Document:

Exhibit 10.4

 

 

HANGER ORTHOPEDIC GROUP, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

(As Amended and Restated Effective January 1, 2011)

 

 

Table of Contents

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    
	
ARTICLE I PURPOSE
    	
3
    
	
1.1.
    	
Effective Date
    	
3
    
	
1.2.
    	
Purpose
    	
3
    
	
1.3.
    	
Legal Compliance
    	
3
    
	
 
    	
 
    	
 
    
	
ARTICLE II DEFINITIONS
    	
4
    
	
2.1.
    	
“Accrued Benefit”
    	
4
    
	
2.2.
    	
“Administrator”
    	
4
    
	
2.3.
    	
“Applicable Interest Rate”
    	
4
    
	
2.4.
    	
“Base Salary”
    	
4
    
	
2.5.
    	
“Beneficiary”
    	
4
    
	
2.6.
    	
“Board”
    	
4
    
	
2.7.
    	
“Change in Control”
    	
4
    
	
2.8.
    	
“Code”
    	
4
    
	
2.9.
    	
“Committee”
    	
5
    
	
2.10.
    	
“Company”
    	
5
    
	
2.11.
    	
“Effective Date”
    	
5
    
	
2.12.
    	
“Employer”
    	
5
    
	
2.13.
    	
“ERISA”
    	
5
    
	
2.14.
    	
“Final Average Salary”
    	
5
    
	
2.15.
    	
“Participant”
    	
5
    
	
2.16.
    	
“Plan”
    	
5
    
	
2.17.
    	
“Present Value”
    	
5
    
	
2.18.
    	
“Separation from Service”
    	
5
    
	
2.19.
    	
“Spouse”
    	
5
    
	
2.20.
    	
“Year of Credited Service”
    	
5
    
	
2.21.
    	
“Year of Vesting Service”
    	
6
    
	
 
    	
 
    	
 
    
	
ARTICLE III PLAN   ADMINISTRATION
    	
6
    
	
3.1.
    	
Administrator
    	
6
    
	
3.2.
    	
Administrator Duties
    	
6
    
	
3.3.
    	
Information
    	
6
    
	
3.4.
    	
Claims Procedure
    	
6
    
	
3.5.
    	
Indemnification
    	
7
    
	
 
    	
 
    	
 
    
	
ARTICLE IV ELIGIBILITY   FOR PARTICIPATION AND ENTITLEMENT TO ACCRUED BENEFIT
    	
8
    
	
4.1.
    	
Designation of Participants
    	
8
    
	
4.2.
    	
Entitlement to Accrued Benefits
    	
8
    
	
4.3.
    	
Forfeiture for Certain Reasons
    	
8
    
	
 
    	
 
    	
 
    
	
ARTICLE V VESTING
    	
9
    
	
5.1.
    	
Vesting
    	
9
    
	
5.2.
    	
Forfeiture If Not Vested
    	
9
    

 

i

 

	
ARTICLE VI AMOUNT OF   ACCRUED BENEFIT
    	
9
    
	
6.1.
    	
Amount of Accrued Benefit
    	
9
    
	
 
    	
 
    	
 
    
	
ARTICLE VII FORM AND   COMMENCEMENT OF PAYMENTS TO A PARTICIPANT
    	
10
    
	
7.1.
    	
Form
    	
10
    
	
7.2.
    	
Commencement
    	
10
    
	
7.3.
    	
Reduction for Early Commencement
    	
10
    
	
7.4.
    	
Small Payment Rules
    	
10
    
	
7.5.
    	
Death While In Pay Status
    	
11
    
	
7.6.
    	
Withholding of Taxes and Amounts Due
    	
11
    
	
7.7.
    	
No Representation as to Tax Consequences
    	
11
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII DEATH   BENEFITS BEFORE PAYMENTS COMMENCE
    	
11
    
	
8.1.
    	
Amount
    	
11
    
	
8.2.
    	
Form
    	
12
    
	
8.3.
    	
Commencement
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE IX EFFECT OF   CHANGE IN CONTROL
    	
12
    
	
9.1.
    	
Vesting Accelerated for Active Participants
    	
12
    
	
9.2.
    	
Plan May Be Terminated and Paid Out
    	
12
    
	
9.3.
    	
Rabbi Trust To Be Established and Funded
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE X AMENDMENT OR   TERMINATION
    	
13
    
	
10.1.
    	
Amendment or Termination by Board
    	
13
    
	
10.2.
    	
No Reduction or Delay of Benefit Payments
    	
13
    
	
10.3.
    	
Cash Out on Plan Termination
    	
13
    
	
 
    	
 
    	
 
    
	
ARTICLE XI MISCELLANEOUS
    	
13
    
	
11.1.
    	
Unfunded Plan; Unsecured Liability
    	
13
    
	
11.2.
    	
No Contract of Employment
    	
14
    
	
11.3.
    	
Nonalienation of Benefits
    	
14
    
	
11.4.
    	
Effect on Retirement Plans
    	
14
    
	
11.5.
    	
Severability
    	
14
    
	
11.6.
    	
Merger, Consolidation or Acquisition
    	
14
    
	
11.7.
    	
Governing Law
    	
14
    
	
11.8.
    	
Binding Effect
    	
14
    

 

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ARTICLE I
 PURPOSE

 

1.1.          Effective Date.  HANGER ORTHOPEDIC GROUP, INC., a Delaware corporation (the “Company”), together with its subsidiaries and affiliates (collectively referred to herein as the “Employer”), established the Hanger Orthopedic Group, Inc. Supplemental Executive Retirement Plan (the “Plan”), as of the Effective Date.  The Plan was previously amended and restated as of January 1, 2005, to conform to the requirements of the American Jobs Creation Act of 2004 and new Code Section 409A.  The Plan is now amended and restated to revise the formula for determining the accrued benefits due to employees who initially become participants on or after January 1, 2011.

 

1.2.          Purpose.  The purpose of the Plan is to promote the best interests of the Company and Company stockholders by attracting and retaining key management employees having a strong interest in the success of the Company and its subsidiaries and affiliates and encouraging their service, loyalty and good counsel.

 

1.3.          Legal Compliance.  It is the intention of the Company:

 

(a)           That the Plan and all elections, deferrals, rights and features, notwithstanding any written terms or provisions to the contrary, be operated in good faith compliance with Code Section 409A; and

 

(b)           That the Plan will be amended or restated retroactively to January 1, 2005, or any later appropriate date, if necessary and without requiring the consent of any Participant or Beneficiary, in order that the Plan be in compliance with Code Section 409A; and

 

(c)           That the Plan shall at all times be administered and interpreted in such a manner as to constitute an unfunded Plan for a select group of management or highly compensated employees, so as to qualify for all available exemptions from the provisions of Title I of ERISA; and

 

(d)           That the Plan constitutes a nonqualified deferred compensation plan for all purposes of Code Section 3121(v)(2) (“Special Timing Rule”) and 4 U. S. C. Section 114 (“Pension Source Act”).

 

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ARTICLE II

DEFINITIONS

 

The following terms have the following meanings unless the context clearly indicates otherwise:

 

2.1.          “Accrued Benefit” means the annual benefit amount calculated pursuant to Article VI.

 

2.2.          “Administrator” means the person designated by the Committee pursuant to Article III to administer the Plan on behalf of the Employers.  As of January 1, 2011, such person is the Vice President of Human Resources.

 

2.3.          “Applicable Interest Rate” means one hundred twenty percent (120%) of the applicable federal long-term rate rounded to the nearest two-tenths of one percent, compounded annually, in effect under Code Section 1274 for the month for which the determination is made.

 

2.4.          “Base Salary” means the annual base salary paid by an Employer to an employee during a calendar year, prior to giving effect to any salary reduction agreement to which Code Sections 125, 132(f), or 402(g)(3) applies or any voluntary deferred compensation election, but not including any other kind of extra or additional compensation.  If the rate of Base Salary changes during a calendar year the higher rate shall be annualized to determine Base Salary for the year.

 

2.5.          “Beneficiary” means the person or entity designated by a Participant to be his or her beneficiary for purposes of receiving benefits under the Plan in the event the Participant dies before receiving payment in full of the Participant’s vested Accrued Benefit.  A designation of Beneficiary shall be valid and in effect only if a properly executed designation, in such form as the Administrator prescribes for this purpose, is filed and received by the Administrator before the death of the Participant.  If a Participant designates his or her Spouse as a Beneficiary, such Beneficiary designation automatically shall become null and void on the date of the Participant’s divorce or legal separation from such Spouse.  If a valid Beneficiary designation is not in effect at the time of the Participant’s death, the estate of the Participant is deemed to be the sole Beneficiary.  If the Administrator is uncertain as to the identity of the Participant’s Beneficiary, the Administrator may deem the estate of the Participant to be the sole Beneficiary.  A legal minor shall not qualify as a Beneficiary under the Plan.

 

2.6.          “Board” means the Board of Directors of Hanger Orthopedic Group, Inc.

 

2.7.          “Change in Control” means a change in the ownership of the Company, a change in the effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, all as defined by Code Section 409A and the guidance applicable to interpreting it.

 

2.8.          “Code” means the Internal Revenue Code of 1986, as it may be amended from time to time and as interpreted by regulations and rulings issued pursuant to the Code.  Any references to a specific provision shall be deemed to include references to any successor Code provision.

 

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2.9.          “Committee” means the Compensation Committee of the Board, which is authorized to oversee, administer and amend the Plan, or any successor committee selected by the Board for this purpose.

 

2.10.        “Company” means Hanger Orthopedic Group, Inc., or any successor.

 

2.11.        “Effective Date” means January 1, 2004.

 

2.12.        “Employer” means the Company and any of its subsidiaries and affiliates.

 

2.13.        “ERISA” means the Employee Retirement Income Security Act of 1974, as amended and as interpreted by regulations and rulings issued pursuant to ERISA.  Any references to a specific provision shall be deemed to include references to any successor ERISA provision.

 

2.14.        “Final Average Salary” means a Participant’s average Base Salary for the three (3) calendar years during which the Participant’s Base Salary was the highest within the last five (5) consecutive calendar years ending with the calendar year in which occurs the Participant’s termination of employment.  If the Participant has fewer than three (3) averaging years for this purpose, the actual number of years in which Base Pay is earned shall be used to determine Final Average Salary.

 

2.15.        “Participant” means an employee of an Employer who is employed in a key management position and who is initially designated in this Plan, or subsequently in writing by the Committee, as a Participant; provided, however, if a Participant transfers out of employment in a key management position, but remains an employee, the Committee shall, in its discretion, determine the extent to which Plan benefits shall continue to accrue and/or vest following such transfer.

 

2.16.        “Plan” means the Hanger Orthopedic Group, Inc. Supplemental Executive Retirement Plan, as contained in this document and including all amendments.

 

2.17.        “Present Value” means the present value of Accrued Benefits, as determined by the Administrator, discounted on the basis of the Applicable Interest Rate to the date of determination.

 

2.18.        “Separation from Service” means an employee’s last day of work or, if later, the expiration date of any required notice period applicable to the employee; provided, however, that no Separation from Service shall be deemed to have occurred earlier than the date as of which the employee has incurred a “separation from service” within the meaning of Code Section 409A, including Treas. Reg. 1.409A-1(h), determined by applying the default rules thereof.

 

2.19.        “Spouse” means the surviving spouse of the Participant, as such term is defined in the law of the State of residency of the Participant, and within the meaning of the federal Defense of Marriage Act (Pub. L. 104-99), at the applicable time.

 

2.20.        “Year of Credited Service” means twelve (12) full months of employment with the Employer measured from a Participant’s initial coverage date (as that term is described in Article VI).  Unless otherwise determined by the Administrator to be a greater amount, service for this purpose is limited to regular, full-time salaried employment by the Employer, including periods of authorized leave of absence.  Effective January 1, 2006, any period following a Participant’s termination of employment date with the Employer during which the Participant is entitled to wage continuation

 

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payments, severance pay, or separation pay shall be deemed for this purpose to be an authorized leave of absence and employment after a Participant’s initial coverage date of fewer than twelve (12) full months shall be counted as a pro rata Year of Credited Service.

 

2.21.        “Year of Vesting Service” means twelve (12) full months of employment with the Employer measured from an employee’s most recent employment date with the Employer.  Unless otherwise determined by the Administrator to be a greater amount, service for this purpose is limited to regular, full-time salaried employment by the Employer, including periods of authorized leave of absence.  Effective January 1, 2006, any period following a Participant’s termination of employment date with the Employer during which the Participant is entitled to wage continuation payments, severance pay, or separation pay shall be deemed for this purpose to be an authorized leave of absence.

 

ARTICLE III

PLAN ADMINISTRATION

 

3.1.          Administrator.  The Committee shall appoint the Administrator, who shall administer the Plan for the exclusive benefit of Participants and their Beneficiaries, subject to the terms of the Plan.  The Administrator shall administer the Plan in accordance with its terms and shall have the power and discretion to construe the terms of the Plan and to determine all questions arising in connection with the administration, interpretation, and application of the Plan.  The Administrator may establish procedures, correct any defect, or reconcile any inconsistency in such manner and to such extent as is deemed necessary or advisable to carry out the purposes of the Plan.  Prior to a Change in Control, all actions by the Administrator shall be binding on all persons unless they are arbitrary or capricious.  The standard of review of Administrator actions following a Change in Control shall be the less deferential de novo standard of review.

 

3.2.          Administrator Duties.  The Administrator is responsible for the general administration of the Plan, including, but not limited to the following:

 

(a)           The discretion to determine matters of eligibility of employees to participate or remain a Participant and to receive Plan benefits;

 

(b)           To determine the amount of benefits payable on behalf of a Participant;

 

(c)           To maintain Plan records;

 

(d)           To interpret the Plan and adopt rules for Plan administration; and

 

(e)           To assist Participants and Beneficiaries regarding their rights and benefits under the Plan.

 

3.3.          Information.  The Employer shall provide to the Administrator all information necessary to the administration of the Plan.  The Administrator may rely on such information as is supplied by the Employer and shall have no duty to verify such information.

 

3.4.          Claims Procedure.  A claim for benefits shall be deemed filed when the Administrator receives written notice from either the person claiming a benefit (hereafter referred to as

 

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“claimant”), or an Employer, that a Participant has either retired, died, or terminated the Participant’s employment for any other reason.  Upon receipt of this written notice, the Administrator shall determine the benefits, if any, payable to the claimant.  The Administrator shall communicate in writing to the claimant the benefits, if any, so determined within ninety (90) days after the date the Administrator receives the written notice described above that a claim has been filed.  If special circumstances require, the 90-day period set forth in the preceding sentence may be extended up to a period of ninety (90) additional days, provided the Administrator furnishes the claimant a written notice, prior to the expiration of the initial 90-day period, of the extension, specifying the special circumstances requiring the extension and the date by which the Administrator expects to determine the benefits payable, if any.

 

If any claim for benefits is subject to a dispute or is partially or wholly denied, the Administrator shall provide the claimant a written notice setting forth in a manner calculated to be understood by the claimant the specific reason(s) for the benefit determination made by the Administrator; specific reference(s) to pertinent Plan provisions on which the benefit determination is based; a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; necessary information as to the requirements for submitting the disputed claim for a review; and a statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination.

