SECURITY AGREEMENT
EXHIBIT
10.2
SECURITY
AGREEMENT, dated as of April 28, 2006 (this “Agreement”),
among
DOBI Medical International, Inc., a Delaware corporation
(the
“Company”)
and
all of the Subsidiaries of the Company
(such
subsidiaries,
the
“Guarantors”)
(the
Company and Guarantors are collectively
referred to as the “Debtors”)
and
the holder or holders of the Company’s Convertible Debentures due August 28,
2007 in the original aggregate principal amount of up to $6,000,000 (the
“Debentures”),
signatory hereto, their endorsees, transferees and assigns (collectively
referred to as, 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 the Secured Parties, pari
passu
with
each other Secured Party, a perfected 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 Debtor’s
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 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 Intellectual Property, 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
(ix) All
files, records, books of account, business papers, and computer programs;
and
2
(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, 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.
3
(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.
(f)
“Permitted
Lien”
shall
have the meaning set forth in the Debentures.
(g)
“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).
4
(h)
“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 Perfected First Priority Security Interest.
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 and perfected 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 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.
5
(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
for Permitted Liens (as defined in the Debentures) and 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. 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 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.
6
(f) This
Agreement creates in favor of the Secured Parties a valid, security interest
in
the Collateral, subject only to Permitted Liens (as defined in the Debentures)
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),
when requested by the Secured Parties, 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 when requested by the Secured Parties, 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. 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
and other Permitted Liens (as defined in the Debenture).
7
(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 liens and Security Interest provided
for
hereunder as valid and perfected first priority liens and security interests
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 (ordinary wear and tear excepted)
and shall not operate 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.
8
(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 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 during normal business hours, 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.
9
(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.
(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.
10
(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.
(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 commercially reasonable 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
reasonable 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.
11
(ii) Each
Debtor shall cause each subsidiary
of such
Debtor 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 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.
12
(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.
(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.
13
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
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
(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.
14
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 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 (which such notice shall be given by the Agent
only at the written direction of the Majority in Interest), 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 to exercise,
at
the written direction of the Majority in Interest, 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 if it were the sole and absolute owner thereof, including,
without
limitation, to vote and/or to exchange, at the written direction of the Majority
in Interest, 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.
15
(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 (at the written direction of the Majority in Interest) and Secured
Parties
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, at the
written direction of the Majority in Interest, 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, except as otherwise required by law.
(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, to the extent it is in such Debtor’s power, 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.
16
9. Applications
of Proceeds.
The
proceeds of any such sale, lease or other disposition of the Collateral
hereunder shall be applied first, to the actual 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 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, upon presentation
of
documentary evidence thereof, 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 not paid within twenty (20) days of written request
by the Secured Parties shall be added to the principal amount of the Debentures
and shall bear interest at the Default Rate.
17
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 monitor or supervise the performance of, or 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.
Except
as otherwise required by law, 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 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. The
Secured Parties shall promptly notify the Debtors of the sale of any Collateral
and the amount received therefor.
18
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.
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.
19
(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 perfect the Security Interests
granted pursuant to the terms 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 CSC Trust Company of Delaware (in its individual
capacity, together with its successors and assigns, “CSCTC”) to act as their
agent (in such capacity, and together with its successors and assigns,
“Agent”)
for
purposes of exercising only those rights, duties and obligations expressly
required to be performed by it hereunder. Such appointment shall continue
until
revoked in writing by a Majority
in Interest, or until such time as CSCTC resigns as Agent hereunder, at which
time a Majority in Interest
shall
appoint a new Agent.
The
Agent
(as such and in its individual capacity) shall have the rights, responsibilities
and immunities set forth in Annex
B
hereto.
The Secured Parties shall be those persons listed in the Debenture Register
(as
defined in the Debentures) maintained by the Company. Promptly upon the Agent’s
request therefor, the Company shall provide to the Agent, at the Company’s
expense, a certified copy of the Debenture Register, and the Agent shall
be
fully protected in relying on such Debenture Register for purposes of
identifying the Secured Parties and the Majority in Interest
hereunder.
20
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.
21
(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.
(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.
22
(j)
All Debtors shall jointly and severally be liable for the obligations of
each
Debtor to the Secured Parties, the Agent, CSCTC, and their respective partners,
members, shareholders, officers, directors, employees and agents
hereunder.
