SECURITY AGREEMENT
Exhibit
10.17 Security Agreement
SECURITY
AGREEMENT, dated as of June 29, 2006 (this
“Agreement”),
among
Chembio
Diagnostics, Inc., a Nevada corporation (the
“Company”),
Chembio
Diagnostic Systems, Inc., a Delaware corporation,
which is a Subsidiary
of the Company (such Subsidiary, the
“Guarantor”
and
together with any other entity that may become a
party hereto as provided
herein, the “Guarantors”)
(the
Company and Guarantors are collectively
referred to as the “Debtors”)
and
the holder or holders of the Company’s Secured Debentures due September 27, 2006
in the original aggregate principal amount of up
to $1,800,000 (the
“Debentures”)
signatory hereto, their endorsees, transferees and
assigns (each, a
“Secured
Party”
and,
collectively, the “Secured
Parties”).
W
I T N E S S E T H:
WHEREAS,
pursuant to the Purchase Agreement (as defined in
the Debentures), the Secured
Parties have severally agreed to extend the loans
to the Company evidenced by
the Debentures;
WHEREAS,
pursuant to a certain Subsidiary Guarantee
dated as of the date hereof (the “Guaranty”),
the
Guarantors
have
jointly and severally agreed to guaranty and act
as surety for payment of such
loans; and
WHEREAS,
in order to induce the Secured Parties to extend
the loans evidenced by the
Debentures, each Debtor has agreed to execute and
deliver to the Secured Parties
this Agreement and to grant each Secured Party, pari passu
with
each other Secured Party, a security interest in
certain property of such Debtor
to secure the prompt payment, performance and discharge
in full of all of the
Company’s obligations under the Debentures and the other
Debtors’ obligations
under the Guaranty.
NOW,
THEREFORE, in consideration of the agreements herein
contained and for other
good and valuable consideration, the receipt and
sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as
follows:
1.
Certain
Definitions.
As used
in this Agreement, the following terms shall have
the meanings set forth in this
Section 1. Terms used but not otherwise defined in
this Agreement that are
defined in Article 9 of the UCC (such as “account”, “chattel paper”, “commercial
tort claim”, “deposit account”, “document”, “equipment”, “fixtures”, “general
intangibles”, “goods”, “instruments”, “inventory”, “investment property”,
“letter-of-credit rights”, “proceeds” and “supporting obligations”) shall have
the respective meanings given such terms in Article
9 of the UCC.
(a)
“Collateral”
means
the collateral in which the Secured Parties are granted
a security interest by
this Agreement and which shall include the following
personal property of the
Debtors, whether presently owned or existing
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or
hereafter acquired or coming into existence, wherever
situated, and all
additions and accessions thereto and all substitutions
and replacements thereof,
and all proceeds, products and accounts thereof,
including, without limitation,
all proceeds from the sale or transfer of the Collateral
and of insurance
covering the same and of any tort claims in connection
therewith,
and all
dividends, interest, cash, notes, securities, equity
interest or other property
at any time and from time to time acquired, receivable
or otherwise distributed
in respect of, or in exchange for, any or all of
the Pledged Securities (as
defined below):
(i)
All
goods, including, without limitations, (A) all machinery,
equipment, computers,
motor vehicles, trucks, tanks, boats, ships, appliances,
furniture, special and
general tools, fixtures, test and quality control
devices and other equipment of
every kind and nature and wherever situated, together
with all documents of
title and documents representing the same, all additions
and accessions thereto,
replacements therefor, all parts therefor, and all
substitutes for any of the
foregoing and all other items used and useful in
connection with any Debtor’s
businesses and all improvements thereto; and (B)
all inventory;
(ii)
All
contract rights and other general intangibles,
including, without limitation,
all partnership interests, membership interests,
stock or other securities,
rights
under any of the Organizational Documents, agreements
related to the Pledged
Securities, licenses,
distribution and other agreements, computer software
(whether “off-the-shelf”,
licensed from any third party or developed by any
Debtor), computer software
development rights, leases, franchises, customer
lists, quality control
procedures, grants and rights, goodwill, trademarks,
service marks, trade
styles, trade names, patents, patent applications,
copyrights, and income tax
refunds;
(iii)
All
accounts, together with all instruments, all documents
of title representing any
of the foregoing, all rights in any merchandising,
goods, equipment, motor
vehicles and trucks which any of the same may represent,
and all right, title,
security and guaranties with respect to each account,
including any right of
stoppage in transit;
(iv)
All
documents, letter-of-credit rights, instruments and
chattel paper;
(v) All
commercial tort claims;
(vi) All
deposit accounts and all cash (whether or not deposited
in such deposit
accounts);
(vii) All
investment property;
(viii) All
supporting obligations; and
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(ix) All
files, records, books of account, business papers,
and computer programs;
and
(x) the
products and proceeds of all of the foregoing Collateral
set forth in clauses
(i)-(ix) above.
Without
limiting the generality of the foregoing, the “Collateral”
shall
include all investment property and general intangibles
respecting ownership
and/or other equity interests in each Guarantor,
including, without limitation,
the shares of capital stock and the other equity
interests listed on
Schedule
H
hereto
(as the same may be modified from time to time
pursuant to the terms hereof),
and any other shares of capital stock and/or other
equity interests of any other
direct or indirect subsidiary of any Debtor obtained
in the future, and, in each
case, all certificates representing such shares
and/or equity interests and, in
each case, all rights, options, warrants, stock,
other securities and/or equity
interests that may hereafter be received, receivable
or distributed in respect
of, or exchanged for, any of the foregoing (all
of the foregoing being referred
to herein as the “Pledged
Securities”)
and
all rights arising under or in connection with
the Pledged Securities,
including, but not limited to, all dividends, interest
and cash.
Notwithstanding
the foregoing, nothing herein shall be deemed to
constitute an assignment of any
asset which, in the event of an assignment, becomes
void by operation of
applicable law or the assignment of which is otherwise
prohibited by applicable
law (in each case to the extent that such applicable
law is not overridden by
Sections 9-406, 9-407 and/or 9-408 of the UCC or
other similar applicable law);
provided, however, that to the extent permitted by
applicable law, this
Agreement shall create a valid security interest
in such asset and, to the
extent permitted by applicable law, this Agreement
shall create a valid security
interest in the proceeds of such asset.
(b)
“Intellectual
Property”
means
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, without limitation,
(i) all copyrights
arising under the laws of the United States, any
other country or any political
subdivision thereof, whether registered or unregistered
and whether published or
unpublished, all registrations and recordings thereof,
and all applications in
connection therewith, including, without limitation,
all registrations,
recordings and applications in the United States
Copyright Office, (ii) all
letters patent of the United States, any other country
or any political
subdivision thereof, all reissues and extensions
thereof, and all applications
for letters patent of the United States or any other
country and all divisions,
continuations and continuations-in-part thereof,
(iii) all trademarks, trade
names, corporate names, company names, business names,
fictitious business
names,
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trade
dress, service marks, logos, domain names and other
source or business
identifiers, 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 or in any similar office or agency
of the United States, any
State thereof or any other country or any political
subdivision thereof, or
otherwise, and all common law rights related thereto,
(iv) all trade secrets
arising under the laws of the United States, any
other country or any political
subdivision thereof, (v) all rights to obtain any
reissues, renewals or
extensions of the foregoing, (vi) all licenses for
any of the foregoing, and
(vii) all causes of action for infringement of the
foregoing.
(c) "Majority
in Interest" shall mean, at any time of determination, the
majority in
interest (based on then-outstanding principal amounts
of Debentures at the time
of such determination) of the Secured Parties.
(d) "Necessary
Endorsement" shall mean undated stock powers endorsed in
blank or other
proper instruments of assignment duly executed and
such other instruments or
documents as the Agent (as that term is defined below)
may reasonably
request.
