SECURITY AGREEMENT

Exhibit 10.2

SECURITY AGREEMENT

This SECURITY AGREEMENT (this “ Agreement ”), dated as of February 17, 2009, among Grantors listed on the signature pages hereof and those additional entities that hereafter become parties hereto by executing the form of Supplement attached hereto as Annex 1 (collectively, the “ Grantors ” and each, a “ Grantor ”), and WELLS FARGO FOOTHILL, LLC, a Delaware limited liability company, as arranger and administrative agent for the Lenders (in such capacity, together with its successors and assigns, if any, in such capacity, “ Agent ”).

WITNESSETH:

WHEREAS , pursuant to that certain Credit Agreement dated as of even date herewith (as amended, restated, supplemented, renewed, extended or otherwise modified from time to time, the “ Credit Agreement ”) among Quest Software, Inc., a California corporation, as borrower (“ Borrower ”), the lenders party thereto as “Lenders” (“ Lenders ”), and Agent, the Lender Group has agreed to make certain financial accommodations available to Borrower from time to time pursuant to the terms and conditions thereof, and

WHEREAS , Agent has agreed to act as agent for the benefit of the Lender Group and the Bank Product Providers in connection with the transactions contemplated by the Credit Agreement and this Agreement, and

WHEREAS , in order to induce the Lender Group to enter into the Credit Agreement and the other Loan Documents and to induce the Lender Group to make financial accommodations to Borrower as provided for in the Credit Agreement, Grantors have agreed to grant a continuing security interest in and to the Collateral in order to secure the prompt and complete payment, observance and performance of, among other things, the Secured Obligations, and

NOW, THEREFORE , for and in consideration of the recitals made above and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

1. Defined Terms . All capitalized terms used herein (including in the preamble and recitals hereof) without definition shall have the meanings ascribed thereto in the Credit Agreement. Any terms used in this Agreement that are defined in the Code shall be construed and defined as set forth in the Code unless otherwise defined herein or in the Credit Agreement; provided , however , that to the extent that the Code is used to define any term herein and if such term is defined differently in different Articles of the Code, the definition of such term contained in Article 9 of the Code shall govern. In addition to those terms defined elsewhere in this Agreement, as used in this Agreement, the following terms shall have the following meanings:

(a) “ Account ” means an account (as that term is defined in Article 9 of the Code).

(b) “ Account Debtor ” means an account debtor (as that term is defined in the Code).

(c) “ Activation Instruction ” has the meaning specified therefor in Section 6(k) .

(d) “ Agent ” has the meaning specified therefor in the preamble to this Agreement.

(e) “ Agent’s Lien ” has the meaning specified therefor in the Credit Agreement.

(f) “ Bank Product Obligations ” has the meaning specified therefor in the Credit Agreement.

(g) “ Bank Product Provider ” has the meaning specified therefor in the Credit Agreement.

(h) “ Books ” means books and records (including each Grantor’s Records indicating, summarizing, or evidencing such Grantor’s assets (including the Collateral) or liabilities, each Grantor’s Records relating to such Grantor’s business operations or financial condition, and each Grantor’s goods or General Intangibles related to such information).

(i) “ Borrower ” has the meaning specified therefor in the recitals to this Agreement.

(j) “ Cash Equivalents ” has the meaning specified therefor in the Credit Agreement.

(k) “ CFC ” has the meaning specified therefor in the Credit Agreement.

(l) “ Chattel Paper ” means chattel paper (as that term is defined in the Code) and includes tangible chattel paper and electronic chattel paper.

(m) “ Code ” means the California Uniform Commercial Code, as in effect from time to time; provided , however , that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, priority, or remedies with respect to Agent’s Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies.

(n) “ Collateral ” has the meaning specified therefor in Section 2 .

(o) “ Collections ” has the meaning specified therefor in the Credit Agreement.

(p) “ Commercial Tort Claims ” means commercial tort claims (as that term is defined in the Code), and includes those commercial tort claims listed on Schedule 1 .

(q) “ Controlled Account ” has the meaning specified therefor in Section 6(k) .

(r) “ Controlled Account Agreements ” means those certain cash management agreements, each of which is in form and substance reasonably satisfactory to Agent and among a Grantor, Agent, and one of the Controlled Account Banks.

(s) “ Controlled Account Bank ” has the meaning specified therefor in Section 6(k) .

(t) “ Copyrights ” means any and all copyrights and copyright registrations, including, (i) the copyright registrations and recordings thereof and all applications in connection therewith listed on Schedule 2 , (ii) all restorations, reversions, extensions or renewals thereof, (iii) all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past or future infringements thereof, (iv) the right to sue for past, present and future infringements thereof and (v) all of each Grantor’s rights corresponding thereto throughout the world.

(u) “ Copyright Security Agreement ” means each Copyright Security Agreement among Grantors, or any of them, and Agent, for the benefit of the Lender Group and the Bank Product Providers, in

 

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substantially the form of Exhibit A , pursuant to which Grantors have granted to Agent, for the benefit of the Lender Group and the Bank Product Providers, a security interest in all their respective Copyrights.

(v) “ Credit Agreement ” has the meaning specified therefor in the recitals to this Agreement.

(w) “ Deposit Account ” means a deposit account (as that term is defined in the Code).

(x) “ Equipment ” means equipment (as that term is defined in the Code).

(y) “ Event of Default ” has the meaning specified therefor in the Credit Agreement.

