EXHIBIT 99.6
SECURITY AGREEMENT
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This Security Agreement (this "Agreement") made this 11th day of October,
1996, between OXIS International, Inc. ("Debtor"), a Delaware corporation having
its chief executive office at 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx,
Xxxxxx 00000-0000, and Capital Ventures International ("Secured Party "), a
Cayman Islands corporation with offices c/o Bala International, Inc. 000 Xxxx
Xxxx Xxxxxx, Xxxxx 000, Xxxx Xxxxxx, Xxxxxxxxxxxx 00000, the address from which
information concerning Secured Party's security interests hereunder may be
obtained, for itself and as Secured Party for each of the parties who have
executed the Purchase Agreement (as defined below) (collectively, the "Buyers").
BACKGROUND
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A. Reference is made to that certain Securities Purchase Agreement of
even date herewith among the Debtor, the Secured Party and the other Buyers (the
"Purchase Agreement").
B. Pursuant to the Purchase Agreement, Debtor has issued to each of the
Buyers, Debtor's Secured Convertible Term Notes due June 8, 1997 in the
aggregate principal amount (collectively, together with any and all renewals,
replacements, renewals, extensions, modifications and rearrangements thereof,
the "NOTES").
C. Pursuant to and in accordance with the Purchase Agreement, Debtor is
required to grant to Secured Party, as agent for the Buyers, a security interest
in and continuing liens on certain assets of Debtor.
NOW, THEREFORE, with the foregoing Background incorporated herein by this
reference, the parties hereto, intending to be legally bound, covenant and agree
as follows:
SECTION 1. CERTAIN DEFINITIONS.
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1.1 "Account", "Account Debtor", "Chattel Paper", "Contracts",
"Document", "Equipment", "Fixtures", "General Intangibles", "Goods",
"Instrument", "Inventory", "Proceeds" and "Purchase Money Security Interest"
shall have the same respective meanings as are given to these terms in or for
the purposes of the Uniform Commercial Code as enacted in the State of Delaware
("UCC").
1.2 "Books and Records" means all present and future books of account
of every nature, correspondence, memoranda, invoices, ledger cards, bills of
lading and other shipping evidence, tapes, disks, diskettes and other software
storage media and devices, papers,
books and other documents, or transcribed information of any type, whether
expressed in ordinary or machine language, and whether on or off the premises of
Debtor.
1.3 "Collateral" means the property of Debtor described in Section 2
of this Agreement.
1.4 "Event of Default" shall have the meaning ascribed to such term
in the Purchase Agreement and/or the Notes.
1.5 "Obligations" means the obligations of Debtor (a) to pay the
principal of and the interest on the Notes in accordance with the terms hereof
and thereof, and to satisfy all other existing and future debts, liabilities and
obligations of Debtor in favor of the Buyers, whether matured or unmatured,
direct or indirect, absolute or contingent, or joint or several including,
without limitation, any liabilities of Debtor to others which the Buyers may
obtain by assignment or otherwise, (b) to repay Secured Party or any Buyer for
all amounts advanced by Secured Party or any Buyer hereunder or otherwise to or
for the benefit of Debtor including, without limitation, advances for principal
or interest payments to prior secured parties, mortgagees or other lienors, or
for taxes, levies, insurance, rent, repairs to or maintenance or storage of any
of the Collateral, (c) to repay Secured Party for its costs of curing any Event
of Default which Secured Party, in its sole discretion, elects to cure, (d) all
of the obligations, covenants and agreements of Debtor under and pursuant to the
Purchase Agreement, the Warrants (as defined in the Purchase Agreement), and the
Registration Rights Agreement (as defined in the Purchase Agreement), and (e) to
repay Secured Party for its fees, expenses and costs (including the reasonable
fees and expenses of Secured Party's counsel) in connection with the
preparation, negotiation, administration, amendment, modification or enforcement
of this Agreement, the Purchase Agreement, the Notes and any and all
instruments, agreements or documents executed and/or delivered in modification,
renewal, extension, rearrangement or replacement hereof and thereof, and Secured
Party's rights hereunder, thereunder and under the instruments, agreements and
documents required pursuant to this Agreement, and in connection with any
proceeding brought or threatened to enforce payment of any of the Obligations
including, without limitation, any bankruptcy and other insolvency proceeding,
whether instituted by or against Debtor and/or any endorser, surety or guarantor
of any Obligations .
1.6 "Permitted Liens" means the liens, claims or encumbrances, if
any, described on Exhibit A attached hereto, incorporated herein by this
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reference and hereby made a part hereof.
1.7 "Person" means any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, joint
venture, court or government or political subdivision or agency thereof.
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SECTION 2. COLLATERAL SECURITY.
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As security for the prompt payment, performance and satisfaction of
all Obligations, Debtor hereby assigns, pledges, hypothecates, transfers and
sets over to Secured Party, as agent for the Buyers, all of Debtor's right,
title and interest in and to, and hereby grants to Secured Party a continuing
lien on and security interest in and to, all of the property described on
Exhibit B attached hereto wherever located, whether now owned or existing or
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hereafter acquired or arising, together with all replacements, accessions,
parts, additions and substitutions therefor and thereof.
SECTION 3. OBLIGATIONS SECURED.
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The Collateral secures all of the Obligations and the liens and
security interests granted pursuant to this Agreement may be retained by Secured
Party, as agent for the Buyers, until all such Obligations have been paid and
satisfied in full.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
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Debtor hereby represents and warrants, which representations and
warranties shall be deemed continuing until all Obligations have been paid and
satisfied in full, as follows:
4.1 Debtor is a corporation duly organized and in good standing under
the laws of its state of formation and is duly qualified as a foreign
corporation and in good standing in all states or other jurisdictions where the
nature and extent of the business transacted by it or the ownership of assets
makes such qualification necessary, except for those jurisdictions in which the
failure to so qualify would not have a material adverse effect on Debtor's
financial condition, results of operation or business or the rights of Secured
Party in or to any of the Collateral.