(k) Each
Debtor shall indemnify, reimburse and hold harmless the Secured Parties,
CSCTC,
the Agent, 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. The
indemnities contained in this Section 19(k) shall survive the termination
or
expiration of this Agreement or the Transaction Documents and shall survive
the
removal or resignation of the Agent.
(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]
23
IN
WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above
written.
|
DOBI
MEDICAL INTERNATIONAL, INC.
|
|
By:
/s/
Xxxxxxx X. Xxxxxxxxx
Name:
Xxxxxxx X. Xxxxxxxxx
Title:
Executive Vice President and
Chief
Financial Officer
|
|
DOBI
MEDICAL SYSTEMS, INC.
|
|
By:
/s/
Xxxxxxx X. Xxxxxxxxx
Name:
Xxxxxxx X. Xxxxxxxxx
Title:
Executive Vice President and
Chief
Financial Officer
|
The
undersigned hereby acknowledges its acceptance of appointment as Agent in
accordance with the terms hereof:
CSC
TRUST COMPANY OF DELAWARE
By:
Xxxxxx X.
Xxxxx
Name:
Xxxxxx X. Xxxxx
Title:
Sr. Vice President
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
24
[SIGNATURE
PAGE OF HOLDERS TO DBMI 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]
25
ANNEX
A
to
SECURITY
AGREEMENT
FORM
OF ADDITIONAL DEBTOR JOINDER
Security
Agreement dated as of April 28, 2006 made by
DOBI
Medical International, Inc.
and
its
subsidiaries party thereto from time to time, as Debtors
to
and in
favor of
the
Secured Parties identified therein (the “Security
Agreement”)
Reference
is made to the Security Agreement as defined above; capitalized terms used
herein and not otherwise defined herein shall have the meanings given to
such
terms in, or by reference in, the Security Agreement.
The
undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
to the Secured Parties referred to above, the undersigned shall (a) be an
Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the
same
extent as if the undersigned was an original signatory thereto and (c) be
deemed
to have made the representations and warranties set forth therein as of the
date
of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE
SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH
IN
THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY
TRIAL
PROVISIONS SET FORTH THEREIN.
Attached
hereto are supplemental and/or replacement Schedules to the Security Agreement,
as applicable.
An
executed copy of this Joinder shall be delivered to the Secured Parties,
and the
Secured Parties may rely on the matters set forth herein on or after the
date
hereof. This Joinder shall not be modified, amended or terminated without
the
prior written consent of the Secured Parties.
IN
WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
the
name and on behalf of the undersigned.
| [Name of Additional Debtor] | ||
| |
|
|
| By: | ||
| Name: | ||
| Title: | ||
| Address: | ||
| Dated: | ||
ANNEX
B
to
SECURITY
AGREEMENT
THE
AGENT
1. Appointment. The
Secured Parties (all capitalized terms used herein and not otherwise defined
shall have the respective meanings provided in the Security Agreement to
which
this Annex B is attached (including this Annex B, the "Agreement")),
by
their acceptance of the benefits of the Agreement, hereby designate CSCTC
as the
Agent to act as specified in the Agreement. Each Secured Party shall be deemed
irrevocably to authorize the Agent to take only such action on its behalf
under
the provisions of the Agreement and to exercise only such powers and to perform
only such duties hereunder as are specifically delegated to or required to
be
performed by the Agent by the terms hereof, or as specifically directed in
writing by a Majority in Interest, and such other powers as are reasonably
incidental thereto. The Agent may perform any of its rights, duties or
obligations hereunder by or through its agents or employees,
and
other than in the case of gross negligence, fraud or willful misconduct,
the
Agent shall not be personally liable for the conduct or misconduct of such
agents or employees if such agents or employees shall have been selected
by the
Agent with reasonable care.
2. Nature
of Duties.