(z) “ General Intangibles ” means general intangibles (as that term is defined in the Code) and includes payment intangibles, contract rights, rights to payment, rights arising under common law, statutes, or regulations, choses or things in action, goodwill (including the goodwill associated with any Trademark), Patents, Trademarks, Copyrights, URLs and domain names, industrial designs, other industrial or Intellectual Property or rights therein or applications therefor, whether under license or otherwise, programs, programming materials, blueprints, drawings, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights to payment and other rights under any royalty or licensing agreements, including Intellectual Property Licenses, infringement claims, computer programs, information contained on computer disks or tapes, software, literature, reports, catalogs, pension plan refunds, pension plan refund claims, insurance premium rebates, tax refunds, and tax refund claims, interests in a partnership or limited liability company which do not constitute a security under Article 8 of the Code, and any other personal property other than Commercial Tort Claims, money, Accounts, Chattel Paper, Deposit Accounts, goods, Investment Related Property, Negotiable Collateral, and oil, gas, or other minerals before extraction.

(aa) “ Grantor ” and “ Grantors ” have the respective meanings specified therefor in the recitals to this Agreement.

(bb) “ Guaranty ” has the meaning specified therefor in the Credit Agreement.

(cc) “ Insolvency Proceeding ” has the meaning specified therefor in the Credit Agreement.

(dd) “ Intellectual Property ” means any and all Intellectual Property Licenses, Patents, Copyrights, Trademarks, the goodwill associated with such Trademarks, trade secrets and customer lists.

(ee) “ Intellectual Property Licenses ” means rights under or interests in any patent, trademark, copyright or other intellectual property, including software license agreements with any other party, whether the applicable Grantor is a licensee or licensor under any such license agreement (but excluding any off-the-shelf software license agreement), and the right to use the foregoing in connection with the enforcement of the Lender Group’s rights under the Loan Documents, including the right to prepare for sale and sell any and all Inventory and Equipment now or hereafter owned by any Grantor and now or hereafter covered by such licenses.

(ff) “ Inventory ” means inventory (as that term is defined in the Code).

(gg) “ Investment Related Property ” means (i) any and all investment property (as that term is defined in the Code), and (ii) any and all of the following (regardless of whether classified as investment property under the Code): all Pledged Interests, Pledged Operating Agreements, and Pledged Partnership Agreements.

(hh) “ Lender Group ” has the meaning specified therefor in the Credit Agreement.

 

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(ii) “ Loan Document ” has the meaning specified therefor in the Credit Agreement.

(jj) “ Loan Party ” has the meaning specified therefor in the Credit Agreement.

(kk) “ Negotiable Collateral ” means letters of credit, letter-of-credit rights, instruments, promissory notes, drafts and documents (as that term is defined in the Code).

(ll) “ Obligations ” has the meaning specified therefor in the Credit Agreement.

(mm) “ Patents ” means patents and patent applications, including, (i) the patents and patent applications listed on Schedule 4 , (ii) all renewals, continuations, divisionals, continuations-in-part, reissues and re-examinations thereof, (iii) all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past or future infringements thereof, (iv) the right to sue for past, present and future infringements thereof, and (v) all of each Grantor’s rights corresponding thereto throughout the world.

(nn) “ Patent Security Agreement ” means each Patent Security Agreement among Grantors, or any of them, and Agent, for the benefit of the Lender Group and the Bank Product Providers, in substantially the form of Exhibit B , pursuant to which Grantors have granted to Agent, for the benefit of the Lender Group and the Bank Product Providers, a security interest in all their respective Patents.

(oo) “ Permitted Liens ” has the meaning specified therefor in the Credit Agreement.

(pp) “ Person ” has the meaning specified therefor in the Credit Agreement.

(qq) “ Pledged Companies ” means, each Person listed on Schedule 5 as a “Pledged Company”, together with each other Person, all or a portion of whose Stock, is acquired or otherwise owned by a Grantor after the Closing Date.

(rr) “ Pledged Interests ” means all of each Grantor’s right, title and interest in and to all of the Stock now or hereafter owned by such Grantor, regardless of class or designation, including, in each of the Pledged Companies, and all substitutions therefor and replacements thereof, all proceeds thereof and all rights relating thereto, also including any certificates representing the Stock, the right to receive any certificates representing any of the Stock, all warrants, options, share appreciation rights and other rights, contractual or otherwise, in respect thereof and the right to receive all dividends, distributions of income, profits, surplus, or other compensation by way of income or liquidating distributions, in cash or in kind, and all cash, instruments, and other property from time to time received, receivable, or otherwise distributed in respect of or in addition to, in substitution of, on account of, or in exchange for any or all of the foregoing.

(ss) “ Pledged Interests Addendum ” means a Pledged Interests Addendum substantially in the form of Exhibit C .

(tt) “ Pledged Operating Agreements ” means all of each Grantor’s rights, powers, and remedies under the limited liability company operating agreements of each of the Pledged Companies that are limited liability companies.

(uu) “ Pledged Partnership Agreements ” means all of each Grantor’s rights, powers, and remedies under the partnership agreements of each of the Pledged Companies that are partnerships.

(vv) “ Proceeds ” has the meaning specified therefor in Section 2 .

 

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(ww) “ Real Property ” means any estates or interests in real property now owned or hereafter acquired by any Grantor or any Subsidiary of any Grantor and the improvements thereto.

(xx) “ Records ” means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.

