Document:

Exhibit 10.3

 

FIRST
LIEN SECURITY AGREEMENT

 

Dated May 31, 2007

 

From

 

The Grantors referred to herein

 

as Grantors

 

To

 

MERRILL LYNCH CAPITAL, a division of MERRILL LYNCH BUSINESS FINANCIAL
SERVICES INC.

 

as Collateral Agent

 

 

T
A  B  L  E  O
F  C  O  N  T
E  N  T  S

 

	
  SECTION 1.
  Grant of Security

  	
   

  	
  2

  
	
   

  	
   

  	
   

  
	
  SECTION 2.
  Security for Obligations

  	
   

  	
  5

  
	
   

  	
   

  	
   

  
	
  SECTION 3.
  Grantors Remain Liable

  	
   

  	
  5

  
	
   

  	
   

  	
   

  
	
  SECTION 4.
  Delivery and Control of Security Collateral and Chattel Paper

  	
   

  	
  5

  
	
   

  	
   

  	
   

  
	
  SECTION 5.
  Maintaining the Collateral Account; Pledged Deposit Accounts

  	
   

  	
  6

  
	
   

  	
   

  	
   

  
	
  SECTION 6.
  Investing of Amounts in the Collateral Account

  	
   

  	
  6

  
	
   

  	
   

  	
   

  
	
  SECTION 7.
  Release of Amounts

  	
   

  	
  6

  
	
   

  	
   

  	
   

  
	
  SECTION 8.
  Representations and Warranties

  	
   

  	
  6

  
	
   

  	
   

  	
   

  
	
  SECTION 9.
  Further Assurances

  	
   

  	
  9

  
	
   

  	
   

  	
   

  
	
  SECTION 10.
  As to Equipment and Inventory

  	
   

  	
  9

  
	
   

  	
   

  	
   

  
	
  SECTION 11.
  Insurance

  	
   

  	
  10

  
	
   

  	
   

  	
   

  
	
  SECTION 12.
  Post-Closing Changes

  	
   

  	
  10

  
	
   

  	
   

  	
   

  
	
  SECTION 13.
  As to Intellectual Property Collateral

  	
   

  	
  10

  
	
   

  	
   

  	
   

  
	
  SECTION 14.
  Commercial Tort Claims

  	
   

  	
  12

  
	
   

  	
   

  	
   

  
	
  SECTION 15.
  Transfers and Other Liens

  	
   

  	
  12

  
	
   

  	
   

  	
   

  
	
  SECTION 16.
  Collateral Agent Appointed Attorney in Fact

  	
   

  	
  12

  
	
   

  	
   

  	
   

  
	
  SECTION 17.
  Collateral Agent May Perform

  	
   

  	
  12

  
	
   

  	
   

  	
   

  
	
  SECTION 18.
  The Collateral Agent’s Duties

  	
   

  	
  12

  
	
   

  	
   

  	
   

  
	
  SECTION 19.
  As to Receivables and Security Collateral

  	
   

  	
  13

  
	
   

  	
   

  	
   

  
	
  SECTION 20.
  Remedies

  	
   

  	
  13

  
	
   

  	
   

  	
   

  
	
  SECTION 21.
  Indemnity and Expenses

  	
   

  	
  14

  
	
   

  	
   

  	
   

  
	
  SECTION 22.
  Amendments; Waivers; Additional Grantors; Etc.

  	
   

  	
  15

  
	
   

  	
   

  	
   

  
	
  SECTION 23.
  Notices, Etc.

  	
   

  	
  15

  

 

ii

 

	
  SECTION 24.
  Continuing Security Interest; Assignments under the Credit Agreement

  	
   

  	
  51

  
	
   

  	
   

  	
   

  
	
  SECTION 25.
  Release; Termination

  	
   

  	
  16

  
	
   

  	
   

  	
   

  
	
  SECTION 26.
  Execution in Counterparts

  	
   

  	
  16

  
	
   

  	
   

  	
   

  
	
  SECTION 27.
  Governing Law

  	
   

  	
  16

  

 

Schedules

 

	
  Schedule
  I

  	
   

  	
  -

  	
   

  	
  Investment
  Property

  
	
  Schedule
  II

  	
   

  	
  -

  	
   

  	
  Pledged
  Deposit Accounts

  
	
  Schedule
  III

  	
   

  	
  -

  	
   

  	
  [Intentionally
  Omitted].

  
	
  Schedule
  IV

  	
   

  	
  -

  	
   

  	
  Intellectual
  Property

  
	
  Schedule
  V

  	
   

  	
  -

  	
   

  	
  Commercial
  Tort Claims

  
	
  Schedule
  VI

  	
   

  	
  -

  	
   

  	
  Location,
  Chief Executive Office, Type of Organization, Jurisdiction of Organization
  and Organizational Identification Number

  
	
  Schedule
  VII

  	
   

  	
  -

  	
   

  	
  Changes
  in Name, Location, Etc.

  
	
  Schedule
  VIII

  	
   

  	
  -

  	
   

  	
  Locations
  of Equipment and Inventory

  

 

Exhibits

 

	
  Exhibit
  A

  	
   

  	
  -

  	
   

  	
  [Intentionally
  Omitted]

  
	
  Exhibit
  B

  	
   

  	
  -

  	
   

  	
  Form
  of Copyright Security Agreement

  
	
  Exhibit
  C

  	
   

  	
  -

  	
   

  	
  Form
  of Patent Security Agreement

  
	
  Exhibit
  D

  	
   

  	
  -

  	
   

  	
  Form
  of Trademark Security Agreement

  
	
  Exhibit
  E

  	
   

  	
  -

  	
   

  	
  Form
  of Security Agreement Supplement

  

 

iii

 

FIRST
LIEN SECURITY AGREEMENT

 

FIRST LIEN SECURITY AGREEMENT dated May 31, 2007
(this “Agreement”) made by UHS MERGER SUB,
INC., a Delaware corporation (“Merger Sub”),
UNIVERSAL HOSPITAL SERVICES, INC., a Delaware corporation (“UHS”) (prior to the Acquisition, Merger
Sub, and after giving effect to the Acquisition, UHS as the surviving
corporation, shall be referred to as the “Borrower”),
and any other Person that subsequently becomes a party hereto (together with
the Borrower, the “Grantors”),
to Merrill Lynch Capital, a division of Merrill Lynch Business Financial
Services Inc., as collateral agent (together with any successor collateral
agent appointed pursuant to Article 9 of the Credit Agreement
referred to below, the “Collateral Agent”) for the Secured Parties (as defined in
the Credit Agreement referred to below).