 

A claimant who, upon receipt of the written notice described in the preceding paragraph, desires a review of the benefit determination made by the Administrator must file not later than sixty (60) days (subject to circumstantial extensions) after such receipt a written request for a review of the benefit determination.  Such written request must be filed with the Committee.  The requested review shall be conducted by the Committee in such a manner so as to provide the claimant a full and fair review of the claimant’s claim and the initial determination.  Upon receipt by the Committee of a written request for such a review, the Committee shall advise the claimant in writing that the claimant or the claimant’s duly authorized representative, may review documents pertinent to the disputed claim and the claimant may submit written issues and comments to the Committee for consideration during the review.

 

The Committee shall review the disputed claim and render a decision not later than sixty (60) days following the receipt by the Committee of the written request for a review, unless special circumstances require an extension of the time for processing, in which case the decision shall be rendered not later than one hundred twenty (120) days following such receipt.  A written notice of any such extension shall be furnished to the claimant prior to the commencement of the extension.

 

The Committee shall render its decision on review in writing to the claimant within the applicable time period set forth above (but not later than five (5) days after the determination is made) and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, as well as references to the pertinent Plan provisions on which the decision is based.  Should the Committee fail to render its decision within the applicable time period the claim shall be deemed to have been denied.

 

“Written notice” includes electronic notification meeting the requirements of ERISA regulation 2520.104b-1(c)(1)(i), (iii), and (iv).

 

3.5.          Indemnification.  The Company shall indemnify, hold harmless and defend the Administrator from any liability which the Administrator may incur in connection with the performance

 

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of his or her duties in connection with this Plan, so long as the Administrator has not acted in an arbitrary and capricious manner prior to a Change in Control (or was acting in good faith after a Change in Control) and within what the Administrator understood to be the scope of his or her duties.

 

ARTICLE IV
 ELIGIBILITY FOR PARTICIPATION AND ENTITLEMENT TO ACCRUED BENEFIT

 

4.1.         Designation of Participants.  The Committee is authorized to designate as Participants those key management employees the Committee has determined should be awarded coverage by this Plan.  In addition, the Committee is authorized to increase the applicable percentage set forth in the Participant’s Table, described in Article VI, for a Participant who is promoted.

 

4.2.         Entitlement to Accrued Benefits.  Subject to Section 4.3, and the small payment rules in Section 7.4, a Participant shall be entitled to the Participant’s vested Accrued Benefit upon the first to occur of:

 

(a)           Normal retirement; defined as Separation from Service and attainment of age sixty-five (65); or

 

(b)           Early retirement; defined as Separation from Service and attainment of age sixty-two (62), provided the Participant has completed at least five (5) Years of Vesting Service.

 

4.3.         Forfeiture for Certain Reasons.  Notwithstanding Section 4.2 or any other Plan provision, one hundred percent (100%) of a Participant’s unpaid Accrued Benefit shall be forfeited and not eligible for payment if the Committee determines as of the Participant’s termination of employment, or subsequently, that either of the following has occurred:

 

(a)           The Participant, in a willful and continuous manner, failed to discharge the Participant’s duties and responsibilities as an employee after having been given notice and an opportunity to cure; the Participant committed a material act of dishonesty involving the Employer; or the Participant was convicted of a felony; or

 

(b)           The Participant materially violated any confidentiality agreement or other covenant restricting actions detrimental to the Employer as set forth in written agreements entered into by the Employer and the Participant.

 

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ARTICLE V

VESTING

 

5.1.         Vesting.  A Participant’s entitlement to his or her Accrued Benefit hereunder vests and becomes nonforfeitable (except as provided in Section 4.3) at the rate of twenty percent (20%) per Year of Vesting Service.  The Committee may apply a shorter vesting schedule in the case of any Participant, should it choose to do so.

 

5.2.         Forfeiture If Not Vested.  If Separation from Service occurs before the Participant is vested in any Accrued Benefits, no benefits are payable hereunder.

 

ARTICLE VI

AMOUNT OF ACCRUED BENEFIT

 

6.1.         Amount of Accrued Benefit.  Subject to other Plan provisions limiting or reducing benefits, the amount of a Participant’s Accrued Benefit shall be equal to:

 

(a)           with respect to a Participant whose initial coverage date was prior to January 1, 2011, the Participant’s Final Average Salary multiplied by the applicable percentage, as determined by the Committee and set out in the Participants’ Table I, attached hereto and incorporated herein by this reference, multiplied by a fraction determined as follows:

 

(i)            If a Participant’s initial coverage date (determined by the Committee and set out in the Participants’ Table) occurs on or before the Participant’s forty-fifth (45th) birthday, the numerator of the fraction shall be the Participant’s total number of Years of Credited Service as of the Participant’s termination of employment or twenty (20) Years of Credited Service (whichever is less) and the denominator shall be twenty (20) Years of Credited Service.

 

(ii)           If a Participant’s initial coverage date (as described in (i)) occurs after the Participant’s forty-fifth (45th) birthday, the numerator of the fraction shall be the maximum number of Years of Credited Service that could be completed between the Participant’s initial Plan coverage date and the Participant’s sixty-fifth (65th) birthday or, if less, the Participant’s total number of Years of Credited Service as of the Participant’s termination of employment, and the denominator shall be the maximum number of Years of Credited Service that could be completed between the Participant’s initial Plan coverage date and the Participant’s sixty-fifth (65th) birthday.

 

(b)           with respect to a Participant whose initial coverage date (determined by the Committee and set out in the Participants’ Table II) is on or after January 1, 2011, the Participant’s Final Average Salary multiplied by two percent (2%) (or such different percentage, as determined by the Committee and set out in the Participants’ Table II, attached hereto and incorporated herein by this reference), multiplied by the Participant’s total number of Years of Credited Service as of the Participant’s termination of employment; provided that in no event shall the amount of the Participant’s Accrued Benefit determined under this

 

9

 

subsection (b) exceed forty percent (40%) of the Participant’s Final Average Salary.

 

ARTICLE VII
 FORM AND COMMENCEMENT OF PAYMENTS TO A PARTICIPANT

 

7.1.         Form.  A Participant’s Accrued Benefit shall be paid in the form of a single annual payment for fifteen (15) consecutive calendar years except as otherwise provided in the small payment rules in Section 7.4.

 

7.2.         Commencement.  Payments shall ordinarily commence on an Employer payroll date in January of the calendar year next following the calendar year in which occurs the earlier of the Participant’s normal or early retirement dates.  However, any benefit payments that would otherwise be payable within six (6) months after the Participant’s Separation from Service shall be accumulated and paid on the first day of the seventh month following the date of the Participant’s Separation from Service (or if earlier, the date of death of the Participant).

 

7.3.         Reduction for Early Commencement.  Any benefit payments commencing before the Participant has attained age sixty-five (65) shall be reduced to reflect the number of years by which the benefit payment commencement date precedes the date on which normal retirement benefits would have commenced, with the reduction being two percent (2%) per year.  There is no actuarial increase for commencement of payments after the January following attainment of age sixty-five (65).

 

7.4.         Small Payment Rules.  The following small payment rules are effective on and after January 1, 2006:

 

(a)           Small Present Value at Payment Due Date.  If on any date on which a payment to a Participant is otherwise due under this Article VII, the Present Value of all remaining payments due to the Participant is one hundred thousand dollars ($100,000) or less, such Present Value amount shall be paid in a lump sum on the payment date to the Participant in full and complete termination of the entirety of the Participant’s interest in the Plan.  Payment shall be made on the first day of the month following the six (6) month anniversary of the Participant’s Separation from Service.  Such dollar amount shall be adjusted not less frequently than once every five (5) years by the Administrator for cost-of-living increases based on changes in the Consumer Price Index for all Urban Consumers (CPI-U) beginning in 2010.  Notwithstanding the foregoing, the amount paid under this subsection shall not exceed the maximum permitted payment amount described in Treas. Reg. 1.409A-2(b)(2)(iii).

 

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(b)           De Minimis Cash Out Rule at Termination of Employment.  If, as of a Participant’s Separation from Service, the Present Value of the Participant’s vested Accrued Benefit is no greater than the applicable dollar amount under Code Section 402(g)(1)(B), such amount shall be paid to the Participant in a single lump sum amount in full and complete settlement of the Participant’s interest in the Plan.  Payment shall be made on the first day of the month following the six (6) month anniversary of the Participant’s Separation from Service.

 

7.5.         Death While In Pay Status.  If a Participant who is receiving installment payments of his or her Accrued Benefits dies before payment in full is completed, any remaining installment payments shall be made to the Participant’s Beneficiary, including when applicable, in accordance with the small payment rule of Section 7.4(a).

 

7.6.         Withholding of Taxes and Amounts Due.  The Employer shall have the right to require the Participant to remit to the Employer an amount sufficient to satisfy Federal, state, and local withholding tax requirements, or to deduct from all payments made pursuant to the Plan (or from a Participant’s other compensation) amounts sufficient to satisfy withholding tax requirements.  Employment taxes with respect to amounts deferred hereunder shall be payable in accordance with Code Section 3121(v)(2) and may be withheld from a Participant’s compensation if due prior to the time of a distribution under the Plan.  In addition, the Employer may deduct from any payment hereunder all amounts owed to the Employer by the Participant for any reason.

 

7.7.         No Representation as to Tax Consequences.  The Employer makes no representations, warranties, or assurances and assumes no responsibility as to the tax consequences of this Plan.

 

ARTICLE VIII
 DEATH BENEFITS BEFORE PAYMENTS COMMENCE

 

8.1.         Amount.  If a Participant who has a vested interest in his or her Accrued Benefit dies before payment of the Participant’s vested Accrued Benefit has commenced, the Beneficiary of the Participant shall be entitled to receive a death benefit hereunder.  The death benefit is equal to the deceased Participant’s vested Accrued Benefit at the time of death.

 

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8.2.         Form.  The death benefit shall be paid in the form of a single annual payment for fifteen (15) consecutive calendar years, subject to Section 8.3(b) and the small payment rules of Section 7.4.

 

8.3.         Commencement.  Upon the death of a Participant eligible for early or normal retirement, death benefit payments shall commence on a payroll date in January of the calendar year next following the calendar year in which the Participant’s death occurs.  Any payments commencing before the Participant would have reached age sixty-five (65) shall be reduced to reflect the number of years by which the benefit payment commencement date precedes the date on which normal retirement benefits would have commenced to the Participant, with the reduction being at the rate of two percent (2%) per year.

 

(b)           Upon the death of a Participant who is not eligible for early or normal retirement at the time of death, the Administrator shall discount to their Present Value the installment payments that would otherwise be payable to the Participant, had the Participant survived to age sixty-five (65), and make payment in full in a single lump sum payment to the Beneficiary.

 

ARTICLE IX
 EFFECT OF CHANGE IN CONTROL

 

9.1.         Vesting Accelerated for Active Participants.  If a Change in Control is determined by the Board to have occurred while a Participant is actively employed by the Employer, the Participant shall be immediately and fully vested in the Participant’s Accrued Benefit determined as of the date of the Change in Control.

 

9.2.         Plan May Be Terminated and Paid Out.  If a Change in Control is determined by the Board to have occurred then, in the sole discretion of the Board, and subject to Code Section 409A, including specifically the plan termination rules in Treas. Reg. 1.409A-3(j)(4)(ix), the Plan may be terminated and the entire Present Value of Accrued Benefits of each Participant be distributed in a lump sum as soon as reasonably possible.

 

9.3.         Rabbi Trust To Be Established and Funded.  If a Change in Control is determined by the Board to have occurred, and the Plan is not terminated as described in Section 9.2, the Company shall, no later than thirty (30) days after the Change in Control, pay into an irrevocable grantor trust (sometimes also referred to as a “rabbi trust”), created by the Company for this purpose, an amount so that the trust’s assets are equal to the Present Value of the Accrued Benefits of all Participants determined on the date of the Change in Control, and periodically thereafter pay into the trust any additional amount necessary so that the trust’s assets continue to equal the Present Value of all Accrued Benefits determined at least annually thereafter.  All assets held by such trust shall be subject to the claims of the Company’s creditors in the event of the Company’s insolvency.  Insolvency for this purpose means that the Company is unable to pay its debts as they become due or the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code.

 

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ARTICLE X

AMENDMENT OR TERMINATION

 

10.1.       Amendment or Termination by Board.  There is no time limit on the duration of the Plan.  However, the Company, by action of the Board or its Compensation Committee, may at any time to comply with Code Section 409A or for any reason, amend or terminate the Plan; provided, however, that the provisions of Section 9.3 shall not be amended or in any way curtailed following a Change in Control until all Accrued Benefits as of the date of the Change in Control have been paid.

 

10.2.       No Reduction or Delay of Benefit Payments.  Except to the extent required for the Plan to comply with Code Section 409A or other applicable law, however, no amendment shall be effective so as to reduce the amount of benefit payable to any Participant or to delay the payment of any amount to a Participant beyond the time that such amount would be payable without regard to such amendment.

 

10.3.       Cash Out on Plan Termination.  If the Plan is terminated, to the extent permissible under Code Section 409A, the Present Value of all Accrued Benefits shall be distributed to Participants in lump sum payments as of the effective date of the Plan termination (or at such other time as permitted by Code Section 409A).

 

ARTICLE XI
 MISCELLANEOUS

 

11.1.       Unfunded Plan; Unsecured Liability.  This Plan is unfunded and is maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees.  The Company may authorize creation of a trust or other arrangements to assist the Company in meeting its obligations under the Plan.  However, any liability to any person with respect to the Plan shall be based solely upon contractual obligations created pursuant to the Plan.  Nothing contained in this Plan and no action taken pursuant to its terms shall create or be construed to create a trust of any kind, or a fiduciary relationship between any Employer and the Participant, or any other person.  The right of the Participant to receive benefits hereunder shall be an unsecured claim against the general assets of the Participant’s Employer and neither the Participant nor any other person shall have any rights in or against any amounts which may be earmarked by the Employer in order to implement this Plan or any other specific assets of the Employer.

 

13

 

11.2.       No Contract of Employment.  The Plan is an expression of the Company’s current policy with respect to Company executives who meet the eligibility requirements set forth in the Plan.  The Plan is not a contract of employment, nor does it provide any Participant with a right to continue in the employment of the Employer.  No Participant, Beneficiary or other person shall have any legal or other right to any benefit payments except in accordance with the terms of the Plan, and then only while the Plan is in effect and subject to the Company’s right to amend or terminate the Plan.

 

11.3.       Nonalienation of Benefits.  The right of a Participant or any other person to the payment of benefits under this Plan shall not be assigned, transferred, pledged or encumbered except as otherwise provided by law, and no rights or benefits hereunder shall be subject to attachment or legal process for or against a Participant or his or her Beneficiary.

 

11.4.       Effect on Retirement Plans.  Any benefits accrued pursuant to this Plan shall not be deemed compensation to the Participant for the purpose of computing benefits under any qualified retirement plan or other benefit plan, whether qualified or nonqualified, which may be maintained by the Employer.

 

11.5.       Severability.  If any of the provisions of the Plan shall be held to be invalid, or shall be determined to be inconsistent with the purpose of the Plan, the remainder of the Plan shall not be affected thereby.