(yy) “ Required Library ” means the copyrights in the source code (excluding manuals or other similar documentation) for the software listed on Schedule 5.15 to the Credit Agreement; provided that upon the occurrence of a Financial Covenant Triggering Event, at the election of Agent or the Required Lenders, the “ Required Library ” shall mean, as of any date of determination after such election is made, the set or collection of copyrights in the source code (excluding manuals or other similar documentation) for the software owned by Borrower or any other Loan Party that generated not less than 50% of the aggregate amount of current revenues from (i) licenses and related Recurring Software Revenue attributable to software owned by Borrower or any other Loan Party, and (ii) consulting services of Borrower or any other Loan Party, each during the 12 month period immediately preceding the date of determination. The Required Library shall include all a.x releases of the software programs that comprise the Required Library for purposes of copyright registration.

(zz) “ Rescission ” has the meaning specified therefor in Section 6(k) .

(aaa) “ Secured Obligations ” means each and all of the following: (i) all of the present and future obligations of Grantors (or any of them) arising from this Agreement, the Credit Agreement, or the other Loan Documents (including any Guaranty); (ii) all Bank Product Obligations; and (iii) all Obligations of Borrower, including, in the case of each of clauses (i), (ii) and (iii), reasonable attorneys’ fees and expenses and any interest, fees, or expenses that accrue after the filing of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any Insolvency Proceeding.

(bbb) “ Securities Account ” means a securities account (as that term is defined in the Code).

(ccc) “ Security Interest ” has the meaning specified therefor in Section 2 .

(ddd) “ Stock ” has the meaning specified therefor in the Credit Agreement

(eee) “ Supporting Obligations ” means supporting obligations (as such term is defined in the Code) and includes letters of credit and guaranties issued in support of Accounts, Chattel Paper, documents, General Intangibles, instruments or Investment Related Property.

(fff) “ Trademarks ” means any and all trademarks, trade names, registered trademarks, trademark applications, service marks, registered service marks and service mark applications, including (i) the trade names, registered trademarks, trademark applications, registered service marks and service mark applications listed on Schedule 6 , (ii) all extensions, modifications and renewals thereof, (iii) all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past or future infringements or dilutions thereof, (iv) the right to sue for past, present and future infringements and dilutions thereof, (v) the goodwill of each Grantor’s business symbolized by the foregoing or connected therewith, and (vi) all of each Grantor’s rights corresponding thereto throughout the world.

(ggg) “ Trademark Security Agreement ” means each Trademark Security Agreement among Grantors, or any of them, and Agent, for the benefit of the Lender Group and the Bank Product Providers, in substantially the form of Exhibit D , pursuant to which Grantors have granted to Agent, for the benefit of the Lender Group and the Bank Product Providers, a security interest in all their respective Trademarks.

 

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(hhh) “ URL ” means “uniform resource locator,” an internet web address.

2. Grant of Security . Each Grantor hereby unconditionally grants, assigns, and pledges to Agent, for the benefit of the Lender Group and the Bank Product Providers, to secure the Secured Obligations, a continuing security interest hereinafter referred to as the “ Security Interest ” in all personal property of such Grantor whether now owned or hereafter acquired or arising and wherever located, including such Grantor’s right, title, and interest in and to the following, whether now owned or hereafter acquired or arising and wherever located (the “ Collateral ”):

(a) all of such Grantor’s Accounts;

(b) all of such Grantor’s Books;

(c) all of such Grantor’s Chattel Paper;

(d) all of such Grantor’s interest with respect to any Deposit Account;

(e) all of such Grantor’s Equipment and fixtures;

(f) all of such Grantor’s General Intangibles;

(g) all of such Grantor’s Inventory;

(h) all of such Grantor’s Investment Related Property;

(i) all of such Grantor’s Negotiable Collateral;

(j) all of such Grantor’s rights in respect of Supporting Obligations;

(k) all of such Grantor’s interest with respect to any Commercial Tort Claims;

(l) all of such Grantor’s money, Cash Equivalents, or other assets of each such Grantor that now or hereafter come into the possession, custody, or control of Agent or any other member of the Lender Group;

(m) all of the proceeds (as that term is defined in the Code) and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance or Commercial Tort Claims covering or relating to any or all of the foregoing, and any and all Accounts, Books, Chattel Paper, Deposit Accounts, Equipment, General Intangibles, Inventory, Investment Related Property, Negotiable Collateral, Supporting Obligations, money, or other tangible or intangible property resulting from the sale, lease, license, exchange, collection, or other disposition of any of the foregoing, whatever is collected on, or distributed on account of any of the foregoing, any and all rights arising out of the foregoing, the proceeds of any award in condemnation with respect to any of the foregoing, any rebates or refunds, whether for taxes or otherwise, and all proceeds of any such proceeds, or any portion thereof or interest therein, and the proceeds thereof, claims arising out of the loss, non-conformity, or interference with the use of, defects, or infringement of rights in, or damage to, any of the foregoing, and all proceeds of any loss of, damage to, or destruction of the above, whether insured or not insured, and, to the extent not otherwise included, any indemnity, warranty, insurance, or guaranty payable by reason of loss or non-conformity of, defects or infringement of rights in, or damage to, or otherwise with respect to any of the foregoing (the “ Proceeds ”). Without limiting the generality of the foregoing, the term “Proceeds” includes whatever is receivable or received when Investment Related Property or proceeds are sold, exchanged, collected, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes proceeds of any indemnity or guaranty payable to any Grantor or Agent from time to time with respect to any of the Investment Related Property.