(e)
"Obligations" means all of the liabilities and obligations
(primary, secondary, direct, contingent, sole, joint
or several) due or to
become due, or that are now or may be hereafter contracted
or acquired, or owing
to, of any Debtor to the Secured Parties, including,
without limitation, all
obligations under this Agreement, the Debentures,
the Guaranty and any other
instruments, agreements or other documents executed
and/or delivered in
connection herewith or therewith, in each case, whether
now or hereafter
existing, voluntary or involuntary, direct or indirect,
absolute or contingent,
liquidated or unliquidated, whether or not jointly
owed with others, and whether
or not from time to time decreased or extinguished
and later increased, created
or incurred, and all or any portion of such obligations
or liabilities that are
paid, to the extent all or any part of such payment
is avoided or recovered
directly or indirectly from any of the Secured Parties
as a preference,
fraudulent transfer or otherwise as such obligations
may be amended,
supplemented, converted, extended or modified from
time to time. Without
limiting the generality of the foregoing, the term
“Obligations” shall include,
without limitation: (i) principal of, and interest
on the Debentures and the
loans extended pursuant thereto; (ii) any and all
other fees, indemnities,
costs, obligations and liabilities of the Debtors
from time to time under or in
connection with this Agreement, the Debentures, the
Guaranty and any other
instruments, agreements or other documents executed
and/or delivered in
connection herewith or therewith; and (iii) all amounts
(including but not
limited to post-petition interest) in respect of
the foregoing that would be
payable but for the fact that the obligations to
pay such amounts are
unenforceable or not allowable due to the existence
of a bankruptcy,
reorganization or similar proceeding involving any
Debtor.
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(f)
"Organizational Documents"means with respect to any Debtor, the
documents by which such Debtor was organized (such
as a certificate of
incorporation, certificate of limited partnership
or articles of organization,
and including, without limitation, any certificates
of designation for preferred
stock or other forms of preferred equity) and which
relate to the internal
governance of such Debtor (such as bylaws, a partnership
agreement or an
operating, limited liability or members agreement)
(g)
"UCC" means the Uniform Commercial Code of the
State of New York
and or any other applicable law of any state or states
which has jurisdiction
with respect to all, or any portion of, the Collateral
or this Agreement, from
time to time. It is the intent of the parties that
defined terms in the UCC
should be construed in their broadest sense so that
the term “Collateral” will
be construed in its broadest sense. Accordingly if
there are, from time to time,
changes to defined terms in the UCC that broaden
the definitions, they are
incorporated herein and if existing definitions in
the UCC are broader than the
amended definitions, the existing ones shall be controlling.
2.
Grant
of Security Interest in Collateral.
As an
inducement for the Secured Parties to extend the
loans as evidenced by the
Debentures and to secure the complete and timely
payment, performance and
discharge in full, as the case may be, of all of
the Obligations, each Debtor
hereby unconditionally and irrevocably pledges, grants
and hypothecates to the
Secured Parties a continuing security interest in
and to, a lien upon and a
right of set-off against all of their respective
right, title and interest of
whatsoever kind and nature in and to, the Collateral
(the “Security
Interest”).
3. Delivery
of Certain Collateral. Contemporaneously or prior to
the
execution of this Agreement, each Debtor shall
deliver or cause to be delivered
to the Agent (a) any and all certificates and other
instruments representing or
evidencing the Pledged Securities, and (b) any
and all certificates and other
instruments or documents representing any of the
other Collateral, in each case,
together with all Necessary Endorsements. The Debtors
are, contemporaneously
with the execution hereof, delivering to Agent,
or have previously delivered to
Agent, a true and correct copy of each Organizational
Document governing any of
the Pledged Securities.
4. Representations,
Warranties, Covenants and Agreements of the Debtors.
Each Debtor represents and warrants to, and covenants
and agrees with, the
Secured Parties as follows:
(a)
Each
Debtor has the requisite corporate, partnership,
limited liability company or
other power and authority to enter into this Agreement
and otherwise to carry
out its obligations hereunder. The execution, delivery
and performance by each
Debtor of this Agreement and the filings contemplated
therein have been duly
authorized by all necessary action on the part of
such Debtor and no further
action is required by such Debtor. This Agreement
has been duly executed by
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each
Debtor. This Agreement constitutes the legal, valid
and binding obligation of
each Debtor, enforceable against each Debtor in accordance
with its terms except
as such enforceability may be limited by applicable
bankruptcy, insolvency,
reorganization and similar laws of general application
relating to or affecting
the rights and remedies of creditors and by general
principles of
equity.
(b)
The
Debtors have no place of business or offices where
their respective books of
account and records are kept (other than temporarily
at the offices of its
attorneys or accountants) or places where Collateral
is stored or located,
except as set forth on Schedule
A
attached
hereto. Except as specifically set forth on Schedule
A,
each
Debtor is the record owner of the real property where
such Collateral is
located, and there exist no mortgages or other liens
on any such real property
except for Permitted Liens (as defined in the Debentures).
Except as disclosed
on Schedule
A,
none of
such Collateral is in the possession of any consignee,
bailee, warehouseman,
agent or processor.
(c)
Except
as
set forth on Schedule
B
attached
hereto, the Debtors are the sole owner of the Collateral
(except for
non-exclusive licenses granted by any Debtor in the
ordinary course of
business), free and clear of any liens, security
interests, encumbrances, rights
or claims, and are fully authorized to grant the
Security Interest. Except as
set forth on Schedule
B
and
Schedule
F
attached
hereto, there is not on file in any governmental
or regulatory authority, agency
or recording office an effective financing statement,
security agreement,
license or transfer or any notice of any of the foregoing
(other than those that
will be filed in favor of the Secured Parties pursuant
to this Agreement)
covering or affecting any of the Collateral. So long
as this Agreement shall be
in effect, the Debtors shall not execute and shall
not knowingly permit to be on
file in any such office or agency any such financing
statement or other document
or instrument (except to the extent filed or recorded
in favor of the Secured
Parties pursuant to the terms of this Agreement).
(d)
No
written claim has been received that any Collateral
or Debtor's use of any
Collateral violates the rights of any third party.
There has been no adverse
decision to any Debtor's claim of ownership rights
in or exclusive rights to use
the Collateral in any jurisdiction or to any Debtor's
right to keep and maintain
such Collateral in full force and effect, and there
is no proceeding involving
said rights pending or, to the best knowledge of
any Debtor, threatened before
any court, judicial body, administrative or regulatory
agency, arbitrator or
other governmental authority.
(e)
Each
Debtor shall at all times maintain its books of account
and records relating to
the Collateral at its principal place of business
and its Collateral at the
locations set forth on Schedule
A
attached
hereto and may not relocate such books of account
and records or tangible
Collateral unless it delivers to the Secured Parties
at least 30 days prior to
such relocation (i) written notice of such relocation
and the new location
thereof (which must be within the United
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States)
and (ii) evidence that appropriate financing statements
under the UCC and other
necessary documents have been filed and recorded
and other steps have been taken
to perfect the Security Interest to create in favor
of the Secured Parties a
valid, perfected and continuing perfected first priority
lien in the
Collateral.