The
Agent shall have no duties, obligations or responsibilities except those
expressly set forth in the Agreement. Neither the Agent nor any of its partners,
members, shareholders, officers, directors, employees or agents shall be
liable
for any action taken or omitted by it as such under the Agreement or in
connection herewith, nor shall any such person be responsible for the
consequence of any oversight or error of judgment or answerable for any loss,
unless caused solely by its or their gross negligence or willful misconduct
as
determined by a final judgment (not subject to further appeal) of a court
of
competent jurisdiction. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have, by reason of the Agreement
or any other Transaction Document (as defined in the Debentures), a fiduciary
relationship in respect of any Debtor or any Secured Party; and nothing in
the
Agreement or any other Transaction Document, expressed or implied, is intended
to or shall be so construed as to impose upon the Agent any obligations in
respect of the Agreement or any other Transaction Document except as expressly
set forth herein, and
no
implied duties, obligations, or liabilities shall be read into this Agreement
or
any other document against or on the part of the Agent and no right, power
or
authority of the Agent shall be construed as a duty.
3. Lack
of Reliance on the Agent.
Independently and without reliance upon the Agent, each Secured Party, to
the
extent it deems appropriate, has made and shall continue to make (i) its
own
independent investigation of the financial condition and affairs of the Company
and its subsidiaries in connection with such Secured Party’s investment in the
Debtors, the creation and continuance of the Obligations, the transactions
contemplated by the Transaction Documents, and the taking or not taking of
any
action in connection therewith, and (ii) its own appraisal of the
creditworthiness of the Company and its subsidiaries, and of the value of
the
Collateral from time to time, and the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any
Secured Party with any credit, market or other information with respect thereto,
whether coming into its possession before any Obligations are incurred or
at any
time or times thereafter. The Agent shall not be responsible to the Debtors
or
any Secured Party for any recitals, statements, information, representations
or
warranties herein or in any document, certificate or other writing delivered
in
connection herewith, or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of the
Agreement or any other Transaction Document, or for the financial condition
of
the Debtors or the value of any of the Collateral, or be required to make
any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of the Agreement or any other Transaction Document,
or
the financial condition of the Debtors, or the value of any of the Collateral,
or the existence or possible existence of any default or Event of Default
under
the Agreement, the Debentures or any of the other Transaction
Documents.
4. Certain
Rights of the Agent.
The
Agent shall have the right (but not the obligation) to take any action with
respect to the Collateral, on behalf of all of the Secured Parties. The Agent
shall request instructions from the Secured Parties with respect to any act
or
action (including failure to act) in connection with the Agreement or any
other
Transaction Document, and shall be entitled to act or refrain from acting
in
accordance with the instructions of the Majority in Interest. If such
instructions are not promptly provided despite the Agent’s request therefor, the
Agent shall be entitled to act or refrain from acting, and the Agent shall
not
incur liability to any person or entity by reason of so acting or so refraining,
and shall be entitled to indemnification from the Secured Parties in respect
of
refraining from acting or actions taken or to be taken by or on behalf of
the
Agent. The Majority in Interest shall not direct the Agent to take action
that
would violate the provisions of this Agreement or any other Transaction
Document. Without
limiting the foregoing, (a) no Secured Party shall have any right of action
whatsoever against the Agent as a result of the Agent acting or refraining
from
acting hereunder in accordance with the written instructions of the Majority
in
Interest, the terms of the Agreement or any other Transaction Document, and
the
Debtors shall have no right to question or challenge the authority of, or
the
instructions given to, the Agent pursuant to the foregoing and (b) the Agent
shall not be required to take any action which the Agent believes (i) could
reasonably be expected to expose it to personal liability or (ii) is contrary
to
this Agreement, the Transaction Documents or applicable law. Notwithstanding
anything herein to the contrary, with respect to any act or action (including
failure to act) to be taken by the Agent in connection with the Agreement,
any
counsel to be used by the Agent in connection therewith shall be reasonably
acceptable to a Majority in Interest.
5. Reliance.
The
Agent shall be entitled to rely, and shall be fully protected in relying,
upon
any writing, resolution, notice, statement, certificate, telex, teletype
or
telecopier message, cablegram, radiogram, order or other document or telephone
message believed by it to be genuine and to have been signed, sent or made
by
the proper person or entity, and, with respect to all legal matters pertaining
to the Agreement and the other Transaction Documents, upon advice of counsel
selected by it, and with respect to all other matters pertaining to this
Agreement and the other Transaction Documents, upon advice of other experts
selected by it. Anything to the contrary notwithstanding, the Agent shall
have
no obligation whatsoever to any Secured Party to assure that the Collateral
exists or is owned by the Debtors or is cared for, protected or insured or
that
the liens granted pursuant to the Agreement have been properly or sufficiently
or lawfully created, perfected, or enforced or are entitled to any particular
priority.