4.2 The execution, delivery and performance of this Agreement, the
Purchase Agreement and the transactions contemplated hereunder and thereunder
are all within Debtor's corporate powers, have been duly authorized by Debtor
and will not violate any provision of any applicable law, rule or regulation,
judgment, order, writ or decree, or of any contract, agreement, indenture or
instrument to which Debtor is a party or by which Debtor or its assets
(including the Collateral) are or may be bound including, without limitation,
any rule or regulation of the U.S. Food and Drug Administration (the "FDA") or
any comparable foreign agency or regulatory authority;
4.3 This Agreement, the Obligations and all related instruments,
agreements and documents, when executed and/or delivered by Debtor, will
represent the legal, valid and binding Obligations of Debtor, enforceable
against Debtor in accordance with their respective terms;
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4.4 No Event of Default or event which, with the passage of time or
the giving of notice, or both, will result in an Event of Default has occurred;
4.5 Debtor follows and is in compliance with the FDA good
manufacturing procedures (as defined and described in the applicable FDA rules
and regulations) and Debtor has received no notice of any deficiency, violation
or default of the rules and regulations of the FDA or any other applicable
domestic or foreign federal, state or local agency or regulatory authority with
respect to Debtor's business including, without limitation, the manufacture,
distribution or sale any of the Assays (as defined on Exhibit B attached
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hereto);
4.6 Other than as stated in Schedule 3(e) to the Purchase Agreement,
Debtor is not in default in any respect under, or in violation in any respect
of, any of the terms of, any agreement, contract, instrument, lease or other
commitment to which it is a party or by which it or any of its assets are bound,
and Debtor is in compliance in all respects with all applicable provisions of
laws, rules, regulations, licenses, permits, approvals and orders of any
foreign, federal, state or local governmental authority, except to the extent
such default, violation or non-compliance would not result in or cause a
material adverse change in the assets, business or prospects of Debtor, or have
an adverse effect on the legality, validity or enforceability of this Agreement
or the Purchase Agreement or priority of the security interests or liens of
Secured Party in the Collateral, or would impair the ability of Debtor to
perform its obligations under this Agreement or under any of the other financing
agreements, or of Secured Party to enforce any Obligation or realize upon any
Collateral;
4.7 Other than as stated in Schedules 3(f) and 3(h) to the Purchase
Agreement, there are no judgments or judicial or administrative orders or
proceedings pending, or to the knowledge of Debtor threatened, against or
affecting Debtor in any court or before any governmental authority or
arbitration board or tribunal which may adversely affect the condition
(financial or otherwise) of Debtor or the assets (including the Collateral) of
Debtor, or the ability of Debtor to perform under this Agreement, the
Obligations or any related instruments, agreements or documents;
4.8 The security interests and liens granted to Secured Party under
this Agreement constitute valid and, upon the filing of a UCC-1 financing
statement with the Office of the Oregon Secretary of State, perfected first
priority liens and security interests in and upon the Collateral, subject only
to Permitted Liens;
4.9 Debtor has good and marketable title in fee simple (or its
equivalent under applicable law) to all of the properties and assets it purports
to own, free from liens, claims and encumbrances of any third Person, except for
Permitted Liens;
4.10 Debtor's chief executive office and the address at which the
Books and Records relating to the Collateral are located, is as set forth on the
first page of this Agreement, and all other locations of the Collateral, if any,
are shown on Exhibit C attached hereto,
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incorporated herein by this reference and hereby made a part hereof. Exhibit C
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correctly identifies any Collateral locations which are not owned by Debtor and
sets forth the owners and/or operators thereof, and to the best of Debtor's
knowledge, the holders of any mortgages on such location; and
4.11 There are no patents, trademarks, third party licenses or other
third party rights required for the commercial exploitation of the Assays
including, without limitation, for the manufacture, distribution, and sale
thereof.
SECTION 5. COVENANTS.
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Debtor covenants and agrees with Secured Party that, so long as any of
the Obligations remain unpaid or unsatisfied, it will comply with the following
covenants:
5.1 Simultaneously with Debtor's receipt of the proceeds of the Notes
Debtor shall pay the entire outstanding principal balance and accrued and unpaid
interest indebtedness owing to Silicon Valley Financial Services ("SVFS") under
and pursuant to that certain Factoring Agreement dated September 6, 1996 between
Debtor and SVFS (the "Factoring Agreement"), and thereafter Debtor shall not
borrow or incur any indebtedness under the Factoring Agreement without the prior
written consent of Secured Party;
5.2 Debtor shall use its best efforts to obtain, as soon as
practicable after the execution of this Agreement, the written consent of SVFS
to the granting of the liens and security interest granted pursuant to this
Agreement and, upon request of Secured Party, shall provide to Secured Party
written evidence of Debtor's efforts to obtain such consent;
5.3 Debtor shall, within five (5) Business Days after the date
hereof, provide written notice to United States National Bank of Oregon to the
granting of the liens and security interest granted pursuant to this Agreement
and shall provide to Secured Party written evidence of such notice;
5.4 Debtor will immediately notify Secured Party, in writing at
Secured Party's address set forth on the first page of this Agreement, of any
prospective change of business location or of any additions or changes to the
locations of Collateral shown on the first page of this Agreement or on
Exhibit C;
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5.5 Debtor will execute and deliver to Secured Party all such further
instruments and do all such further acts and things as Secured Party may request
or as may be necessary or desirable to effectuate the purposes of this
Agreement, or for filing financing or continuation statements or other
instruments or records necessary or proper for perfection of the security
interest of Secured Party. Secured Party may execute on behalf of any Debtor
and file or record any such documents in such manner as Secured Party may see
fit to effectuate the purposes hereof;
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5.6 Debtor shall keep complete and accurate Books and Records and
make all necessary entries therein to reflect the quantities, costs and location
of the Collateral. Debtor shall permit Secured Party or any other holder of
Notes, its officers, employees, agents and representatives at any time and from
time to time, to have full access to all of the Books and Records and any other
records pertaining to Debtor's business or the Collateral which Secured Party
may reasonably request, and shall cause all Persons to make all such Books and
Records in their possession reasonably available to Secured Party, its officers,
employees, agents and representatives and, if deemed necessary by Secured Party,
in its sole discretion, permit Secured Party, its officers, employees, agents
and representatives to remove the Books and Records, for a reasonable period of
time, from Debtor's place(s) of business or any other place where they may be
found for the purpose of examining, auditing and/or reproducing the same.