(f)
This Agreement creates in favor of the Secured Parties
a valid, security
interest in the Collateral, subject only to the liens
and licenses set forth on
Schedule B and Schedule F attached hereto, securing the payment
and performance of the Obligations. Upon making the
filings described in the
immediately following paragraph, all security interests
created hereunder in any
Collateral which may be perfected by filing Uniform
Commercial Code financing
statements shall have been duly perfected. Except
for the filing of the Uniform
Commercial Code financing statements referred to
in the immediately following
paragraph, the recordation of the Intellectual Property
Security Agreement (as
defined below) with respect to copyrights and copyright
applications in the
United States Copyright Office referred to in paragraph
(m), the execution and
delivery of deposit account control agreements satisfying
the requirements of
Section 9-104(a)(2) of the UCC with respect to each
deposit account of the
Debtors, and the delivery of the certificates and
other instruments provided in
Section 3, no action is necessary to create, perfect
or protect the security
interests created hereunder. Without limiting the
generality of the foregoing,
except for the filing of said financing statements,
the recordation of said
Intellectual Property Security Agreement, and the
execution and delivery of said
deposit account control agreements, no consent of
any third parties and no
authorization, approval or other action by, and no
notice to or filing with, any
governmental authority or regulatory body is required
for (i) the execution,
delivery and performance of this Agreement, (ii)
the creation or perfection of
the Security Interests created hereunder in the Collateral
or (iii) the
enforcement of the rights of the Secured Parties
hereunder.
(g)
Each
Debtor hereby authorizes the Secured Parties, or
any of them, to file one or
more financing statements under the UCC, with respect
to the Security Interest
with the proper filing and recording agencies in
any jurisdiction deemed proper
by them.
(h)
The
execution, delivery and performance of this Agreement
by the Debtors does not
(i) violate any of the provisions of any Organizational
Documents of any Debtor
or any judgment, decree, order or award of any court,
governmental body or
arbitrator or any applicable law, rule or regulation
applicable to any Debtor or
(ii) conflict with, or constitute a default (or an
event that with notice or
lapse of time or both would become a default) under,
or give to others any
rights of termination, amendment, acceleration or
cancellation (with or without
notice, lapse of time or both) of, any agreement,
credit facility, debt or other
instrument (evidencing any Debtor's debt or otherwise)
or other understanding to
which any Debtor is a party or by which any property
or asset of any Debtor is
bound or affected. Except as set forth on Schedule
4(h)
attached
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hereto,
no consent (including, without limitation, from stockholders
or creditors of any
Debtor) is required for any Debtor to enter into
and perform its obligations
hereunder.
(i)
The
capital stock and other equity interests listed on
Schedule
H
hereto
represent all of the capital stock and other equity
interests of the Guarantors,
and represent all capital stock and other equity
interests owned, directly or
indirectly, by the Company. All of the Pledged Securities
are validly issued,
fully paid and nonassessable, and the Company is
the legal and beneficial owner
of the Pledged Securities, free and clear of any
lien, security interest or
other encumbrance except for the security interests
created by this
Agreement.
(j)
The
ownership and other equity interests in partnerships
and limited liability
companies (if any)
included
in the Collateral
(the
“Pledged
Interests”)
by
their express terms do not provide that they are
securities governed by Article
8 of the UCC and are not held in a securities account
or by any financial
intermediary.
(k)
Each
Debtor shall at all times maintain the lien and Security
Interest provided for
hereunder as a valid and perfected lien and security
interest in the Collateral
in favor of the Secured Parties until this Agreement
and the Security Interest
hereunder shall be terminated pursuant to Section
11 hereof. Each Debtor hereby
agrees to defend the same against the claims of any
and all persons and
entities. Each Debtor shall safeguard and protect
all Collateral for the account
of the Secured Parties. At the request of the Secured
Parties, each Debtor will
sign and deliver to the Secured Parties at any time
or from time to time one or
more financing statements pursuant to the UCC in
form reasonably satisfactory to
the Secured Parties and will pay the cost of filing
the same in all public
offices wherever filing is, or is deemed by the Secured
Parties to be, necessary
or desirable to effect the rights and obligations
provided for herein. Without
limiting the generality of the foregoing, each Debtor
shall pay all fees, taxes
and other amounts necessary to maintain the Collateral
and the Security Interest
hereunder, and each Debtor shall obtain and furnish
to the Secured Parties from
time to time, upon demand, such releases and/or subordinations
of claims and
liens which may be required to maintain the priority
of the Security Interest
hereunder.
(l)
No
Debtor
will transfer, pledge, hypothecate, encumber, license,
sell or otherwise dispose
of any of the Collateral (except for non-exclusive
licenses granted by a Debtor
in its ordinary course of business and sales of inventory
by a Debtor in its
ordinary course of business) without the prior written
consent of a Majority
in Interest.
(m) Each
Debtor shall keep and preserve its equipment, inventory
and other tangible
Collateral in good condition, repair and order and
shall not operate
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or
locate
any such Collateral (or cause to be operated or located)
in any area excluded
from insurance coverage.
(n) Each
Debtor shall maintain with financially sound and
reputable insurers, insurance
with respect to the Collateral against loss or damage
of the kinds and in the
amounts customarily insured against by entities of
established reputation having
similar properties similarly situated and in such
amounts as are customarily
carried under similar circumstances by other such
entities and otherwise as is
prudent for entities engaged in similar businesses
but in any event sufficient
to cover the full replacement cost thereof. Each
Debtor shall cause each
insurance policy issued in connection herewith to
provide, and the insurer
issuing such policy to certify to the Agent that
(a) the Agent will be named as
lender loss payee and additional insured under each
such insurance policy; (b)
if such insurance be proposed to be cancelled or
materially changed for any
reason whatsoever, such insurer will promptly notify
the Agent and such
cancellation or change shall not be effective as
to the Agent for at least
thirty (30) days after receipt by the Agent of such
notice, unless the effect of
such change is to extend or increase coverage under
the policy; and (c) the
Agent will have the right (but no obligation) at
its election to remedy any
default in the payment of premiums within thirty
(30) days of notice from the
insurer of such default. If no Event of Default (as
defined in the Debenture)
exists and if the proceeds arising out of any claim
or series of related claims
do not exceed $100,000, loss payments in each instance
will be applied by the
applicable Debtor to the repair and/or replacement
of property with respect to
which the loss was incurred to the extent reasonably
feasible, and any loss
payments or the balance thereof remaining, to the
extent not so applied, shall
be payable to the applicable Debtor, provided, however,
that payments received
by any Debtor after an Event of Default occurs and
is continuing or in excess of
$100,000 for any occurrence or series of related
occurrences shall be paid to
the Agent and, if received by such Debtor, shall
be held in trust for and
immediately paid over to the Agent unless otherwise
directed in writing by the
Agent. Copies of such policies or the related certificates,
in each case, naming
the Agent as lender loss payee and additional insured
shall be delivered to the
Agent at least annually and at the time any new policy
of insurance is
issued.
(o)
Each
Debtor shall, within ten (10) days of obtaining knowledge
thereof, advise the
Secured Parties promptly, in sufficient detail, of
any substantial change in the
Collateral, and of the occurrence of any event which
would have a material
adverse effect on the value of the Collateral or
on the Secured Parties’
security interest therein.
(p)
Each
Debtor shall promptly execute and deliver to the
Secured Parties such further
deeds, mortgages, assignments, security agreements,
financing statements or
other instruments, documents, certificates and assurances
and take such further
action as the Secured Parties may from time to time
request and may in its sole
discretion deem necessary to perfect, protect or
enforce its
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security
interest in the Collateral including, without limitation,
if applicable, the
execution and delivery of a separate security agreement
with respect to each
Debtor’s Intellectual Property (“Intellectual
Property Security Agreement”)
in
which the Secured Parties have been granted a security
interest hereunder,
substantially in a form acceptable to the Secured
Parties, which Intellectual
Property Security Agreement, other than as stated
therein, shall be subject to
all of the terms and conditions hereof.
(q)
Each
Debtor shall permit the Secured Parties and their
representatives and agents to
inspect the Collateral at any time, and to make copies
of records pertaining to
the Collateral as may be requested by a Secured Party
from time to
time.
