SECURITY AGREEMENT
THIS
SECURITY AGREEMENT dated
as
of August 4, 2006 (“Security
Agreement”),
is
made
by
Integrated
Surgical Systems, Inc., a Delaware corporation
(“Debtor”),
in
favor
of Novatrix
Biomedical, Inc., a
California corporation (“Secured
Party”).
RECITALS
A. Secured
Party has made and has agreed to make certain advances of money and to extend
certain financial accommodation to Debtor as evidenced by that certain Secured
Promissory Note (the “Note”)
dated
August 4, 2006 executed by Debtor in favor of Secured Party (collectively,
the
“Loans”).
B. Secured
Party is willing to make the Loans to Debtor, but only upon the condition,
among
others, that Debtor shall have executed and delivered to Secured Party this
Security Agreement.
AGREEMENT
NOW,
THEREFORE,
in
order
to induce Secured Party to make the Loans and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, and
intending to be legally bound, Debtor hereby represents, warrants, covenants
and
agrees as follows:
1. DEFINED
TERMS. When
used
in this Security Agreement the following terms shall have the following meanings
(such meanings being equally applicable to both the singular and plural forms
of
the terms defined):
“Collateral”
shall
have the meaning assigned to such term in Section 2 of this Security
Agreement.
“Contracts”
means
all
contracts, undertakings, franchise agreements or other agreements in or under
which Debtor now holds or hereafter acquires any right, title or interest,
including, without limitation, with respect to an Account, any agreement
relating to the terms of payment or the terms of performance
thereof.
“Copyright
License” means
any
written agreement, in which Debtor now holds or hereafter acquires any interest,
granting any right in or to any Copyright or Copyright registration (whether
Debtor is the licensee or the licensor thereunder) including, without
limitation, licenses pursuant to which Debtor has obtained the exclusive right
to use a copyright owned by a third party.
“Copyrights”
means
all
of the following in which Debtor now holds or hereafter acquires any interest:
(a) all copyrights, whether registered or unregistered, held pursuant to the
laws of the United States, any State thereof or any other country; (b)
registrations, applications, recordings and proceedings in the United States
Copyright Office or in any similar office or agency of the United States, any
State thereof or any other country; (c) any continuations, renewals or
extensions thereof; (d) any registrations to be issued in any pending
applications; (e) prior versions of works covered by copyright and all works
based upon, derived from or incorporating such works; (f) income, royalties,
damages, claims and payments now and hereafter due and/or payable with respect
to copyrights, including, without limitation, damages, claims and recoveries
for
past, present or future infringement; (g) rights to xxx for past, present and
future infringements of any copyright; and (h) any other rights corresponding
to
any of the foregoing rights throughout the world.
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“Event
of Default”
means
(i) any failure by Debtor forthwith to pay or perform any of the Secured
Obligations and (ii) any “Event of Default” as defined in the Note.
“License”
means
any
Copyright License, Patent License, Trademark License or other license of rights
or interests now held or hereafter acquired by Debtor.
“Lien”
means
any
mortgage, lien, deed of trust, charge, pledge, security interest or other
encumbrance.
“Patent
License”
means
any written agreement, in which Debtor now holds or hereafter acquires any
interest, granting any right with respect to any invention on which a Patent
is
in existence (whether Debtor is the licensee or the licensor
thereunder).
“Patents”
means
all
of the following in which Debtor now holds or hereafter acquires any interest:
(a) all letters patent of the United States or any other country, all
registrations and recordings thereof and all applications for letters patent
of
the United States or any other country, including, without limitation,
registrations, recordings and applications 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; (b) all reissues, divisions, continuations,
renewals, continuations-in-part or extensions thereof; (c) all xxxxx patents,
divisionals and patents of addition; (d) all patents to issue in any such
applications; (e) all Technical Disclosures and Trade Secrets; (f) all
information and data, including, but not limited to, preclinical and clinical
study data, engineering drawings and specifications, models and renderings,
computer and machine tool programming code, that Debtor considers proprietary
in
nature; (g) income, royalties, damages, claims and payments now and hereafter
due and/or payable with respect to patents, including, without limitation,
damages, claims and recoveries for past, present or future infringement; and
(h)
rights to xxx for past, present and future infringements of any
patent.
“Secured
Obligations” means
(a)
the obligation of Debtor to repay Secured Party all of the unpaid principal
amount of, and accrued interest on (including any interest that accrues after
the commencement of bankruptcy), the Loans, (b) the obligation of Debtor to
pay
any fees, costs and expenses of the Secured Party under the Note or under
Section 6(b) hereof and (c) all other indebtedness, liabilities and obligations
of Debtor to Secured Party, whether now existing or hereafter incurred, and
whether created under, arising out of or in connection with any written
agreement or otherwise.