Subject to the terms and conditions of this Agreement, any of Debtor's Books and
Records so removed by Secured Party, its officers, employees, agents or
representatives, shall be returned to Debtor as soon as Secured Party shall have
completed its inspection, audit and/or reproduction thereof. Secured Party's
right to take possession of the Books and Records shall be enforceable at law by
an action of replevin or by any other appropriate remedy at law or in equity;
5.7 Without limiting the generality of any provision of this
Agreement, Debtor shall maintain the master device files for each Assay at the
chief executive office of Debtor, all in accordance with the rules and
regulations of the FDA; and, upon reasonable prior notice, shall permit Secured
Party and Secured Party's authorized representatives to inspect such master
device files;
5.8 If the manufacture or distribution of any Assay now or hereafter
requires a patent, trademark or third party license, Debtor shall immediately
notify Secured Party and thereafter Debtor shall take such actions and execute
such documents and instruments as Secured Party may require to perfect the lien
of Secured Party in such patent, trademark or license agreement;
5.9 Debtor shall promptly pay, when due, all taxes, assessments and
impositions upon the Collateral or for its use or operation or upon this
Agreement or the Obligations including, without limitation, any and all
documentary stamp and intangible taxes, and shall promptly furnish to Secured
Party the receipted bills therefor; provided, however, Debtor shall have the
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right to contest the payment of taxes, assessments and impositions, if (a) such
contest will not have a material adverse effect on the Collateral, (b) Debtor
prosecutes such contest in good faith and with due diligence, and (c) Debtor has
established reserves for such taxes, assessments or impositions in accordance
with generally accepted accounting principles, consistently applied. At its
option, Secured Party may (without obligation) discharge taxes, liens or
security interests, or other encumbrances at any time levied or placed on the
Collateral, and may pay for the maintenance and preservation of the Collateral.
Debtor agrees to reimburse Secured Party, on demand, together with interest at
the highest rate set forth in the Notes, for any payment made, or any expense
incurred by Secured Party, pursuant to the foregoing authorization;
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5.10 Debtor shall at any time and from time to time allow Secured
Party, by or through any of its officers, employees, agents or representatives,
to examine or inspect the Collateral, wherever located;
5.11 If the Collateral includes any property for which a Document,
Instrument, or certificate of title is issuable, Debtor shall, subject to any
reasonable limitations imposed by the holder of a Permitted Lien, within ten
(10) business days after Debtor obtains possession of such Collateral, submit to
Secured Party an appropriate Document, Instrument, or certificate of title for
such Collateral and shall, at Debtor's sole expense, execute and deliver all
forms and applications so as to cause a notation of the lien on and security
interest in and to such Collateral granted to Secured Party pursuant to this
Agreement to be made, noted and/or recorded on any such Document, Instrument, or
certificate of title. If any such Collateral is subject to a prior encumbrance,
the Document, Instrument, or certificate of title relating to such Collateral
shall nevertheless reflect a lien on and security interest in and to such
Collateral in favor of Secured Party and possession of such Document,
Instrument, or certificate of title shall be given to Secured Party after
release or satisfaction of such prior encumbrance. Debtor hereby authorizes
such prior encumbrance holder to deliver such Document, Instrument, or
certificate of title directly to Secured Party (and not to Debtor) and such
prior encumbrance holder may rely on a copy of this Agreement for the purpose of
relinquishing and delivering possession of such Document, Instrument, or
certificate of title directly to Secured Party;
5.12 If any of the Collateral or any of the Books and Records are, at
any time, to be located on premises leased by Debtor or on premises owned by
Debtor subject to a mortgage or other lien, Debtor shall obtain and deliver, or
cause to be obtained and delivered to Secured Party, prior to delivery of any
Collateral or Books and Records to such premises, an agreement, in form and
substance satisfactory to Secured Party and its counsel, pursuant to which such
landlord, mortgagee or other lien holder waives its rights, if any, to enforce
any claims against Debtor for monies due under a landlord's lien, mortgagee's
mortgage or other lien by levy or distraint, or similar proceeding against the
Collateral or the Books and Records, and assuring Secured Party's ability to
have access to the Collateral and the Books and Records in order to exercise
Secured Party's rights to take possession thereof and to remove the same from
such premises and/or to prepare for disposition and dispose of the same at or
about such premises;
5.13 If the Collateral or any part of the Collateral is purchased or
to be purchased by Debtor with the Proceeds of any loan, advance or extension of
credit made by Secured Party to or for the benefit of Debtor, Debtor shall join
with Secured Party in executing and/or delivering all notices or other
instruments, agreements and documents deemed necessary to enable Secured Party
to perfect a Purchase Money Security Interest in and to such Collateral;
5.14 If any of Debtor's Accounts or Contracts arise out of a Contract
with the United States of America or any department, agency or instrumentality
thereof, Debtor shall immediately notify Secured Party thereof in writing and
execute any and all instruments, agreements and documents, and take such other
and further steps as may be required by Secured
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Party, in order that the liens on and security interests in and to such
Collateral, and in the Proceeds thereof, shall be protected under the provisions
of the Federal Assignment of Claims Act;
5.15 If any of Debtor's Accounts or Contracts are or become evidenced