(r)
Each
Debtor shall take all steps reasonably necessary
to diligently pursue and seek
to preserve, enforce and collect any rights, claims,
causes of action and
accounts receivable in respect of the Collateral.
(s)
Each
Debtor shall promptly notify the Secured Parties
in sufficient detail upon
becoming aware of any attachment, garnishment, execution
or other legal process
levied against any Collateral and of any other information
received by such
Debtor that may materially affect the value of the
Collateral, the Security
Interest or the rights and remedies of the Secured
Parties
hereunder.
(t)
All
information heretofore, herein or hereafter supplied
to the Secured Parties by
or on behalf of any Debtor with respect to the Collateral
is accurate and
complete in all material respects as of the date
furnished.
(u)
The
Debtors shall at all times preserve and keep in full
force and effect their
respective valid existence and good standing and
any rights and franchises
material to its business.
(v)
No
Debtor
will change its name, type of organization, jurisdiction
of organization,
organizational identification number (if it has one),
legal or corporate
structure, or identity, or add any new fictitious
name unless it provides at
least 30 days prior written notice to the Secured
Parties of such change and, at
the time of such written notification, such Debtor
provides any financing
statements or fixture filings necessary to perfect
and continue perfected the
perfected security Interest granted and evidenced
by this
Agreement.
(w) No
Debtor
may consign any of its Inventory or sell any of its
Inventory on xxxx and hold,
sale or return, sale on approval, or other conditional
terms of sale without the
consent of a Majority
in Interest
which
shall not be unreasonably withheld, except to the
extent such consignment or
sale does not exceed 15% of the total value of all
of the Company’s finished
goods in Inventory.
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(x)
No
Debtor
may relocate its chief executive office to a new
location without providing 30
days prior written notification thereof to the Secured
Parties and so long as,
at the time of such written notification, such Debtor
provides any financing
statements or fixture filings necessary to perfect
and continue perfected the
perfected security Interest granted and evidenced
by this
Agreement.
(y) Each
Debtor was organized and remains organized solely
under the laws of the state
set forth next to such Debtor’s name in the first paragraph of this Agreement.
Schedule
D
attached
hereto sets forth each Debtor’s organizational identification number or, if any
Debtor does not have one, states that one does not
exist.
(z)
(i) The
actual name of each Debtor is the name set forth
in the preamble above; (ii) no
Debtor has any trade names except as set forth on
Schedule
E
attached
hereto; (iii) no Debtor has used any name other than
that stated in the preamble
hereto or as set forth on Schedule
E
for the
preceding five years; and (iv) no entity has merged
into any Debtor or been
acquired by any Debtor within the past five years
except as set forth on
Schedule
E.
(aa) At
any
time and from time to time that any Collateral consists
of instruments,
certificated securities or other items that require
or permit possession by the
secured party to perfect the security interest created
hereby, the applicable
Debtor shall deliver such Collateral to the Agent.
(bb)
Each
Debtor, in its capacity as issuer, hereby agrees
to comply with any and all
orders and instructions of Agent regarding the Pledged
Interests consistent with
the terms of this Agreement without the further consent
of any Debtor as
contemplated by Section 8-106 (or any successor section)
of the UCC. Further,
each Debtor agrees that it shall not enter into a
similar agreement (or one that
would confer “control” within the meaning of Article 8 of the UCC) with
any
other person or entity.
(cc) Each
Debtor shall cause all tangible chattel paper constituting
Collateral to be
delivered to the Agent, or, if such delivery is not
possible, then to cause such
tangible chattel paper to contain a legend noting
that it is subject to the
security interest created by this Agreement. To the
extent that any Collateral
consists of electronic chattel paper, the applicable
Debtor shall cause the
underlying chattel paper to be “marked” within the meaning of Section 9-105 of
the UCC (or successor section thereto).
(dd) If
there
is any investment property or deposit account included
as Collateral that can be
perfected by “control” through an account control agreement, the applicable
Debtor shall cause such an account control agreement,
in form and substance in
each case satisfactory to the Secured Parties, to
be entered into and delivered
to the Secured Parties.
11
(ee)
To
the
extent that any Collateral consists of letter-of-credit
rights, the applicable
Debtor shall cause the issuer of each underlying
letter of credit to consent to
an assignment of the proceeds thereof to the Secured
Parties.
(ff)
To
the
extent that any Collateral is in the possession of
any third party, the
applicable Debtor shall join with the Secured Parties
in notifying such third
party of the Secured Parties’ security interest in such Collateral and shall use
its best efforts to obtain an acknowledgement and
agreement from such third
party with respect to the Collateral, in form and
substance satisfactory to the
Secured Parties.
(gg) If
any
Debtor shall at any time hold or acquire a commercial
tort claim, such Debtor
shall promptly notify the Secured Parties in a writing
signed by such Debtor of
the particulars thereof and grant to the Secured
Parties 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 satisfactory to
the Secured Parties.
(hh) Each
Debtor shall immediately provide written notice to
the Secured Parties of any
and all accounts which arise out of contracts with
any governmental authority
and, to the extent necessary to perfect or continue
the perfected status of the
Security Interest in such accounts and proceeds thereof,
shall execute and
deliver to the Secured Parties an assignment of claims
for such accounts and
cooperate with the Secured Parties in taking any
other steps required, in their
judgment, under the Federal Assignment of Claims
Act or any similar federal,
state or local statute or rule to perfect or continue
the perfected status of
the Security Interest in such accounts and proceeds
thereof.
(ii) Each
Debtor shall cause each subsidiary
of such
Debtor with assets having a fair market value in
excess of $50,000 to
immediately become a party hereto (an “Additional
Debtor”),
by
executing and delivering an Additional Debtor Joinder
in substantially the form
of Annex A attached hereto and comply with the provisions
hereof applicable to
the Debtors. Concurrent therewith, the Additional
Debtor shall deliver
replacement schedules for, or supplements to all
other Schedules to (or referred
to in) this Agreement, as applicable, which replacement
schedules shall
supersede, or supplements shall modify, the Schedules
then in effect. The
Additional Debtor shall also deliver such opinions
of counsel, authorizing
resolutions, good standing certificates, incumbency
certificates, organizational
documents, financing statements and other information
and documentation as the
Secured Parties may reasonably request. Upon delivery
of the foregoing to the
Secured Parties, the Additional Debtor shall be and
become a party to this
Agreement with the same rights and obligations as
the Debtors, for all purposes
hereof as fully and to the same extent as if it were
an original signatory
hereto and shall be deemed to have made the representations,
warranties and
covenants set forth herein as of the date of execution
and delivery
12
of
such
Additional Debtor Joinder, and all references herein
to the “Debtors” shall be
deemed to include each Additional Debtor.
(jj)
Each
Debtor shall vote the Pledged Securities to comply
with the covenants and
agreements set forth herein and in the Debentures.
(kk) Each
Debtor shall register the pledge of the applicable
Pledged Securities on the
books of such Debtor. Each Debtor shall notify each
issuer of Pledged Securities
to register the pledge of the applicable Pledged
Securities in the name of the
Secured Parties on the books of such issuer. Further,
except with respect to
certificated securities delivered to the Agent, the
applicable Debtor shall
deliver to Agent an acknowledgement of pledge (which,
where appropriate, shall
comply with the requirements of the relevant UCC
with respect to perfection by
registration) signed by the issuer of the applicable
Pledged Securities, which
acknowledgement shall confirm that: (a) it has registered
the pledge on its
books and records; and (b) at any time directed by
Agent during the continuation
of an Event of Default, such issuer will transfer
the record ownership of such
Pledged Securities into the name of any designee
of Agent, will take such steps
as may be necessary to effect the transfer, and will
comply with all other
instructions of Agent regarding such Pledged Securities
without the further
consent of the applicable Debtor.