“Technical
Disclosure”
means
all Technical Disclosures (Schedule A).
“Trademark
License” means
any
written agreement, in which Debtor now holds or hereafter acquires any interest,
granting any right in and to any Trademark or Trademark registration (whether
Debtor is the licensee or the licensor thereunder).
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“Trademarks”
means
any
of the following in which Debtor now holds or hereafter acquires any interest:
(a) any trademarks, tradenames, corporate names, company names, business names,
trade styles, service marks, logos, other source or business identifiers, prints
and labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof and any applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any Sate thereof or any other
country (collectively, the “Marks”); (b) any reissues, extensions or renewals
thereof; (c) the goodwill of the business symbolized by or associated with
the
Marks; (d) income, royalties, damages, claims and payments now and hereafter
due
and/or payable with respect to the Marks, including, without limitation,
damages, claims and recoveries for past, present or future infringement; and
(e)
rights to xxx for past, present and future infringements of the
Marks.
“Trade
Secret” means
any
and all information pertaining to the filing of any patents, technical data,
customer lists, and technical know-how necessary to design manufacture, market
and sell any and all products developed by Debtor.
“UCC”
means
the
Uniform Commercial Code as the same may, from time to time, be in effect in
the
State of California; provided, however, in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection or
priority of Secured Party’s security interest in any Collateral is governed by
the Uniform Commercial Code as in effect in a jurisdiction other than the State
of California, the term “UCC” shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such attachment, perfection of priority and for purposes of definitions
related to such provisions.
2. GRANT
OF SECURITY INTEREST. As
collateral security for the prompt and complete payment and performance when
due
(whether at stated maturity, by acceleration or otherwise) of all the Secured
Obligations and in order to induce Secured Party to cause the Loans to be made,
Debtor hereby assigns, conveys, mortgages, pledges, hypothecates and transfers
to Secured Party, and hereby grants to Secured Party, a security interest in
all
of Debtor’s right, title and interest in, to and under the following (all of
which being collectively referred to herein as the “Collateral”):
(a) All
Accounts of Debtor;
(b) All
Chattel Paper of Debtor;
(c) All
Contracts and License Agreements of Debtor;
(d) All
Deposit Accounts of Debtor;
(e) All
Documents of Debtor;
(f) All
Equipment of Debtor;
(g) All
Financial Assets of Debtor;
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(h) All
Fixtures of Debtor;
(i) All
General Intangibles of Debtor, including, without limitation, all Copyrights,
Patents, Trademarks, Licenses, designs, drawings, technical information,
marketing plans, customer lists, trade secrets, proprietary or confidential
information, inventions (whether or not patentable), procedures, know-how,
models and data;
(j) All
Instruments of Debtor;
(k) All
Inventory of Debtor;
(l) All
Investment Property of Debtor;
(m) All
property of Debtor held by Secured Party, or any other party for whom Secured
Party is acting as agent hereunder, including, without limitation, all property
of every-description now or hereafter in the possession or custody of or in
transit to Secured Party or such other party for any purpose, including, without
limitation, safekeeping, collection or pledge, for the account of Debtor, or
as
to which Debtor may have any right or power;
(n) All
other
goods and personal property of Debtor, wherever located, whether tangible or
intangible, and whether now owned or hereafter acquired, existing, leased or
consigned by or to Debtor;
(o) All
Insurance Proceeds to Debtor; and
(p) To
the
extent not otherwise included, all Proceeds of each of the foregoing and all
accessions to, substitutions and replacements for and rents, profits and
products of each of the foregoing.
3. RIGHTS
OF SECURED PARTY; COLLECTION OF ACCOUNTS.
(a) Notwithstanding
anything contained in this Security Agreement to the contrary, Debtor expressly
agrees that it shall remain liable under each of its Contracts and each of
its
Licenses to observe and perform all the conditions and obligations to be
observed and performed by it thereunder and that it shall perform all of its
duties and obligations thereunder, all in accordance with and pursuant to the
terms and provisions of each such Contract or License. Secured Party shall
not
have any obligation or liability under any Contract or License by reason of
or
arising out of this Security Agreement or the granting to Secured Party of
a
lien therein or the receipt by Secured Party of any payment relating to any
Contract or License pursuant hereto, nor shall Secured Party be required or
obligated in any manner to perform or fulfill any of the obligations of Debtor
under or pursuant to any Contract or License, or to make any payment, or to
make
any inquiry as to the nature or the sufficiency of any payment received by
it or
the sufficiency of any performance by any party under any Contract or License,
or to present or file any claim, or to take any action to collect or enforce
any
performance or the payment of any amounts which may have been assigned to it
or
to which it may be entitled at any time or times.