 

PRELIMINARY
STATEMENTS

 

The
Borrower and UHS HOLDCO, INC., a Delaware corporation (“Parent”), have entered into a Credit Agreement dated
as of May 31, 2007 (such
agreement, as it may hereafter be amended, amended and restated, supplemented
or otherwise modified from time to time, being the “Credit Agreement”) the Lenders (as
defined in the Credit Agreement), the Initial L/C Issuer (as defined in the
Credit Agreement), the Initial Swing Line Lender (as defined in the Credit
Agreement) and the Administrative Agent (as defined in the Credit Agreement).

 

Each Grantor is the owner of
the indebtedness (the “Initial Pledged Debt”)
set forth opposite such Grantor’s name on and as otherwise described in
Schedule I hereto and issued by the obligors named therein.

 

Each Grantor is the owner of
the deposit accounts (the “Pledged Deposit Accounts”) set forth opposite such Grantor’s
name on Schedule II hereto.

 

The Borrower will be the
owner of an account to be opened at the request of the Collateral Agent (the “Collateral Account”).

 

The Grantors own the other
Collateral described below.

 

It is a condition precedent
to the making of Loans by the Lenders and the issuance of Letters of Credit by
the L/C Issuer under the Credit Agreement and the entry into Secured Hedge
Agreements by the Hedge Banks from time to time that the Grantors shall have
granted the security interest contemplated by this Agreement. Each Grantor will
derive substantial direct and indirect benefit from the transactions
contemplated by the Loan Documents.

 

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 the 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 (a) the Lenders to make
Loans and issue Letters of Credit under the Credit Agreement, (b) Affiliates of
the Lenders to incur

 

 

Cash Management Obligations,
and (c) 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 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, including, without limitation, all
machinery, tools, motor vehicles, vessels, aircraft, furniture and fixtures,
and all parts thereof and all accessions thereto, including, without
limitation, computer programs and supporting information that constitute
equipment within the meaning of the UCC (any and all such property being the “Equipment”);

 

(b)           all inventory in all of its forms, including, without limitation, (i)
all raw materials, work in process, finished goods and materials used or
consumed in the manufacture, production, preparation or shipping thereof, (ii)
goods in which such Grantor has an interest in mass or a joint or other
interest or right of any kind (including, without limitation, goods in which
such Grantor has an interest or right as consignee) and (iii) goods that are
returned to or repossessed or stopped in transit by such Grantor), and all
accessions thereto and products thereof and documents therefor, including,
without limitation, computer programs and supporting information that
constitute inventory within the meaning of the UCC (any and all such property
being the “Inventory”);

 

(c)           all accounts (including, without limitation, health-care-insurance
receivables), chattel paper (including, without limitation, tangible chattel
paper and electronic chattel paper), instruments (including, without
limitation, promissory notes), deposit accounts, letter-of-credit rights,
general intangibles (including, without limitation, payment intangibles) 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
supporting obligations and in and to all security agreements, mortgages, Liens,
leases, letters of credit and other contracts securing or otherwise relating to
the foregoing property (any and all of such accounts, chattel paper,
instruments, deposit accounts, letter-of-credit rights, general intangibles and
other obligations, to the extent not referred to in subsection (d) or (e)
below, being the “Receivables,”
and any and all such supporting obligations, security agreements, mortgages,
Liens, leases, letters of credit and other contracts being the “Related Contracts”);

 

(d)           the following (collectively, the “Security
Collateral”):

 

(i)            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;

 

(ii)           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;

 

(e)           Contracts;

 

 

(f)            the following (collectively, the “Account Collateral”):

 

(i)            the Pledged Deposit Accounts, the Collateral
Account and all funds from time to time credited thereto (including without
limitation, all Cash Equivalents), and all certificates and instruments, if
any, from time to time representing or evidencing the Pledged Deposit Accounts
or the Collateral Account;

 

(ii)           all promissory notes, certificates of deposit, checks and other
instruments from time to time delivered to or otherwise possessed by the
Collateral Agent for or on behalf of such Grantor in substitution for or in
addition to any or all of the then existing Account Collateral; and

 

(iii)          all interest, dividends, distributions, 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 patents, patent applications, utility
models and statutory invention registrations, all inventions claimed or
disclosed therein and all improvements thereto (“Patents”);

 

(ii)           all trademarks, service marks, domain names, trade dress, logos,
designs, slogans, trade names, business names, corporate names and other source
identifiers, whether registered or unregistered (provided that no security
interest shall be granted in United States intent-to-use trademark applications
to the extent that, and solely during the period in which, the grant of a
security interest therein would impair the validity or enforceability of such
intent-to-use trademark applications under applicable federal law), together,
in each case, with the goodwill symbolized thereby (“Trademarks”);

 

(iii)          all copyrights, including, without limitation, copyrights in Computer
Software (as hereinafter defined), internet web sites and the content thereof,
whether registered or unregistered (“Copyrights”);

 

(iv)          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, together
with any and all maintenance rights, service rights, programming rights,
hosting rights, test rights, improvement rights, renewal rights and
indemnification rights and any substitutions, replacements, improvements, error
corrections, updates and new versions of any of the foregoing (“Computer Software”);

 

(v)           all confidential and proprietary information, including, without
limitation, know-how, trade secrets, manufacturing and production processes and
techniques, inventions, research and development information, databases and
data, including, without limitation, technical data, financial, marketing and
business data, pricing and cost information, business and marketing plans and
customer and supplier lists and information (collectively, “Trade Secrets”),
and all other intellectual, industrial and intangible property of any type,
including, without limitation, industrial designs and mask works;

 

(vi)          all registrations and applications for registration for any of the
foregoing, including, without limitation, those registrations and applications
for registration set forth in

 

 

Schedule IV hereto, together
with all reissues, divisions, continuations, continuations-in-part, extensions,
renewals and reexaminations thereof;

 

(vii)         all tangible embodiments of the foregoing, all rights in the foregoing
provided by international treaties or conventions, all rights corresponding
thereto throughout the world and all other rights of any kind whatsoever of
such Grantor accruing thereunder or pertaining thereto;

 

(viii)        all agreements, permits, consents, orders and franchises relating to
the license, development, use or disclosure of any of the foregoing to which
such Grantor, now or hereafter, is a party or a beneficiary (all of the
foregoing collectively referred to as “IP Agreements”); and

 

(ix)           any and all claims for damages and injunctive relief for past, present
and future infringement, dilution, misappropriation, violation, misuse or
breach with respect to any of the foregoing, with the right, but not the
obligation, to sue for and collect, or otherwise recover, such damages;

 

(h)           the commercial tort claims described in Schedule V hereto (together
with any commercial tort claims as to which the Grantors have complied with the
requirements of Section 14, the “Commercial
Tort Claims Collateral”);

 

(i)            all books and records (including, without
limitation, customer lists, credit files, printouts and other computer output
materials and records) of such Grantor pertaining to any of the Collateral; and

 

(j)            all proceeds of, collateral for, income,
royalties and other payments now or hereafter due and payable with respect to,
and supporting obligations relating to, any and all of the Collateral
(including, without limitation, proceeds, collateral and supporting obligations
that constitute property of the types described in subsections (a) through (i)
of this Section 1) and, to the extent not otherwise included, all (A)
payments under insurance (whether or not the Collateral Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral, and (B)
cash.