by a promissory note, trade acceptance or any other negotiable or non-negotiable
Instrument, Debtor shall promptly deliver any such Instruments to Secured Party
appropriately endorsed to Secured Party's order, and regardless of the form of
such endorsement, Debtor hereby waives presentment, demand, dishonor, notice of
dishonor, protest, notice of protest and all other notices with respect thereto;
5.16 Debtor shall immediately notify Secured Party, in writing, of
(a) any event causing a material loss or decline in the value of the Collateral
(whether or not covered by insurance) and of the amount of such loss or
depreciation, (b) the inability or unwillingness of any Account Debtor to pay or
preserve the Collateral, and of any defense, set-off or counterclaim asserted by
any Account Debtor, and (c) any Collateral having been returned by any Account
Debtor to Debtor for any reason. Debtor agrees not to return any Inventory to
the supplier thereof, or to sell or otherwise dispose of Goods returned or
repossessed from Buyers, lessees or consignees thereof, without Secured Party's
prior written consent;
5.17 Debtor shall, at its sole cost and expense, (a) preserve the
Collateral and Debtor's rights against any Person free and clear of all liens,
claims and encumbrances, except for Permitted Liens and liens, claims and
encumbrances created pursuant to this Agreement, (b) defend its right, title and
interest in and to the Collateral and (c) defend the Collateral against any and
all claims and demands of all Persons at any time or from time to time claiming
the same or any interest therein. Debtor will not grant to any Person, other
than Secured Party, any lien on or security interest in and to the Collateral,
nor allow any Person other than Secured Party to obtain a lien on or security
interest in and to or levy upon the Collateral;
5.18 Debtor shall, at its sole cost and expense, maintain the
Collateral in good condition and repair at all times and shall not waste, abuse
or destroy, or use in violation of any applicable laws, any of the Collateral;
5.19 Debtor shall, at all times, maintain with financially sound and
reputable insurers insurance with respect to the Collateral against loss or
damage and all other insurance of the kinds and in the amounts customarily
insured against or carried by corporations of established reputation engaged in
the same or similar businesses and similarly situated. Said policies of
insurance shall be satisfactory to Secured Party as to form, amount and insurer.
Debtor shall furnish such certificates, policies or endorsements to Secured
Party as Secured Party shall require as proof of such insurance, and, if Debtor
fails to do so, Secured Party is authorized, but not required, to obtain such
insurance at the expense of Debtor. All policies shall provide for at least
thirty (30) days prior written notice to Secured Party of any cancellation or
reduction of coverage and that Secured Party may act as attorney for Debtor in
obtaining, and at any time an
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Event of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Debtor shall cause Secured Party to be
named as a loss payee and an additional insured (but without any liability for
any premiums) under such insurance policies and Debtor shall obtain non-
contributory Buyer's loss payable endorsements to all insurance policies in form
and substance satisfactory to Secured Party. Such Buyer's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Secured Party as its interest may appear and further specify that Secured
Party shall be paid regardless of any act omission by Debtor or any of its
affiliates. At its option, Secured Party may apply any insurance proceeds
received by Secured Party at any time to the cost of repairs or replacement of
Collateral and/or to payment of the Obligations, whether or not then due, in any
order and in such manner as Secured Party may determine or hold such proceeds as
cash collateral for the Obligations;
5.20 Debtor shall furnish to Secured Party such data and information
as Secured Party may at any time or from time to time require including, without
limitation, (a) financial statements, (b) schedules, in form and detail
satisfactory to Secured Party, reflecting the names and addresses of Account
Debtors, lessees and consignees, together with the amounts due under all
outstanding Accounts, Chattel Paper, Instruments, leases and consignment
agreements. Secured Party may also require Debtor to submit to Secured Party
copies of all invoices pertaining to any and all such Accounts, Chattel Paper,
Instruments, leases and consignment agreements, with evidence of performance of
services or the shipment of Goods, the sale, consignment or leasing of which
have given rise to the same, and Debtor hereby agrees, at Secured Party's
request, to notify all such Account Debtors, lessees and consignees to pay to
Secured Party directly all amounts due Debtor;
5.21 Debtor will collect its Accounts and sell its Inventory only in
the ordinary course of its business; and
5.22 Debtor shall, upon request of Secured Party or, after the
occurrence of an Event of Default Secured Party itself may in the name of
Secured Party or Debtor and without notice to Debtor, at any time or from time
to time, notify Account Debtors and other obligors of debts, liabilities and
obligations to Debtor that are included in the Collateral of Secured Party's
interest in the Collateral pursuant to this Agreement and direct all payments to
be made to Secured Party with respect to such Collateral. After the occurrence
of an Event of Default, Secured Party shall have the right at any time and from
time to time, in Secured Party's name or in the name of a nominee of Secured
Party, to verify the validity, amount or any other matter relating to any
Account or Collateral, by mail, telephone, facsimile transmission or otherwise.
Secured Party may demand, xxx for, collect or receive any money or property
payable or receivable on any Accounts, Contracts, and General Intangibles, and
settle, release, compromise, adjust, xxx upon, foreclose, realize upon or
otherwise enforce any Accounts, Contracts, or rights in General Intangibles as
Secured Party may determine (whether or not Debtor is in default of this
Agreement).