(ll)
In
the
event that, upon an occurrence of an Event of Default,
Agent shall sell all or
any of the Pledged Securities to another party or
parties (herein called the
“Transferee”)
or
shall purchase or retain all or any of the Pledged
Securities, each Debtor
shall, to the extent applicable: (i) deliver to Agent
or the Transferee, as the
case may be, the articles of incorporation, bylaws,
minute books, stock
certificate books, corporate seals, deeds, leases,
indentures, agreements,
evidences of indebtedness, books of account, financial
records and all other
Organizational Documents and records of the Debtors
and their direct and
indirect subsidiaries; (ii) use its best efforts
to obtain resignations of the
persons then serving as officers and directors of
the Debtors and their direct
and indirect subsidiaries, if so requested; and (iii)
use its best efforts to
obtain any approvals that are required by any governmental
or regulatory body in
order to permit the sale of the Pledged Securities
to the Transferee or the
purchase or retention of the Pledged Securities by
Agent and allow the
Transferee or Agent to continue the business of the
Debtors and their direct and
indirect subsidiaries.
(mm) Without
limiting the generality of the other obligations
of the Debtors hereunder, each
Debtor shall promptly (i) cause to be registered
at the United States Copyright
Office all of its material copyrights, (ii) cause
the security interest
contemplated hereby with respect to all Intellectual
Property registered at the
United States Copyright Office or United States Patent
and Trademark Office to
be duly recorded at the applicable office, and (iii)
give the Agent notice
whenever it acquires (whether absolutely or by license)
or creates any
additional material Intellectual Property.
13
(nn) Each
Debtor will from time to time, at the joint and several
expense of the Debtors,
promptly execute and deliver all such further instruments
and documents, and
take all such further action as may be necessary
or desirable, or as the Secured
Parties may reasonably request, in order to perfect
and protect any security
interest granted or purported to be granted hereby
or to enable the Secured
Parties to exercise and enforce their rights and
remedies hereunder and with
respect to any Collateral or to otherwise carry out
the purposes of this
Agreement.
(oo) Schedule
F
attached
hereto lists all of the patents, patent applications,
trademarks, trademark
applications, registered copyrights, and domain names
owned by any of the
Debtors as of the date hereof. Schedule
F
lists
all material licenses in favor of any Debtor for
the use of any patents,
trademarks, copyrights and domain names as of the
date hereof. All material
patents and trademarks of the Debtors have been duly
recorded at the United
States Patent and Trademark Office and all material
copyrights of the Debtors
have been duly recorded at the United States Copyright
Office.
(pp) Except
as
set forth on Schedule
G
attached
hereto, none of the account debtors or other persons
or entities obligated on
any of the Collateral is a governmental authority
covered by the Federal
Assignment of Claims Act or any similar federal,
state or local statute or rule
in respect of such Collateral.
5. Effect
of Pledge on Certain Rights. If
any of
the Collateral subject to this Agreement consists
of nonvoting equity or
ownership interests (regardless of class, designation,
preference or rights)
that may be converted into voting equity or ownership
interests upon the
occurrence of certain events (including, without
limitation, upon the transfer
of all or any of the other stock or assets of the
issuer), it is agreed that the
pledge of such equity or ownership interests pursuant
to this Agreement or the
enforcement of any of Agent’s rights hereunder shall not be deemed to be the
type of event which would trigger such conversion
rights notwithstanding any
provisions in the Organizational Documents or agreements
to which any Debtor is
subject or to which any Debtor is party.
6.
Defaults.
The
following events shall be “Events
of Default”:
(a)
The
occurrence of an Event of Default (as defined in
the Debenture) under the
Debenture;
(b)
Any
material representation or warranty of any Debtor
in this Agreement shall prove
to have been incorrect in any material respect when
made;
(c)
The
failure by any Debtor to observe or perform any of
its obligations hereunder for
five (5) days after delivery to such Debtor of notice
of such failure by or on
behalf of a Secured Party unless such default is
capable of cure but cannot be
cured within such time frame and such Debtor is using
best efforts to cure same
in a timely fashion; or
14
(d)
If
any provision of this Agreement shall at any time
for any reason be declared to
be null and void, or the validity or enforceability
thereof shall be contested
by any Debtor, or a proceeding shall be commenced
by any Debtor, or by any
governmental authority having jurisdiction over any
Debtor, seeking to establish
the invalidity or unenforceability thereof, or any
Debtor shall deny that any
Debtor has any liability or obligation purported
to be created under this
Agreement.
7. Duty
To Hold In Trust.
(a) Upon
the
occurrence of any Event of Default and at any time
thereafter, each Debtor
shall, upon receipt of any revenue, income,
dividend, interest
or other
sums subject to the Security Interest, whether payable
pursuant to the
Debentures or otherwise, or of any check, draft,
note, trade acceptance or other
instrument evidencing an obligation to pay any such
sum, hold the same in trust
for the Secured Parties and shall forthwith endorse
and transfer any such sums
or instruments, or both, to the Secured Parties,
pro-rata in proportion to their
initial purchases of Debentures for application to
the satisfaction of the
Obligations (and if any Debenture is not outstanding,
pro-rata in proportion to
the initial purchases of the remaining Debentures).
(b) If
any
Debtor shall become entitled to receive or shall
receive any securities or other
property (including, without limitation, shares of
Pledged Securities or
instruments representing Pledged Securities acquired
after the date hereof, or
any options, warrants, rights or other similar property
or certificates
representing a dividend, or any distribution in connection
with any
recapitalization, reclassification or increase or
reduction of capital, or
issued in connection with any reorganization of such
Debtor or any of its direct
or indirect subsidiaries) in respect of the Pledged
Securities (whether as an
addition to, in substitution of, or in exchange for,
such Pledged Securities or
otherwise), such Debtor agrees to (i) accept the
same as the agent of the
Secured Parties; (ii) hold the same in trust on behalf
of and for the benefit of
the Secured Parties; and (iii) to deliver any and
all certificates or
instruments evidencing the same to Agent on or before
the close of business on
the fifth business day following the receipt thereof
by such Debtor, in the
exact form received together with the Necessary Endorsements,
to be held by
Agent subject to the terms of this Agreement as Collateral.
8. Rights
and Remedies Upon Default.
(a) Upon
the
occurrence of any Event of Default and at any time
thereafter, the Secured
Parties, acting through any agent appointed by them
for such purpose, shall have
the right to exercise all of the remedies conferred
hereunder and under the
Debentures, and the Secured Parties shall have all
the
15
rights
and remedies of a secured party under the UCC. Without
limitation, the Secured
Parties shall have the following rights and powers:
(i)
The
Secured Parties shall have the right to take possession
of the Collateral and,
for that purpose, enter, with the aid and assistance
of any person, any premises
where the Collateral, or any part thereof, is or
may be placed and remove the
same, and each Debtor shall assemble the Collateral
and make it available to the
Secured Parties at places which the Secured Parties
shall reasonably select,
whether at such Debtor's premises or elsewhere, and
make available to the
Secured Parties, without rent, all of such Debtor’s respective premises and
facilities for the purpose of the Secured Parties
taking possession of, removing
or putting the Collateral in saleable or disposable
form.
(ii) Upon
notice to the Debtors by Agent, all rights of each
Debtor to exercise the voting
and other consensual rights which it would otherwise
be entitled to exercise and
all rights of each Debtor to receive the dividends
and interest which it would
otherwise be authorized to receive and retain, shall
cease. Upon such notice,
Agent shall have the right to receive any interest,
cash dividends or other
payments on the Collateral and, at the option of
Agent, to exercise in such
Agent’s discretion all voting rights pertaining thereto.