 

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Notwithstanding the foregoing or anything contained in this Agreement to the contrary, the term “Collateral” shall not include: (i) voting Stock of any CFC, solely to the extent that (y) such Stock represents more than 65% of the outstanding voting Stock of such CFC, and (z) hypothecating more than 65% of the total outstanding voting Stock of such CFC would result in adverse tax consequences; (ii) the Stock of Quest Software Public Sector; (iii) any intent-to-use US trademark application for which an amendment to allege use or statement of use has not been filed and accepted by the US Patent and Trademark Office and that would otherwise be deemed invalidated, cancelled or abandoned due to the grant of a Lien thereon ( provided that each intent-to-use application shall be considered Collateral immediately and automatically upon such filing and acceptance); or (iv) any rights or interest in any contract, lease, permit, license, charter or license agreement covering real or personal property of any Grantor if under the terms of such contract, lease, permit, license, charter or license agreement, or applicable law with respect thereto, the grant of a security interest or lien therein is prohibited as a matter of law or under the terms of such contract, lease, permit, license, charter or license agreement and such prohibition has not been waived or the consent of the other party to such contract, lease, permit, license, charter or license agreement has not been obtained (provided, that, the foregoing exclusions of this clause (iv) shall in no way be construed (A) to apply to the extent that any described prohibition is unenforceable under Section 9-406, 9-407, 9-408, OR 9-409 of the Code or other applicable law, (B) to limit, impair, or otherwise affect the Lender Group’s continuing security interests in and liens upon any rights or interests of any Grantor in or to (x) monies due or to become due under any described contract, lease, permit, license, charter or license agreement (including any Accounts), or (y) any proceeds from the sale, license, lease, or other dispositions of any such contract, lease, permit, license, charter, license agreement, or Stock, or (C) apply to the extent that any consent or waiver has been obtained that would permit the security interest of lien notwithstanding the prohibition).

3. Security for Obligations . The Security Interest created hereby secures the payment and performance of the Secured Obligations, whether now existing or arising hereafter. Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts which constitute part of the Secured Obligations and would be owed by Grantors, or any of them, to Agent, the Lender Group, the Bank Product Providers or any of them, but for the fact that they are unenforceable or not allowable due to the existence of an Insolvency Proceeding involving any Grantor.

4. Grantors Remain Liable . Anything herein to the contrary notwithstanding, (a) each of the Grantors shall remain liable under the contracts and agreements included in the Collateral, including the Pledged Operating Agreements and the Pledged Partnership Agreements, to perform all of the duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by Agent or any other member of the Lender Group of any of the rights hereunder shall not release any Grantor from any of its duties or obligations under such contracts and agreements included in the Collateral, and (c) none of the members of the Lender Group shall have any obligation or liability under such contracts and agreements included in the Collateral by reason of this Agreement, nor shall any of the members of the Lender Group be obligated to perform any of the obligations or duties of any Grantors thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. Until an Event of Default shall occur and be continuing, except as otherwise provided in this Agreement, the Credit Agreement, or other Loan Documents, Grantors shall have the right to possession and enjoyment of the Collateral for the purpose of conducting the ordinary course of their respective businesses, subject to and upon the terms hereof and of the Credit Agreement and the other Loan Documents. Without limiting the generality of the foregoing, it is the intention of the parties hereto that record and beneficial ownership of the Pledged Interests, including all voting, consensual, and dividend rights, shall remain in the applicable Grantor until the occurrence of an Event of Default and until Agent shall notify the applicable Grantor of Agent’s exercise of voting, consensual, or dividend rights with respect to the Pledged Interests pursuant to Section 15 .

5. Representations and Warranties . Each Grantor hereby represents and warrants as follows:

(a) The exact legal name of each of the Grantors is set forth on the signature pages of this Agreement or a written notice provided to Agent pursuant to Section 6.5 of the Credit Agreement.

 

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(b) Schedule 7 sets forth all Real Property owned by Grantors as of the Closing Date.

(c) Such Grantor is the legal and beneficial owner or exclusive or non-exclusive licensee of all Intellectual Property that is material to the conduct of its business as currently conducted. As of the Closing Date, no Grantor has any interest in, or title to, any registered Copyrights, material Intellectual Property Licenses, Patents, or registered Trademarks except as set forth on Schedule 2 , Schedule 4.17 to the Credit Agreement, Schedule 4 , and Schedule 6 , respectively. This Agreement is effective to create a valid and continuing Lien on such Copyrights, Intellectual Property Licenses, Patents and Trademarks and, upon filing of the Copyright Security Agreement with the United States Copyright Office and filing of the Patent Security Agreement and the Trademark Security Agreement with the United States Patent and Trademark Office, and the filing of appropriate financing statements in the jurisdictions listed on Schedule 8 , all action necessary or desirable to protect and perfect the Security Interest in and to on each Grantor’s Patents, Trademarks, or Copyrights has been taken and such perfected Security Interest is enforceable as such as against any and all creditors of and purchasers from any Grantor. No Grantor has any interest in any Copyright that is necessary in connection with the operation of such Grantor’s business, except for those Copyrights identified on Schedule 2 which have been registered with the United States Copyright Office.