 

11.6.       Merger, Consolidation or Acquisition.  This Plan shall be binding upon and inure to the benefit of the Company and its successors and assigns and the Participants and their heirs, executors, administrators, and legal representatives.

 

11.7.       Governing Law.  This Plan shall be construed in accordance with and governed by the laws of the State of Delaware to the extent not preempted by federal law.

 

11.8.       Binding Effect.  This document and any amendments hereto contain all the terms and provisions of the Plan and shall constitute the entire Plan, any other alleged terms or provisions being of no effect.  Obligations incurred by the Employer pursuant to this Plan shall be binding upon and inure to the benefit of the Participant, his or her Beneficiaries, personal representatives, heirs and legatees.

 

Dated this 18th day of January, 2011.

 

 

	
 
    	
 
    	
HANGER   ORTHOPEDIC GROUP, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Andrew C. Morton
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Its:
    	
Vice President — Human Resources
    

 

14Exhibit 10.9

 

EXECUTION COPY

 

	
 
    

 

 

GUARANTEE AND COLLATERAL AGREEMENT

 

made by

 

HANGER ORTHOPEDIC GROUP, INC.,
 as Borrower,

 

and certain of its Subsidiaries
 in favor of

 

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

 

Dated as of December 1, 2010

 

	
 
    

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
SECTION 1. DEFINED TERMS
    	
1
    
	
 
    	
 
    	
 
    
	
1.1
    	
Definitions
    	
1
    
	
1.2
    	
Other Definitional Provisions
    	
6
    
	
 
    	
 
    	
 
    
	
SECTION 2. GUARANTEE
    	
6
    
	
 
    	
 
    	
 
    
	
2.1
    	
Guarantee
    	
6
    
	
2.2
    	
Right of Contribution
    	
8
    
	
2.3
    	
Subrogation
    	
8
    
	
2.4
    	
Amendments, etc. with respect to the Borrower   Obligations
    	
8
    
	
2.5
    	
Guarantee Absolute and Unconditional
    	
9
    
	
2.6
    	
Reinstatement
    	
10
    
	
2.7
    	
Payments
    	
11
    
	
 
    	
 
    	
 
    
	
SECTION 3. GRANT OF SECURITY   INTEREST
    	
11
    
	
 
    	
 
    
	
SECTION 4. REPRESENTATIONS   AND WARRANTIES
    	
12
    
	
 
    	
 
    	
 
    
	
4.1
    	
Representations in Credit Agreement
    	
12
    
	
4.2
    	
Title; No Other Liens
    	
12
    
	
4.3
    	
Perfected First Priority Liens
    	
12
    
	
4.4
    	
Jurisdiction of Organization; Chief Executive Office
    	
12
    
	
4.5
    	
[Reserved]
    	
12
    
	
4.6
    	
Farm Products
    	
12
    
	
4.7
    	
Investment Property
    	
13
    
	
4.8
    	
Receivables
    	
13
    
	
4.9
    	
Intellectual Property
    	
13
    
	
 
    	
 
    
	
SECTION 5. COVENANTS
    	
14
    
	
 
    	
 
    
	
5.1
    	
Covenants in Credit Agreement
    	
14
    
	
5.2
    	
Delivery of Instruments and Chattel Paper
    	
14
    
	
5.3
    	
Maintenance of Insurance
    	
14
    
	
5.4
    	
Payment of Obligations
    	
15
    
	
5.5
    	
Maintenance of Perfected Security Interest; Further   Documentation
    	
15
    
	
5.6
    	
Changes in Name, etc.
    	
16
    
	
5.7
    	
Notices
    	
16
    
	
5.8
    	
Investment Property
    	
16
    
	
5.9
    	
Receivables
    	
17
    
	
5.10
    	
Intellectual Property
    	
18
    
	
5.11
    	
Commercial Tort Claims
    	
19
    
	
 
    	
 
    	
 
    
	
SECTION 6. REMEDIAL   PROVISIONS
    	
19
    
	
 
    	
 
    	
 
    
	
6.1
    	
Certain Matters Relating to Receivables
    	
19
    
	
6.2
    	
Communications with Obligors; Grantors Remain Liable
    	
20
    
	
6.3
    	
Pledged Stock
    	
20
    
	
6.4
    	
Proceeds to be Turned Over To Administrative Agent
    	
21
    
	
6.5
    	
Application of Proceeds
    	
21
    
	
6.6
    	
Code and Other Remedies
    	
22
    
	
6.7
    	
Sale of Pledged Stock
    	
23
    

 

i

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
6.8
    	
Deficiency
    	
23
    
	
 
    	
 
    	
 
    
	
SECTION 7. THE   ADMINISTRATIVE AGENT
    	
23
    
	
 
    	
 
    	
 
    
	
7.1
    	
Administrative Agent’s Appointment as   Attorney-in-Fact, etc.
    	
23
    
	
7.2
    	
Duty of Administrative Agent
    	
25
    
	
7.3
    	
Execution of Financing Statements
    	
25
    
	
7.4
    	
Authority of Administrative Agent
    	
25
    
	
 
    	
 
    	
 
    
	
SECTION 8. MISCELLANEOUS
    	
26
    
	
 
    	
 
    	
 
    
	
8.1
    	
Amendments in Writing
    	
26
    
	
8.2
    	
Notices
    	
26
    
	
8.3
    	
No Waiver by Course of Conduct; Cumulative Remedies
    	
26
    
	
8.4
    	
Enforcement Expenses; Indemnification
    	
26
    
	
8.5
    	
Successors and Assigns
    	
27
    
	
8.6
    	
Set-Off
    	
27
    
	
8.7
    	
Counterparts
    	
27
    
	
8.8
    	
Severability
    	
27
    
	
8.9
    	
Section Headings
    	
27
    
	
8.10
    	
Integration
    	
27
    
	
8.11
    	
GOVERNING LAW
    	
27
    
	
8.12
    	
Submission To Jurisdiction; Waivers
    	
28
    
	
8.13
    	
Acknowledgements
    	
28
    
	
8.14
    	
Additional Grantors
    	
28
    
	
8.15
    	
Releases
    	
28
    
	
8.16
    	
WAIVER OF JURY TRIAL
    	
29
    
	
8.17
    	
Effectiveness of ACP Execution
    	
29
    

 

	
Schedules
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Schedule   1
    	
 
    	
Notice   Address of Guarantors
    
	
Schedule   2
    	
 
    	
Description   of Pledged Securities
    
	
Schedule   3
    	
 
    	
Filings   and Other Actions Required to Perfect Security Interest
    
	
Schedule   4
    	
 
    	
Jurisdiction   of Organization, Identification Number and Location of Chief Executive   Office
    
	
Schedule   5
    	
 
    	
[Reserved]
    
	
Schedule   6
    	
 
    	
[Reserved]
    
	
Schedule   7
    	
 
    	
Intellectual   Property
    
	
Schedule   8
    	
 
    	
Intellectual   Property Matters
    
	
Schedule   9
    	
 
    	
Deposit   Accounts
    
	
 
    	
 
    	
 
    
	
Annexes
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Annex   I
    	
 
    	
Assumption   Agreement
    
	
Annex   II
    	
 
    	
[Reserved]
    
	
Annex   III
    	
 
    	
Form of   Patent Security Agreement
    
	
Annex   IV
    	
 
    	
Form of   Trademark Security Agreement
    

 

ii

 

GUARANTEE AND COLLATERAL AGREEMENT, dated as of December 1, 2010, made by each of the signatories hereto (together with any other entity that may become a party hereto as provided herein, the “Grantors”), in favor of BANK of AMERICA, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”) for the banks and other financial institutions (the “Lenders”) from time to time parties to the Credit Agreement, dated as of December 1, 2010, (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement,”), among HANGER ORTHOPEDIC GROUP, INC., a Delaware corporation (the “Borrower”), the several banks and other financial institutions or entities from time to time parties to the Credit Agreement (the “Lenders”) and the Administrative Agent.

 

W I T N E S S E D:

 

WHEREAS, pursuant to the Credit Agreement, the Lenders have severally agreed to make extensions of credit to the Borrower upon the terms and subject to the conditions set forth therein;

 

WHEREAS, the Borrower is a member of an affiliated group of companies that includes each other Grantor;

 

WHEREAS, the proceeds of the extensions of credit under the Credit Agreement will be used in part to enable the Borrower to make valuable transfers to one or more of the other Grantors in connection with the operation of their respective businesses;

 

WHEREAS, certain of the Qualified Counterparties may enter into Specified Agreements with one or more of the Grantors;

 

WHEREAS, the Borrower and the other Grantors are engaged in related businesses, and each Grantor will derive substantial direct and indirect benefit from the extensions of credit under the Credit Agreement and from the Specified Agreements; and

 

WHEREAS, it is a condition precedent to the obligation of the Lenders to make their respective extensions of credit to the Borrower under the Credit Agreement that the Grantors shall have executed and delivered this Agreement to the Administrative Agent;

 

NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the Borrower thereunder, each Grantor hereby agrees with the Administrative Agent, for the benefit of the Secured Creditors, as follows:

 

SECTION 1.  DEFINED TERMS

 

1.1           Definitions.

 

(a)           Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement and the following terms are used herein as defined in the New York UCC:  Accounts, Certificated Security, Chattel Paper, Commercial Tort Claims, Documents, Equipment, Farm Products, General Intangibles, Goods, Instruments, Inventory, Letter-of-Credit Rights and Supporting Obligations.

 

(b)           The following terms shall have the following meanings:

 

“Agreement”:  this Guarantee and Collateral Agreement, as the same may be amended, supplemented or otherwise modified from time to time.

 

 

“Borrower Credit Agreement Obligations”:  the collective reference to the unpaid principal of and interest on the Loans and reimbursement obligations under Letters of Credit and all other obligations and liabilities of the Borrower (including interest and fees accruing at the then applicable rate provided in the Credit Agreement after the maturity of the Loans and such reimbursement obligations and interest and fees accruing at the then applicable rate provided in the Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest and fees is allowed in such proceeding) to the Administrative Agent or any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Credit Agreement, this Agreement, or the other Loan Documents, or any Letter of Credit, or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Administrative Agent or to the Lenders that are required to be paid by the Borrower pursuant to the terms of any of the foregoing agreements).

 

“Borrower Hedge Agreement Obligations”:  the collective reference to all obligations and liabilities of the Borrower (including interest and fees accruing at the then applicable rate provided in any Specified Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) to any Qualified Counterparty, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, any Specified Agreement or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the relevant Qualified Counterparty that are required to be paid by the Borrower pursuant to the terms of any Specified Agreement).

 

“Borrower Obligations”:  the collective reference to (i) the Borrower Credit Agreement Obligations, (ii) the Borrower Hedge Agreement Obligations, but only to the extent that, and only so long as, the Borrower Credit Agreement Obligations are secured and guaranteed pursuant hereto, and (iii) all other obligations and liabilities of the Borrower, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement (including all fees and disbursements of counsel to the Administrative Agent or to the Secured Creditors that are required to be paid by the Borrower pursuant to the terms of this Agreement).

 

“Collateral”:  as defined in Section 3.

 

“Collateral Account”:  any collateral account established by the Administrative Agent as provided in Section 6.1 or 6.4.

 

“Copyrights”:  all copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered, including any renewals thereof, or unregistered and whether published or unpublished (including those listed in Schedule 7), all regis trations and recordings thereof, and all applications in connection therewith, including all registrations, recordings and applications in the United States Copyright Office.

 

2

 

“Copyright Licenses”:  any written agreement naming any Grantor as licensor or licensee (including those listed in Schedule 7), granting any right under any Copyright, including the grant of rights to manufacture, distribute, exploit and sell materials derived from any Copyright.

 

“Deposit Account”:  as defined in the Uniform Commercial Code of any applicable jurisdiction and, in any event, including any demand, time, savings, passbook or like account maintained with a depositary institution.

 

“Excluded Account” shall mean (i) any Deposit Account maintained with Bank of America, N.A., (ii) any Deposit Account the balance of which is swept at the end of each Business Day into another Deposit Account that is subject to Administrative Agent’s control (within the meaning of Section 9-104  of the applicable Uniform Commercial Code), and (iii) any Deposit Account the average daily available balance of which in the aggregate, together with the average daily available balance of all such other Deposit Accounts of all Grantors excluded pursuant to this clause (iii), shall not exceed $5,000,000.

 

“Excluded Assets”:  the collective reference to (i) any contract, General Intangible, Copyright License, Patent License or Trademark License (“Intangible Assets”), or other asset upon which a Lien is permitted pursuant to Section 8.01(f) of the Credit Agreement in each case to the extent the grant by the relevant Grantor of a security interest pursuant to this Agreement in such Grantor’s right, title and interest in such Intangible Asset or other asset (A) is prohibited by provisions of any contract, agreement, instrument or indenture governing such Intangible Asset or other asset, or (B) would give any other party to such contract, agreement, instrument or indenture a right to terminate its obligations thereunder, or (C) is permitted only with the consent of another party, if such consent has not been obtained, in each case unless such prohibition, right or requirement to obtain consent is rendered ineffective pursuant to Sections 9-406(d), 9-407(a), 9-408(a) or 9-409 of any applicable Uniform Commercial Code (or any successor provision or provisions) or, if determined by a court of competent jurisdiction, any other applicable law (including the Bankruptcy Code) or principles of equity, (ii) assets owned by any Grantor on the date hereof or hereafter acquired and any proceeds thereof that are subject to a Lien securing a purchase money obligations or Capital Lease Obligations permitted to be incurred pursuant to the provisions of the Credit Agreement (and including any refinancing thereof permitted pursuant to the Credit Agreement) (including cross-collateralization to other purchase money obligation or Capital Lease Obligation permitted by the Credit Agreement and provided by the same Person and its Affiliates) to the extent and for so long as the contract or other agreement in which such Lien is granted (or the documentation providing for such purchase money obligation or Capital Lease Obligation) prohibits the creation of any other Lien on such assets and proceeds, (iii) any property of a person existing at the time such person is (or the assets of such person are) acquired or merged with or into or consolidated with any Grantor that is subject to a Lien permitted by Section 8.01(l) of the Credit Agreement (and including any refinancing thereof) to the extent and for so long as the contract or other agreement in which such Lien is granted prohibits the creation of any other Lien on such property, (iv) any intent-to-use trademark application to the extent and for so long as creation by a Grantor of a security interest therein would result in the loss by such Grantor of any material rights therein, (v) any Equity Interests of a Foreign Subsidiary to the extent and for so long as the pledge thereof to the Administrative Agent could result in adverse tax consequences to the Borrower; provided that this clause (v) shall not apply to (A) Voting Stock of any Subsidiary which is a first-tier controlled foreign corporation (as defined in Section 957(a) of the Code) representing 66% of the total voting power of all outstanding Voting Stock of such Subsidiary and (B) 100% of the Equity Interests not constituting Voting Stock of any such Subsidiary, except that any such Equity Interests constituting “stock entitled to vote” within the meaning of Treasury Regulation Section 1.956-2(c)(2) shall be treated as Voting Stock for

 

3

 

purposes of this clause (v); (vi) any rights or property to the extent that any law or governmental regulation prohibits the creation or perfection of a security interest therein; provided, that in any event any Receivable or any money or other amounts due or to become due under any such contract, agreement, instrument or indenture shall not be Excluded Assets to the extent that any of the foregoing is (or if it contained a provision limiting the transferability or pledge thereof would be) subject to Section 9-406 of the New York UCC, and (vii) Foreign Subsidiary Voting Stock excluded from the definition of “Pledged Stock” set forth in this Section 1.1.