Without limiting the
generality of the foregoing, Agent shall have the
right (but not the obligation)
to exercise all rights with respect to the Collateral
as it were the sole and
absolute owners thereof, including, without limitation,
to vote and/or to
exchange, at its sole discretion, any or all of the
Collateral in connection
with a merger, reorganization, consolidation, recapitalization
or other
readjustment concerning or involving the Collateral
or any Debtor or any of its
direct or indirect subsidiaries.
(iii)
The
Secured Parties shall have the right to operate the
business of each Debtor
using the Collateral and shall have the right to
assign, sell, lease or
otherwise dispose of and deliver all or any part
of the Collateral, at public or
private sale or otherwise, either with or without
special conditions or
stipulations, for cash or on credit or for future
delivery, in such parcel or
parcels and at such time or times and at such place
or places, and upon such
terms and conditions as the Secured Parties may deem
commercially reasonable,
all without (except as shall be required by applicable
statute and cannot be
waived) advertisement or demand upon or notice to
any Debtor or right of
redemption of a Debtor, which are hereby expressly
waived. Upon each such sale,
lease, assignment or other transfer of Collateral,
the Secured Parties may,
unless prohibited by applicable law which cannot
be waived, purchase all or any
part of the Collateral being sold, free from and
discharged of all trusts,
claims, right of redemption and equities of any Debtor,
which are hereby waived
and released.
16
(iv) The
Secured Parties shall have the right (but not the
obligation) to notify any
account debtors and any obligors under instruments
or accounts to make payments
directly to the Secured Parties and to enforce the
Debtors’ rights against such
account debtors and obligors.
(v) The
Secured Parties may (but are not obligated to) direct
any financial intermediary
or any other person or entity holding any investment
property to transfer the
same to the Secured Parties or their designee.
(vi) The
Secured Parties may (but are not obligated to) transfer
any or all Intellectual
Property registered in the name of any Debtor at
the United States Patent and
Trademark Office and/or Copyright Office into the
name of the Secured Parties or
any designee or any purchaser of any Collateral.
(b) The
Agent
may comply with any applicable law in connection
with a disposition of
Collateral and such compliance will not be considered
adversely to affect the
commercial reasonableness of any sale of the Collateral.
The Agent may sell the
Collateral without giving any warranties and may
specifically disclaim such
warranties. If the Agent sells any of the Collateral
on credit, the Debtors will
only be credited with payments actually made by the
purchaser. In addition, each
Debtor waives any and all rights that it may have
to a judicial hearing in
advance of the enforcement of any of the Agent’s rights and remedies hereunder,
including, without limitation, its right following
an Event of Default to take
immediate possession of the Collateral and to exercise
its rights and remedies
with respect thereto.
(c) For
the
purpose of enabling the Agent to further exercise
rights and remedies under this
Section 8 or elsewhere provided by agreement or applicable
law, each Debtor
hereby grants to the Agent, for the benefit of the
Agent and the Secured
Parties, an irrevocable, nonexclusive license (exercisable
without payment of
royalty or other compensation to such Debtor) to
use, license or sublicense
following an Event of Default, any Intellectual Property
now owned or hereafter
acquired by such Debtor, and wherever the same may
be located, and including in
such license access to all media in which any of
the licensed items may be
recorded or stored and to all computer software and
programs used for the
compilation or printout thereof.
9. Applications
of Proceeds.
The
proceeds of any such sale, lease or other disposition
of the Collateral
hereunder shall be applied first, to the expenses
of retaking, holding, storing,
processing and preparing for sale, selling, and the
like (including, without
limitation, any taxes, fees and other costs incurred
in connection therewith) of
the Collateral, to the reasonable attorneys’ fees and expenses incurred by the
Secured Parties in enforcing their rights hereunder
and in connection with
collecting, storing and
17
disposing
of the Collateral, and then to satisfaction of the
Obligations pro rata among
the Secured Parties (based on then-outstanding principal
amounts of Debentures
at the time of any such determination), and to the
payment of any other amounts
required by applicable law, after which the Secured
Parties shall pay to the
applicable Debtor any surplus proceeds. If, upon
the sale, license or other
disposition of the Collateral, the proceeds thereof
are insufficient to pay all
amounts to which the Secured Parties are legally
entitled, the Debtors will be
liable for the deficiency, together with interest
thereon, at the rate of 10%
per annum or the lesser amount permitted by applicable
law (the “Default Rate”),
and the reasonable fees of any attorneys employed
by the Secured Parties to
collect such deficiency. To the extent permitted
by applicable law, each Debtor
waives all claims, damages and demands against the
Secured Parties arising out
of the repossession, removal, retention or sale of
the Collateral, unless due
solely to the gross negligence or willful misconduct
of the Secured Parties as
determined by a final judgment (not subject to further
appeal) of a court of
competent jurisdiction.
10. Securities
Law Provision.
Each
Debtor recognizes that Agent may be limited in its
ability to effect a sale to
the public of all or part of the Pledged Securities
by reason of certain
prohibitions in the Securities Act of 1933, as amended,
or other federal or
state securities laws (collectively, the “Securities
Laws”),
and
may be compelled to resort to one or more sales to
a restricted group of
purchasers who may be required to agree to acquire
the Pledged Securities for
their own account, for investment and not with a
view to the distribution or
resale thereof. Each Debtor agrees that sales so
made may be at prices and on
terms less favorable than if the Pledged Securities
were sold to the public, and
that Agent has no obligation to delay the sale of
any Pledged Securities for the
period of time necessary to register the Pledged
Securities for sale to the
public under the Securities Laws. Each Debtor shall
cooperate with Agent in its
attempt to satisfy any requirements under the Securities
Laws (including,
without limitation, registration thereunder if requested
by Agent) applicable to
the sale of the Pledged Securities by Agent.
11. Costs
and Expenses.
Each
Debtor agrees to pay all reasonable out-of-pocket
fees, costs and expenses
incurred in connection with any filing required hereunder,
including without
limitation, any financing statements pursuant to
the UCC, continuation
statements, partial releases and/or termination statements
related thereto or
any expenses of any searches reasonably required
by the Secured Parties. The
Debtors shall also pay all other claims and charges
which in the reasonable
opinion of the Secured Parties might prejudice, imperil
or otherwise affect the
Collateral or the Security Interest therein. The
Debtors will also, upon demand,
pay to the Secured Parties the amount of any and
all reasonable expenses,
including the reasonable fees and expenses of its
counsel and of any experts and
agents, which the Secured Parties may incur in connection
with (i) the
enforcement of this Agreement, (ii) the custody or
preservation of, or the sale
of, collection from, or other realization upon, any
of the Collateral, or (iii)
the exercise or enforcement of any of the rights
of the Secured Parties under
the Debentures. Until so paid, any fees payable hereunder
shall be added to the
principal amount of the Debentures and shall bear
interest at the Default
Rate.
18
12. Responsibility
for Collateral.
The
Debtors assume all liabilities and responsibility
in connection with all
Collateral, and the Obligations shall in no way be
affected or diminished by
reason of the loss, destruction, damage or theft
of any of the Collateral or its
unavailability for any reason. Without limiting the
generality of the foregoing,
(a) neither the Agent nor any Secured Party (i) has
any duty (either before or
after an Event of Default) to collect any amounts
in respect of the Collateral
or to preserve any rights relating to the Collateral,
or (ii) has any obligation
to clean-up or otherwise prepare the Collateral for
sale, and (b) each Debtor
shall remain obligated and liable under each contract
or agreement included in
the Collateral to be observed or performed by such
Debtor thereunder. Neither
the Agent nor any Secured Party shall have any obligation
or liability under any
such contract or agreement by reason of or arising
out of this Agreement or the
receipt by the Agent or any Secured Party of any
payment relating to any of the
Collateral, nor shall the Agent or any Secured Party
be obligated in any manner
to perform any of the obligations of any Debtor under
or pursuant to any such
contract or agreement, to make inquiry as to the
nature or sufficiency of any
payment received by the Agent or any Secured Party
in respect of the Collateral
or as to the sufficiency of any performance by any
party under any such contract
or agreement, 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 the Agent or to which the Agent or any
Secured Party may be entitled
at any time or times.