(d) This Agreement creates a valid security interest in the Collateral of each of Grantors, to the extent a security interest therein can be created under the Code, securing the payment of the Secured Obligations. Except to the extent a security interest in the Collateral cannot be perfected by the filing of a financing statement under the Code or pursuant to filings with the United States Patent and Trademark Office or the United States Copyright Office, all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken or will have been taken upon (i) the filing of financing statements listing each applicable Grantor, as a debtor, and Agent, as secured party, in the jurisdictions listed next to such Grantor’s name on Schedule 8 , (ii) the filing of the Copyright Security Agreement with the United States Copyright Office and (iii) the filing of the Patent Security Agreement and the Trademark Security Agreement with the United States Patent and Trademark Office. Upon the making of such filings, Agent shall have a first priority perfected security interest in the Collateral of each Grantor to the extent such security interest can be perfected by the filing of a financing statement or pursuant to filings with the United States Patent and Trademark Office or the United States Copyright Office. No Grantor owns any registered Copyright or any Copyright that is the subject of an application for registration that is not the subject of a Copyright Security Agreement in favor of Agent.

(e) (i) Except for the Security Interest created hereby, each Grantor is and will at all times be the sole holder of record and the legal and beneficial owner, free and clear of all Liens other than Permitted Liens, of the Pledged Interests indicated on Schedule 5 as being owned and pledged by such Grantor and, when acquired by such Grantor, any Pledged Interests acquired after the Closing Date; (ii) all of the Pledged Interests are duly authorized, validly issued, fully paid and non-assessable and the Pledged Interests constitute or will constitute the percentage of the issued and outstanding Stock of the Pledged Companies of such Grantor identified on Schedule 5 as supplemented or modified by any Pledged Interests Addendum or any Supplement to this Agreement; (ii) such Grantor has the right and requisite authority to pledge, the Investment Related Property pledged by such Grantor to Agent as provided herein; (iii) all actions necessary or desirable to perfect, establish the first priority of, or otherwise protect, Agent’s Liens in the Investment Related Property, and the proceeds thereof, will have been duly taken, (A) upon the execution and delivery of this Agreement; (B) upon the taking of possession by Agent of any certificates constituting the Pledged Interests, to the extent such Pledged Interests are represented by certificates, together with undated powers endorsed in blank by the applicable Grantor; (C) upon the filing of financing statements in the applicable jurisdiction set forth on Schedule 8 for such Grantor with respect to the Pledged Interests of such Grantor that are not represented by certificates, and (D) with respect to any Securities Accounts, upon the delivery of Control Agreements with respect thereto; and (iv) each Grantor will deliver to and deposit with Agent (or, with respect to any Pledged Interests of Pledged Companies that are Material Subsidiaries organized in the United States created or obtained after the Closing Date, will deliver and deposit in accordance with Sections 6(a) and 8 ), within the timeframe required by the Credit Agreement, all certificates representing the Pledged Interests of Pledged

 

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Companies that are Material Subsidiaries organized in the United States owned by such Grantor to the extent such Pledged Interests are represented by certificates, and undated powers endorsed in blank with respect to such certificates. None of the Pledged Interests owned or held by such Grantor has been issued or transferred in violation of any securities registration, securities disclosure, or similar laws of any jurisdiction to which such issuance or transfer may be subject.

(f) No consent, approval, authorization, or other order or other action by, and no notice to or filing with, any Governmental Authority or any other Person is required (i) for the grant of a Security Interest by such Grantor in and to the Collateral pursuant to this Agreement or for the execution, delivery, or performance of this Agreement by such Grantor, or (ii) for the exercise by Agent of the voting or other rights provided for in this Agreement with respect to the Investment Related Property or the remedies in respect of the Collateral pursuant to this Agreement, except as may be required in connection with such disposition of Investment Related Property by laws affecting the offering and sale of securities generally. No Intellectual Property License to which such Grantor is a party requires any consent for such Grantor to grant the security interest granted hereunder in such Grantor’s right, title or interest in or to any Copyrights, Patents, Trademarks or material Intellectual Property Licenses.

(g) With respect to the Required Library, each Grantor has made, in good faith and in accordance with the procedures and regulations of the United States Copyright Office, all payments, filings and recordations necessary to protect and maintain its interest in such Intellectual Property in a manner sufficient to claim in the public record such Grantor’s ownership thereof, including (i) making all necessary registration, maintenance, and renewal fee payments with respect thereto, and (ii) filing all necessary documents, including all applications for registration of Copyrights comprising the Required Library. With respect to the other Intellectual Property identified on Schedules 2 , 4 and 5 , such Grantor has made, in good faith and in accordance with the procedures and regulations of the United States Copyright Office and the United States Patent and Trademark Office, all payments, filings and recordations to protect and maintain its interest in such Intellectual Property in a manner sufficient to claim in the public record such Grantor’s ownership thereof, including (i) making all necessary registration, maintenance, and renewal fee payments with respect thereto, and (ii) filing all necessary documents, including all applications for registration of Copyrights, Patents and Trademarks.

(h) Each Grantor has and enforces a policy requiring its employees, consultants, licensees, vendors and contractors who develop software or other material technology or material intellectual property of such Grantor to execute appropriate assignment agreements, pursuant to which each such employee, consultant or contractor has assigned to such Grantor all of such individual’s rights (including with respect to Intellectual Property) in and to all ideas, inventions, processes, works of authorship and other work products that relate to such Grantor’s business and that were conceived, created, authored or developed during the term of such employee’s, consultant’s, licensee’s, vendor’s and contractor’s employment, engagement or other business arrangement by such Grantor. No past or present employee, consultant or contractor of any Grantor has any ownership interest, license, permission or other right in or to any Intellectual Property that is material to the conduct of such Grantor’s business, except that, to the extent necessary for the conduct of their work for or on behalf of any Grantor, consultants and contractors may have permission to use or license rights in Intellectual Property of such Grantor.