 

“Foreign Subsidiary”:  any Subsidiary organized under the laws of any jurisdiction outside the United States of America.

 

“Foreign Subsidiary Voting Stock”:  the voting Capital Stock of any Foreign Subsidiary.

 

“Grantor Obligations”: with respect to the Borrower, means Borrower Obligations and with respect to any Guarantor, means such Guarantor’s Obligations.

 

“Guarantor Hedge Agreement Obligations”:  the collective reference to all obligations and liabilities of a Guarantor (including interest accruing at the then applicable rate provided in any Specified Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to such Guarantor, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) to any Qualified Counterparty, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, any Specified Agreement or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the relevant Qualified Counterparty that are required to be paid by such Guarantor pursuant to the terms of any Specified Agreement).

 

“Guarantor Obligations”:  with respect to any Guarantor, the collective reference to (i) any Guarantor Hedge Agreement Obligations of such Guarantor, but only to the extent that, and only so long as, the other Obligations of such Guarantor are secured and guaranteed pursuant hereto, and (ii) all obligations and liabilities of such Guarantor which may arise under or in connection with this Agreement (including Section 2) or any other Loan Document to which such Guarantor is a party, in each case whether on account of guarantee obligations, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Administrative Agent or to any Secured Creditors that are required to be paid by such Guarantor pursuant to the terms of this Agreement or any other Loan Document).

 

“Guarantors”:  the collective reference to each Grantor other than the Borrower.

 

“Intellectual Property”:  the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks and the Trademark Licenses, inventions, processes, designs, formulae, trade secrets and know-how, computer software (including data and related documentation), other than off-the-shelf software, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.

 

“Intercompany Note”:  any promissory note evidencing loans made by any Grantor to the Borrower or any of its Subsidiaries.

 

4

 

“Investment Property”:  the collective reference to (i) all “investment property” as such term is defined in Section 9-102(a)(49) of the New York UCC (other than any Foreign Subsidiary Voting Stock excluded from the definition of “Pledged Stock” in this Section 1.1) and (ii) whether or not constituting “investment property” as so defined, all Pledged Notes and all Pledged Stock.

 

“Issuers”:  the collective reference to each issuer of any Investment Property.

 

“Licensed Intellectual Property”:  as defined in Section 4.10.

 

“New York UCC”:  the Uniform Commercial Code as from time to time in effect in the State of New York.

 

“Obligations”:  (i) in the case of the Borrower, the Borrower Obligations, and (ii) in the case of each Guarantor, its Guarantor Obligations.

 

“Patents”:  (i) all letters patent, including any reissues or extensions, of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof and all goodwill associated therewith, including any of the foregoing referred to in Schedule 7, and (ii) all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, including any of the foregoing referred to in Schedule 7.

 

“Patent License”:  any agreement, whether written or oral, providing for the grant by or to any Grantor of any right to manufacture, use or sell any invention covered in whole or in part by a Patent, including any of the foregoing referred to in Schedule 7.

 

“Pledged Notes”:  all promissory notes listed on Schedule 2, all Intercompany Notes at any time issued to any Grantor and all other promissory notes issued to or held by any Grantor (other than promissory notes issued in connection with extensions of trade credit by any Grantor in the ordinary course of business).

 

“Pledged Securities”:  the collective reference to the Pledged Notes and the Pledged Stock.

 

“Pledged Stock”:  the shares of Capital Stock held by any Grantor (including those listed on Schedule 2), together with any other shares, stock certificates, options or rights of any nature whatsoever in respect of the Capital Stock of any Person that may be issued or granted to, or held by, any Grantor while this Agreement is in effect; provided that in no event shall more than 66% of the total outstanding Foreign Subsidiary Voting Stock of any Foreign Subsidiary be required to be pledged hereunder.

 

“Proceeds”:  all “proceeds” as such term is defined in Section 9-102(a)(64) of the Uniform Commercial Code in effect from time to time in the State of New York and, in any event, including all dividends or other income from the Investment Property, collections thereon or distributions or payments with respect thereto.

 

“Qualified Counterparty”:  with respect to any Specified Agreement, any counterparty thereto that, at the time such Specified Agreement was entered into, was a Lender or an Affiliate of a Lender.

 

5

 

“Receivable”:  any right to payment for goods sold, leased, licensed, assigned or otherwise disposed of, or for services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance (including any Account).

 

“Securities Act”:  the Securities Act of 1933, as amended.

 

“Specified Agreement”:  any Rate Swap Document or Cash Management Agreement entered into by (i) the Borrower or any Guarantor and (ii) any Qualified Counterparty.

 

“Trademarks”:  all registered and unregistered trademarks, trade names, corporate names, company names, business names, Internet domain names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, including any renewals thereof, and all 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, any State thereof or any other country or any political subdivision thereof, or otherwise, and all common-law rights related thereto, including any of the foregoing referred to in Schedule 7.

 

“Trademark License”:  any agreement, whether written or oral, providing for the grant by or to any Grantor of any right to use any Trademark, including any of the foregoing referred to in Schedule 7.

 

“Vehicles”:  all cars, trucks, trailers, construction and earth moving equipment and other vehicles covered by a certificate of title law of any state and all tires and other appurtenances to any of the foregoing.

 

1.2           Other Definitional Provisions.

 

(a)           The words “hereof,” “herein,” “hereto” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and Schedule references are to this Agreement unless otherwise specified.

 

(b)           The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

 

(c)           The terms “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”

 

(d)           Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor’s Collateral or the relevant part thereof.

 

SECTION 2.  GUARANTEE

 

2.1           Guarantee.

 

(a)           (i)  The Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantee to the Administrative Agent, for the ratable benefit of the Secured Creditors and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Borrower when due (whether at stated maturity, by acceleration or otherwise) of the Borrower Obligations (other than, in the case of each Guarantor, Borrower Obligations arising pursuant to clause (ii) of

 

6

 

this Section 2.1(a) in respect of Guarantor Hedge Agreement Obligations in respect of which such Guarantor is a primary obligor).

 

(ii)           The Borrower hereby unconditionally and irrevocably guarantees to the Administrative Agent, for the ratable benefit of the Secured Creditors and their respective successors, endorsees, transferees and assigns, the prompt and complete payment and performance by each Guarantor when due (whether at stated maturity, by acceleration or otherwise) of the Guarantor Hedge Agreement Obligations of such Guarantor.

 

(b)           Anything herein or in any other Loan Document to the contrary notwithstanding, (i) the maximum liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws relating to fraudulent conveyances or transfers or the insolvency of debtors (after giving effect to the right of contribution established in Section 2.2) and (ii) the maximum liability of the Borrower under this Section 2 shall in no event exceed the amount which can be guaranteed by the Borrower under applicable federal and state laws relating to fraudulent conveyances or transfers or the insolvency of debtors (after giving effect to the right of contribution established in Section 2.2).

 

(c)           (i)  Each Guarantor agrees that the Borrower Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee of such Guarantor contained in this Section 2 or affecting the rights and remedies of the Administrative Agent or any other Secured Creditor hereunder.

 

(ii)           The Borrower agrees that the Guarantor Hedge Agreement Obligations may at any time and from time to time exceed the amount of the liability of the Borrower under this Section 2 without impairing the guarantee of the Borrower contained in this Section 2 or affecting the rights and remedies of the Administrative Agent or any other Secured Creditor hereunder.

 

(d)           Subject to Section 8.15 hereof, the guarantee contained in this Section 2 shall remain in full force and effect until all the Borrower Obligations (other than Borrower Obligations arising under Section 2.1(a)(ii) hereof) and the obligations of each Guarantor under the guarantee contained in this Section 2 (other than Guarantor Obligations in respect of Borrower Obligations arising under Section 2.1(a)(ii) hereof) shall have been satisfied by full and final payment in cash, no Letter of Credit shall be outstanding (unless cash collateralized on terms acceptable to the L/C Issuer or such Letter of Credit becomes a Supported Letter of Credit) and the Commitments shall be terminated, notwithstanding that from time to time during the term of the Credit Agreement the Borrower may be free from any Borrower Obligations and any or all of the Guarantors may be free from their respective Guarantor Hedge Agreement Obligations.

 

(e)           No payment made by the Borrower, any of the Guarantors, any other guarantor or any other Person or received or collected by the Administrative Agent or any Secured Creditor from the Borrower, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Borrower Obligations or the Guarantor Hedge Agreement Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of the Borrower or any Guarantor under this Section 2 which shall, notwithstanding any such payment (other than any payment made by the Borrower or such Guarantor in respect of the Borrower Obligations or the Guarantor Hedge Agreement Obligations or any payment received or collected from the Borrower or such Guarantor in respect of the Borrower Obligations or the Guarantor Hedge Agreement Obligations, respectively), remain liable for the Borrower Obligations and the Guarantor Hedge Agreement Obligations up to the maximum liability of the Borrower or such Guarantor hereunder until the Borrower Obligations and the Guarantor Hedge Agreement Obligations

 

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are fully and finally paid in cash, no Letter of Credit shall be outstanding and the Commitments are terminated.

 

2.2           Right of Contribution.

 

(a)           Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder or the Guarantor Hedge Agreement Obligations, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment.

 

(b)           The Borrower and each Guarantor agrees that to the extent that the Borrower or any Guarantor shall have paid more than its proportionate share of any payment made hereunder in respect of any Guarantor Hedge Agreement Obligation of any other Guarantor, the Borrower or such Guarantor, as the case may be, shall be entitled to seek and receive contribution from and against the Borrower and any other Guarantor which has not paid its proportionate share of such payment.

 

(c)           The Borrower’s and each Guarantor’s right of contribution under this Section 2.2 shall be subject to the terms and conditions of Section 2.3.  The provisions of this Section 2.2 shall in no respect limit the obligations and liabilities of the Borrower or any Guarantor to the Administrative Agent and the Secured Creditor, and the Borrower and each Guarantor shall remain liable to the Administrative Agent and the Secured Creditor for the full amount guaranteed by the Borrower or such Guarantor hereunder.

 

2.3           Subrogation.  Notwithstanding any payment made by the Borrower or any Guarantor hereunder or any set- off or application of funds of the Borrower or any Guarantor by the Administrative Agent or any Secured Creditor, neither the Borrower nor any Guarantor shall be entitled to be subrogated to any of the rights of the Administrative Agent or any Secured Creditor against the Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by the Administrative Agent or any Secured Creditor for the payment of the Borrower Obligations or the Guarantor Hedge Agreement Obligations, nor shall the Borrower or any Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrower or any other Guarantor in respect of payments made by the Borrower or such Guarantor hereunder, until all amounts owing to the Administrative Agent and the Secured Creditors by the Borrower on account of the Borrower Obligations are fully and finally paid in cash, no Letter of Credit shall be outstanding (unless cash collateralized on terms acceptable to the L/C Issuer or such Letter of Credit becomes a Supported Letter of Credit) and the Commitments are terminated.  If any amount shall be paid to the Borrower or any Guarantor on account of such subrogation rights at any time when all of the Borrower Obligations shall not have been fully and finally paid in cash, such amount shall be held by the Borrower or such Guarantor in trust for the Administrative Agent and the Secured Creditors, segregated from other funds of the Borrower or such Guarantor, and shall, forthwith upon receipt by the Borrower or such Guarantor, be turned over to the Administrative Agent in the exact form received by the Borrower or such Guarantor (duly indorsed by the Borrower or such Guarantor to the Administrative Agent, if required), to be applied against the Borrower Obligations or the Guarantor Hedge Agreement Obligations, whether matured or unmatured, in such order as the Administrative Agent may determine.

 

2.4           Amendments, etc. with respect to the Borrower Obligations.  The Borrower and each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against the Borrower or any Guarantor and without notice to or further assent by the Borrower or any Guarantor, any demand for payment of any of the Borrower Obligations or Guarantor Hedge Agreement Obligations made by the Administrative Agent or any Secured Creditor may be rescinded by the Administrative Agent or such Secured Creditor and any of the Borrower Obligations or Guarantor Hedge Agreement Obligations continued, and the Borrower Obligations or Guarantor Hedge Agreement Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security or guarantee therefor

 

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or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Administrative Agent or any Secured Creditor (with the consent of such of the Borrower and the Guarantors as shall be required thereunder), and the Specified Agreements, the Credit Agreement and the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Administrative Agent (or the Required Lenders or all Lenders, as the case may be) may (with the consent of such of the Borrower and the Guarantors as shall be required thereunder) deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Administrative Agent or any Secured Creditor for the payment of the Borrower Obligations or Guarantor Hedge Agreement Obligations may (with the consent of such of the Borrower and the Guarantor as shall be required thereunder) be sold, exchanged, waived, surrendered or released.  Neither the Administrative Agent nor any Secured Creditor shall, except to the extent set forth in, and for the benefit of the parties to, the agreements and instruments governing such Lien or guarantee, have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Borrower Obligations or Guarantor Hedge Agreement Obligations or for the guarantees contained in this Section 2 or any property subject thereto.

 

2.5           Guarantee Absolute and Unconditional.

 

(a)           Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Borrower Obligations (other than any notice with respect to any Guarantor Hedge Agreement Obligation with respect to which such Guarantor is a primary obligor and to which it is entitled pursuant to the applicable Specified Agreement) and notice of or proof of reliance by the Administrative Agent or any Secured Creditor upon the guarantee contained in this Section 2 or acceptance of the guarantee contained in this Section 2; the Borrower Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Section 2; and all dealings between the Borrower and any of the Guarantors, on the one hand, and the Administrative Agent and the Secured Creditors, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 2.  Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower or any of the Guarantors with respect to the Borrower Obligations (other than any diligence, presentment, protest, demand or notice with respect to any Guarantor Hedge Agreement Obligation with respect to which such Guarantor is a primary obligor and to which it is entitled pursuant to the applicable Specified Agreement).  Each Guarantor understands and agrees that the guarantee of such Guarantor contained in this Section 2 shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity or enforceability of the Credit Agreement or any other Loan Document, any of the Borrower Obligations or any collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Administrative Agent or any Secured Creditor, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Borrower or any other Person against the Administrative Agent or any Secured Creditor, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Borrower or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for the Borrower Obligations, or of such Guarantor under the guarantee of such Guarantor contained in this Section 2, in bankruptcy or in any other instance.  When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, the Administrative Agent or any Secured Creditor may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against the Borrower, any other Guarantor or any other Person or against any collateral security or guarantee for the Borrower Obligations or any right of offset with respect thereto, and any failure by the Administrative Agent or any Secured Creditor to make any such demand, to pursue such other rights or remedies or to collect any payments from the Borrower, any other Guarantor or any

 

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other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Borrower, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability under this Section 2, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Administrative Agent or any Secured Creditor against any Guarantor.  For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.

