INSTRUMENTS SECURITY AGREEMENT
DATE: January 15, 1998
DEBTOR SECURED PARTY
------ -------------
Xxxxxx X. Xxxxxxxxx Oxboro Medical International, Inc.
00000 Xxxxxxx Xxxxxx X.X. 00000 Xxxxxxx Xxxxxx X.X.
Xxx Xxxx, XX 00000 Xxx Xxxx, XX 00000
-------------------------------------------------------------------------------
1. SECURITY INTEREST AND COLLATERAL. To secure the debt, liability or
obligation of the Debtor to secured party evidenced by the following: that
certain Promissory Note dated January 15, 1998, and any extensions, renewals or
replacements thereof (herein referred to as the "Obligations"), Debtor hereby
grants Secured Party a security interest (herein called the "Security Interest")
in the property owned by Debtor and held by Secured Party that is described as
follows: Share Certificate No. A-10009 of Oxboro Medical International, Inc.,
representing 40,000 shares, together with all rights in connection with such
property (herein called the "Collateral").
2. REPRESENTATIONS, WARRANTIES AND COVENANTS. Debtor represents,
warrants and covenants that:
(a) Debtor will duly endorse, in blank, each and every instrument
constituting Collateral by signing on said instrument or by signing a
separate document of assignment or transfer, if required by Secured Party.
(b) Debtor is the owner of the Collateral free and clear of all
liens, encumbrances, security interests and restrictions, except the
Security Interest and any restrictive legend appearing on any instrument
constituting Collateral.
(c) Debtor will keep the Collateral free and clear of all liens,
encumbrances and security interests, except the Security Interest.
(d) Debtor will pay when due all taxes and other governmental charges
levied or assessed upon or against any Collateral.
(e) At any time, upon request by Secured Party, Debtor will deliver
to Secured Party all notices, financial statements, reports or other
communications received by Debtor as an owner or holder of the Collateral.
(f) Debtor will upon receipt deliver to Secured Party in pledge as
additional Collateral all securities distributed on account of the
Collateral such as stock dividends and securities resulting from stock
splits, reorganizations and recapitalizations.
3. RIGHTS OF SECURED PARTY. Debtor agrees that Secured Party may at any
time, whether before or after the occurrence of an Event of Default and without
notice or demand of any kind, (a) notify the obligor on or issue of any
Collateral to make payment to Secured Party of any amounts due or distributable
thereon, (b) in Debtor's name or Secured Party's name enforce collection of any
Collateral by suit or otherwise, or surrender, release or exchange all or any
part of it, or compromise, extend or renew for any period any obligation
evidenced by the Collateral, (c) receive all proceeds of the Collateral, and (d)
hold any increase or profits received from the Collateral as additional security
for the Obligations, except that any money received from the Collateral shall,
at Secured Party's option, be applied in reduction of the Obligations, in such
order of application as Secured Party may determine, or be remitted to Debtor.
4. EVENTS OF DEFAULT. Each of the following occurrences shall constitute
an event of default under this Agreement (herein called "Event of Default"); (a)
Debtor shall fail to observe or perform any covenant or agreement herein binding
on him; (b) any representation or warranty by Debtor set forth in this Agreement
shall prove materially false or misleading; (c) a garnishment summons or a writ
of attachment shall be issued against or served upon the secured Party for the
attachment of any property of the Debtor or any indebtedness owing to Debtor; or
(d) Debtor shall (i) be or become insolvent (however defined); (ii) voluntarily
file, or have filed against him involuntarily, a petition under the United
States Bankruptcy Code; or (iii) die.
5. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of an Event of
Default and at any time thereafter, Secured Party may exercise any one or more
of the following rights or remedies: (a) if any interest hereon or any
principal amount hereof is not paid when due, then, in such event, the holder
hereof may, at its option, transfer a number of shares held as Collateral equal
to $9,000.00 plus interest accrued to the installment payment date divided by
the per-share market value of the Stock as of the close of trading on the
installment payment date, as payment therefore; (b) on January 15, 2003, declare
all unmatured Obligations to be immediately due and payable, and the same shall
thereupon be immediately due and payable, without presentment or other notice or
demand; (c) exercise all voting and other rights as a holder of the Collateral;
(d) exercise and enforce any or all rights and remedies available upon default
to a secured party under the Uniform Commercial Code, including the right to
offer and sell the Collateral privately to purchasers who will agree to take the
Collateral for investment and not with a view to distribution and who will agree
to the imposition of restrictive legends on the certificates representing the
Collateral, and the right to arrange for a sale which would otherwise qualify as
exempt from
2
registration under the Securities Act of 1933; and if notice to Debtor of any
intended disposition of the Collateral or any other intended action is
required by law in a particular instance, such notice shall be deemed
commercially reasonable if given at lease 10 calendar days prior to the date
of intended disposition or other action; (e) exercise or enforce any or all
other rights or remedies available to Secured Party by law or agreement
against the Collateral, against Debtor or against any other person or
property. Upon the occurrence of the Event of Default described in Section
4(d)(ii), all Obligations shall be immediately due and payable without demand
or notice thereof. Any disposition of the Collateral in the manner provided
in this Section 5 shall be deemed commercially reasonable. In the event
Debtor fails to pay the remaining principal and accrued interest outstanding
on January 15, 2003, then the sole remedy of the Secured Party shall be to
cancel the Certificate or Certificates representing the remaining Collateral
or to sell said Collateral to a third party and, in either event, such
cancelation or sale shall be in full and complete satisfaction of said
outstanding principal and accrued interest and Debtor shall have no further
obligation or liability to Secured Party under the Obligations.
6. MISCELLANEOUS. This Agreement can be waived, modified, amended,
terminated or discharged, and the Security Interest can be released, only
explicitly in a writing signed by Secured Party. A waiver signed by Secured
Party shall be effective only in the specific instance and for the specific
purpose given. Mere delay or failure to act shall not preclude the exercise or
enforcement of any of Secured Party's rights or remedies. All rights and
remedies of Secured Party shall be cumulative and may be exercised singularly or
concurrently, at Secured Party's option, and the exercise or enforcement of any
one such right or remedy shall neither be a condition to nor bar the exercise or
enforcement of any other.
All notices to be given to Debtor shall be deemed sufficiently given if
delivered or mailed b registered or certified mail, postage prepaid, to Debtor
at its address set forth above or at the most recent address shown on Secured
Party's records.
Secured Party's duty of care with respect to Collateral in its possession
(as imposed by law) shall be deemed fulfilled if Secured Party exercises
reasonable care in physically safekeeping such Collateral or, in the case of
Collateral in the custody of possession of a bailee or other third person,
exercises reasonable care in the selection of the bailee or other third person,
and Secured Party need not otherwise preserve, protect, insure or care for any
Collateral. Secured Party shall not be obligated to preserve any rights Debtor
may have against prior parties, to exercise at all or in any particular manner
any voting rights which may be available with respect to any Collateral, to
realize on the Collateral at all or in any particular manner or order, or to
apply any cash proceeds of Collateral in any particular order of application.
Debtor will reimburse Secured Party for all expenses (including reasonable
attorneys' fees and legal expenses) incurred by Secured Party in the protection,
defense or enforcement of the Security Interest, including expenses incurred in
any litigation or bankruptcy or insolvency proceedings.
3
This Agreement shall be binding upon and inure to the benefit of Debtor and
Secured Party and their respective heirs, representatives, successors and
assigns and shall take effect when signed by Debtor and delivered to Secured
Party, and Debtor waives notice of Secured Party's acceptance hereof.
This Agreement shall be governed by the substantive law of the State of
Minnesota and, unless the context otherwise requires, all terms used herein
which are defined in Articles 1 and 9 of the Uniform Commercial Code, as in
effect in Minnesota, shall have the meanings therein stated. If any provision
or application of this Agreement is held unlawful or unenforceable in any
respect, such illegality or unenforceability shall not affect other provisions
or applications which can be given effect, and this Agreement shall be construed
as if the unlawful or unenforceable provision or application had never been
contained herein or prescribed hereby.
All representations and warranties contained in this Agreement shall
survive the execution, delivery and performance of this Agreement and the
creation and payment of the Obligations. The Debtor hereby irrevocably submits
to the jurisdiction of the Minnesota District Court, Fourth Division, and the
Xxxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx of Minnesota, Fourth Divisions, over any action
or proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of such action or proceeding may be heard and determined in
any such court.
SECURED PARTY DEBTOR
OXBORO MEDICAL INTERNATIONAL, INC.
By /s/Xxxxx X. Xxxxxxxxx /s/Xxxxxx X. Xxxxxxxxx
--------------------------------- --------------------------------
Xxxxx X. Xxxxxxxxx Xxxxxx X. Xxxxxxxxx
Title: Chief Executive Officer
4