(i) Except as set forth in Schedules 2 , 4 and 5 and other than immaterial matters arising after the Closing Date, no claim has been made in writing and is continuing or, to the best of each Grantor’s knowledge, threatened that the use by any Grantor of any Intellectual Property that is material to the conduct of such Grantor’s business does or may violate the Intellectual Property rights of any other Person, and, to the best of each Grantor’s knowledge, there is currently no infringement or unauthorized use of any item of Intellectual Property listed on Schedules 2 , 4 and 5 .

 

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6. Covenants . Each Grantor, jointly and severally, covenants and agrees with Agent that from and after the date of this Agreement and until the date of termination of this Agreement in accordance with Section 22 :

(a) Possession of Collateral . In the event that any Collateral, including proceeds, is evidenced by or consists of Negotiable Collateral, Investment Related Property, or Chattel Paper, and if and to the extent that perfection or priority of Agent’s Security Interest is dependent on or enhanced by possession and such Collateral has a value of $100,000 or more in any one instance or $250,000 or more in the aggregate, the applicable Grantor, promptly upon the request of Agent (and in no event later than 10 Business Days after receiving such request), shall execute such other documents and instruments as shall be requested by Agent or, if applicable, endorse and deliver physical possession of such Negotiable Collateral, Investment Related Property, or Chattel Paper to Agent, together with such undated powers endorsed in blank as shall be requested by Agent; provided that, notwithstanding the foregoing, Grantors shall not be required to deliver certificates (if any) representing the Pledged Interests of Pledged Companies that are not Material Subsidiaries organized in the United States;

(b) Chattel Paper .

(i) Each Grantor, promptly upon the request of Agent (and in no event later than 10 Business Days after receiving such request), shall take all steps reasonably necessary to grant Agent control of all electronic Chattel Paper having a value of $100,000 or more in any one instance or $250,000 or more in the aggregate in accordance with the Code and all “transferable records” as that term is defined in Section 16 of the Uniform Electronic Transaction Act and Section 201 of the federal Electronic Signatures in Global and National Commerce Act as in effect in any relevant jurisdiction;

(ii) If any Grantor retains possession of Chattel Paper or instruments (which retention of possession shall be subject to the extent permitted hereby and by the Credit Agreement) having a value of $100,000 or more in any one instance or $250,000 or more in the aggregate, promptly upon the request of Agent (and in no event later than 10 Business Days after receiving such request), such Chattel Paper and instruments shall be marked with the following legend: “This writing and the obligations evidenced or secured hereby are subject to the Security Interest of Wells Fargo Foothill, LLC, as Agent for the benefit of the Lender Group and the Bank Product Providers”;

(c) Control Agreements .

(i) Except to the extent otherwise excused by the Credit Agreement, each Grantor shall obtain an authenticated Control Agreement within 30 days after the Closing Date, from each bank maintaining a Deposit Account for such Grantor;

(ii) Except to the extent otherwise excused by the Credit Agreement, each Grantor shall obtain an authenticated Control Agreement within 30 days after the Closing Date, from each issuer of uncertificated securities, securities intermediary, or commodities intermediary issuing or holding any financial assets or commodities to or for any Grantor;

(d) Letter-of-Credit Rights . If any Grantor is or becomes the beneficiary of letters of credit having a value of $100,000 or more in any one instance or $250,000 or more in the aggregate shall promptly (and in no event later than 10 Business Days after becoming a beneficiary), notify Agent thereof and, promptly upon the request of Agent (and in no event later than 10 Business Days after receiving such request), enter into a tri-party agreement with Agent and the issuer or confirming bank with respect to letter-of-credit rights assigning such letter-of-credit rights to Agent and directing all payments thereunder to Agent’s Account, all in form and substance satisfactory to Agent;

 

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(e) Commercial Tort Claims . Each Grantor shall promptly (and in no event later than 10 Business Days of receipt thereof), notify Agent in writing upon incurring or otherwise obtaining any Commercial Tort Claims for an amount in excess of $1,000,000 in any one instance or $2,500,000 in the aggregate, after the Closing Date and, upon request of Agent, promptly amend Schedule 1 to describe such after-acquired Commercial Tort Claims in a manner that reasonably identifies such Commercial Tort Claims, and hereby authorizes the filing of additional financing statements or amendments to existing financing statements describing such Commercial Tort Claims, and agrees to do such other acts or things deemed necessary or desirable by Agent to give Agent a first priority, perfected security interest in any such Commercial Tort Claims;

(f) Government Contracts . If any Account or Chattel Paper arises out of a contract or contracts with the United States of America or any department, agency, or instrumentality thereof pursuant to which $100,000 or more may be paid with respect to any one such contract or $250,000 or more may be paid in the aggregate for all such contracts, the applicable Grantor shall promptly (and in no event later than 10 Business Days of the creation thereof) notify Agent thereof in writing and execute any instruments or take any steps reasonably required by Agent in order that all moneys due or to become due under such contract or contracts shall be assigned to Agent, for the benefit of the Lender Group and the Bank Product Providers, and shall provide written notice thereof under the Assignment of Claims Act or other applicable law;

(g) Intellectual Property .