 

(b)           The Borrower waives any and all notice of the creation, renewal, extension or accrual of any of the Guarantor Hedge Agreement Obligations and notice of or proof of reliance by the Administrative Agent or any Secured Creditor upon the guarantee by the Borrower contained in this Section 2 or acceptance of the guarantee by the Borrower contained in this Section 2; the Guarantor Hedge Agreement Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee by the Borrower contained in this Section 2; and all dealings between the Borrower and any of the Guarantors, on the one hand, and the Administrative Agent and the Secured Creditors, on the other hand, with respect to any Guarantor Hedge Agreement Obligation likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee by the Borrower contained in this Section 2.  The Borrower waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower with respect to the Guarantor Hedge Agreement Obligations.  The Borrower understands and agrees that the guarantee by the Borrower contained in this Section 2 shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity or enforceability of the Guarantor Hedge Agreement Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Administrative Agent or any Secured Creditor, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by any Person against the Administrative Agent or any Secured Creditor, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Borrower or any Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the applicable Guarantor for the applicable Guarantor Hedge Agreement Obligations, or of the Borrower under its guarantee contained in this Section 2, in bankruptcy or in any other instance.  When making any demand under this Section 2 or otherwise pursuing its rights and remedies under this Section 2 against the Borrower, the Administrative Agent or any Secured Creditor may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against any Guarantor or any other Person or against any collateral security or guarantee for the Guarantor Hedge Agreement Obligations or any right of offset with respect thereto, and any failure by the Administrative Agent or any Secured Creditor to make any such demand, to pursue such other rights or remedies or to collect any payments from any Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of any Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve the Borrower of any obligation or liability under this Section 2, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Administrative Agent or any Secured Creditor against the Borrower under this Section 2.  For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.

 

2.6           Reinstatement.  The guarantee contained in this Section 2 shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Borrower Obligations or Guarantor Hedge Agreement Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent or any Secured Creditor upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made.

 

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2.7           Payments.  The Borrower and each Guarantor hereby guarantees that payments by it hereunder will be paid to the Administrative Agent without set-off or counterclaim (i) in the case of obligations in respect of Borrower Obligations arising under the Credit Agreement or any other Loan Document in Dollars at the Agent’s Payment Office specified in the Credit Agreement and (ii) in the case of obligations in respect of any Borrower Hedge Agreement Obligations or any Guarantor Hedge Agreement Obligations, in the currency and at the place specified in the applicable Specified Agreement.

 

SECTION 3.  GRANT OF SECURITY INTEREST

 

Each Grantor hereby assigns and transfers to the Administrative Agent, and hereby grants to the Administrative Agent, for the benefit of the Secured Creditors, a security interest in, all of the following property now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, but excluding the Excluded Assets, the “Collateral”), as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of such Grantor’s Obligations:

 

(a)           all Accounts;

 

(b)           all Chattel Paper;

 

(c)           all Deposit Accounts;

 

(d)           all Documents;

 

(e)           all Equipment;

 

(f)            all General Intangibles;

 

(g)           all Instruments;

 

(h)           all Intellectual Property;

 

(i)            all Inventory;

 

(j)            all Investment Property;

 

(k)           all Letter-of-Credit Rights;

 

(l)            all Commercial Tort Claims to the extent they have been notified to the Administrative Agent pursuant to Section 5.11;

 

(m)          all Goods and other property not otherwise described above;

 

(n)           all books and records pertaining to the Collateral; and

 

(o)           to the extent not otherwise included, all Proceeds and products of any and all of the foregoing, all Supporting Obligations in respect of any of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing; provided that the Collateral shall not include any Excluded Assets.

 

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SECTION 4.  REPRESENTATIONS AND WARRANTIES

 

To induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the Borrower thereunder, each Grantor hereby represents and warrants to the Administrative Agent and each Lender that:

 

4.1           Representations in Credit Agreement.  In the case of each Guarantor, the representations and warranties set forth in Article VI of the Credit Agreement as they relate to such Guarantor or to the Loan Documents to which such Guarantor is a party, each of which is hereby incorporated herein by reference, are true and correct, and the Administrative Agent and each Lender shall be entitled to rely on each of them as if they were made by such Guarantor and fully set forth herein, provided that each reference in each such representation and warranty to the Borrower’s knowledge shall, for the purposes of this Section 4.1, be deemed to be a reference to such Guarantor’s knowledge.

 

4.2           Title; No Other Liens.  Except for the security interest granted to the Administrative Agent for the benefit of the Secured Creditors pursuant to this Agreement and the other Liens permitted to exist on the Collateral by the Credit Agreement, such Grantor owns each item of the Collateral free and clear of any and all Liens.  On the date hereof, no financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as have been filed in favor of the Administrative Agent, for the ratable benefit of the Secured Creditors, pursuant to this Agreement or as are permitted by the Credit Agreement.  For the avoidance of doubt, it is understood and agreed that any Grantor may, as part of its business, grant licenses to third parties to use Intellectual Property owned or developed by a Grantor.  For purposes of this Agreement and the other Loan Documents, such licensing activity shall not constitute a “Lien” on Intellectual Property.

 

4.3           Perfected First Priority Liens.  Except for Deposit Accounts and for securities accounts, assets credited thereto and security entitlements in respect thereof, in each case as to which Section 5.5 hereof does not require the delivery of a control agreement, the security interests granted pursuant to this Agreement (a) upon completion of the filings and other actions specified on Schedule 3 (which, in the case of all filings and other documents referred to on said Schedule and required to be delivered hereunder, have been delivered to the Administrative Agent in completed and duly executed form) will constitute valid perfected security interests in all of the Collateral for which a lien can be perfected by the filing of a financing statement or by possession, control or filings with the USPTO or the United States Copyright Office in favor of the Administrative Agent, for the benefit of the Secured Parties, as collateral security for such Grantor’s Obligations, enforceable in accordance with the terms hereof against all creditors of such Grantor and any Persons purporting to purchase any Collateral from such Grantor and except buyers in the ordinary course that take free of liens pursuant to the UCC and (b) are prior to all other Liens on the Collateral in existence on the date hereof except for Liens permitted by the Credit Agreement.

 

4.4           Jurisdiction of Organization; Chief Executive Office.  On the date hereof, such Grantor’s correct legal name, jurisdiction of organization, organizational identification number (if any) from its jurisdiction of organization, and the location of such Grantor’s chief executive office or sole place of business, as the case may be, are specified on Schedule 4.  On the date hereof, such Grantor has furnished to the Administrative Agent a certified charter, certificate of incorporation or other organization document and good standing certificate as of a date which is recent to the date hereof.

 

4.5           [Reserved].

 

4.6           Farm Products.  None of the Collateral constitutes, or is the Proceeds of, Farm Products.

 

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4.7           Investment Property.

 

(a)           The shares of Pledged Stock pledged by such Grantor hereunder constitute all the issued and outstanding shares of all classes of the Capital Stock of each Issuer owned by such Grantor (other than any shares that constitute Excluded Assets) or, in the case of Foreign Subsidiary Voting Stock, if less, 66% of the outstanding Foreign Subsidiary Voting Stock of each relevant Issuer.

 

(b)           All the shares of the Pledged Stock have been duly and validly issued and are fully paid and nonassessable.

 

(c)           Each of the Pledged Notes issued by any Loan Party and to such Grantor’s knowledge, each of the Pledged Notes issued by any other Person, constitutes the legal, valid and binding obligation of the obligor with respect thereto, enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

 

(d)           Such Grantor is the record and beneficial owner of, and has good and marketable title to, the Investment Property pledged by it hereunder, free of any and all Liens or options in favor of, any other Person, except the security interest created by this Agreement and Liens permitted by the Credit Agreement.

 

4.8           Receivables.

 

(a)           No amount payable to such Grantor under or in connection with any Receivable is evidenced by any Instrument or Chattel Paper which has not been (or will be) delivered to the Administrative Agent to the extent required by Section 5.2.

 

(b)           Excluding obligors with respect to Medicare and Medicaid Receivables, none of the obligors on any Receivable is a Governmental Authority, except for Receivables constituting not more than 5% of the face amount of all Receivables.

 

(c)           The amounts represented by such Grantor to the Secured Creditors from time to time as owing to such Grantor in respect of the Receivables will at such times be accurate in all material respects.

 

4.9           Intellectual Property.

 

(a)           Schedule 7 lists the registered Intellectual Property (other than trade secrets) owned by such Grantor in its own name on the date hereof that is registered or applied for with the United States Patent and Trademark Office or United States Copyright Office.

 

(b)           On the date hereof, all material Intellectual Property of such Grantor described on Schedule 7 is in compliance in all material respects with applicable legal requirements (including payment of maintenance fees and the like) and, to the best of such Grantor’s knowledge, all such rights are valid, subsisting, and enforceable, except in each case to the extent the failure to be in such compliance would not have a Material Adverse Effect.

 

(c)           On the date hereof, to the best of such Grantor’s knowledge, the conduct by such Grantor of its business does not infringe upon, misappropriate, constitute an unauthorized use of or otherwise violate the Intellectual Property rights of any other Person except to the extent such violation would not have a Material Adverse Effect.  Except as set forth in Schedule 8, no claim or demand of any Person has

 

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been made in writing, nor is there any proceeding that is pending or to the knowledge of such Grantor threatened in writing, which (in any such case) (i) challenges the rights of such Grantor in respect of any Intellectual Property or (ii) asserts that such Grantor is infringing upon, misappropriating, making an unauthorized use of or otherwise violating or in conflict with, or is required to pay any royalty, license fee, charge or other amount with regard to, any Intellectual Property, except with respect to clause (i) or (ii) as would not have a Material Adverse Effect.

 

(d)           Except as set forth in Schedule 7, on the date hereof, none of the Intellectual Property is the subject of any licensing or franchise agreement pursuant to which such Grantor is the licensor or franchisor.

 

(e)           None of the Intellectual Property described in Schedule 8 is subject to any outstanding order, ruling, decree, judgment or stipulation which would limit, cancel or call into question the validity of, or such Grantor’s rights in, the Intellectual Property in any respect that could reasonably be expected to have a Material Adverse Effect.

 

(f)            Except as set forth in Schedule 8, no action or proceeding is pending, or, to the knowledge of such Grantor, threatened, on the date hereof (i) seeking to limit, cancel or question the validity of any material Intellectual Property or such Grantor’s ownership interest therein, or (ii) which is reasonably expected to have a material adverse effect on the value of any Intellectual Property.

 

SECTION 5.  COVENANTS

 

Each Grantor covenants and agrees with the Administrative Agent and the Secured Creditors that, from and after the date of this Agreement until the Obligations (other than any contingent indemnification or similar obligation not yet due and payable, and any Obligation owing under any Rate Swap Document or Cash Management Agreement) shall have been paid in full, no Letter of Credit shall be outstanding (unless cash collateralized on terms acceptable to the L/C Issuer or such Letter of Credit becomes a Supported Letter of Credit) and the Commitments shall have terminated:

 

5.1           Covenants in Credit Agreement.  In the case of each Guarantor, such Guarantor shall take, or shall refrain from taking, as the case may be, each action that is necessary to be taken or not taken by it, as the case may be, so that no Default or Event of Default is caused by the failure to take such action or to refrain from taking such action by such Guarantor or any of its Subsidiaries.

 

5.2           Delivery of Instruments and Chattel Paper.  If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument, Certificated Security or Chattel Paper, such Instrument, Certificated Security or Chattel Paper shall be immediately delivered to the Administrative Agent, duly indorsed in a manner satisfactory to the Administrative Agent, to be held as Collateral pursuant to this Agreement; provided, that the Grantors shall not be obligated to deliver to the Administrative Agent any Instruments or Chattel Paper held by any Grantor at any time to the extent that the aggregate face amount of all such Instruments and Chattel Paper held by such Grantor at such time does not exceed $2,000,000.

 

5.3           Maintenance of Insurance.

 

(a)           Except to the extent the failure to so maintain could not reasonably be expected to have a Material Adverse Effect, each Grantor shall maintain, and shall cause each Subsidiary to maintain, with financially sound and reputable independent insurers, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by

 

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such other Persons; provided that self insurance of risks and in amounts customary in the Borrower’s and its Subsidiaries’ industry shall be permitted; provided, further, that all such insurance shall (i) provide for not less than 30 days’ prior notice to the Administrative Agent of termination, lapse or cancellation of such insurance, (ii) name the Administrative Agent as additional insured on behalf of the Secured Creditors (in the case of liability insurance) or loss payee (in the case of property insurance), as applicable and (iii) be reasonably satisfactory in all other respects to the Administrative Agent.

 

(b)           Upon the Administrative Agent’s request, the Borrower shall deliver to the Administrative Agent a report of a reputable insurance broker with respect to such insurance and such supplemental reports with respect thereto as the Administrative Agent may from time to time reasonably request.

 

5.4           Payment of Obligations.  Such Grantor will pay and discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all material taxes, assessments and governmental charges or levies imposed upon the Collateral unless the same is being contested in good faith by appropriate action and reserves in conformity with GAAP with respect thereto have been provided on the books of such Grantor.

 

5.5           Maintenance of Perfected Security Interest; Further Documentation.

 

(a)           Such Grantor shall maintain the security interest created by this Agreement as a perfected security interest having at least the priority described in Section 4.3 and shall defend such security interest against the claims and demands of all Persons whomsoever (other than those holding Liens permitted by the Credit Agreement).

 

(b)           In addition to the obligations of the Borrower under the Credit Agreement, after the occurrence and during the continuance of an Event of Default, such Grantor will furnish to the Administrative Agent and the Lenders from time to time statements and schedules further identifying and describing the assets and property of such Grantor and such other reports in connection with the Collateral as the Administrative Agent may reasonably request, all in reasonable detail.

 

(c)           To each Grantor’s knowledge, each of such Grantor’s Deposit Accounts existing on the date hereof is set forth on Schedule 9 and such Grantor will on the Closing Date execute and deliver to the Administrative Agent Deposit Account control agreements in favor of the Administrative Agent with respect to each such Deposit Account (other than the Excluded Accounts) in a form reasonably satisfactory to the Administrative Agent.

 

(d)           Such Grantor will execute and deliver to the Administrative Agent from time to time, promptly (and in any event within 45 days) after opening any new Deposit Account (other than an Excluded Account), a Deposit Account control agreement in favor of the Administrative Agent with respect to such new Deposit Account (other than an Excluded Account) in a form reasonably satisfactory to the Administrative Agent.

 

(e)           At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver, and have recorded, such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including (i) the filing of any financing or continuation statements under the Uniform Commercial Code (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby and (ii) in the case of Investment Property, Deposit Accounts and Letter-of-Credit Rights, taking, to the extent required by the Credit Agreement or herein,

 

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any actions necessary to enable the Administrative Agent to obtain “control” (within the meaning of the applicable Uniform Commercial Code) with respect thereto.

 

5.6           Changes in Name, etc.  Such Grantor will not, except upon 15 days’ prior written notice to the Administrative Agent and delivery to the Administrative Agent of all additional executed financing statements and other documents reasonably requested by the Administrative Agent to maintain the validity, perfection and priority of the security interests provided for herein:

 

(a)           change its jurisdiction of organization or the location of its chief executive office or sole place of business from that referred to in Section 4.4; or

 

(b)           change its name.

 

5.7           Notices.  Such Grantor will advise the Administrative Agent and the Lenders promptly, in reasonable detail, of:

 

(a)           any Lien (other than security interests created hereby or Liens permitted under the Credit Agreement) on any of the Collateral which would adversely affect the ability of the Administrative Agent to exercise any of its remedies hereunder; and

 

(b)           the occurrence of any other event which could reasonably be expected to have a material adverse effect on the aggregate value of the Collateral or on the security interests created hereby.