13. Security
Interest Absolute.
All
rights of the Secured Parties and all obligations
of the Debtors hereunder,
shall be absolute and unconditional, irrespective
of: (a) any lack of validity
or enforceability of this Agreement, the Debentures
or any agreement entered
into in connection with the foregoing, or any portion
hereof or thereof; (b) any
change in the time, manner or place of payment or
performance of, or in any
other term of, all or any of the Obligations, or
any other amendment or waiver
of or any consent to any departure from the Debentures
or any other agreement
entered into in connection with the foregoing; (c)
any exchange, release or
nonperfection of any of the Collateral, or any release
or amendment or waiver of
or consent to departure from any other collateral
for, or any guaranty, or any
other security, for all or any of the Obligations;
(d) any action by the Secured
Parties to obtain, adjust, settle and cancel in its
sole discretion any
insurance claims or matters made or arising in connection
with the Collateral;
or (e) any other circumstance which might otherwise
constitute any legal or
equitable defense available to a Debtor, or a discharge
of all or any part of
the Security Interest granted hereby. Until the Obligations
shall have been paid
and performed in full, the rights of the Secured
Parties shall continue even if
the Obligations are barred for any reason, including,
without limitation, the
running of the statute of limitations or bankruptcy.
Each Debtor expressly
waives presentment, protest, notice of protest, demand,
notice of nonpayment and
demand for performance. In the event that at any
time any transfer of any
Collateral or any payment received by the Secured
Parties hereunder shall be
deemed by final order of a court of competent jurisdiction
to have been a
voidable preference or fraudulent conveyance under
the bankruptcy or insolvency
laws of the United States, or shall be deemed to
be otherwise due to any party
other than the Secured Parties, then, in any such
event, each Debtor’s
obligations hereunder shall
19
survive
cancellation of this Agreement, and shall not be
discharged or satisfied by any
prior payment thereof and/or cancellation of this
Agreement, but shall remain a
valid and binding obligation enforceable in accordance
with the terms and
provisions hereof. Each Debtor waives all right to
require the Secured Parties
to proceed against any other person or entity
or
to
apply
any Collateral which the Secured Parties may hold
at any time, or to marshal
assets, or to pursue any other remedy. Each Debtor
waives any defense arising by
reason of the application of the statute of limitations
to any obligation
secured hereby.
14.
Term
of Agreement.
This
Agreement and the Security Interest shall terminate
on the date on which all
payments under the Debentures have been indefeasibly
paid in full and all other
Obligations have been paid or discharged; provided,
however, that all
indemnities of the Debtors contained in this Agreement
(including, without
limitation, Annex B hereto) shall survive and remain
operative and in full force
and effect regardless of the termination of this
Agreement.
15.
Power
of Attorney; Further Assurances.
(a)
Each
Debtor authorizes the Secured Parties, and does hereby
make, constitute and
appoint the Secured Parties and their respective
officers, agents, successors or
assigns with full power of substitution, as such
Debtor’s true and lawful
attorney-in-fact, with power, in the name of the
various Secured Parties or such
Debtor, to, after the occurrence and during the continuance
of an Event of
Default, (i) endorse any note, checks, drafts, money
orders or other instruments
of payment (including payments payable under or in
respect of any policy of
insurance) in respect of the Collateral that may
come into possession of the
Secured Parties; (ii) to sign and endorse any financing
statement pursuant to
the UCC or any invoice, freight or express xxxx,
xxxx of lading, storage or
warehouse receipts, drafts against debtors, assignments,
verifications and
notices in connection with accounts, and other documents
relating to the
Collateral; (iii) to pay or discharge taxes, liens,
security interests or other
encumbrances at any time levied or placed on or threatened
against the
Collateral; (iv) to demand, collect, receipt for,
compromise, settle and xxx for
monies due in respect of the Collateral; (v) to transfer
any Intellectual
Property or provide licenses respecting any Intellectual
Property; and (vi)
generally, at the option of the Secured Parties,
and at the expense of the
Debtors, at any time, or from time to time, to execute
and deliver any and all
documents and instruments and to do all acts and
things which the Secured
Parties deem necessary to protect, preserve and realize
upon the Collateral and
the Security Interest granted therein in order to
effect the intent of this
Agreement and the Debentures all as fully and effectually
as the Debtors might
or could do; and each Debtor hereby ratifies all
that said attorney shall
lawfully do or cause to be done by virtue hereof.
This power of attorney is
coupled with an interest and shall be irrevocable
for the term of this Agreement
and thereafter as long as any of the Obligations
shall be outstanding.
The
designation set forth herein shall be deemed to amend
and supersede any
inconsistent provision in the Organizational Documents
or other documents or
agreements to which any Debtor is subject or to which
any Debtor is a party.
20
Without
limiting the generality of the foregoing, after the
occurrence and during the
continuance of an Event of Default, each Secured
Party is specifically
authorized to execute and file any applications for
or instruments of transfer
and assignment of any patents, trademarks, copyrights
or other Intellectual
Property with the United States Patent and Trademark
Office and the United
States Copyright Office.
(b)
On
a
continuing basis, each Debtor will make, execute,
acknowledge, deliver, file and
record, as the case may be, with the proper filing
and recording agencies in any
jurisdiction, including, without limitation, the
jurisdictions indicated on
Schedule
C
attached
hereto, all such instruments, and take all such action
as may reasonably be
deemed necessary or advisable, or as reasonably requested
by the Secured
Parties, to perfect the Security Interest granted
hereunder and otherwise to
carry out the intent and purposes of this Agreement,
or for assuring and
confirming to the Secured Parties the grant or perfection
of a perfected
security interest in all the Collateral under the
UCC.
(c)
Each
Debtor hereby irrevocably appoints the Secured Parties
as such Debtor’s
attorney-in-fact, with full authority in the place
and instead of such Debtor
and in the name of such Debtor, from time to time
in the Secured Parties’
discretion, to take any action and to execute any
instrument which the Secured
Parties may deem necessary or advisable to accomplish
the purposes of this
Agreement, including the filing, in its sole discretion,
of one or more
financing or continuation statements and amendments
thereto, relative to any of
the Collateral without the signature of such Debtor
where permitted by law,
which financing statements may (but need not) describe
the Collateral as “all
assets” or “all personal property” or words of like import, and ratifies all
such actions taken by the Secured Parties. This power
of attorney is coupled
with an interest and shall be irrevocable for the
term of this Agreement and
thereafter as long as any of the Obligations shall
be outstanding.
16. Notices.
All
notices, requests, demands and other communications
hereunder shall be subject
to the notice provision of the Purchase Agreement
(as such term is defined in
the Debentures).
17. Other
Security.
To the
extent that the Obligations are now or hereafter
secured by property other than
the Collateral or by the guarantee, endorsement or
property of any other person,
firm, corporation or other entity, then the Secured
Parties shall have the
right, in its sole discretion, to pursue, relinquish,
subordinate, modify or
take any other action with respect thereto, without
in any way modifying or
affecting any of the Secured Parties’ rights and remedies
hereunder.
18. Appointment
of Agent.
The
Secured Parties hereby appoint Alpha Capital AG to
act as their agent
(“Alpha”
or
“Agent”)
for
purposes of exercising any and all rights and remedies
of the Secured Parties
hereunder. Such appointment shall continue until
revoked in writing by a
Majority
in Interest, at which time a Majority in Interest
21
shall
appoint a new Agent, provided that Alpha may not
be removed as Agent unless
Alpha shall then hold less than $50,000 in principal
amount of
Debentures;
provided,
further,
that
such removal may occur only if each of the other
Secured Parties shall then hold
not less than $500,000 in principal amount of Debentures.