 

Notwithstanding anything
herein to the contrary, this Agreement shall not constitute a grant of security
interest in (and the term “Collateral” shall be deemed not to include) (A) any
lease, license, contract, property rights or agreement to which any Grantor is
a party or any of its rights or interests thereunder, to the extent that and
for so long as (but only for so long as), the grant of such security interest
shall (1) constitute or result in the abandonment, invalidation or
unenforceability under applicable law of any right, title or interest of any
Grantor therein or (2) constitute or result in a material breach or termination
pursuant to the terms of, or a material default, under, any such lease,
license, contract, property rights or agreement (other than to the extent that
any such term would be rendered ineffective pursuant to Sections 9-406, 9-407,
9-408 or 9-409 of the UCC (or any successor provision or provisions)); (B) any
Equipment owned by any Grantor that is subject to a purchase money Lien or a
Capitalized Lease (as defined in the Credit Agreement) permitted pursuant to
the Credit Agreement if the contract or other agreement in which such Lien is
granted (or in the documentation providing for such Capitalized Lease)
prohibits the creation of any other Lien on such Equipment, but only, in each
case, to the extent and for so long as (but only for so long as), the
Indebtedness (as defined in the Credit Agreement) secured by the applicable
Lien or the applicable Capitalized Lease has not been repaid in full or the
applicable prohibition has not otherwise been removed or terminated; provided that any proceeds, substitutions or replacements of any
property included in subclauses (A) and (B) above shall not be excluded (unless
such proceeds, substitutions or replacements would itself constitute property
excluded under subclause (A) or (B)); (C) any Equity Interests or investment
property in any subsidiary or joint

 

 

venture; or (D) motor
vehicles and other assets subject to certificates of title and letter of credit
rights, and assets requiring perfection through control agreements (other than
deposit accounts (excluding any payroll, trust, petty cash, zero balance and
tax withholding accounts).

 

SECTION 2. Security
for Obligations. This Agreement secures, in the case of each Grantor, the
payment of all Obligations of such Grantor now or hereafter existing under the
Loan Documents and all Cash Management Obligations and Secured Hedge
Obligations of such Grantor, 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.

 

SECTION 4. Delivery
and Control of Security Collateral and Chattel Paper. (a)  All instruments representing or evidencing
Security Collateral in excess of $500,000 in principal amount individually
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 reasonably satisfactory to the Collateral Agent. Upon
the occurrence and during the continuance of (x) an Event of Default, the
Collateral Agent shall have the right, at any time, to (i) transfer to or
to register in the name of the Collateral Agent or any of its nominees any or all
of the Security Collateral and (ii) exchange instruments representing or
evidencing Security Collateral for instruments of smaller or larger
denominations; provided that the Collateral
Agent provides written notice to the applicable Grantor. If any Grantor has
possession of any Chattel Paper representing monetary obligations in excess of
$500,000, such Chattel Paper shall be marked with the following legend: “This
writing and the obligations evidenced or secured thereby are subject to the
security interest of Merrill Lynch Capital, a division of Merrill Lynch
Business Financial Services Inc., as Collateral Agent, for the benefit of the
Collateral Agent and certain Lenders”. If any Grantor has possession of any
electronic chattel paper representing monetary obligations in excess of
$500,000, each Grantor shall take all steps necessary to grant the Collateral
Agent control of all such electronic chattel paper in accordance with the UCC
and all “transferable records” as defined in each of the Uniform Electronic
Transactions Act and the Electronic Signatures in Global and National Commerce
Act.

 

(b)           Upon the occurrence and during the continuance of an Event of Default,
the Collateral Agent shall have the right 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.

 

(c)           Upon the request of the Collateral Agent upon the occurrence and during
the continuance of an Event of Default, each Grantor will notify each issuer of
Security Collateral granted by it hereunder that such Security Collateral is
subject to the security interest granted hereunder.

 

 

SECTION 5. Maintaining
the Collateral Account; Pledged Deposit Accounts. So long as any Loan or
any other Obligation of any Loan Party under any Loan Document shall remain
unpaid (other than contingent indemnification obligations not yet accrued and
payable and which by their terms survive termination of the Loan Document), any
Letter of Credit shall be outstanding, or any Lender shall have any Commitment
(provided that Letters of Credit shall be
deemed no longer outstanding hereunder in accordance with the Cash
Collateralization or back-to-back letter of credit provisions set forth in Section
2.03(g) of the Credit Agreement):

 

(a)           Each Grantor will maintain the Collateral Account and the Pledged
Deposit Accounts only with the financial institution acting as Collateral Agent
hereunder or with a bank (a “Pledged Account
Bank”) that has agreed with such Grantor and the Collateral Agent to
comply, upon the occurrence and during the continuance of an Event of Default,
and upon a receipt of notice of exclusive control, to comply with instructions
originated by the Collateral Agent directing the disposition of funds in such
deposit account without the further consent of such Grantor, such agreement to
be in form and substance reasonably satisfactory to the Collateral Agent (a “Deposit Account Control Agreement”); provided, however, this Section 5(a)
shall not apply to deposit accounts (i) to the extent the average daily
balance, measurable over a trailing 30 day period on deposit in each such
deposit account does not exceed $50,000 at any time or (ii) operated solely as
a payroll account, zero balance account or tax withholding account. Each
Grantor agrees that at no time shall the average daily balance, measurable over
a trailing 30 day period, on deposit in all deposit accounts for which there is
not in effect a Deposit Account Control Agreement exceed $250,000.

 

(b)           If an Event of Default shall have occurred or be continuing, the
Collateral Agent may, at any time and without notice to, or consent from, the
Grantor, transfer, or direct the transfer of funds from the Pledged Deposit
Accounts or the Collateral Account to satisfy the Grantor’s Obligations under
the Loan Documents.