 

5.8           Investment Property.

 

(a)           If such Grantor shall become entitled to receive or shall receive any certificate (including any certificate representing a dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights in respect of the Capital Stock of any Issuer pledged hereunder, whether in addition to, in substitution of, as a conversion of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect thereof, such Grantor shall accept the same as the agent of the Administrative Agent and the Secured Creditors, hold the same in trust for the Administrative Agent and the Secured Creditors and deliver the same forthwith to the Administrative Agent in the exact form received, duly indorsed by such Grantor to the Administrative Agent, if required, together with an undated stock power covering such certificate duly executed in blank by such Grantor and with, if the Administrative Agent so requests, signature guaranteed, to be held by the Administrative Agent, subject to the terms hereof, as additional collateral security for the Obligations.  Any sums paid upon or in respect of Investment Property pledged hereunder upon the liquidation or dissolution of any Issuer other than a Grantor shall be paid over to the Administrative Agent to be held by it hereunder as additional collateral security for the Obligations, and in case any distribution of capital shall be made on or in respect of Investment Property, or any property shall be distributed upon or with respect to the Investment Property not issued by a Grantor pursuant to the recapitalization or reclassification of the capital of such Issuer or pursuant to the reorganization thereof, the property so distributed shall, unless otherwise subject to a perfected security interest in favor of the Administrative Agent, be delivered to the Administrative Agent to be held by it hereunder as additional collateral security for the Obligations.  If any sums of money or property so paid or distributed in respect of Investment Property pledged hereunder shall be received by such Grantor, such Grantor shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the Secured Creditors, segregated from other funds of such Grantor, as additional collateral security for the Obligations.  Notwithstanding the foregoing, the Grantors shall not be required to pay over to the Administrative Agent or deliver to the Administrative Agent as Collateral any proceeds of any liquidation or dissolution of any Issuer, or any

 

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distribution of capital or property in respect of any Investment Property, to the extent that (i) such liquidation, dissolution or distribution, if treated as a Disposition of the relevant Issuer or of such Investment Property, would be permitted by the Credit Agreement and (ii) the proceeds thereof are applied toward prepayment of Loans and reduction of Commitments to the extent required by the Credit Agreement.  For the avoidance of doubt, nothing under this Section 5.8(a) shall apply to any Excluded Assets.

 

(b)           Without the prior written consent of the Administrative Agent, such Grantor will not with respect to any Investment Property constituting Collateral (i) vote to enable, or take any other action to permit, any Issuer to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any nature of any Issuer, unless such securities are delivered to the Administrative Agent, concurrently with the issuance thereof, to be held by the Administrative Agent as Collateral, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Investment Property or Proceeds thereof (except pursuant to a transaction permitted (or not prohibited) by the Credit Agreement), (iii) create, incur or permit to exist any Lien with respect to, any of the Investment Property or Proceeds thereof, or any interest therein, except for Permitted Liens or (iv) enter into any agreement or undertaking restricting the right or ability of such Grantor or the Administrative Agent to sell, assign or transfer any of the Pledged Securities or Proceeds thereof other than in connection with a transaction permitted by the Credit Agreement.

 

(c)           In the case of each Grantor which is an Issuer with respect to any Investment Property constituting Collateral, such Issuer agrees that (i) it will be bound by the terms of this Agreement relating to the Pledged Securities issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify the Administrative Agent promptly in writing of the occurrence of any of the events described in Section 5.8(a) with respect to the Pledged Securities issued by it and (iii) the terms of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to all actions that may be required of it pursuant to Section 6.3(c) or 6.7 with respect to the Pledged Securities issued by it.

 

(d)           Each Issuer with respect to any Investment Property constituting Collateral that is a partnership or a limited liability company (i) confirms that none of the terms of any equity interest issued by it provides that such equity interest is a “security” within the meaning of Sections 8-102 and 8-103 of the New York UCC (a “Security”), (ii) agrees that it will take no action to cause or permit any such equity interest to become a Security, (iii) agrees that it will not issue any certificate representing any such equity interest and (iv) agrees that if, notwithstanding the foregoing, any such equity interest shall be or become a Security, such Issuer will (and the Grantor that holds such equity interest hereby instructs such Issuer to) comply with instructions originated by the Administrative Agent with respect to such equity interests (or with respect to any additions thereto or replacements or proceeds thereof whether now existing or hereafter acquired) during the continuance of an Event of Default, without further consent by such Grantor.

 

5.9           Receivables.

 

(a)           Other than in the ordinary course of business consistent with its past practice, or otherwise in its best business judgment, such Grantor will not (i) grant any extension of the time of payment of any Receivable, (ii) compromise or settle any Receivable for less than the full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any Receivable, (iv) allow any credit or discount whatsoever on any Receivable or (v) amend, supplement or modify any Receivable in any manner that could adversely affect the value thereof.

 

(b)           Such Grantor will deliver to the Administrative Agent a copy of each material demand, notice or document received by it that questions or calls into doubt the validity or enforceability of more

 

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than 5% of the aggregate amount of the then outstanding Receivables (excluding Medicare and Medicaid Receivables).

 

5.10         Intellectual Property.

 

(a)           Such Grantor (either itself or through licensees) will (i) continue to use each material Trademark owned by it in each international class for the goods and/or services set forth in its applications or registrations to maintain such Trademark in full force, free from any claim of abandonment for non-use, (ii) maintain the past quality of products and services offered under such Trademark, (iii) use such Trademark with the appropriate notice of registration and all other notices and legends required by applicable Requirements of Law, (iv) not adopt or use any mark which is confusingly similar or a colorable imitation of such Trademark unless the Administrative Agent, for the ratable benefit of the Secured Creditors, shall obtain a perfected security interest in such mark pursuant to this Agreement, and (v) not (and not authorize any licensee or sublicensee thereof to) knowingly do any act or knowingly omit to do any act whereby such Trademark may become invalidated or impaired in any way; unless, in each case, such Grantor, in the exercise of its best business judgment, deems it not commercially reasonable to do so under the circumstances.

 

(b)           Such Grantor (either itself or through licensees) will not knowingly do any act, or knowingly omit to do any act, whereby any material Patent may become forfeited, abandoned or dedicated to the public; unless such Grantor, in the exercise of its best business judgment, deems it commercially reasonable to do so under the circumstances.

 

(c)           Such Grantor (either itself or through licensees) (i) will not (and will not permit any licensee or sublicensee thereof to) knowingly do any act or knowingly omit to do any act whereby any material portion of the Copyrights may become invalidated or otherwise impaired and (ii) will not knowingly do any act whereby any material portion of the Copyrights may fall into the public domain unless, in each case, such Grantor, in the exercise of its best business judgment, deems it commercially reasonable to do so under the circumstances.

 

(d)           Such Grantor (either itself or through licensees) will not do any act that knowingly uses any material Intellectual Property to infringe the intellectual property rights of any other Person.

 

(e)           Such Grantor will promptly notify the Administrative Agent and the Lenders in writing if it knows that any application or registration relating to any material Intellectual Property owned by it may become forfeited, abandoned or dedicated to the public, 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, the United States Copyright Office or any court or tribunal in any country) regarding such Grantor’s ownership of, or the validity of, any material Intellectual Property owned by it or such Grantor’s right to register the same or to own and maintain the same.

 

(f)            Whenever such Grantor, either by itself or through any agent, employee, licensee or designee, shall file an application for the registration of any Intellectual Property with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, such Grantor shall report such filing to the Administrative Agent within 30 Business Days after the last day of the fiscal quarter in which such filing occurs.  Upon request of the Administrative Agent, such Grantor shall execute, deliver and authorize the recording of any and all agreements, instruments, documents, and papers as the Administrative Agent may request to evidence the Administrative Agent’s and the Secured Creditors’ security interest in any Copyright, Patent or Trademark and the goodwill and general intangibles of such Grantor relating thereto or represented thereby.

 

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(g)           Such Grantor will, at its own expense, take all steps which such Grantor shall reasonably deem appropriate under the circumstances, which may include any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue each application relating to any material Intellectual Property (and to obtain the relevant registration) and to maintain each registration of the material Intellectual Property, including filing of applications for renewal, affidavits of use and affidavits of incontestability.

 

(h)           In the event that any other Person infringes upon, misappropriates, makes an unauthorized use of or otherwise violates any material Intellectual Property, such Grantor shall (i) take such actions as such Grantor shall reasonably deem appropriate under the circumstances to protect such Intellectual Property and (ii) if such Intellectual Property is of material economic value, promptly notify the Administrative Agent after it learns thereof.

 

(i)            Such Grantor shall execute and deliver to the Administrative Agent in form and substance reasonably acceptable to the Administrative Agent and suitable for filing in the United States Patent and Trademark Office, (i) a patent security agreement in the form attached hereto as Annex III for all Patents owned by such Grantor and (ii) a trademark security agreement in the form attached hereto as Annex IV for all Trademarks owned by such Grantor.

 

5.11         Commercial Tort Claims.  If any Grantor shall at any time commence a suit, action or proceeding with respect to any Commercial Tort Claim held by it with a value which such Grantor reasonably believes to be of $1,000,000 or more, such Grantor shall promptly notify the Administrative Agent thereof in a writing signed by such Grantor and describing the details thereof and shall grant to the Administrative Agent for the benefit of the Secured Creditors in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to the Administrative Agent.

 

SECTION 6.  REMEDIAL PROVISIONS

 

6.1           Certain Matters Relating to Receivables.

 

(a)           The Administrative Agent shall have the right, at any time after the occurrence and during the continuance of an Event of Default, to make test verifications of the Receivables in any manner and through any medium that it reasonably considers advisable, and each Grantor shall furnish all such assistance and information as the Administrative Agent may require in connection with such test verifications.  At any time and from time to time after the occurrence and during the continuance of an Event of Default, upon the Administrative Agent’s request and at the expense of the relevant Grantor, such Grantor shall cause independent public accountants or others satisfactory to the Administrative Agent to furnish to the Administrative Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Receivables.

 

(b)           The Administrative Agent hereby authorizes each Grantor to collect such Grantor’s Receivables, subject to the Administrative Agent’s direction and control (to the extent permitted by applicable law) after the occurrence and during the continuance of an Event of Default, and (to the extent permitted by applicable law) the Administrative Agent may curtail or terminate said authority at any time after the occurrence and during the continuance of an Event of Default; provided that Medicare and Medicaid Receivables shall be in the sole dominion and control of the Grantor.  If required by the Administrative Agent (to the extent permitted by applicable law and governmental regulation) at any time after the occurrence and during the continuance of an Event of Default, any payments of Receivables, when collected by any Grantor, (i) shall be forthwith (and, in any event, within two Business Days) deposited by such Grantor

 

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in the exact form received, duly indorsed by such Grantor to the Administrative Agent if required, in a Collateral Account maintained under the sole dominion and control of the Administrative Agent, subject to withdrawal by the Administrative Agent for the account of the Secured Creditors only as provided in Section 6.5, and (ii) until so turned over, shall be held by such Grantor in trust for the Administrative Agent and the Secured Creditors, segregated from other funds of such Grantor.  Each such deposit of Proceeds of Receivables shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit.

 

(c)           At the Administrative Agent’s request (to the extent permitted by applicable law), at any time after the occurrence and during the continuation of an Event of Default, each Grantor shall deliver to the Administrative Agent all original and other documents evidencing, and relating to, the agreements and transactions which gave rise to the Receivables, including all original orders, invoices and shipping receipts.

 

(d)           At any time after the occurrence and during the continuance of an Event of Default, each Grantor will cooperate with the Administrative Agent to establish a system of lockbox accounts, under the sole dominion and control of the Administrative Agent (to the extent permitted by applicable law), into which all Receivables shall be paid and from which all collected funds will be transferred to a Collateral Account.

 

6.2           Communications with Obligors; Grantors Remain Liable.

 

(a)           The Administrative Agent in its own name or in the name of others may at any time after the occurrence and during the continuance of an Event of Default communicate with obligors under the Receivables to verify with them to the Administrative Agent’s satisfaction the existence, amount and terms of any Receivables.

 

(b)           Upon the request of the Administrative Agent (to the extent permitted by applicable law) at any time after the occurrence and during the continuance of an Event of Default, each Grantor shall notify obligors on the Receivables that the Receivables have been assigned to the Administrative Agent for the ratable benefit of the Secured Creditors and that payments in respect thereof shall be made directly to the Administrative Agent.

 

(c)           Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each of the Receivables (or any agreement giving rise thereto) 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 thereto.  Neither the Administrative Agent nor any Secured Creditor shall have any obligation or liability under any Receivable (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Administrative Agent or any Secured Creditor of any payment relating thereto, nor shall the Administrative Agent or any Secured Creditor be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any Receivable (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 thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

 

6.3           Pledged Stock.

 

(a)           Unless an Event of Default shall have occurred and be continuing and the Administrative Agent shall have given notice to the relevant Grantor of the Administrative Agent’s intent to exercise its corresponding rights pursuant to Section 6.3(b), each Grantor shall be permitted to receive all cash dividends

 

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paid in respect of the Pledged Stock and all payments made in respect of the Pledged Notes, in each case paid in the normal course of business of the relevant Issuer, to the extent permitted by the Credit Agreement, and to exercise all voting and corporate rights with respect to the Pledged Securities; provided, however, that no vote shall be cast or corporate right exercised or other action taken which, in the Administrative Agent’s reasonable judgment, would impair the Collateral or which would be inconsistent with or result in any violation of any provision of the Credit Agreement, this Agreement or any other Loan Document.

 

(b)           If an Event of Default shall occur and be continuing and the Administrative Agent shall give notice of its intent to exercise such rights to the relevant Grantor or Grantors, (i) the Administrative Agent shall have the right to receive any and all cash dividends, payments or other Proceeds paid in respect of the Pledged Securities constituting Collateral and make application thereof to the Obligations in the order set forth in Section 6.5, and (ii) any or all of the Pledged Securities constituting Collateral shall be registered in the name of the Administrative Agent or its nominee, and the Administrative Agent or its nominee may thereafter exercise (x) all voting, corporate and other rights pertaining to such Pledged Securities at any meeting of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and all rights of conversion, exchange and subscription and any other rights, privileges or options pertaining to such Pledged Securities as if it were the absolute owner thereof (including the right to exchange at its discretion any and all of the Pledged Securities upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of any Issuer, or upon the exercise by any Grantor or the Administrative Agent of any right, privilege or option pertaining to such Pledged Securities, and in connection therewith, the right to deposit and deliver any and all of the Pledged Securities with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Administrative Agent may determine), all without liability except to account for property actually received by it, but the Administrative Agent shall have no duty to any Grantor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing.

 

(c)           Each Grantor hereby authorizes and instructs each Issuer of any Pledged Securities pledged by such Grantor hereunder to (i) comply with any instruction received by it from the Administrative Agent in writing that (x) states that an Event of Default has occurred and is continuing and (y) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from such Grantor, and each Grantor agrees that each Issuer shall be fully protected in so complying, and (ii) unless otherwise expressly permitted hereby, pay any dividends or other payments with respect to the Pledged Securities directly to the Administrative Agent.