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SECTION 6. SIGNATORY AUTHORIZATION/POWER-OF-ATTORNEY.
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Debtor hereby appoints any employee, officer, agent or representative
of Secured Party as Debtor's true and lawful attorney-in-fact with the following
powers:
6.1 To sign and endorse the name of Debtor upon any Instrument,
Chattel paper, financing statements and continuations thereof, and upon any
other Instruments or Documents required by Secured Party to perfect and continue
perfected liens on and security interests in and to the Collateral, and all
other notes, checks, drafts, money orders or other Instruments of payment or
regarding sale or other disposition of any Collateral which comes into
possession of Secured Party;
6.2 After the occurrence of an Event of Default, to sign and endorse
the name of Debtor upon any invoices and Documents including, without
limitation, freight or express bills, bills of lading or storage or warehouse
receipts relating to the Collateral;
6.3 After the occurrence of an Event of Default, to give written
notices and request verifications and execute assignments with respect to
Accounts, Contracts and rights in General Intangibles;
6.4 After the occurrence of an Event of Default, to give written
notice to such officers and officials of the United States Post Office to effect
such change or changes of address so that all mail may be delivered directly to
Secured Party (all mail not related to the Obligations or the Collateral shall
be returned to Debtor);
6.5 After the occurrence of an Event of Default, to receive all mail
addressed to Debtor, to open all such mail and to endorse the name of Debtor
upon any draft, check or other Instrument(s) which may be payable to Debtor in
payment of, arising from or relating to, the Collateral;
Granting unto said attorney full power to do any and all things necessary to be
done with respect to the foregoing and such other authorizations as are granted
to Secured Party herein as fully and effectively as Debtor might or could do,
and hereby ratifying all its said attorney shall lawfully do or cause to be done
by virtue hereof. This power-of-attorney, being coupled with an interest, shall
be deemed irrevocable until all of the Obligations to Secured Party are paid and
satisfied in full.
SECTION 7. SECURED PARTY'S RIGHTS UPON DEFAULT.
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Upon the occurrence of an Event of Default, the Obligations shall be
immediately due and payable without notice or demand and Secured Party shall
have, in addition to any and all rights and remedies that Secured Party may then
have under the instruments, agreements and
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documents evidencing the Obligations, the UCC or at law or in equity, at its
option, and without further action, the unconditional right to do any one or
more of the following:
7.1 Exercise any or all rights, remedies, benefits and privileges
available to Secured Party under this Agreement, the Purchase Agreement, the
Notes, and those available to a secured party under the UCC, as well as those
under any other applicable agreement with respect to any of the Collateral, and
to apply such monies and the net Proceeds of the Collateral to any of the
Obligations in such order as Secured Party, in its sole discretion, may elect;
7.2 Require Debtor to assemble all or part of the Collateral as
Secured Party may in its sole discretion request or demand and make the same
available to Secured Party in a place to be designated by Secured Party which is
reasonably convenient to Secured Party and Debtor;
7.3 Without limiting the generality of the foregoing, Secured Party
may immediately, without demand of performance and without other notice (except
as specifically required by this Agreement or the Collateral Documents) or
demand whatsoever to Debtor, all of which are hereby expressly waived, sell at
public or private sale or otherwise realize upon, in Portland, Oregon or
elsewhere, the whole or, from time to time, any part of the Collateral, or any
interest which Debtor may have therein, in one or more parcels at public sale or
sales, at any exchange, broker's board or elsewhere, at such price and on such
terms as Secured Party may deem best, for or on credit, or for future delivery
without assumption of any credit risk. Notice of any sale or other disposition
shall be given to Debtor at least ten (10) days before the time of any intended
public sale or of the time after which any intended private sale or other
disposition of the Collateral is to be made, which Debtor hereby agrees shall be
reasonable notice of such sale or other disposition. Debtor agrees to assemble,
or to cause to be assembled at its expense, the Collateral at such place or
places as Secured Party shall designate. At any such sale or other disposition,
Secured Party may, to the extent permissible under applicable laws, purchase the
whole or any part of the Collateral, free from any right or equity of redemption
on the part of Debtor, which right or equity is hereby waived and released.
7.4 The proceeds of any disposition of the Collateral or other action
by Secured Party shall be applied as follows:
(a) First, the costs and expenses incurred in connection
therewith or incidental thereto or to the care or safekeeping of any of the
Collateral or in any way relating to the rights of Secured Party hereunder,
including reasonable attorneys' fees and legal expenses;
(b) Second, to the satisfaction of the Obligations;
(c) Third, to the payment of any other amounts required by
applicable law (including, without limitation, Section 9-504(a)(3) of the UCC);
and
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(d) Fourth, to Debtor, to the extent of any surplus proceeds,
absent the agreement of the parties to the contrary.
7.5 Without limiting the generality of any of the rights and remedies
conferred upon Secured Party under this paragraph, Secured Party may, to the
full extent permitted by applicable laws:
(a) Enter upon the any of Debtor's premises and take immediate
possession of the Collateral, either personally or by means of a receiver
appointed by a court of competent jurisdiction, using all necessary force to do
so;
(b) At Secured Party's option, use, operate, manage and control
the Collateral in any lawful manner;
(c) Exercise rights of set-off in accordance with applicable law;
(d) Maintain, repair, renovate, alter, remove, abandon or
relinquish rights in and to the Collateral as Secured Party may determine in its
discretion;
(e) Cure any default in any reasonable manner and add the cost of
any such cure to the Obligations and accrue interest thereon at the highest rate
of interest then being charged to Debtor on any of the Obligations;
(f) Notwithstanding any outstanding commitment of any Buyer to
Debtor to make additional and further loans, advances or extensions of credit to
or for the benefit of Debtor, declare any such commitment null and void and of
no further force and effect whatsoever; and
(g) Retain all of Debtor's Books and Records relating to the
Collateral.
