (other than any obligations with respect to the
indemnities and the representations and warranties set forth in the Credit
Documents). Upon such payment and termination, this Security Agreement shall be
automatically terminated and the Collateral Agent and the holders of the Secured
Obligations shall, upon the request and at the expense of the Grantors,
forthwith release all of its liens and security interests hereunder and shall
authorize or execute and deliver all UCC termination statements and/or other
documents reasonably requested by the Grantors evidencing such termination.
Notwithstanding the foregoing, all releases and indemnities provided hereunder
shall survive termination of this Security Agreement.

 

(b)          This Security Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in whole
or in part, of any of the Secured Obligations is rescinded or must otherwise be
restored or returned by the Collateral Agent or any holder of the Secured
Obligations as a preference, fraudulent conveyance or otherwise under any Debtor
Relief Law, all as though such payment had not been made; provided that in the
event payment of all or any part of the Secured Obligations is rescinded or must
be restored or returned, all reasonable costs and expenses (including reasonable
attorneys’ fees and disbursements) incurred by the Collateral Agent or any
holder of the Secured Obligations in defending and enforcing such reinstatement
shall be deemed to be included as a part of the Secured Obligations.

 

14.         Amendments and Waivers. This Security Agreement and the provisions
hereof may not be amended, waived, modified, changed, discharged or terminated
except by written agreement of (a) the Grantors and (b) the Collateral Agent
(with the consent or at the direction of the Required Lenders under the Credit
Agreement).

 

15.         Successors in Interest. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Grantor and its successors and assigns, and shall inure, together with the
rights and remedies of the Collateral Agent and the holders of the Secured
Obligations hereunder, to the benefit of the Collateral Agent and the holders of
the Secured Obligations and their successors and permitted assigns; provided,
however, that none of the Grantors may assign its rights or delegate its duties
hereunder without the prior written consent of the Required Lenders under the
Credit Agreement. To the fullest extent permitted by Law, each Grantor hereby
releases the Collateral Agent and each holder of the Secured Obligations, and
their respective successors, assigns, officers, attorneys, employees and agents,
from any liability for any act or omission or any error of judgment or mistake
of fact or of Law relating to this Security Agreement or the Collateral, except
for any liability arising from the gross negligence or willful misconduct of the
Collateral Agent or such holder of the Secured Obligations, as determined by a
final and nonappealable judgment of a court of competent jurisdiction.

 

16.         Notices. All notices required or permitted to be given under this
Security Agreement shall be given as provided in Section 11.02 of the Credit
Agreement.

 

17.         Counterparts. This Security Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.

 

15

CHAR1\887101v3

 

 

 

18.         Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.

 

 

19.

Governing Law; Submission to Jurisdiction; Venue.

 

(a)           THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NORTH CAROLINA APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT THE
COLLATERAL AGENT SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

 

(b)           ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY
AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NORTH CAROLINA SITTING IN CHARLOTTE, NORTH CAROLINA OR OF THE UNITED STATES
FOR THE WESTERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS
SECURITY AGREEMENT, EACH GRANTOR AND THE COLLATERAL AGENT CONSENTS, FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS. EACH GRANTOR AND THE COLLATERAL AGENT IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS SECURITY AGREEMENT OR ANY
OTHER DOCUMENT RELATED HERETO. EACH GRANTOR AND THE COLLATERAL AGENT WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE
BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.

 

20.         Waiver of Right to Trial by Jury. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY TO THIS SECURITY AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
ARISING UNDER THIS SECURITY AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO THIS SECURITY AGREEMENT OR ANY OTHER DOCUMENT
RELATED HERETO, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR
OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT ANY PARTY TO THIS SECURITY AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

21.         Severability. If any provision of this Security Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.

 

22.         Entirety. This Security Agreement, the other Credit Documents and
the other documents relating to the Secured Obligations represent the entire
agreement of the parties hereto and thereto, and supersede all prior agreements
and understandings, oral or written, if any, including any commitment letters

 

16

CHAR1\887101v3

 

 

or correspondence relating to the Credit Documents, any other documents relating
to the Secured Obligations, or the transactions contemplated herein and therein.

 

23.         Survival. All representations and warranties of the Grantors
hereunder shall survive the execution and delivery of this Security Agreement,
the other Credit Documents and the other documents relating to the Secured
Obligations, the delivery of the Notes and the extension of credit thereunder or
in connection therewith.