 

6.4           Proceeds to be Turned Over To Administrative Agent.  In addition to the rights of the Administrative Agent and the Secured Creditors specified in Section 6.1 with respect to payments of Receivables, if an Event of Default shall occur and be continuing, all Proceeds received by any Grantor consisting of cash, checks and Instruments shall be held by such Grantor in trust for the Administrative Agent and the Secured Creditors, segregated from other funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to the Administrative Agent in the exact form received by such Grantor (duly indorsed by such Grantor to the Administrative Agent, if required).  All Proceeds received by the Administrative Agent hereunder shall be held by the Administrative Agent in a Collateral Account maintained under its sole dominion and control.  All Proceeds while held by the Administrative Agent in a Collateral Account (or by such Grantor in trust for the Administrative Agent and the Secured Creditors) shall continue to be held as collateral security for all the Obligations and shall not constitute payment thereof until applied as provided in Section 6.5.

 

6.5           Application of Proceeds.  At such intervals as may be agreed upon by the Borrower and the Administrative Agent, or, if an Event of Default shall have occurred and be continuing, at any time at the Administrative Agent’s election, the Administrative Agent may apply all or any part of Proceeds constituting

 

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Collateral, whether or not held in any Collateral Account, and any proceeds of the guarantee set forth in Section 2, in payment of the Obligations in the following order:

 

First, to pay incurred and unpaid fees and expenses of the Administrative Agent under the Loan Documents;

 

Second, to the Administrative Agent, for application by it towards payment of amounts then due and owing and remaining unpaid in respect of the Obligations, pro  rata among the Secured Creditors according to the amounts of the Obligations then due and owing and remaining unpaid to the Secured Creditors;

 

Third, to the Administrative Agent, for application by it towards prepayment of the Obligations, pro  rata among the Secured Creditors according to the amounts of the Obligations then held by the Secured Creditors; and

 

Fourth, any balance of such Proceeds remaining after the Obligations shall have been paid in full, no Letters of Credit shall be outstanding and the Commitments shall have terminated shall be paid over to the Borrower or to whomsoever may be lawfully entitled to receive the same.

 

6.6           Code and Other Remedies.  If an Event of Default shall occur and be continuing, the Administrative Agent, on behalf of the Secured Creditors, may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the New York UCC or any other applicable law.  Without limiting the generality of the foregoing, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of the Administrative Agent or any Secured Creditor or elsewhere, subject to applicable law, upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk.  The Administrative Agent or any Secured Creditor shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Grantor, which right or equity is hereby waived and released.  Each Grantor further agrees, at the Administrative Agent’s request, to assemble the Collateral and make it available to the Administrative Agent at places which the Administrative Agent shall reasonably select, whether at such Grantor’s premises or elsewhere.  The Administrative Agent shall apply the net proceeds of any action taken by it pursuant to this Section 6.6 with respect to any Grantor’s Collateral, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral of such Grantor or in any way relating to the Collateral of such Grantor or the rights of the Administrative Agent and the Secured Creditors hereunder with respect thereto, including reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the Obligations of such Grantor, in the order specified in Section 6.5, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including Section 9- 615(a)(3) of the New York UCC, need the Administrative Agent account for the surplus, if any, to any Grantor.  To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against the Administrative Agent or any Secured Creditor arising out of the exercise by them of any rights

 

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hereunder.  If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition.

 

6.7           Sale of Pledged Stock.

 

(a)           Each Grantor recognizes that the Administrative Agent may be unable to effect a public sale of any or all the Pledged Stock, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof.  Each Grantor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner.  The Administrative Agent shall be under no obligation to delay a sale of any of the Pledged Stock for the period of time necessary to permit the Issuer thereof to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if such Issuer would agree to do so.

 

(b)           Each Grantor agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Pledged Stock pursuant to this Section 6.7 valid and binding and in compliance with any and all other applicable Requirements of Law.  Each Grantor further agrees that a breach of any of the covenants contained in this Section 6.7 will cause irreparable injury to the Administrative Agent and the Secured Creditors, that the Administrative Agent and the Secured Creditors have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 6.7 shall be specifically enforceable against such Grantor, and such Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred under the Credit Agreement.

 

6.8           Deficiency.  Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay its Obligations and the reasonable fees and disbursements of any attorneys employed by the Administrative Agent or any Secured Creditor to collect such deficiency.

 

SECTION 7.  THE ADMINISTRATIVE AGENT

 

7.1           Administrative Agent’s Appointment as Attorney-in-Fact, etc.

 

(a)           Each Grantor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in its own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Grantor hereby gives the Administrative Agent the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any or all of the following:

 

(i)      in the name of such Grantor or its own name, or otherwise, take possession of and indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Receivable or with respect to any other Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed

 

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appropriate by the Administrative Agent for the purpose of collecting any and all such moneys due under any Receivable or with respect to any other Collateral whenever payable (to the extent permitted by applicable law);

 

(ii)     in the case of any Intellectual Property, execute and deliver, and have recorded, any and all agreements, instruments, documents and papers as the Administrative Agent may request to evidence the Administrative Agent’s and the Secured Creditors’ security interest in such Intellectual Property and the goodwill and general intangibles of such Grantor relating thereto or represented thereby;

 

(iii)    pay or discharge taxes and Liens levied or placed on or threatened against the Collateral, effect any repairs or any insurance called for by the terms of this Agreement and pay all or any part of the premiums therefor and the costs thereof;

 

(iv)    execute, in connection with any sale provided for in Section 6.6 or 6.7, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral;

 

(v)     (1) direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct (to the extent permitted by applicable law); (2) ask or demand for, collect, and receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral (to the extent permitted by applicable law); (3) sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (4) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof and to enforce any other right in respect of any Collateral; (5) defend any suit, action or proceeding brought against such Grantor with respect to any Collateral; (6) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as the Administrative Agent may deem appropriate; (7) assign any Copyright, Patent or Trademark (along with the goodwill of the business to which any such Copyright, Patent or Trademark pertains), throughout the world for such term or terms, on such conditions, and in such manner, as the Administrative Agent shall in its sole discretion determine; and (8) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and do, at the Administrative Agent’s option and such Grantor’s expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent’s and the Secured Creditors’ security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do; and

 

(vi)    license or sublicense whether on an exclusive or non-exclusive basis, any Intellectual Property for such term and on such conditions and in such manner as the Administrative Agent shall in its sole judgment determine and, in connection therewith, such Grantor hereby grants to the Administrative Agent for the benefit of the Secured Creditors a royalty-free, world- wide irrevocable license of its Intellectual Property.

 

Anything in this Section 7.1(a) to the contrary notwithstanding, the Administrative Agent agrees that it will not exercise any rights under the power of attorney provided for in this Section 7.1(a) unless an Event of Default shall have occurred and be continuing, and then subject to applicable law.

 

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(b)           If any Grantor fails to perform or comply with any of its agreements contained herein, the Administrative Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement.

 

(c)           The expenses of the Administrative Agent incurred in connection with actions undertaken as provided in this Section 7.1, together with interest thereon at a rate per annum equal to the rate per annum at which interest would then be payable on past due Revolving Credit Loans that are Base Rate Loans under the Credit Agreement, from the date of payment by the Administrative Agent to the date reimbursed by the relevant Grantor, shall be payable by such Grantor to the Administrative Agent on demand.

 

(d)           Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof.  All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released.

 

7.2           Duty of Administrative Agent.  The Administrative Agent’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the New York UCC or otherwise, shall be to deal with it in the same manner as the Administrative Agent deals with similar property for its own account.  Neither the Administrative Agent, any Secured Creditor nor any of their respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof.  The powers conferred on the Administrative Agent and the Secured Creditors hereunder are solely to protect the Administrative Agent’s and the Secured Creditors’ interests in the Collateral and shall not impose any duty upon the Administrative Agent or any Secured Creditor to exercise any such powers.  The Administrative Agent and the Secured Creditors shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct.

 

7.3           Execution of Financing Statements.  Pursuant to any applicable law, each Grantor authorizes the Administrative Agent to file or record financing statements and other filing or recording documents or instruments with respect to the Collateral without the signature of such Grantor in such form and in such offices as the Administrative Agent determines appropriate to perfect the security interests of the Administrative Agent under this Agreement.  Each Grantor authorizes the Administrative Agent to use the collateral description “all personal property” or “all assets” or words of similar effect in any such financing statements, with the Excluded Assets described as an exclusion from the collateral described therein.  Each Grantor hereby ratifies and authorizes the filing by the Administrative Agent of any financing statement with respect to the Collateral made prior to the date hereof.

 

7.4           Authority of Administrative Agent.  Each Grantor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Secured Creditors, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Grantors, the Administrative Agent shall be conclusively presumed to be acting as agent for the Secured Creditors with full and valid authority so to act or refrain from acting, and no Grantor shall be under any obligation, or entitlement, to make any

 

25

 

inquiry respecting such authority.  Notwithstanding any other provision herein or in any Loan Document, the only duty or responsibility of the Administrative Agent to any Qualified Counterparty under this Agreement is the duty to remit to such Qualified Counterparty any amounts to which it is entitled pursuant to Section 6.5.

 

SECTION 8. MISCELLANEOUS

 

8.1           Amendments in Writing.  None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in accordance with Section 11.01 of the Credit Agreement.  No consent of any Qualified Counterparty shall be required for any waiver, amendment, supplement or other modification to this Agreement.

 

8.2           Notices.  All notices, requests and demands to or upon the Administrative Agent or any Grantor hereunder shall be effected in the manner provided for in Section 11.02 of the Credit Agreement; provided that any such notice, request or demand to or upon any Guarantor shall be addressed to such Guarantor at its notice address set forth on Schedule 1.

 

8.3           No Waiver by Course of Conduct; Cumulative Remedies.  Neither the Administrative Agent nor any Secured Creditor shall by any act (except by a written instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default.  No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent or any Secured Creditor, any right, power or privilege hereunder shall operate as a waiver thereof.  No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  A waiver by the Administrative Agent or any Secured Creditor of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent or such Secured Creditor would otherwise have on any future occasion.  The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.

 

8.4           Enforcement Expenses; Indemnification.

 

(a)           Each Guarantor agrees to pay, or reimburse each Secured Creditor and the Administrative Agent for, all its reasonable costs and expenses incurred in collecting against such Guarantor under the guarantee contained in Section 2 or otherwise enforcing or preserving any rights under this Agreement and the other Loan Documents to which such Guarantor is a party, including the reasonable fees and disbursements of counsel to each Secured Creditor and of counsel to the Administrative Agent to the same extent the Borrower is required to do so pursuant to the Credit Agreement.

 

(b)           Each Guarantor agrees to pay, and to save the Administrative Agent and the Secured Creditors harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement to the same extent the Borrower is required to do so pursuant to the Credit Agreement.

 

(c)           Each Guarantor agrees to pay, and to save the Administrative Agent and the Secured Creditors harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement to the extent the Borrower would be required to do so pursuant to Section 11.04 of the Credit Agreement.

 

26

 

(d)           The agreements in this Section shall survive repayment of the Obligations and all other amounts payable under the Credit Agreement and the other Loan Documents.

 

8.5           Successors and Assigns.  This Agreement shall be binding upon the successors and assigns of each Grantor and shall inure to the benefit of the Administrative Agent and the Secured Creditors and their successors and assigns; provided that no Grantor may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Administrative Agent.

 

8.6           Set-Off.  Each Grantor hereby irrevocably authorizes the Administrative Agent and each Secured Creditor at any time and from time to time while an Event of Default shall have occurred and be continuing pursuant to Section 11.09 of the Credit Agreement, without prior notice to such Grantor or any other Grantor, any such notice being expressly waived by each Grantor to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Administrative Agent or such Secured Creditor to or for the credit or the account of such Grantor, or any part thereof in such amounts as the Administrative Agent or such Secured Creditor may elect, against and on account of the obligations and liabilities of such Grantor to the Administrative Agent or such Secured Creditor hereunder and claims of every nature and description of the Administrative Agent or such Secured Creditor against such Grantor, in any currency, whether arising hereunder, under the Credit Agreement, any other Loan Document or otherwise, as the Administrative Agent or such Secured Creditor may elect, whether or not the Administrative Agent or any Secured Creditor has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured.  The Administrative Agent and each Secured Creditor shall notify such Grantor promptly of any such set-off and the application made by the Administrative Agent or such Secured Creditor of the proceeds thereof, provided that the failure to give such notice shall not affect the validity of such set-off and application.  The rights of the Administrative Agent and each Secured Creditor under this Section are in addition to other rights and remedies (including other rights of set-off) which the Administrative Agent or such Secured Creditor may have.

 

8.7           Counterparts.  This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

 

8.8           Severability.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

8.9           Section Headings.  The Section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.

 

8.10         Integration.  This Agreement and the other Loan Documents represent the agreement of the Grantors, the Administrative Agent and the Secured Creditors with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Secured Creditor relative to subject matter hereof and thereof not expressly set forth or referred to herein or in the other Loan Documents.

 

8.11         GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

27

 

8.12         Submission To Jurisdiction; Waivers.  Each Grantor hereby irrevocably and unconditionally:

 

(a)           submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof;

 

(b)           consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

 

(c)           agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Grantor at its address referred to in Section 8.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto;

 

(d)           agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

 

(e)           waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.

 

8.13         Acknowledgements.  Each Grantor hereby acknowledges that:

 

(a)           it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party;

 

(b)           neither the Administrative Agent nor any Secured Creditor has any fiduciary relationship with or duty to any Grantor arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Grantors, on the one hand, and the Administrative Agent and Secured Creditors, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

 

(c)           no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Secured Creditors or among the Grantors and the Secured Creditors.

 

8.14         Additional Grantors.  Each Subsidiary of the Borrower that is required to become or otherwise becomes a party to this Agreement pursuant to Section 7.12 of the Credit Agreement shall become a Grantor for all purposes of this Agreement upon execution and delivery by such Subsidiary of an Assumption Agreement in the form of Annex I hereto.

 

8.15         Releases.

 

(a)           At such time as the Loans, the reimbursement obligations under any Letter of Credit and the other Obligations (other than Borrower Hedge Agreement Obligations and Guarantor Hedge Agreement Obligations, any contingent indemnification or similar obligation not yet due and payable and any

 

28

 

obligation owing under any Rate Swap Document or Cash Management Agreement) shall have been paid in full, the Commitments have been terminated and no Letters of Credit shall be outstanding (unless cash collateralized on terms acceptable to the L/C Issuer or such Letter of Credit becomes a Supported Letter of Credit), the Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Administrative Agent and each Grantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantors.  At the request and sole expense of any Grantor following any such termination, the Administrative Agent shall deliver to such Grantor any Collateral held by the Administrative Agent hereunder, and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination.