SECTION 8. MISCELLANEOUS.
-------------
8.1 This Agreement shall inure to the benefit of, and is and shall
continue to be binding upon, the parties hereto, the Buyers and their respective
heirs, personal representatives, successors and assigns, including, without
limitation, receivers, trustees and debtors-in-possession, but nothing contained
herein shall be construed to permit Debtor to assign this Agreement or any of
Debtor's rights or obligations hereunder without Secured Party's prior written
consent, which consent may be withheld in Secured Party's sole and absolute
discretion. It is expressly intended by the parties hereto that the Buyers be
deemed third party beneficiaries of the representations, warranties, covenants
and other agreements contained in this Agreement.
8.2 This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware. The parties to this Agreement agree to
the jurisdiction of the
12
federal courts located in Philadelphia, Pennsylvania for resolution of
controversies arising out of or relating to this Agreement, the Notes and any
related instruments, agreements or documents.
8.3 Debtor agrees to pay upon demand, all expenses (including
reasonable fees and expenses of attorneys, experts and agents) incurred in any
way in connection with the exercise, defense or assertion of any rights or
interests of Secured Party hereunder or the enforcement of any provisions
hereof, or the management, preservation, use, operation, maintenance,
collection, possession, disposition or enforcement of any of the Collateral (all
such expenses to be Obligations hereunder), plus interest thereon at the highest
rate specified in the documents and agreements evidencing the Obligations.
Debtor agrees to defend, indemnify and save Secured Party and its directors,
officers, employees, and agents harmless from and against any and all claims,
losses, liabilities, costs and expenses, arising out of or resulting from this
Security Agreement (including, without limitation, enforcement of this
Agreement) or Secured Party's interest in the Collateral, including claims for
the return or disgorgement of amounts paid to Secured Party, whether or not
ultimately successful, whether brought by Debtor or any other party, and in
connection therewith to indemnify it against all costs, reasonable counsel fees,
expenses and liabilities incurred in or about the defense of any such claims,
actions or proceedings brought or threatened thereon, whether brought by Debtor
or any other party, except claims, losses or liabilities resulting from Secured
Party's gross negligence or willful misconduct.
8.4 If any provision of this Agreement shall for any reason be held
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof, and this Agreement shall be construed as if
such invalid or unenforceable provision had never been contained herein.
8.5 The rights, powers and remedies of Secured Party hereunder are
cumulative, concurrent and not alternative, and shall not be exhausted by the
single assertion or exercise thereof, and the failure of Secured Party to
exercise any such right, power or remedy will not be deemed a waiver thereof nor
preclude any further or additional assertion or exercise of such right, power or
remedy. The waiver of any default, violation or Event of Default hereunder
shall not be a waiver of any subsequent default, violation or Event of Default
hereunder.
8.6 No modifications or amendments of this Agreement shall be binding
or enforceable unless in writing and signed by duly authorized representatives
of Debtor and Secured Party.
SECTION 9. AGENCY PROVISIONS.
-----------------
This Section sets forth the relative rights and duties of Secured Party and
the Buyers respecting the Obligations and does not (a) confer any enforceable
rights on Debtor against the Buyers or create on the part of any Buyer any
duties or obligations to the Debtor or (b) create any obligations of Debtor to
Secured Party or the Buyers.
13
9.1 Application of Payments. Secured Party shall apply all payments
-----------------------
of principal, interest, or other amounts hereunder made to Secured Party by or
on behalf of Debtor, to the Buyers on the basis of their Pro Rata Share. As
used herein, "Pro Rata Share" means, with respect to a Buyer, as of the date of
determination, a fraction the numerator of which is equal to the outstanding
principal balance evidenced by a Buyer's Note and the denominator of which is
equal to the outstanding principal balance of all Notes.
9.2 Modifications and Waivers. No modification or amendment hereof,
-------------------------
consent hereunder or waiver of Event of Default shall be effective except by
written consent of the Buyers holding a majority of the outstanding indebtedness
evidenced by the Notes (the "Required Buyers"). Each Buyer hereby agrees to
execute such further documents, and certificates and deliver such opinions as
the Secured Party and its counsel shall so request to implement any termination
or replacement contemplated hereby. Any amendment or waiver made pursuant to
this Section 9.2 shall apply to and bind all of the Buyers and any future holder
of any Notes. No modification or waiver of any provision of this Agreement or
any Note, nor any consent to any departure by the Debtor herefrom or therefrom,
shall in any case be effective unless the same be in writing, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on the Debtor in any
case shall entitle the Debtor to any other or further notice or demand in any
similar or other circumstances.
9.3 Obligations Several. The obligations of each Buyer hereunder are
-------------------
several, and each Buyer hereunder shall not be responsible for the obligations
of the other Buyers hereunder, nor, will the failure of one Buyer to perform any
of its obligations hereunder relieve the other Buyers from the performance of
their respective obligations hereunder.
9.4 Buyer's Representations. Each Buyer represents and warrants to
-----------------------
the other Buyers and to the Secured Party that (a) it has been furnished all
information it has requested for the purpose of evaluating its proposed
participation under this Agreement and the Purchase Agreement; (b) it has
decided to enter into this Agreement on the basis of its independent review and
credit analysis of Debtor, this Agreement, the Purchase Agreement and the
documentation in connection therewith and has not relied for such analysis on
any information or analysis provided by any other Buyer or the Secured Party;
and (c) it is participating herein for its own account as a commercial
transaction and not with a view to the distribution, disposition or
participation of its interest herein, and it has no present intention of making
any such distribution, disposition or participation.