 

SECTION 6. Investing
of Amounts in the Collateral Account. During periods when the Collateral
Agent exercises sole control over the Collateral Account, the Collateral Agent
shall, subject to the provisions of Sections 5, 7 and 20:  (a) from time to time, invest, or direct the
applicable Pledged Account Bank to invest, amounts received with respect to the
Collateral Account in such Cash Equivalents credited to the Collateral Account
as the Borrower may select, (b) from time to time, invest interest paid on the
Cash Equivalents referred to in subsection (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 in the same manner, (c) deposit interest and
proceeds that are not invested or reinvested in Cash Equivalents as provided
above in the Collateral Account and (d) have the right to exchange, or direct
the applicable Pledged Account Bank to exchange, such Cash Equivalents for
similar Cash Equivalents of smaller or larger determinations, or for other Cash
Equivalents, credited to the Collateral Account.

 

SECTION 7. Release
of Amounts. To the extent that (a) any proceeds were deposited in the
Collateral Account or a Pledged Deposit Account during the continuance of an
Event of Default and (b) there are remaining proceeds in such Collateral
Account or Pledged Deposit Account upon the termination of such Event of
Default, so long as no Event of Default shall have occurred and be continuing,
the Collateral Agent will pay and release, or direct the applicable Pledged
Account Bank to pay and release, to the applicable Grantor or at its order or,
at the request of such Grantor, to the Collateral Agent to be applied to the
Obligations of the Grantors under the Loan Documents, such amount, if any, as
is then on deposit in such Collateral Account or Pledged Deposit Account, in
each case 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 VI hereto. Such Grantor’s location,
chief executive office, type of organization, jurisdiction of organization and
organizational identification number, if any, is set forth in Schedule VI
hereto and is accurate in all material respects. Within the five years
preceding the date hereof, such Grantor has not changed its legal name,
location (as defined in the UCC), chief executive office, type of organization,
jurisdiction of organization or organizational identification number, if any,
from those set forth in Schedule VI hereto except as set forth in
Schedule VII hereto.

 

(b)           Such Grantor is the legal and beneficial owner of, or with respect to
Intellectual Property has the right to use, the Collateral for which a security
interest is granted or purported to be granted by it under this Agreement free
and clear of any Lien, claim, option or right of others, except for the
security interest created under this Agreement or otherwise permitted under the
Credit Agreement. No effective financing statement or other instrument similar
in effect covering all or any part of the Collateral or listing such Grantor as
debtor is on file in any relevant recording office, except such as may have
been filed in favor of the Collateral Agent relating to the Loan Documents or
as otherwise permitted under the Credit Agreement.

 

(c)           All of the Equipment and Inventory (other than Equipment and Inventory
that is (i) located at customer or supplier locations in the normal course of
business or (ii) in transit or out for repair or further process) of such
Grantor are located at the places specified therefor in Schedule VIII hereto or
at another owned or leased location as to which such Grantor has complied (or
will comply within the period set forth therein) with the requirements of Section
10 or otherwise has an aggregate book value of no more than $250,000.

 

(d)           None of the Receivables or Agreement Collateral is evidenced by a
promissory note or other instrument in excess of (i) $250,000 individually and
(ii) $1,000,000 in the aggregate, that has not been delivered to the Collateral
Agent.

 

(e)           If such Grantor is an issuer of Security Collateral, such Grantor
confirms that it has received notice of the security interest granted
hereunder.

 

(f)            The Pledged Debt 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, is not in
default and, to the extent applicable, is evidenced by one or more promissory
notes (which promissory notes have been delivered to the Collateral Agent).

 

(g)           The Initial Pledged Debt constitutes all of the outstanding
indebtedness in excess of (i) $100,000 individually and (ii) $500,000 in the
aggregate, owed to such Grantor by the issuers thereof evidenced by a note or
other instrument and is outstanding in the principal amount indicated on
Schedule I hereto.

 

(h)           Such Grantor has no deposit accounts to the extent that the average
daily balance, measurable over a 30 day trailing period on deposit in each such
deposit account does not exceed $50,000 other than the Collateral Account, or
Pledged Deposit Accounts listed on Schedule II hereto or operated solely as a
payroll account, zero balance account or tax withholding account and additional
Pledged Deposit Accounts as to which such Grantor has complied with the
applicable requirements of Section 5.

 

(i)            This Agreement creates in favor of the
Collateral Agent for the benefit of the Secured Parties a valid first priority
security interest, except as otherwise provided for under the Loan Documents,
in the Collateral granted by such Grantor, securing the payment of the Secured
Obligations. Each Grantor has authorized the Collateral Agent to file financing
and continuation statements under the

 

 

UCC and record Intellectual Property Security Agreements referred to in
Section 13(c) with the U.S. Patent and Trademark Office and the
U.S. Copyright Office necessary to perfect a first priority security interest
in the respective Collateral, as applicable, subject to certain exceptions
contained herein and in the Credit Agreement.

 

(j)            No authorization or approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required (other than as otherwise provided for under the Credit
Agreement or this Agreement) for (i) the grant by such Grantor of the
security interest granted hereunder or for the execution, delivery or
performance of this Agreement by such Grantor, (ii) the perfection (to the
extent required hereunder and excluding any security interest in cash) or
maintenance of the security interest created hereunder (including the first
priority nature of such security interest), except for the filing of financing
and continuation statements under the UCC, which, upon filing of the financing
statements delivered pursuant to Section 4.01(a)(iv)(B) of the Credit
Agreement, have been duly filed and are in full force and effect, upon the
recordation of the Intellectual Property Security Agreements referred to in Section 13(d)
with the U.S. Patent and Trademark Office and the U.S. Copyright Office, any
filings outside the United States required to perfect a security interest in
Intellectual Property Collateral, and the actions described in Section 4
with respect to the Security Collateral, which actions, upon filing of the
Intellectual Property Security Agreement executed by the Loan Parties on the
Closing Date, have been taken and are in full force and effect, or (iii) 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 disposition of any
portion of the Security Collateral by laws affecting the offering and sale of
securities generally.

 

(k)           As to itself and its Intellectual Property Collateral:

 

(i)            Except as could not be reasonably expected to
have a Material Adverse Effect, the operation of such Grantor’s business as
currently conducted and the use of the Material Intellectual Property
Collateral (as defined below) in connection therewith does not infringe,
misappropriate, dilute, misuse or otherwise violate the intellectual property
rights of any third party.

 

(ii)           Such Grantor is the exclusive owner or joint owner of all right, title
and interest in and to the Material Intellectual Property Collateral, or is
entitled to use the Material Intellectual Property Collateral subject only to
the terms of the related IP Agreements.