(i) Upon request of Agent, in order to facilitate filings with the United States Patent and Trademark Office and the United States Copyright Office, each Grantor shall promptly (and in no event later than 10 Business Days after receiving such request) execute and deliver to Agent one or more Copyright Security Agreements, Trademark Security Agreements, or Patent Security Agreements to further evidence Agent’s Lien on such Grantor’s Patents, Trademarks, or Copyrights, and the General Intangibles of such Grantor relating thereto or represented thereby;

(ii) Each Grantor shall have the duty, as determined in such Grantor’s reasonable business judgment to be necessary or economically desirable in the operation of such Grantor’s business, (A) to promptly sue for infringement, misappropriation, or dilution of any Intellectual Property Right and to recover any and all damages for such infringement, misappropriation, or dilution, (B) to prosecute diligently any trademark application or service mark application that is part of the Trademarks pending as of the date hereof or hereafter until the termination of this Agreement, (C) to prosecute diligently any patent application that is part of the Patents pending as of the date hereof or hereafter until the termination of this Agreement, and (D) to take all reasonable and necessary action to preserve and maintain all of such Grantor’s Trademarks, Patents, Copyrights, Intellectual Property Licenses, and its rights therein, including the filing of applications for renewal, affidavits of use, affidavits of noncontestability and opposition and interference and cancellation proceedings and the making of all necessary payments and filings in connection with the registration, maintenance, and renewal of Copyrights, Patents, and Trademarks in the United States Copyright Office or the United States Patent and Trademark Office (as appropriate) to maintain all Intellectual Property and all rights therein. Each Grantor shall promptly (but in no event later than the timeframe specified in Section 6(g)(vi) below) file an application with the United States Copyright Office for any Copyright that has not been registered with the United States Copyright Office if such Copyright is part of the Required Library. Any expenses incurred in connection with the foregoing shall be borne by the appropriate Grantor. Each Grantor further agrees not to abandon any Trademark, Patent, Copyright, or Intellectual Property License that is (as determined in the reasonable business judgment of such Grantor) necessary or economically desirable in the operation of such Grantor’s business;

(iii) Grantors acknowledge and agree that the Lender Group shall have no duties with respect to the Trademarks, Patents, Copyrights, or Intellectual Property Licenses. Without limiting the generality of this Section 6(g)(iii) , Grantors acknowledge and agree that no member of the Lender Group shall be under any obligation to take any steps necessary to preserve rights in the Trademarks, Patents, Copyrights,

 

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or Intellectual Property Licenses against any other Person, but any member of the Lender Group may do so at its option from and after the occurrence and during the continuance of an Event of Default, and all expenses incurred in connection therewith (including reasonable fees and expenses of attorneys and other professionals) shall be for the sole account of Borrower and shall be chargeable to the Loan Account;

(iv) In no event shall any Grantor, either itself or through any agent, employee, licensee, or designee, file an application for the registration of any Copyright with the United States Copyright Office without giving Agent at least 5 Business Days prior written notice thereof; provided that such notice shall not be required to the extent that such Grantor is applying for the registration of such Copyright pursuant to Section 6(g)(vi) below. Concurrently with the filing of an application for the registration of any Copyright, Patent or Trademark with the United States Copyright Office or the United States Patent and Trademark Office, as applicable, each Grantor shall comply with Section 6(g)(i) ;

(v) Within 45 days after the end of each calendar quarter commencing with the calendar quarter ending March 31, 2009, each Grantor shall (A) deliver to Agent documentation reasonably satisfactory to Agent identifying the Copyrights, whether created or acquired before or after the Closing Date, comprising the Required Library (including all supporting documentation relating to the determination of the composition of the Required Library), and a certificate signed by an officer of Borrower certifying as to whether or not such Copyrights have been registered with the United States Copyright Office, (B) provide Agent with a written report of all new Copyrights (to the extent not already covered in Section 6(g)(v)(A) ) that are registered or the subject of pending applications for registrations in the United States Copyright Office, and (C) a written report of all new Patents and Trademarks that are registered or the subject of pending applications for registrations in the United States Patent and Trademark Office, which, in the case of clauses (B) and (C) above, were acquired, generated or filed by such Grantor during the prior period. In the case of such registrations or applications therefor which were acquired by such Grantor, such Grantor shall file the necessary documents with the appropriate federal filing office identifying such Grantor as the sole claimant thereto in a manner sufficient to claim in the public record (or as a co-claimant thereof, if such is the case) such Grantor’s ownership thereof. In connection with the foregoing, each Grantor shall within the timeframe required by Section 6(g)(vi) (with respect to Copyrights that are (x) part of the Required Library, and (y) are not registered or as to which an application for registration has not been filed) and as promptly as practicable (in all other cases) (but in no event more than 10 Business Days after the date of delivery set forth in the first sentence of this Section 6(g)(v) ) : (I) cause to be prepared, executed, and delivered to Agent supplemental schedules to the applicable Loan Documents to identify such Copyright, Patent and Trademark registrations and applications therefor (as applicable) as being subject to the security interests created thereunder, and (II) comply with Section 6(g)(i) ;