9.5 Investigation. No Buyer shall have any obligation to the others
-------------
to investigate the condition of the Debtors or any of the Collateral or any
other matter concerning the Obligations.
14
9.6 Powers of Secured Party. Secured Party shall have and may
-----------------------
exercise those powers specifically delegated to Secured Party herein, together
with such powers as are reasonably incidental thereto.
9.7 General Duties of Secured Party, Immunity and Indemnity. In
-------------------------------------------------------
performing its duties as agent for the Buyer, Secured Party will take the same
care as it takes in connection with loans in which it alone is interested,
subject to the limitations on liabilities contained herein; provided that
Secured Party shall not be obligated to ascertain or inquire as to the
performance of any of the terms, covenants or conditions hereof by Debtor.
Neither Secured Party nor any of its directors, officers, agents or employees
shall be liable for any action or omission by any of them hereunder or in
connection herewith except for gross negligence or willful misconduct. Subject
to such exception, each of the Buyers hereby indemnifies Secured Party on the
basis of such Buyer's Pro Rata Share, against any such liability, claim, loss or
expense.
9.8 No Responsibility for Representations or Validity, Etc. Each
------------------------------------------------------
Buyer agrees that Secured Party shall not be responsible to any Buyer for any
representations, statements, or warranties of Debtor herein. Neither Secured
Party nor any of its directors, officers, employees or agents shall be
responsible for the validity, effectiveness, sufficiency, perfection or
enforceability of this Agreement and any collateral security therefor, or any
documents relating thereto or for the priority of any of Buyer's security
interests in any such collateral security.
9.9 Action on Instruction of Buyer; Right to Indemnity. Secured
--------------------------------------------------
Party shall in all cases be fully protected in acting or refraining from acting
hereunder in accordance with written instructions to it signed by Required
Buyers unless the consent of all Buyers are expressly required hereunder in
which case Secured Party shall be so protected when acting in accordance with
such instructions from all Buyers. Such instructions and any action taken or
failure to act pursuant thereto shall be binding on all Buyers, provided that
except as otherwise provided herein, Secured Party may act hereunder in its own
discretion without requesting such instructions. Secured Party shall be fully
justified in failing or refusing to take any action hereunder unless it shall
first be specifically indemnified to its satisfaction by the Buyers on the basis
of their respective Pro Rata Shares, against any and all liability and expense
which Secured Party may incur by reason of taking or continuing to take any such
action.
9.10 Employment of Agents. In connection with its activities
--------------------
hereunder, Secured Party may employ Agents and attorneys-in-fact and shall not
be answerable, except as to money or securities received by it or its authorized
Agents, for the default or misconduct of Agents or attorneys-in-fact selected
with reasonable care.
9.11 Reliance on Documents. Secured Party shall be entitled to rely
---------------------
upon (a) any paper or document believed by it to be genuine and correct and to
have been signed or sent
15
by the proper person or persons and (b) upon the opinion of its counsel with
respect to legal matters.
9.12 Expenses. Each Buyer shall reimburse Secured Party, from time
--------
to time at the request of Secured Party, for its Pro Rata Share of any expenses
incurred by Secured Party in connection with the performance of its functions
hereunder; provided, however, that if any Buyer shall reimburse Secured Party
-------- -------
for expenses for which Debtor subsequently reimburses Secured Party, Secured
Party shall remit to such Buyer the respective amount received from such Buyer
against such expenses.
9.13 Resignation of Secured Party. Secured Party may at any time
----------------------------
resign its position as agent for the Buyers by giving written notice to the
Buyers and Debtor. Such resignation shall take effect upon the appointment of a
successor Secured Party in accordance with this Paragraph. In the event Secured
Party shall resign, the Buyers shall appoint a Buyer as successor Secured Party.
If within thirty (30) days of the Secured Party's notice of resignation no
successor Secured Party shall have been appointed by Buyer and accepted such
appointment, then Secured Party, in its discretion may appoint any other Buyer
as a successor Secured Party.
9.14 Successor Agent. The successor agent appointed pursuant to
---------------
Paragraph 9.13 shall execute and deliver to its predecessor and Buyer an
instrument in writing accepting such appointment, and thereupon such successor,
without any further act, deed or conveyance, shall become fully vested with all
the properties, rights, duties and obligations of its predecessor Agent. The
predecessor Agent shall deliver to its successor Agent forthwith all collateral
security, documents and moneys held by it as agent for the Buyers, if any,
whereupon such predecessor Agent shall be discharged from its duties and
obligations as agent for the Buyers under this Agreement.
9.15 Collateral Security. Secured Party will hold, administer and
-------------------
manage any collateral security pledged from time to time hereunder either in its
own name or as agent for the Buyers, but each Buyer shall hold a direct,
undivided pro-rata beneficial interest therein, on the basis of its Pro Rata
Share, by reason of and as evidenced by this Agreement.
9.16 Enforcement by Secured Party. All rights of action under this
----------------------------
Agreement, the Purchase Agreement and under the Notes and all rights to the
collateral security, if any, hereunder may be enforced by Secured Party and any
suit or proceeding instituted by Secured Party in furtherance of such
enforcement shall be brought in its name as agent for the Buyers without the
necessity of joining as plaintiffs or defendants any Buyer, and the recovery of
any judgment shall be for the benefit of the Buyers subject to the expenses of
Secured Party.
16
IN WITNESS WHEREOF, the parties have hereunto caused this Security
Agreement to be duly executed as of the day and year first above written.