 

24.         Other Security. To the extent that any of the Secured Obligations
are now or hereafter secured by property other than the Collateral (including
real property and securities owned by a Grantor), or by a guarantee, endorsement
or property of any other Person, then the Collateral Agent shall have the right
to proceed against such other property, guarantee or endorsement upon the
occurrence of any Event of Default, and the Collateral Agent shall have the
right, in its sole discretion, to determine which rights, security, liens,
security interests or remedies the Collateral Agent shall at any time pursue,
relinquish, subordinate, modify or take with respect thereto, without in any way
modifying or affecting any of them or the Secured Obligations or any of the
rights of the Collateral Agent or the holders of the Secured Obligations under
this Security Agreement, under any of the other Credit Documents or under any
other document relating to the Secured Obligations.

 

 

25.

Joint and Several Obligations of Grantors.

 

(a)          Subject to subsection (c) of this Section 25, each of the Grantors
is accepting joint and several liability hereunder in consideration of the
financial accommodation to be provided by the holders of the Secured
Obligations, for the mutual benefit, directly and indirectly, of each of the
Grantors and in consideration of the undertakings of each of the Grantors to
accept joint and several liability for the obligations of each of them.

 

(b)          Subject to subsection (c) of this Section 25, each of the Grantors
jointly and severally hereby irrevocably and unconditionally accepts, not merely
as a surety but also as a co-debtor, joint and several liability with the other
Grantors with respect to the payment and performance of all of the Secured
Obligations arising under this Security Agreement, the other Credit Documents
and any other documents relating to the Secured Obligations, it being the
intention of the parties hereto that all the Secured Obligations shall be the
joint and several obligations of each of the Grantors without preferences or
distinction among them.

 

(c)         Notwithstanding any provision to the contrary contained herein, in
any other of the Credit Documents or in any other documents relating to the
Secured Obligations, the obligations of each Grantor under the Credit Agreement
and the other Credit Documents shall be limited to an aggregate amount equal to
the largest amount that would not render such obligations subject to avoidance
under Section 548 of the Bankruptcy Code of the United States or any other
applicable Debtor Relief Law (including any comparable provisions of any
applicable state Law).

 

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CHAR1\887101v3

 

 

 

                 Each of the parties hereto has caused a counterpart of this
Security Agreement to be duly executed and delivered as of the date first above
written.

 

GRANTORS:

REHABCARE GROUP, INC.,

a Delaware Corporation

AMERICAN VITALCARE, INC.,

a California corporation

MANAGED ALTERNATIVE CARE, INC.,

a California corporation

PHASE 2 CONSULTING, INC.,

a Delaware corporation

REHABCARE GROUP OF CALIFORNIA, INC.,

a Delaware corporation

REHABCARE GROUP EAST, INC.,

a Delaware corporation

REHABCARE GROUP MANAGEMENT SERVICES, INC.,

a Delaware corporation

REHABCARE SANTA MONICA, INC.,

a Delaware corporation

REHABCARE TEXAS HOLDINGS, INC.,

a Delaware corporation

SALT LAKE PHYSICAL THERAPY ASSOCIATES, INC.,

a Utah corporation

STARMED MANAGEMENT, INC.,

a Delaware corporation

REHABCARE GROUP OF VIRGINIA LLC,

a Virginia limited liability company

REHABCARE HOSPITAL HOLDINGS, L.L.C.,

a Delaware limited liability company

LOUISIANA SPECIALTY HOSPITAL, L.L.C.,

a Delaware limited liability company

WEST GABLES REHABILITATION HOSPITAL, L.L.C.,

a Delaware limited liability company

LAFAYETTE SPECIALTY HOSPITAL, L.L.C.,

a Delaware limited liability company

TULSA SPECIALTY HOSPITAL, L.L.C.,

a Delaware limited liability company

CLEAR LAKE REHABILITATION HOSPITAL, L.L.C.,

a Delaware limited liability company

 

By:                                                               

 

Name: Jay W. Shreiner

 

 

Title:

Senior Vice President and

 

Chief Financial Officer

 

 

 

REHABCARE GROUP, INC.