 

(iii)          The Intellectual Property Collateral set forth on Schedule IV hereto
includes all patents, patent applications, domain names, trademark registrations
and applications, copyright registrations and applications that are owned by
and material to the business of such Grantor in each case which are reasonably
necessary to the operation of such Grantor’s respective business.

 

(iv)          The Material Intellectual Property Collateral owned by such Grantor is
subsisting and has not been adjudged invalid or unenforceable in whole or part,
and is valid and enforceable.

 

(v)           Except as set forth on Schedule IV hereto, such Grantor has not granted
any material license, release, covenant not to sue, non-assertion assurance, or
other material right to any Person with respect to any part of the Material
Intellectual Property Collateral (other than (A) licenses granted to such
Grantor’s customers in the ordinary course of business), the effect of which
would create a material impairment of such Grantor’s use of such Material
Intellectual Property Collateral as intended in the operation of its respective
business. The consummation of the transactions contemplated by the Transaction
Documents will not result in the termination or impairment of any of the
Material Intellectual Property Collateral.

 

 

(vi)          With respect to each material IP Agreement, except as could not be
reasonably expected to have a Material Adverse Effect:  (A) such IP Agreement is valid and binding
and in full force and effect with respect to such Grantor, and to the knowledge
of any Specified Officer of such Grantor, with respect to any other party
thereto, and represents the entire agreement between the respective parties
thereto with respect to the subject matter thereof; (B) such IP Agreement 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 material
breach or default under such IP Agreement or otherwise give any party thereto a
right to terminate such IP Agreement; (C) such Grantor has not received any
written notice of termination or cancellation under such IP Agreement; (D) such
Grantor has not received any notice of a breach or default under such IP
Agreement, which breach or default has not been cured; and (E) neither such
Grantor nor, to the knowledge of any Specified Officer of such Grantor, is any
other party to such IP Agreement is in breach or default thereof in any
material respect, and, to the knowledge of any Specified Officer of such
Grantor 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 IP Agreement.

 

(l)            Such Grantor has no commercial tort claims in
excess of $2,500,000 other than those listed in Schedule V hereto and
additional commercial tort claims as to which such Grantor has complied with
the requirements of Section 14.

 

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 commercially reasonable action
that is necessary, or that the Collateral Agent may reasonably request, in
order to perfect and protect any pledge 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. Each Grantor further agrees that it shall, at
the expense of such Grantor, take any and all commercially reasonable actions
necessary to defend title to the Collateral against all Persons and to defend
the security interest created hereunder and the priority thereof against any
Lien prohibited under the Credit Agreement.

 

(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 all assets or all personal property (or words of
similar effect) of such Grantor, regardless of whether any particular asset
described in such financing statements falls within the scope of the UCC or the
granting clause of this Agreement. A photocopy or other reproduction of this
Agreement 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.

 

(d)           Notwithstanding anything to the contrary in this Agreement or any other
Collateral Document, this Agreement shall be subject to the provisions of Section
6.12 of the Credit Agreement.

 

SECTION 10. As
to Equipment and Inventory. Each Grantor will keep its Equipment (other
than Equipment that is located at a customer or supplier location or is
intransit in the ordinary course of business or sold in accordance with the
Credit Agreement) and Inventory (other than Inventory on

 

 

consignment or sold in the
ordinary course of business) at the places therefor specified in Section
8(c) or at such other places identified by UHS concurrently with the
delivery of the financial statements pursuant to Section 6.01(b) of the
Credit Agreement.

 

(a)           Each Grantor will cause its Equipment to be maintained and preserved in
accordance with Section 6.06 of the Credit Agreement.

 

(b)           Each Grantor will pay promptly when due all property and other material
taxes, assessments and governmental charges or levies imposed upon, and all
claims (including, without limitation, claims for labor, materials and
supplies) against, its Equipment and Inventory, except to the extent payment
thereof is not required by Section 6.04 of the Credit Agreement.

 

(c)           Each Grantor, at its own expense, shall deliver to the Collateral Agent
the results of each physical verification, if any, which such Grantor may in
its discretion have made, or caused any other Person to make on its behalf, of
all or a portion of its Inventory.

 

SECTION 11. Insurance.
Each Grantor will, at its own expense, maintain insurance as required by the
terms of the Credit Agreement. Each casualty, property and liability (excluding
business interruption) policy shall in addition (a) name the Collateral Agent
as loss payee or additional insured party, as applicable, thereunder (without
any representation or warranty by or obligation upon the Collateral Agent) or
other language satisfactory to the Collateral Agent, (b) provide that there
shall be no recourse against the Collateral Agent for payment of premiums or
other amounts with respect thereto and (c) provide that at least 10 days’ prior
written notice of cancellation or of lapse shall be given to the Collateral
Agent by the insurer or other language satisfactory to the Collateral Agent. Each
Grantor will, if so reasonably requested by the Collateral Agent, deliver to
the Collateral Agent original or duplicate policies of such insurance. 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.

 

SECTION 12. Post-Closing
Changes. Each Grantor agrees to promptly notify the Collateral Agent in
writing of any change to its legal name, type of organization, jurisdiction of
organization or organizational identification number (if any) and shall take
all action reasonably required by the Collateral Agent for the purposes of
perfecting or protecting the security interest granted by this Agreement. Each
Grantor will hold and preserve its records relating to the Collateral,
including, without limitation and the Related Contracts, and will permit
representatives of the Collateral Agent at any reasonable time during normal
business hours to inspect and make abstracts from such records and other
documents, upon reasonable advance notice to such Grantor; provided
that, excluding any such visits and inspections during the continuance of an
Event of Default, only the Collateral Agent may exercise rights under this Section
12 and the Collateral Agent shall not exercise such rights more often than
one (1) time during any calendar year absent the existence of an Event of
Default; provided further that, upon the
occurrence and during the continuance of an Event of Default, the Collateral
Agent or any Lender (or any respective representative or independent
contractor) may do any of the foregoing at the reasonable expense of such
Grantor at any time during normal business hours and upon reasonable advance
notice. If any Grantor does not have an organizational identification number
and later obtains one, within thirty (30) days, it will notify the Collateral
Agent of such organizational identification number.