 

(b)           If any of the Collateral shall be sold, transferred or otherwise disposed of by any Grantor other than to another Grantor in a transaction permitted by the Credit Agreement or any Grantor is not required to be a party hereto pursuant to Section 7.12 of the Credit Agreement, then (x) automatically and without any further action the Liens created hereby on such Collateral shall be released and (y) the Administrative Agent, at the request and sole expense of such Grantor, shall execute and deliver to such Grantor all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on such Collateral.  At the sole expense of the Borrower, a Guarantor shall be released from its obligations hereunder in the event that (x) all the Capital Stock of such Guarantor shall be sold, transferred or otherwise disposed of in a transaction permitted by the Credit Agreement; provided that the Borrower shall have delivered to the Administrative Agent, at least five Business Days prior to the date of the proposed release, a written request for release identifying the relevant Guarantor and the terms of the sale or other disposition in reasonable detail, including the price thereof in connection therewith, together with a certification by the Borrower stating that such transaction is in compliance with the Credit Agreement and the other Loan Documents, or (y) such Guarantor is not required to be a party hereto pursuant to Section 7.12 of the Credit Agreement; provided, that such release shall occur automatically and without any action other than the delivery by the Borrower to the Administrative Agent of a certification stating that such Guarantor is not required to be a party hereto pursuant to Section 7.12 of the Credit Agreement.

 

(c)           No consent of any Qualified Counterparty shall be required for any release of Collateral or Guarantors pursuant to this Section.

 

8.16         WAIVER OF JURY TRIAL.  EACH GRANTOR AND, BY ACCEPTANCE OF THE BENEFITS HEREOF, EACH AGENT AND EACH SECURED CREDITOR, HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

 

8.17         Effectiveness of ACP Execution.  The execution and delivery of this Agreement by each of Accelerated Care Plus Corp. and ACP Medical Supply Corporation are effective as of the consummation of the Merger.[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

29

 

IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee and Collateral Agreement to be duly executed and delivered as of the date first above written.

 

	
 
    	
HANGER   ORTHOPEDIC GROUP, INC.,
    
	
 
    	
as   Grantor
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Thomas E. Hartman
    
	
 
    	
 
    	
Name:   
    	
Thomas   E. Hartman
    
	
 
    	
 
    	
Title:   
    	
Assistant   Secretary
    

 

Guarantee and Collateral Agreement Signature Page

 

30

 

	
 
    	
DOSTEON   SOLUTIONS, LLC
    
	
 
    	
 
    
	
 
    	
INNOVATIVE   NEUROTRONICS, INC.
    
	
 
    	
 
    
	
 
    	
HANGER   PROSTHETICS & ORTHOTICS, INC.
    
	
 
    	
 
    
	
 
    	
SOUTHERN   PROSTHETIC SUPPLY, INC.
    
	
 
    	
 
    
	
 
    	
OPNET, INC.
    
	
 
    	
 
    
	
 
    	
LINKIA,   LLC
    
	
 
    	
 
    
	
 
    	
ABI   ORTHOTIC/PROSTHETIC LABORATORIES, LTD.
    
	
 
    	
 
    
	
 
    	
EUGENE   TEUFEL & SON ORTHOTICS &
   PROSTHETICS, INC.
    
	
 
    	
 
    
	
 
    	
THE   BRACE SHOP PROSTHETIC ORTHOTIC
   CENTERS, INC.
    
	
 
    	
 
    
	
 
    	
HANGER   PROSTHETICS & ORTHOTICS WEST, INC.
    
	
 
    	
 
    
	
 
    	
HANGER   PROSTHETICS & ORTHOTICS EAST, INC.
    
	
 
    	
 
    
	
 
    	
ELITE   CARE, INCORPORATED
    
	
 
    	
 
    
	
 
    	
INLINE   ORTHOTIC AND PROSTHETIC SYSTEMS
    
	
 
    	
 
    
	
 
    	
CREATIVE   ORTHOTICS & PROSTHETICS, INC.
    
	
 
    	
 
    
	
 
    	
NEBRASKA   ORTHOTIC & PROSTHETIC SERVICES, INC.
    
	
 
    	
 
    
	
 
    	
ORTHOPEDIC   REHABILITATION PRODUCTS, LTD.
    
	
 
    	
 
    
	
 
    	
HATTINGH   HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
COLORADO   PROFESSIONAL MEDICAL, INC.
    
	
 
    	
 
    
	
 
    	
ADVANCED   PROSTHETICS OF AMERICA, INC.
    
	
 
    	
 
    
	
 
    	
DDOPP   HOLDING LLC
    
	
 
    	
 
    
	
 
    	
DIBELLO’S   DYNAMIC ORTHOTICS AND PROSTHETICS
   PARTNERSHIP, LTD.
    
	
 
    	
 
    
	
 
    	
WASATCH   ORTHOTHICS & PEDORTHICS, LLC
    
	
 
    	
 
    
	
 
    	
ACCELERATED   CARE PLUS CORP.
    
	
 
    	
 
    
	
 
    	
ACP   MEDICAL SUPPLY CORPORATION,
    
	
 
    	
 
    
	
 
    	
as   Grantor and Guarantor
    

 

 

	
 
    	
By:
    	
/s/   Thomas E. Hartman
    
	
 
    	
 
    	
Name:   Thomas E. Hartman
    
	
 
    	
 
    	
Title:   Assistant Secretary
    

 

Guarantee and Collateral Agreement Signature Page

 

31

 

Accepted and Agreed:

 

BANK OF AMERICA, N.A.,

as Administrative Agent

 

 

	
By:
    	
/s/   Kristine Thennes
    	
 
    
	
 
    	
Name:   Kristine Thennes
    	
 
    
	
 
    	
Title:   Vice President
    	
 
    

 

Guarantee and Collateral Agreement Signature Page

 

32

 

ANNEX I

 

[Form of]

 

ASSUMPTION AGREEMENT

 

[Name of New Pledgor]

[Address of New Pledgor]

 

[Date]

 

 

 

Ladies and Gentlemen:

 

Reference is made to the Guarantee and Collateral Agreement (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement;” capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Security Agreement), dated as of December [1], 2010, made by HANGER ORTHOPEDIC GROUP, INC., a Delaware corporation (the “Borrower”), the Guarantors party thereto and BANK OF AMERICA, N.A., as administrative agent (in such capacity and together with any successors in such capacity, the “Administrative Agent”).

 

This Assumption Agreement supplements the Security Agreement and is delivered by the undersigned, [                         ] (the “New Pledgor”), pursuant to Section 8.14 of the Security Agreement.  The New Pledgor hereby agrees to be bound as a Guarantor and as a Grantor party to the Security Agreement by all of the terms, covenants and conditions set forth in the Security Agreement on and after the date hereof.  The New Pledgor also hereby agrees to be bound as a party by all of the terms, covenants and conditions applicable to it set forth in Articles VII and VIII of the Credit Agreement on and after the date hereof.  Without limiting the generality of the foregoing, the New Pledgor hereby grants and pledges to the Administrative Agent, as collateral security for the full, prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Obligations, a Lien on and security interest in, all of its right, title and interest in, to and under the Collateral and expressly assumes all obligations and liabilities of a Guarantor and Grantor thereunder.  The New Pledgor hereby makes each of the representations and warranties and agrees to each of the covenants applicable to the Grantors contained in the Security Agreement and Article VI of the Credit Agreement on and after the date hereof (except to the extent such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date).

 

Annexed hereto are supplements to each of the schedules to the Security Agreement and the Credit Agreement, as applicable, with respect to the New Pledgor.  Such supplements shall be deemed to be part of the Security Agreement or the Credit Agreement, as applicable.

 

 

This Assumption Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all such counterparts together shall constitute one and the same agreement.

 

THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

2

 

IN WITNESS WHEREOF, the New Pledgor has caused this Assumption Agreement to be executed and delivered by its duly authorized officer as of the date first above written.

 

	
 
    	
[NEW   PLEDGOR]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

 

	
AGREED TO AND ACCEPTED:
    
	
 
    
	
BANK OF AMERICA, N.A.,
    
	
 as Administrative Agent
    
	
 
    
	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

[Schedules to be attached]

 

3

 

ANNEX II

 

[RESERVED]

 

 

ANNEX III

 

[Form of]

 

Patent Security Agreement

 

Patent Security Agreement, dated as of [         ], 2010, by [              ] (individually, a “Pledgor”, and, collectively, the “Pledgors”), in favor of BANK OF AMERICA, N.A., in its capacity as administrative agent pursuant to the Credit Agreement (in such capacity, the “Administrative Agent”).

 

W I T N E S S E T H:

 

WHEREAS, the Pledgors are party to a Guarantee and Collateral Agreement date December 1, 2010 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”) in favor of the Administrative Agent pursuant to which the Pledgors are required to execute and deliver this Patent Security Agreement;

 

NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent, for the benefit of the Secured Creditors, to enter into the Credit Agreement, the Pledgors hereby agree with the Administrative Agent as follows:

 

SECTION 1.           Defined Terms.  Unless otherwise defined herein, terms defined in the Security Agreement and used herein have the meaning given to them in the Security Agreement.

 

SECTION 2.           Grant of Security Interest in Patent Collateral.  Each Pledgor hereby pledges and grants to the Administrative Agent for the benefit of the Secured Creditors a lien on and security interest in and to all of its right, title and interest in, to and under all the following Collateral of such Pledgor:

 

(a)           Patents of such Pledgor listed on Schedule I attached hereto; and

 

(b)           all Proceeds of any and all of the foregoing (other than Excluded Assets).

 

SECTION 3.           Security Agreement.  The security interest granted pursuant to this Patent Security Agreement is granted in conjunction with the security interest granted to the Administrative Agent pursuant to the Security Agreement and Pledgors hereby acknowledge and affirm that the rights and remedies of the Administrative Agent with respect to the security interest in the Patents made and granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.  In the event that any provision of this Patent Security Agreement is deemed to conflict with the Security Agreement, the provisions of the Security Agreement shall control.

 

SECTION 4.           Termination.  At such time as the Loans, the reimbursement obligations under any Letter of Credit and the other Obligations (other than contingent indemnification or similar obligations not yet due, Borrower Hedge Agreement Obligations and Guarantor Hedge Agreement Obligations) shall have been paid in full, the Commitments have been terminated and no Letters of Credit shall be outstanding (unless cash collateralized on terms acceptable to the L/C Issuer or such Letter of Credit becomes a Supported Letter of Credit) and termination of the Security Agreement, the Administrative Agent shall execute, acknowledge, and deliver to the Pledgors an instrument in writing in recordable form releasing the collateral pledge, grant, assignment, lien and security interest in the Patents under this Patent Security Agreement.

 

 

SECTION 5.           Counterparts.  This Patent Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Patent Security Agreement by signing and delivering one or more counterparts.

 

SECTION 6.           Governing Law.  This Patent Security Agreement and the transactions contemplated hereby, and all disputes between the parties under or relating to this Patent Security Agreement or the facts or circumstances leading to its execution, whether in contract, tort or otherwise, shall be construed in accordance with and governed by the laws (including statutes of limitation) of the State of New York, without regard to conflicts of law principles that would require the application of the laws of another jurisdiction.

 

[signature page follows]

 

2

 

IN WITNESS WHEREOF, each Pledgor has caused this Patent Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[PLEDGORS]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

3

 

	
Accepted and Agreed:
    
	
 
    
	
 
    
	
BANK OF AMERICA, N.A.,
    
	
as Administrative Agent
    
	
 
    
	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

4

 

SCHEDULE I
 to
 PATENT SECURITY AGREEMENT
 PATENT REGISTRATIONS AND PATENT APPLICATIONS

 

UNITED STATES PATENTS:

 

Registrations:

 

	
OWNER
    	
 
    	
REGISTRATION NUMBER
    	
 
    	
DESCRIPTION
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

Applications:

 

	
OWNER
    	
 
    	
APPLICATION NUMBER
    	
 
    	
DESCRIPTION
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

OTHER PATENTS:

 

Registrations:

 

	
OWNER
    	
 
    	
REGISTRATION
   NUMBER
    	
 
    	
COUNTRY/STATE
    	
 
    	
DESCRIPTION
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

Applications:

 

	
OWNER
    	
 
    	
APPLICATION
   NUMBER
    	
 
    	
COUNTRY/STATE
    	
 
    	
DESCRIPTION
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

5

 

ANNEX IV

 

[Form of]

 

Trademark Security Agreement

 

Trademark Security Agreement, dated as of [         ], 2010, by [              ] (individually, a “Pledgor”, and, collectively, the “Pledgors”), in favor of BANK OF AMERICA, N.A., in its capacity as administrative agent pursuant to the Credit Agreement (in such capacity, the “Administrative Agent”).

 

W I T N E S S E T H:

 

WHEREAS, the Pledgors are party to a Guarantee and Collateral Agreement date December 1, 2010 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”) in favor of the Administrative Agent pursuant to which the Pledgors are required to execute and deliver this Trademark Security Agreement;

 

NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent, for the benefit of the Secured Creditors, to enter into the Credit Agreement, the Pledgors hereby agree with the Administrative Agent as follows:

 

SECTION 1.           Defined Terms.  Unless otherwise defined herein, terms defined in the Security Agreement and used herein have the meaning given to them in the Security Agreement.

 

SECTION 2.           Grant of Security Interest in Trademark Collateral.  Each Pledgor hereby pledges and grants to the Administrative Agent for the benefit of the Secured Creditors a lien on and security interest in and to all of its right, title and interest in, to and under all the following Collateral of such Pledgor:

 

(a)           Trademarks of such Pledgor listed on Schedule I attached hereto; and

 

(b)           all Proceeds of any and all of the foregoing (other than Excluded Property).

 

SECTION 3.           Security Agreement.  The security interest granted pursuant to this Trademark Security Agreement is granted in conjunction with the security interest granted to the Administrative Agent pursuant to the Security Agreement and Pledgors hereby acknowledge and affirm that the rights and remedies of the Administrative Agent with respect to the security interest in the Trademarks made and granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.  In the event that any provision of this Trademark Security Agreement is deemed to conflict with the Security Agreement, the provisions of the Security Agreement shall control.

 

SECTION 4.           Termination.  At such time as the Loans, the reimbursement obligations under any Letter of Credit and the other Obligations (other than contingent indemnification or similar obligations not yet due, Borrower Hedge Agreement Obligations and Guarantor Hedge Agreement Obligations) shall have been paid in full, the Commitments have been terminated and no Letters of Credit shall be outstanding (unless cash collateralized on terms acceptable to the L/C Issuer or such Letter of Credit becomes a Supported Letter of Credit) and termination of the Security Agreement, the Administrative Agent shall execute, acknowledge, and deliver to the Pledgors an instrument in writing in recordable form releasing 

 

 

the collateral pledge, grant, assignment, lien and security interest in the Trademarks under this Trademark Security Agreement.

 

SECTION 5.           Counterparts.  This Trademark Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Trademark Security Agreement by signing and delivering one or more counterparts.

 

SECTION 6.           Governing Law.  This Trademark Security Agreement and the transactions contemplated hereby, and all disputes between the parties under or relating to this Trademark Security Agreement or the facts or circumstances leading to its execution, whether in contract, tort or otherwise, shall be construed in accordance with and governed by the laws (including statutes of limitation) of the State of New York, without regard to conflicts of law principles that would require the application of the laws of another jurisdiction.

 

[signature page follows]

 

2

 

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

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    
	
 
    	
[PLEDGORS]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

3

 

	
Accepted and Agreed:
    
	
 
    
	
BANK OF AMERICA, N.A.,
    
	
as Administrative Agent
    
	
 
    
	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

4

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