AMENDED AND RESTATED SECURITY AGREEMENT

 

 

 

REHABCARE GROUP OF TEXAS, L.P.,

a Texas limited liability company

REHABCARE GROUP OF ARLINGTON, LP,

a Texas limited partnership

REHABCARE GROUP OF AMARILLO, LP,

a Texas limited partnership

 

 

 

By:

RehabCare Group, Inc.,

 

 

a Delaware corporation, as its General Partner

 

By:                                                               

 

Name: Jay W. Shreiner

 

 

Title:

Senior Vice President and

 

Chief Financial Officer

 

 

 

 

 

REHABCARE GROUP, INC.

AMENDED AND RESTATED SECURITY AGREEMENT

 

 

 

Accepted and agreed to as of the date first above written.

 

BANK OF AMERICA, N.A.,

as Collateral Agent

 

By:                                                               

Name:

Title:

 

 

 

REHABCARE GROUP, INC.

AMENDED AND RESTATED SECURITY AGREEMENT

 

 

 

SCHEDULES AND EXHIBITS

 

 

Schedule 1(a)

Intellectual Property

 

Schedule 2(d)

Commercial Tort Claims

Schedule 4(a)(i)

Legal Name, Jurisdiction of Organization/Formation, Principal Place of Business,
Chief Executive Office

Schedule 4(a)(ii)

Mergers, Consolidations, Changes in Structure, Use of Tradenames

Exhibit 5(g)(i)

Form of Notice of Grant of Security Interest in Copyrights

 

Exhibit 5(g)(ii)

Form of Notice of Grant of Security Interest in Patents

 

Exhibit 5(g)(iii)

Form of Notice of Grant of Security Interest in Trademarks

 

 

 

CHAR1\887101v3

 

 

 

Schedule 1(a)

 

INTELLECTUAL PROPERTY

 

 

Registered Federal Trademarks

 

 

RehabCare Management Services, Inc.

 

Trademark

Registration No.

Registration Date

Status

REHABCARE

1,350,149

07/16/85

REGISTERED

REHABCARE (Coin)

1,453,225

08/18/87

REGISTERED

 

 

 

Registered Federal Trademarks

 

American VitalCare, Inc.

 

 

Trademark

Registration No.

Registration Date

Status

LIFE WITH DIGNITY AND...HOPE

2,056,837

04/29/97

REGISTERED

VITALTEAM

1,952,151

01/30/96

REGISTERED

THE ACUTE CARE ALTERNATIVE

1,952,150

01/30/96

REGISTERED

 

 

Registered Federal Trademarks

 

RehabCare Group, Inc.

 

 

Trademark

Application No.

Filing Date

Status

REHABCARE DELIVERING THE POST-ACUTE CONTINUUM

78/431176

06/07/04

PENDING

Design Mark

78/431172

06/07/04

PENDING

DELIVERING THE POST-ACUTE CONTINUUM

78/799915

01/26/06

PENDING

Heart and Hand logo

78/908056

06/14/06

PENDING

HELPING PEOPLE REGAIN THEIR LIVES

78/907278

06/13/06

PENDING

REHAB CARE and heart and hand logo

78/907264

06/13/06

PENDING

 

 

CHAR1\887101v3

 

 

 

Registered State Trademarks

 

RehabCare Group, Inc.

 

Trademark

State

Registration
No.

Registration
Date

Status

REHABCARE

Oklahoma

21,519

10/22/97

REGISTERED

REHABCARE

Georgia

S16278

04/10/97

REGISTERED

REHABCARE

Indiana

1997-0185

04/16/97

REGISTERED

REHABCARE

Kansas

14,358

04/04/97

REGISTERED

REHABCARE

Louisiana

XLA300027451

04/08/97

REGISTERED

REHABCARE

Michigan

M01593

07/22/97

REGISTERED

REHABCARE

Minnesota

26,061

04/04/97

REGISTERED

REHAB CARE

Missouri

S13912

04/08/97

REGISTERED

REHAB CARE

Nebraska

1,539,038

04/04/97

REGISTERED

REHABCARE

New Mexico

TK97041812

04/18/97

REGISTERED

REHABCARE

New York

S15561

04/21/97

REGISTERED

REHABCARE

North Dakota

12,351,500

04/22/97

REGISTERED

REHABCARE

Ohio

SM 99378

05/23/97

REGISTERED

REHAB CARE

Oregon

S31449

04/15/97

REGISTERED

REHAB CARE

Texas

56,555

04/07/97

REGISTERED

REHABCARE

Virginia

271

04/14/97

REGISTERED

REHABCARE

Illinois

81774

03/11/93

REGISTERED

REHABCARE

South Carolina

00-412638

10/28/87

REGISTERED

REHABCARE

Louisiana

36-200956

02/20/87

REGISTERED

 

 

CHAR1\887101v3

 

 

 

 

Registered State Trademarks

 

RehabCare Corporation

 

 

Trademark

State

Registration
No.