(vi) No more than 45 days following the date of delivery set forth in Section 6(g)(v)(A) , each Grantor shall (A) file applications and take any and all other actions necessary to register or record a transfer of ownership, as applicable, to such Grantor on an expedited basis (if expedited processing is available in accordance with the applicable regulations and procedures of the United States Copyright Office and any similar office of any other jurisdiction in which Copyrights are used) each such Copyright which on the applicable date of delivery is part of the Required Library and not already the subject of a valid registration or an application therefor diligently prosecuted with the United States Copyright Office identifying such Grantor as the sole claimant thereof in a manner sufficient to claim in the public record (or as a co-claimant thereof, if such is the case) such Grantor’s ownership thereof, and (B) cause to be prepared, executed, and delivered to Agent, with sufficient time to permit Agent to record concurrently with the date of such registration of or recordation of transfer of ownership, as applicable, to the applicable Grantor of such Copyrights, (I) a Copyright Security Agreement or supplemental schedules to the Copyright Security Agreement reflecting the security interest of Agent in such Copyrights, which supplemental schedules shall be in form and content suitable for recordation with the United States Copyright Office so as to give constructive notice, when so recorded, of the transfer by such Grantor to Agent of a security interest in such Copyrights and (II) any other documentation as Agent reasonably deems necessary in order to perfect and continue perfected Agent’s Liens on such Copyrights following such recordation;

 

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(vii) Each Grantor shall take the actions reasonably necessary to protect the confidentiality of the Intellectual Property rights that such Grantor has determined in its reasonable business judgment should remain confidential or that such Grantor has determined in its reasonable business judgment are material to the conduct of its business, including with respect to such Intellectual Property rights (A) taking reasonable actions to protect the secrecy and confidentiality of its confidential information and trade secrets by requiring all current employees, consultants, licensees, vendors and contractors to execute appropriate confidentiality agreements, (B) taking actions reasonably necessary to ensure that no trade secret that such Grantor has determined in its reasonable business judgment should remain confidential or that such Grantor has determined in its reasonable business judgment is necessary to the conduct of its business falls or has fallen into the public domain, and (C) to the extent such Grantor has determined in its reasonable business judgment necessary or economically desirable in the operation of such Grantor’s business, protecting the secrecy and confidentiality of the source code of all computer software programs and applications of which it is the owner or licensee by requiring any licensees (or sublicensees) of such source code to enter into license agreements with appropriate use and non-disclosure restrictions, it being understood that such Grantor may maintain its customary practices of disclosing its source code; provided that customers are subject to reasonable obligations of confidentiality and reasonable restrictions governing the use of such disclosed source code;

(viii) Each Grantor shall enforce a policy requiring all employees, consultants and contractors that participate in the development of Intellectual Property to execute appropriate assignment agreements, pursuant to which each such employee, consultant or contractor assigns to such Grantor, to the extent permitted by Applicable Law, all of its rights, including all Intellectual Property rights, in and to all ideas, inventions, processes, works of authorship and other work products that relate to such Grantor’s business and that were conceived, created, authored or developed during the term of and in the course of such employee’s, consultant’s or contractor’s employment or engagement by such Grantor;

(h) Investment Related Property .

(i) If any Grantor shall receive or become entitled to receive any Pledged Interests after the Closing Date, it shall promptly (and in no event later than 10 Business Days of receipt thereof) deliver to Agent a duly executed Pledged Interests Addendum identifying such Pledged Interests;

(ii) Upon the occurrence and during the continuance of an Event of Default, all sums of money and property paid or distributed in respect of the Investment Related Property which are received by any Grantor shall be held by such Grantor in trust for the benefit of Agent segregated from such Grantor’s other property, and such Grantor shall promptly deliver such property to Agent in the exact form received;

(iii) Each Grantor shall promptly (and in no event later than 10 Business Days of receipt thereof) deliver to Agent a copy of each material written notice or other material written communication received by it in respect of any Pledged Interests;

(iv) No Grantor shall make or consent to any amendment or other modification or waiver with respect to any Pledged Interests, Pledged Operating Agreement, or Pledged Partnership Agreement, or enter into any agreement or permit to exist any restriction with respect to any Pledged Interests which would materially adversely affect either the rights of Agent and the other members of the Lender Group pursuant to the Loan Documents or the value of the Pledged Interests, or that would result in a violation of any provision of the Credit Agreement or any other Loan Document;

(v) Each Grantor agrees that it will cooperate with Agent in obtaining all necessary approvals and making all necessary filings under federal, state, local, or foreign law in connection with the Security Interest on the Investment Related Property or any sale or transfer thereof;

 

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(vi) As to all limited liability company or partnership interests, issued under any Pledged Operating Agreement or Pledged Partnership Agreement, each Grantor hereby represents, warrants and covenants that the Pledged Interests issued pursuant to such agreement (A) are not and shall not be dealt in or traded on securities exchanges or in securities markets, (B) do not and will not constitute investment company securities, and (C) are not and will not be held by such Grantor in a securities account. In addition, none of the Pledged Operating Agreements, the Pledged Partnership Agreements, or any other agreements governing any of the Pledged Interests issued under any Pledged Operating Agreement or Pledged Partnership Agreement, provide or shall provide that such Pledged Interests are securities governed by Article 8 of the Uniform Commercial Code as in effect in any relevant jurisdiction;

(vii) No Grantor will deliver the certificates (if any) representing the Pledged Interests of Pledged Companies owned by such Grantor to any Person other than Borrower, such Grantor (to the extent not Borrower), or Agent.

(i) Transfers and Other Liens . Grantors shall not (i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Collateral, except expressly permitted by the Credit Agreement, or (ii) create or permit to exist any Lien upon or with respect to any