The
Agent
shall have the rights, responsibilities and immunities
set forth in Annex
B
hereto.
19. Miscellaneous.
(a)
No
course
of dealing between the Debtors and the Secured Parties,
nor any failure to
exercise, nor any delay in exercising, on the part
of the Secured Parties, any
right, power or privilege hereunder or under the
Debentures shall operate as a
waiver thereof; nor shall any single or partial exercise
of any right, power or
privilege hereunder or thereunder preclude any other
or further exercise thereof
or the exercise of any other right, power or privilege.
(b)
All
of
the rights and remedies of the Secured Parties with
respect to the Collateral,
whether established hereby or by the Debentures or
by any other agreements,
instruments or documents or by law shall be cumulative
and may be exercised
singly or concurrently.
(c)
This
Agreement constitutes the entire agreement of the
parties with respect to the
subject matter hereof and is intended to supersede
all prior negotiations,
understandings and agreements with respect thereto.
Except as specifically set
forth in this Agreement, no provision of this Agreement
may be modified or
amended except by a written agreement specifically
referring to this Agreement
and signed by the parties hereto.
(d)
In
the
event any provision of this Agreement is held to
be invalid, prohibited or
unenforceable in any jurisdiction for any reason,
unless such provision is
narrowed by judicial construction, this Agreement
shall, as to such
jurisdiction, be construed as if such invalid, prohibited
or unenforceable
provision had been more narrowly drawn so as not
to be invalid, prohibited or
unenforceable. If, notwithstanding the foregoing,
any provision of this
Agreement is held to be invalid, prohibited or unenforceable
in any
jurisdiction, such provision, as to such jurisdiction,
shall be ineffective to
the extent of such invalidity, prohibition or unenforceability
without
invalidating the remaining portion of such provision
or the other provisions of
this Agreement and without affecting the validity
or enforceability of such
provision or the other provisions of this Agreement
in any other
jurisdiction.
(e)
No
waiver
of any breach or default or any right under this
Agreement shall be considered
valid unless in writing and signed by the party giving
such waiver, and no such
waiver shall be deemed a waiver of any subsequent
breach or default or right,
whether of the same or similar nature or otherwise.
22
(f)
This
Agreement shall be binding upon and inure to the
benefit of each party hereto
and its successors and assigns.
(g)
Each
party shall take such further action and execute
and deliver such further
documents as may be necessary or appropriate in order
to carry out the
provisions and purposes of this Agreement.
(h)
All
questions concerning the construction, validity,
enforcement and interpretation
of this Agreement shall be governed by and construed
and enforced in accordance
with the internal laws of the State of New York,
without regard to the
principles of conflicts of law thereof. Each Debtor
agrees that all proceedings
concerning the interpretations, enforcement and defense
of the transactions
contemplated by this Agreement and the Debentures
(whether brought against a
party hereto or its respective affiliates, directors,
officers, shareholders,
partners, members, employees or agents) shall be
commenced exclusively in the
state and federal courts sitting in the City of New
York, Borough of Manhattan.
Each Debtor hereby irrevocably submits to the exclusive
jurisdiction of the
state and federal courts sitting in the City of New
York, Borough of Manhattan
for the adjudication of any dispute hereunder or
in connection herewith or with
any transaction contemplated hereby or discussed
herein, and hereby irrevocably
waives, and agrees not to assert in any proceeding,
any claim that it is not
personally subject to the jurisdiction of any such
court, that such proceeding
is improper. Each party hereto hereby irrevocably
waives personal service of
process and consents to process being served in any
such proceeding by mailing a
copy thereof via registered or certified mail or
overnight delivery (with
evidence of delivery) to such party at the address
in effect for notices to it
under this Agreement and agrees that such service
shall constitute good and
sufficient service of process and notice thereof.
Nothing contained herein shall
be deemed to limit in any way any right to serve
process in any manner permitted
by law. Each party hereto hereby irrevocably waives,
to the fullest extent
permitted by applicable law, any and all right to
trial by jury in any legal
proceeding arising out of or relating to this Agreement
or the transactions
contemplated hereby. If any party shall commence
a proceeding to enforce any
provisions of this Agreement, then the prevailing
party in such proceeding shall
be reimbursed by the other party for its reasonable
attorney’s fees and other
costs and expenses incurred with the investigation,
preparation and prosecution
of such proceeding.
(i)
This
Agreement may be executed in any number of counterparts,
each of which when so
executed shall be deemed to be an original and, all
of which taken together
shall constitute one and the same Agreement. In the
event that any signature is
delivered by facsimile transmission, such signature
shall create a valid binding
obligation of the party executing (or on whose behalf
such signature is
executed) the same with the same force and effect
as if such facsimile signature
were the original thereof.
23
(j) All
Debtors shall jointly and severally be liable for
the obligations of each Debtor
to the Secured Parties hereunder.
(k) Each
Debtor shall indemnify, reimburse and hold harmless
the Secured Parties and
their respective partners, members, shareholders,
officers, directors, employees
and agents (collectively, “Indemnitees”)
from
and against any and all losses, claims, liabilities,
damages, penalties, suits,
costs and expenses, of any kind or nature, (including
fees relating to the cost
of investigating and defending any of the foregoing)
imposed on, incurred by or
asserted against such Indemnitee in any way related
to or arising from or
alleged to arise from this Agreement or the Collateral,
except any such losses,
claims, liabilities, damages, penalties, suits, costs
and expenses which result
from the gross negligence or willful misconduct of
the Indemnitee as determined
by a final, nonappealable decision of a court of
competent jurisdiction. This
indemnification provision is in addition to, and
not in limitation of, any other
indemnification provision in the Debentures, the
Purchase Agreement (as such
term is defined in the Debentures) or any other agreement,
instrument or other
document executed or delivered in connection herewith
or therewith.
(l) Nothing
in this Agreement shall be construed to subject Agent
or any Secured Party to
liability as a partner in any Debtor or any if its
direct or indirect
subsidiaries that is a partnership or as a member
in any Debtor or any of its
direct or indirect subsidiaries that is a limited
liability company, nor shall
Agent or any Secured Party be deemed to have assumed
any obligations under any
partnership agreement or limited liability company
agreement, as applicable, of
any such Debtor or any if its direct or indirect
subsidiaries or otherwise,
unless and until any such Secured Party exercises
its right to be substituted
for such Debtor as a partner or member, as applicable,
pursuant
hereto.
(m)
To
the
extent that the grant of the security interest in
the Collateral and the
enforcement of the terms hereof require the consent,
approval or action of any
partner or member, as applicable, of any Debtor or
any direct or indirect
subsidiary of any Debtor or compliance with any provisions
of any of the
Organizational Documents, the Debtors hereby grant
such consent and approval and
waive any such noncompliance with the terms of said
documents.
[SIGNATURE
PAGES FOLLOW]
24
IN
WITNESS WHEREOF, the parties hereto have caused this
Security
Agreement to be duly executed on the day and year
first above
written.
|
CHEMBIO
DIAGONISTICS, INC.
|
|
By:__________________________________________
Name:
Xxxxxxxx X. Xxxxxxx
Title:
President
|
|
CHEMBIO
DIAGNOSTICS SYSTEMS, INC.
|
|
By:__________________________________________
Name:
Title:
|
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
25
[SIGNATURE
PAGE OF HOLDERS TO CEMI SA]
Name
of
Investing Entity: __________________________
Signature
of Authorized Signatory of Investing entity:
_________________________
Name
of
Authorized Signatory: _________________________
Title
of
Authorized Signatory: __________________________
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