Registration
Date

Status

REHABCARE

Tennessee

731 0319

12/21/87

REGISTERED

REHABCARE

Wisconsin

1,716

10/28/97

REGISTERED

REHABCARE

Delaware

1,716

10/23/87

REGISTERED

REHABCARE

California

16,860

06/24/93

REGISTERED

REHABCARE

Ohio

SM 63406

03/03/86

REGISTERED

REHABCARE

Utah

29,329

08/04/88

REGISTERED

REHABCARE

Illinois

81,774

03/11/98

REGISTERED

 

 

Registered State Trademarks

 

RehabCare Group East, Inc.

 

 

Trademark

State

Registration
No.

Registration
Date

Status

REHABCARE GROUP THERAPY SERVICES

New Hampshire

411,505

8/13/02

REGISTERED

 

 

Registered Copyrights

 

 

RehabCare Corporation

 

Title

Registration No.

Registration Date

A Program Evaluation System for RehabCare Units

Txu 192306

04/01/85

                

 

CHAR1\887101v3

 

 

 

Schedule 2(d)

 

COMMERCIAL TORT CLAIMS

 

None.

 

CHAR1\887101v3

 

 

 

Schedule 4(a)(i)

 

LEGAL NAME, JURISDICTION OF ORGANIZATION/FORMATION, PRINCIPAL PLACE OF BUSINESS,
CHIEF EXECUTIVE OFFICE

 

Legal Name Of Company

Jurisdiction of Organization/Formation

Principal Place of Business, Chief Executive Office

RehabCare Group, Inc.

Delaware

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

RehabCare Group East, Inc.

Delaware

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

RehabCare Group Management Services, Inc.

Delaware

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

Salt Lake Physical Therapy Associates, Inc.

Utah

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

RehabCare Texas Holdings, Inc.

Delaware

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

RehabCare Group of Texas, L.P.

Texas

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

RehabCare Group of California, Inc.

Delaware

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

StarMed Management, Inc.

Delaware

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

Managed Alternative Care, Inc.

Delaware

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

American VitalCare, Inc.

California

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

RehabCare Santa Monica, Inc.

Delaware

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

RehabCare Group of Virginia, LLC

Virginia

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

Phase 2 Consulting, Inc.

Delaware

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

RehabCare Hospital Holdings, L.L.C.

Delaware

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

 

 

CHAR1\887101v3

 

 

 

 

RehabCare Group of Arlington, LP

Texas

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

RehabCare Group of Amarillo, LP

Texas

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

West Gables Rehabilitation, L.L.C.

Delaware

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

Lafayette Specialty Hospital, L.L.C.

Delaware

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

Tulsa Specialty Hospital, L.L.C.

Delaware

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

Clear Lake Rehabilitation Hospital, L.L.C.

Delaware

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

Louisiana Specialty Hospital, L.L.C.

Delaware

7733 Forsyth Boulevard

23rd Floor

St. Louis, MO 63105

 

 

CHAR1\887101v3

 

 

 

Schedule 4(a)(ii)

 

MERGER, CONSOLIDATION OR OTHER CHANGE IN STRUCTURE

 

1.

DiversiCare Rehab Services, Inc., a Kentucky corporation, Orthopaedic
Specialties, LLC, a Kentucky limited liability company, RehabCare Group Therapy
Services, Inc., a Missouri corporation, and Therapeutic Systems, Ltd., an
Illinois corporation, merged with and into RehabCare Group East, Inc., a
Delaware corporation, on December 27, 2001.

 

2.

StarMed Management, L.L.C., a Delaware limited liability company, merged with
and into Health Tour Management, Inc., a Delaware corporation, on December 27,
2001. The name of Health Tour Management, Inc., a Delaware corporation, was
changed to StarMed Management, Inc. on December 27, 2001.