 

SECTION 13. As
to Intellectual Property Collateral. (a) 
With respect to each item of its Intellectual Property Collateral that
is material to the business of any Grantor (any such item of Intellectual
Property Collateral being “Material Intellectual
Property Collateral”), except to the extent failure to act could not
reasonably be expected to have a Material Adverse Effect, with respect to each
item of Material Intellectual Property Collateral owned by such Grantor, each
Grantor agrees to take, at

 

 

its expense, commercially
reasonable actions that it determines are necessary in accordance with the
exercise of its business discretion, 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 such
Material Intellectual Property Collateral and maintain such Material
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 such Material
Intellectual Property Collateral of such Grantor, including, without limitation,
the payment of required fees and taxes, the filing of responses to office
actions issued by the U.S. Patent and Trademark Office, the U.S. Copyright
Office or other governmental authorities, the filing of applications for
renewal or extension, the filing of affidavits under Sections 8 and 15 of the
U.S. Trademark Act, the filing of divisional, continuation,
continuation-in-part, reissue and renewal applications or extensions, the
payment of maintenance fees and the participation in interference, reexamination,
opposition, cancellation, infringement and misappropriation proceedings.

 

(b)           Except as could not be reasonably expected to have a Material Adverse
Effect, no Grantor shall do or permit any act or knowingly omit to do any act
whereby any of its Material Intellectual Property Collateral may lapse, be
terminated or become invalid or unenforceable or placed in the public domain
(or, in case of a trade secret, lose its competitive value) other than the
expiration of patents at the end of their statutory term.

 

(c)           Except when failure to do so could not reasonably be expected to cause
a Material Adverse Effect, each Grantor shall take commercially reasonable
actions that it determines are necessary in accordance with the exercise of its
business discretion to preserve and protect each item of its Material
Intellectual Property Collateral.

 

(d)           With respect to its Material Intellectual Property, on the Closing Date
or such later date as provided under the terms of the Credit Agreement or which
the Collateral Agent consents to in writing, each Grantor agrees to execute and
deliver to the Collateral Agent, with respect to all Material Intellectual
Property that is registered or with respect to which registration is pending
(i) an agreement, in substantially the form set forth in Exhibit B hereto or
otherwise in form and substance reasonably satisfactory to the Collateral Agent
(a “Copyright Security Agreement”),
(ii) an agreement, in substantially the form set forth in Exhibit C hereto or
otherwise in form and substance reasonably satisfactory to the Collateral Agent
(a “Patent Security Agreement”)
and (iii) an agreement, in substantially the form set forth in Exhibit D hereto
or otherwise in form and substance reasonably satisfactory to the Collateral
Agent (a “Trademark Security Agreement”
and, together with each Copyright Security Agreement and each Patent Security
Agreement, the “Intellectual Property
Security Agreements”), in each case for recording the security
interest granted hereunder to the Collateral Agent in such Intellectual
Property Collateral with the U.S. Patent and Trademark Office or the U.S.
Copyright Office, as applicable.

 

(e)           Each Grantor agrees that should it obtain an ownership interest in any
item of the type set forth in Section 1(g) that is not on the date
hereof a part of the Intellectual Property Collateral (“After-Acquired Intellectual Property”) (i)
the provisions of this Agreement shall automatically apply thereto, and (ii)
any such After-Acquired Material Intellectual Property and, in the case of
trademarks, the goodwill symbolized thereby, shall automatically become part of
the Intellectual Property Collateral subject to the terms and conditions of
this Agreement with respect thereto. After the end of each fiscal quarter of
the Borrower, as set forth in Section 6.14(b) of the Credit
Agreement, each Grantor shall provide written notice to the Collateral Agent
identifying the After-Acquired Intellectual Property consisting of material
patents, patent applications, trademark registrations, trademark applications,
copyright registrations, and copyright applications acquired during such fiscal
quarter, and such Grantor shall execute and deliver to the Collateral Agent
with such written notice, or otherwise authenticate, an

 

 

agreement  in form and substance
reasonably satisfactory to the Collateral Agent (an “IP Security Agreement Supplement”) covering such
After-Acquired Intellectual Property, which IP Security Agreement Supplement
shall be recorded with the U.S. Patent and Trademark Office, the U.S. Copyright
Office and any other governmental authorities necessary to perfect (subject to
the exceptions contained herein and in the Credit Agreement) the security
interest hereunder in such After-Acquired Intellectual Property in the United States.

 

SECTION 14. Commercial
Tort Claims. Each Grantor will promptly after the end of each fiscal
quarter give notice to the Collateral Agent of any commercial tort claim
individually in excess of $2,500,000 that may arise after the date hereof and
will immediately execute or otherwise authenticate a supplement to this
Agreement, and otherwise take all necessary action, to subject such commercial
tort claim to the first priority security interest created under this
Agreement.

 

SECTION 15. Transfers
and Other Liens. (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 Loan Documents.

 

SECTION 16. 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, upon the occurrence and during the continuance of
an Event of Default, in the Collateral Agent’s reasonable discretion, to take
any action and to execute any instrument that the Collateral Agent may deem necessary
or advisable to effect the provisions of this Agreement, including, without
limitation:

 

(a)           to obtain and adjust insurance required to be paid to the Collateral
Agent pursuant to Section 11,

 

(b)           to ask for, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral,

 

(c)           to receive, indorse and collect any drafts or other instruments,
documents and chattel paper, in connection with subsection (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 the rights of the Collateral Agent with respect to any of
the Collateral.

 

SECTION 17. Collateral
Agent May Perform. If any Grantor fails to perform any agreement contained
herein, the Collateral Agent may, but without any obligation to do so, with
notice (or upon the occurrence and during the continuance of an Event of
Default, without notice), itself perform, or cause performance of, such
agreement, and the expenses of the Collateral Agent incurred in connection
therewith shall be payable by such Grantor under Section 21.

 

SECTION 18. The
Collateral Agent’s Duties. The powers conferred on the Collateral Agent
hereunder are solely to protect the Secured Parties’ interest in the Collateral
and shall not impose any duty upon it to exercise any such powers. Except for
the safe custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Collateral Agent shall have no
duty

 

 

(other than as imposed by law,
this Agreement or any other Loan Document) 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 or as required by law and will
not be liable or responsible for any loss or damage to any Collateral, or for
any diminution in the value thereof, by reason of any act or omission of any
sub-agent or bailee selected by the Collateral Agent in good faith, except to
the extent that such liability arises from the Collateral Agent’s gross
negligence, bad faith or willful misconduct.

 

SECTION 19. As
to Receivables and Security Collateral. The Collateral Agent may at any
time in the Collateral Agent’s own name, in the name of a nominee of the
Collateral Agent or in the name of any Grantor communicate (by mail, telephone,
facsimile or otherwise) with Account Debtors and obligors in respect of any
Security Collateral to verify with such Persons, to the Collateral Agent’s
satisfaction, the existence, the amount, the terms of, and any other matter
relating to Receivables, payment intangibles, Security Collateral or Chattel
Paper.