6. Indemnification.
To the
extent that the Agent, CSCTC, and their respective partners, members,
shareholders, officers, directors, employees and agents, are not reimbursed
and
indemnified by the Debtors, the Secured Parties will jointly and severally
reimburse and indemnify the Agent, CSCTC, and their respective partners,
members, shareholders, officers, directors, employees and agents, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against
the
Agent in performing its duties hereunder or under the Agreement or any other
Transaction Document, or in any way relating to or arising out of the Agreement
or any other Transaction Document except for those determined by a final
judgment (not subject to further appeal) of a court of competent jurisdiction
to
have resulted solely from the Agent's own gross negligence or willful
misconduct. Prior to taking any action hereunder as Agent, the Agent may
require
each Secured Party to deposit with it sufficient sums as it determines in
good
faith is necessary to protect the Agent for costs and expenses associated
with
taking such action. The
indemnities contained in this Section 6 shall survive the termination or
expiration of this Agreement or the Transaction Documents and shall survive
the
removal or resignation of the Agent.
7. Resignation
by the Agent.
(a) The
Agent may resign from the performance of all its functions and duties under
the
Agreement at any time by giving 30 days' prior written notice to the Debtors
and
the Secured Parties. Such resignation shall take effect upon the appointment
of
a successor Agent pursuant to clauses (b) and (c) below.
(b) Upon
any such notice of resignation, the Secured Parties, acting by a Majority
in Interest,
shall
appoint a successor Agent hereunder, and notice of such appointment shall
be
promptly provided to the Agent and the successor Agent.
(c) If
a successor Agent shall not have been so appointed within said 30-day period,
the Agent shall then appoint a successor Agent who shall serve as Agent until
such time, if any, as the Secured Parties appoint a successor Agent as provided
above. If a successor Agent has not been appointed within such 30-day period,
the Agent may petition any court of competent jurisdiction or may interplead
the
Debtors and the Secured Parties in a proceeding for the appointment of a
successor Agent, and all fees, including, but not limited to, extraordinary
fees
associated with the filing of such a petition or interpleader and expenses
associated therewith, shall be payable by the Debtors on
demand.
8.
Rights
with respect to Collateral.
Each
Secured Party agrees with all other Secured Parties and the Agent (i) that
it
shall not, and shall not attempt to, exercise any rights with respect to
its
security interest in the Collateral, whether pursuant to any other agreement
or
otherwise (other than pursuant to this Agreement), or take or institute any
action against the Agent or any of the other Secured Parties in respect of
the
Collateral or its rights hereunder (other than any such action arising from
the
breach of this Agreement) and (ii) that such Secured Party has no other rights
with respect to the Collateral other than as set forth in this Agreement
and the
other Transaction Documents. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed
to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent and the retiring Agent shall be discharged from its duties
and
obligations under the Agreement, all without the need for further action
by any
person. After any retiring Agent’s resignation or removal hereunder as
Agent, the provisions of the Agreement including this Annex B shall inure
to its
benefit as to any actions taken or omitted to be taken by it while it was
Agent.
9.
Compensation;
Financial Liability.
CSCTC
shall receive from the Company as compensation for its services hereunder
such
fees as are set forth on Schedule A hereto and CSCTC shall be entitled to
be
reimbursed for its other reasonable expenses hereunder.
No
provision of this Agreement or any Transaction Document shall require the
Agent
to expend or risk its own funds or otherwise incur any personal financial
liability in the performance of any of its rights or powers hereunder, nor
shall
the Agent be personally liable for indebtedness evidenced by or arising under
any of the Transaction Documents.
10.
Merger
or Consolidation of the Agent.
Any
entity into which the Agent may be merged or converted or with which it may
be
consolidated, or any entity resulting from any merger, conversion or
consolidation to which such Agent shall be a party, or any entity to which
substantially all the corporate trust business of the Agent may be transferred,
shall, subject to the preceding sentence, be the Agent under this Agreement
without further act.