 

 

CHAR1\887101v3

 

 

 

EXHIBIT 5(g)(i)

 

NOTICE

 

OF

 

GRANT OF SECURITY INTEREST

 

IN

 

COPYRIGHTS

 

United States Copyright Office

 

Ladies and Gentlemen:

 

Please be advised that pursuant to the Amended and Restated Security Agreement
dated as of June 16, 2006 (as the same may be amended, modified, extended or
restated from time to time, the “Security Agreement”) by and among the Grantors
party thereto (each an “Grantor” and collectively, the “Grantors”) and Bank of
America, N.A., as Collateral Agent (the “Collateral Agent”) for the holders of
the Secured Obligations referenced therein, the undersigned Grantor has granted
a continuing security interest in and continuing lien upon, the copyrights and
copyright applications shown on Schedule 1 attached hereto to the Collateral
Agent for the benefit of the holders of the Secured Obligations.

 

The Grantors and the Collateral Agent, on behalf of the holders of the Secured
Obligations, hereby acknowledge and agree that the security interest in the
copyrights and copyright applications set forth on Schedule 1 attached hereto
(i) may only be terminated in accordance with the terms of the Security
Agreement and (ii) is not to be construed as an assignment of any copyright or
copyright application.

 

 

Very truly yours,

 

 

__________________________________

 

[Grantor], a Delaware corporation

 

 

 

By:                                                               

 

Name:

 

 

Title:

 

 

 

Grantor’s Address:

 

 

Acknowledged and Accepted:

 

BANK OF AMERICA, N.A., as Collateral Agent

 

By:                                                               

Name:

Title:

 

 

CHAR1\887101v3

 

 

 

EXHIBIT 5(g)(ii)

 

NOTICE

 

OF

 

GRANT OF SECURITY INTEREST

 

IN

 

PATENTS

 

United States Patent and Trademark Office

 

Ladies and Gentlemen:

 

Please be advised that pursuant to the Amended and Restated Security Agreement
dated as of June 16, 2006 (the “Security Agreement”) by and among the Grantors
party thereto (each an “Grantor” and collectively, the “Grantors”) and Bank of
America, N.A., as Collateral Agent (the “Collateral Agent”) for the holders of
the Secured Obligations referenced therein, the undersigned Grantor has granted
a continuing security interest in and continuing lien upon, the patents and
patent applications set forth on Schedule 1 attached hereto to the Collateral
Agent for the benefit of the holders of the Secured Obligations.

 

The Grantors and the Collateral Agent, on behalf of the holders of the Secured
Obligations, hereby acknowledge and agree that the security interest in the
patents and patent applications set forth on Schedule 1 attached hereto (i) may
only be terminated in accordance with the terms of the Security Agreement and
(ii) is not to be construed as an assignment of any patent or patent
application.

 

 

Very truly yours,

 

 

__________________________________

 

[Grantor], a Delaware corporation

 

 

 

By:                                                               

 

Name:

 

 

Title:

 

 

 

Grantor’s Address:

 

 

Acknowledged and Accepted:

 

BANK OF AMERICA, N.A., as Collateral Agent

 

By:                                                               

Name:

Title:

 

 

CHAR1\887101v3

 

 

 

EXHIBIT 5(g)(iii)

 

NOTICE

 

OF

 

GRANT OF SECURITY INTEREST

 

IN

 

TRADEMARKS

 

United States Patent and Trademark Office

 

Ladies and Gentlemen:

 

Please be advised that pursuant to the Amended and Restated Security Agreement
dated as of June 16, 2006 (the “Security Agreement”) by and among the Grantors
party thereto (each an “Grantor” and collectively, the “Grantors”) and Bank of
America, N.A., as Collateral Agent (the “Collateral Agent”) for the holders of
the Secured Obligations referenced therein, the undersigned Grantor has granted
a continuing security interest in and continuing lien upon, the trademarks and
trademark applications set forth on Schedule 1 attached hereto to the Collateral
Agent for the benefit of the holders of the Secured Obligations.

 

The Grantors and the Collateral Agent, on behalf of the holders of the Secured
Obligations, hereby acknowledge and agree that the security interest in the
trademarks and trademark applications set forth on Schedule 1 attached hereto
(i) may only be terminated in accordance with the terms of the Security
Agreement and (ii) is not to be construed as an assignment of any trademark or
trademark application.

 

 

Very truly yours,

 

 

__________________________________

 

[Grantor], a Delaware corporation

 

 

 

By:                                                               

 

Name:

 

 

Title:

 

 

 

Grantor’s Address:

 

 

Acknowledged and Accepted:

 

BANK OF AMERICA, N.A., as Collateral Agent

 

By:                                                               

Name:

Title:

 

 

CHAR1\887101v3