 

SECTION 20. Remedies.
Subject to Section 8.02 of the Credit Agreement, 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 UCC (whether or not the UCC 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, to
the extent lawful and permitted, leased by any of the Grantors where the
Collateral or any part thereof is assembled or located for a reasonable period
in order to effectuate its rights and remedies hereunder or under law, without
obligation to such Grantor in respect of such occupation; and (iv) exercise any
and all rights and remedies of any of the Grantors under or in connection with
the Collateral, or otherwise in respect of 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
Receivables, the Related Contracts and the other Collateral, (B) withdraw, or
cause or direct the withdrawal, of all funds with respect to the Account
Collateral and (C) exercise all other rights and remedies with respect to
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, 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, as set forth in Section
8.03 of the Credit Agreement.

 

(c)           [Intentionally omitted].

 

(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 with respect to the Account Collateral or in any other deposit account.

 

(e)           The Collateral Agent may send to each bank party to any Deposit Account
Control Agreement a “Notice of Exclusive Control” (or similar term) as defined
in and under such Agreement.

 

(f)            In the event of any sale or other disposition
of any of the Intellectual Property Collateral of any Grantor, the goodwill
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.

 

(g)           If the Collateral Agent shall determine to exercise its right to sell
all or any of the Security Collateral of any Grantor pursuant to this Section 20,
each Grantor agrees that, upon request of the Collateral Agent, such Grantor
will, at its own reasonable expense, do or cause to be done all such other
commercially reasonable acts and things as may be reasonably necessary to make
such sale of such Security Collateral or any part thereof valid and binding and
in compliance with applicable law.

 

(h)           Notwithstanding anything to the contrary in this Agreement, the
exercise of remedies by the Collateral Agent under this Agreement upon the
occurrence and during the continuance of an Event of Default shall be subject
to Section 8.02 of the Credit Agreement.

 

SECTION 21. Indemnity
and Expenses. (a)  Each Grantor
agrees to indemnify, defend and save and hold harmless each Secured Party and
each Representative Party (as defined below) of any of the foregoing Persons
(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 (which shall be limited to one (1) counsel to the
Collateral Agent and the Lenders (exclusive of one local counsel to the Collateral
Agent and the Lenders in each appropriate jurisdiction), unless (x) the
interests of the Collateral Agent and the Lenders are sufficiently divergent,
in which case one (1) additional counsel may be appointed and (y) if the
interests of any Lender or group of Lenders (other than all of the Lenders) are
distinctly or disproportionately affected, one (1) additional counsel for such
Lender or group of Lenders))) 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), provided that
such indemnity shall not, as to any Indemnitee, be available to the extent that
such losses, claims, damages, liabilities or related expenses (x) are
determined by a court of competent jurisdiction by final judgment to have
resulted from the gross negligence, bad faith or willful misconduct of such
Indemnitee or such Indemnitee’s Representative Parties or (y) result from a
claim brought by any Grantor against an Indemnitee for breach of such
Indemnitee’s obligations under this Agreement, if such Grantor has obtained a
final judgment in

 

 

its favor on such claim as
determined by a court of competent jurisdiction. For purposes of this Section 21(a),
“Representative Parties” means, as to
any Person, (i) such Person’s officers, directors and employees and (ii) such
Person’s Affiliates, agents, advisers and other representatives, in each case
to the extent acting at the direction of such Person.

 

(b)           Each Grantor will within 30 days of written demand pay to the
Collateral Agent the amount of any and all reasonable expenses, including,
without limitation, the reasonable fees and reasonable out-of-pocket expenses
of its counsel and of any experts and agents, that the Collateral Agent may
incur in connection with (i) the custody, preservation, use or operation of, or
the sale of, collection from or other realization upon, any of the Collateral
of such Grantor, (ii) the exercise or enforcement of any of the rights of the
Collateral Agent or the other Secured Parties hereunder or (iii) 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 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 E hereto (each a “Security Agreement Supplement”), 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, each reference in this
Agreement and the other Loan Documents to the “Collateral” shall also mean and be a reference to the
Collateral granted by such Additional Grantor and each reference in this
Agreement to a Schedule shall also mean and be a reference to the schedules
attached to such Security Agreement Supplement.

 

SECTION 23. Notices,
Etc.  All notices and other
communications provided for hereunder shall be either (a) in writing (including
telegraphic, telecopier or telex communication) and mailed, telegraphed,
telecopied, telexed or otherwise delivered or (b) by electronic mail (if
electronic mail addresses are designated as provided below) confirmed
immediately in writing, in the case of the Borrower or the Collateral Agent (as
provided for the Administrative Agent thereunder), 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 its address set forth opposite such
Grantor’s name on the signature pages hereto or on the signature page to the
Security Agreement Supplement pursuant to which it became a party hereto; 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 deemed to be given or made upon the earlier to occur of
(a) actual receipt by the relevant party hereto and (b) (i) if delivered by
hand or by courier, when signed for by or on behalf of the relevant party
hereto; (ii) if delivered by mail, four (4) Business Days after deposit in the
mails, postage prepaid; (iii) if delivered by facsimile, when sent and receipt
has been confirmed; and (iv) if delivered by electronic mail, when delivered. Delivery
by telecopier of “pdf” 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
(x) obligations with respect to Secured Hedge Agreements, (y) Cash
Management Obligations not yet due and payable and (z) the contingent
obligations not yet accrued and payable under the Loan Documents), (ii) the
Maturity Date for the Revolving Credit Facility, (iii) the Maturity Date
for the Term Loan Facility and (iv) the termination or expiration of all
Letters of Credit, (b) be binding upon each Grantor, its permitted 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
permitted successors, transferees and assigns. Without limiting the generality
of the foregoing subsection (c), any Lender may assign or otherwise transfer
all or any portion of its rights and obligations under the Credit Agreement
(including, without limitation, all or any portion of its Commitments, the
Loans 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 herein or otherwise, in each
case as provided in Section 10.07 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 (other than sales of
Inventory in the ordinary course of business), 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 assignment and security interest granted hereby; provided, however,
that (i) such Grantor shall have delivered to the Collateral Agent a written
request for release describing the item of Collateral and the terms of the
sale, lease, transfer or other disposition in reasonable detail, 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 reasonably
request, and (ii) 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 2.05(b) 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
2.05(b) of the Credit Agreement.