ATTEST: OXIS INTERNATIONAL, INC.
By: /s/ Xxx Xxxxxxx By: /s/ Xxx X. Xxxxxx
______________________________ _________________________________
Name: Xxx X. Xxxxxxx Name: Xxx X. Xxxxxx
Title: Chief Financial Officer Title: Chairman
[Corporate Seal]
CAPITAL VENTURES INTERNATIONAL,
for itself and as agent for the Buyers
By Bala International, Inc. as authorized
agent
By: /S/ Xxxxxx Xxxxx
___________________________________
Name: Xxxxxx Xxxxx
Title: Director
The undersigned are executing this Security Agreement only for the purpose
of acknowledging and agreeing to the provisions of Section 9 hereof.
CAPITAL VENTURES INTERNATIONAL
By Bala International, Inc. as authorized agent
By: /s/ Xxxxxx Xxxxx
_________________________________
Name: Xxxxxx Xxxxx
Title: Director
S.R. ONE, LIMITED
By: /s/ Xxxxxx X. Xxxxxx
_________________________________
Name: Xxxxxx X. Xxxxxx
Title: Vice President
17
EXHIBIT A
Permitted Liens
---------------
Liens on substantially all of the assets of Debtor (excluding patents and
trademarks) in favor of Silicon Valley Financial Services pursuant to that
certain Factoring Agreement dated September 6, 1996 between Debtor and Silicon
Valley Financial Services.
EXHIBIT B
Collateral
----------
All of Debtor's clinical diagnostics products described hereinbelow
and all Related Contract and Other Rights (including, without limitation, any
and all patents, trademarks, inventory, equipment and general intangibles), now
owned or hereafter acquired and necessary or used by Debtor to exploit such
clinical diagnostics products (each, an "Assay" and collectively, the "Assays"):
Innofluor Reagent and Calibrator Sets with the following FDA numbers:
Amikacin: Calibrator K903101; Reagent K903100
Carbamazepine: Calibrator K893506; Reagent K893507
Digitoxin: Calibrator K913186; Reagent K913187
Digoxin: Calibrator K895826; Reagent K895828
Gentamicin: Calibrator K872462; Reagent K955569
Phenobarbital: Calibrator K872461; Reagent K841707
Phenytoin: Calibrator K872142; Reagent K955562
Quinidine: Calibrator K892212; Reagent K955568
Theophylline: Calibrator K872463; Reagent K850629
Tobramycin: Calibrator K872349; Reagent K872562
Vancomycin: Calibrator K872644; Reagent K872579
Valproic Acid: Calibrator K911466; Reagent K911688
"Related Contract and Other Rights" includes the following: all
assets, rights and interests of Debtor that uniquely reflect or embody the
associated goodwill (i.e., all goodwill of Debtor and its business, products and
services appurtenant to, associated with or symbolized by the trademarks and the
use thereof), including, without limitation, the following:
A. The master device file and the FDA (or comparable foreign agency
or regulatory authority) registration for each Assay;
B. All patents, inventions, copyrights, trade secrets, confidential
information, formulae, methods or processes, compounds, recipes,
know-how, methods and operating systems, drawings, descriptions,
formulations, manufacturing and production and delivery
procedures, quality control procedures, product and service
specifications, catalogs, price lists, and advertising materials
relating to the manufacture, production, delivery, provision and
sale of goods or services under or in association with any of the
trademarks; and
EXHIBIT B (CONTINUED)
PAGE 2 OF 3
C. The following documents and things in the possession or under the
control of Debtor, or subject to its demand for possession or
control, related to the production, delivery, provision and sale
by Debtor, or any affiliate, franchisee, licensee or contractor,
of products or services sold by or under the authority of Debtor
in connection with the trademarks, whether prior to, on or
subsequent to the date hereof:
1. all lists, contracts, ancillary documents and other information
that identify, describe or provide information with respect to any customers,
dealers or distributors of Debtor, its affiliates or franchisees or licensees or
contractors, for products or services sold under or in connection with the
trademarks, including all lists and documents containing information regarding
each customer's dealer's or distributor's name and address, credit, payment,
discount, delivery and other sale terms, and history, pattern and total of
purchases by brand, product, style, size and quantity including, without
limitation, with respect to the distributors listed below;
2. all agreements (including franchise agreements), products and
service specification documents and operating, production and quality control
manuals relating to or used in the design, manufacture, production, delivery,
provision and sale of products or services under or in connection with the
trademarks; and
3. all documents and agreements relating to the identity and
locations of all sources of supply, all terms of purchase and delivery, for all
materials, components, raw materials and other supplies and services used in the
manufacture, production, provision, delivery and sale of products or services
under or in connection with the trademarks.
D. For purposes of this Financing Statement, reference to
"trademarks" refers to Debtor's only diagnostics-related
trademark, "INNOFLUOR", for which registration is pending with the
United States Patent and Trademark Office. Upon registration of
the aforementioned trademark, Debtor shall take all steps and
measures requested by the Secured Party to perfect Secured Party's
lien and security interest in such trademark.
EXHIBIT B (CONTINUED)
---------------------
PAGE 3 OF 3
Distributors
------------
Biostat Diagnostics Ltd. Biomedical Diagnostics S.A.
United Kingdom France
Biomedical Diagnostics N.V. Immucor Canada Inc.
Belgium Canada
Immuno Diagnostics Ingelheim Diagnostica y Technolojica
Australia S.A. Spain
Quatro Biosystems Ltd. Xxxx Xxxxxxx BioChemica GmbH
United Kingdom Germany
TEMA ricerca s.r.l.
Italy
EXHIBIT C
Locations of Collateral
-----------------------
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxx 00000-0000