 

(b)           Upon the latest of (i) the payment in full in cash of the Secured
Obligations (other than (x) obligations with respect to Secured Hedge
Agreements, (y) Cash Management Obligations not yet due and payable and
(z) contingent indemnification obligations not yet accrued and payable
under the Loan Documents), (ii) the Maturity Date for the Revolving Credit
Facility, (iii) the Maturity Date for the Term Loan Facility and (iv) the
cash collateralization, back-stop (on terms reasonably satisfactory to the
Collateral Agent), termination or expiration of all Letters of Credit, the
pledge 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. 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 27. Governing
Law. This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York.

 

[REMAINDER OF THIS PAGE
INTENTIONALLY LEFT BLANK.]

 

 

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.

 

	
   

  	
  UHS HOLDCO, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Rex T. Clevenger

  
	
   

  	
   

  	
   

  	
  Name: Rex T. Clevenger

  
	
   

  	
   

  	
   

  	
  Title: CFO & Executive Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address for Notices:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
					

 

 

 

	
   

  	
  UHS MERGER SUB, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Robert Juneja

  
	
   

  	
   

  	
   

  	
  Name: Robert Juneja

  
	
   

  	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address for Notices:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
					

 

 

	
   

  	
  UNIVERSAL
  HOSPITAL SERVICES, INC., after giving effect to the
  Acquisition

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Rex T. Clevenger

  
	
   

  	
   

  	
   

  	
  Name: Rex T. Clevenger

  
	
   

  	
   

  	
   

  	
  Title: CFO & Executive Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address for Notices:Exhibit 10.4

 

EXECUTION COPY

 

TRADEMARK SECURITY AGREEMENT

 

This Trademark Security
Agreement (as amended, amended and restated, supplemented or otherwise modified
from time to time, the “Trademark Security
Agreement”) dated May 31, 2007 is made by the Persons listed on the
signature pages hereof (collectively, the “Grantors”)
in favor of MERRILL LYNCH CAPITAL, a division of MERRILL LYNCH BUSINESS
FINANCIAL SERVICES INC., as collateral agent (the “Collateral Agent”) for the Secured Parties (as defined in the
Credit Agreement referred to below).

 

WHEREAS, UHS MERGER SUB,
INC., a Delaware corporation, UNIVERSAL HOSPITAL SERVICES, INC., a Delaware
corporation, UHS HOLDCO, INC., a Delaware corporation, have entered into a
Credit Agreement dated as of May 31, 2007 (as amended, amended and restated, supplemented
or otherwise modified from time to time, the “Credit
Agreement”) with the Lenders party thereto and MERRILL LYNCH
CAPITAL, a division of MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC., as
administrative agent.

 

WHEREAS, as a condition
precedent to (i) the making of the Loans, (ii) the issuance of Letters of
Credit by the Lenders under the Credit Agreement, and (iii) 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 as of May 31, 2007
made by the Grantors to the Collateral Agent (as amended, amended and restated,
supplemented or otherwise modified from time to time, the “Security Agreement”). Terms defined in the
Security Agreement and not otherwise defined herein are used herein as defined
in the Security Agreement.

 

WHEREAS, under the terms of
the Security Agreement, the Grantors have granted to the Collateral Agent, for
the ratable benefit of the Secured Parties, a security interest in, among other
property, certain Trademarks constituting Material Intellectual Property
Collateral of the Grantors, and have agreed as a condition thereof to execute
this Trademark Security Agreement for recording with the U.S. Patent and
Trademark Office and any other appropriate 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 continuing security interest in all of such Grantor’s
right, title and interest in and to the following (all of the following items
or types of property being herein collectively referred to as the “Trademark Collateral”), whether now owned
or existing or hereafter acquired or arising:

 

(i)            each Trademark constituting Material
Intellectual Property Collateral owned by the Grantor (including, without limitation,
each Trademark registration and application therefor, referred to in Schedule 1
hereto, and all of the goodwill of the business connected with the use of or
symbolized by, each Trademark);

 

(ii)           all registrations and applications for registration for any of the
foregoing, together with all renewals thereof;

 

 

(iii)          all rights in the foregoing provided by international treaties or
conventions, all rights corresponding thereto throughout the world and all
other rights of any kind whatsoever of such Grantor accruing thereunder or
pertaining thereto; and

 

(iv)          any and all proceeds of, collateral for, income, royalties and other
payments now or hereafter due and payable with respect to any and all of the
foregoing, including, without limitation, all Proceeds of and revenues from any
and all claims for damages and injunctive relief for past, present and future
infringement, dilution, misappropriation, violation, misuse or breach with
respect to any of the foregoing, with the right, but not the obligation, to sue
for and collect, or otherwise recover, all proceeds and damages relating
thereto.

 

Notwithstanding
the foregoing, no security interest shall be granted in any United States intent-to-use
applications to the extent that, and solely during the period in which, the
grant of a security interest therein would impair the validity or
enforceability of such intent-to-use trademark applications under federal law.

 

Section 2. Recordation.
Each Grantor authorizes and requests that the Commissioner for Trademarks and
any other applicable government officer record this Trademark Security
Agreement.

 

Section 3. Execution in
Counterparts. This Trademark Security 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 4. Grants, Rights
and Remedies. This Trademark Security Agreement has been executed and
delivered by the Grantors for the purpose of recording the grant of security
interest herein with the U.S. Patent and Trademark Office. The security
interest granted hereby has been granted to the Collateral Agent in connection
with the Security Agreement and is expressly subject to the terms and conditions
thereof and does not modify its terms or conditions or create any additional
rights or obligations for any party thereto or hereto. The Security Agreement
(and all rights and remedies of the Collateral Agent thereunder) shall remain
in full force and effect in accordance with its terms. In the event of a
conflict between any provision of this Trademark Security Agreement and any
provision of the Security Agreement, the Security Agreement shall govern.

 

Section 5. Governing Law.
This Trademark Security Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.

 

2

 

IN WITNESS WHEREOF, each Grantor has caused this Trademark Security
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.

 

	
   

  	
  UHS MERGER SUB, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert Juneja

  	
   

  
	
   

  	
   

  	
  Name: Robert Juneja

  
	
   

  	
   

  	
  Title: President

  

 

 

	
   

  	
  UNIVERSAL HOSPITAL SERVICES, INC.,
  after

  giving effect to the Acquisition

  
	
   

  	
  By:

  	
  /s/ Rex T. Clevenger

  	
   

  
	
   

  	
   

  	
  Name: Rex T. Clevenger

  
	
   

  	
   

  	
  Title: CFO & Executive Vice President

  

 

 

	
   

  	
  UHS HOLDCO, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rex T. Clevenger

  	
   

  
	
   

  	
   

  	
  Name: Rex T. Clevenger

  
	
   

  	
   

  	
  Title: CFO & Executive Vice President

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