(b) Secured
Party authorizes Debtor to collect its Accounts, provided that such collection
is performed in a prudent and businesslike manner, and Secured Party may, upon
the occurrence and during the continuation of any Event of Default and without
notice, limit or terminate said authority at any time. Upon the occurrence
and
during the continuance of any Event of Default, at the request of Secured Party,
Debtor shall deliver all original and other documents evidencing and relating
to
the performance of labor or service which created such Accounts, including,
without limitation, all original orders, invoices and shipping
receipts.
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(c) Secured
Party may at any time, upon the occurrence and during the continuance of any
Event of Default, without notifying Debtor of its intention to do so, notify
Account Debtors of Debtor, parties to the Contracts of Debtor, obligors in
respect of Instruments of Debtor and obligors in respect of Chattel Paper of
Debtor that the Accounts and the right, title and interest of Debtor in and
under such Contracts, Instruments and Chattel Paper have been assigned to
Secured Party and that payments shall be made directly to Secured Party. Upon
the request of Secured Party, Debtor shall so notify such Account Debtors,
parties to such Contracts, obligors in respect of such Instruments and obligors
in respect of such Chattel Paper. Upon the occurrence and during the continuance
of any Event of Default, Secured Party may, in its name or in the name of
others, communicate with such Account Debtors, parties to such Contracts,
obligors in respect of such Instruments and obligors in respect of such Chattel
Paper to verify with such parties, to Secured Party’s satisfaction, the
existence, amount and terms of any such Accounts, Contracts, Instruments or
Chattel Paper.
4. REPRESENTATIONS
AND WARRANTIES. Debtor
hereby represents and warrants to Secured Party that:
(a) Except
for the security interest granted to Secured Party under this Security
Agreement, Debtor is the sole legal and equitable owner of each item of the
Collateral in which it purports to grant a security interest hereunder, having
good and marketable title thereto, free and clear of any and all
Liens.
(b) No
effective security agreement, financing statement, equivalent security or lien
instrument or continuation statement covering all or any part of the Collateral
exists, except such as may have been filed by Debtor in favor of Secured Party
pursuant to this Security Agreement.
(c) This
Security Agreement creates a legal and valid security interest on and in all
of
the Collateral in which Debtor now has rights and all filings and other actions
necessary or desirable to perfect and protect such security interest have been
duly taken. Accordingly, Secured Party has a fully perfected first priority
security interest in all of the Collateral in which Debtor now has rights.
This
Security Agreement will create a legal and valid and fully perfected first
priority security interest in the Collateral in which Debtor later acquires
rights, when Debtor acquires those rights and additional filings to be made
with
the United States Copyright Office and/or Patent and Trademark Office as are
necessary to perfect Secured Party’s security interest in subsequent ownership
rights and interests of Debtor in Copyrights, Patents, Trademarks and
Licenses.
(d) Debtor’s
chief executive office, principal place of business and the place where Debtor
maintains its records concerning the Collateral are presently located at the
address set forth on the signature page hereof. The Collateral is presently
located at the address of the Debtor.
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(e) All
Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks and
Trademark Licenses now owned, held or in which Debtor otherwise has any interest
are listed on Schedule A attached hereto.
5. COVENANTS.
Debtor
covenants and agrees with Secured Party that from and after the date of this
Security Agreement and until the Secured Obligations have been performed and
paid in full:
5.1 Disposition
of Collateral. Debtor
shall not sell, lease, transfer, license or otherwise dispose of any of the
Collateral, or attempt or contract to do so.
5.2 Relocation
of Business or Collateral. Debtor
shall not relocate its chief executive office, principal place of business
or
its records, or allow the relocation of any Collateral (except as allowed
pursuant to Section 5.1 immediately above) from such address(es) provided to
Secured Party pursuant to Section 4(d) above without twenty (20) days prior
written notice to Secured Party.
5.3 Limitation
on Liens on Collateral. Debtor
shall not, directly or indirectly, create, permit or suffer to exist, and shall
defend the Collateral against and take such other action as is necessary to
remove, any Lien on the Collateral, except the Lien granted to Secured Party
under this Security Agreement.
5.4 Insurance.
Maintain
insurance policies insuring the Collateral against loss or damage from such
risks and in such amounts and forms and with such companies as are customarily
maintained by businesses similar to Debtor.
5.5 Taxes,
Assessments, Etc. Debtor
shall pay promptly when due all property and other taxes, assessments and
government charges or levies imposed upon, and all claims (including claims
for
labor, materials and supplies) against, the Equipment, Fixtures or Inventory,
except to the extent the validity thereof is being contested in good faith
and
adequate reserves are being maintained in connection therewith.
5.6 Maintenance
of Records. Debtor
shall keep and maintain at its own cost and expense satisfactory and complete
records of the Collateral.
5.7 Registration
and maintenance of Intellectual Property Rights. After
consultation with Secured Party, Debtor shall promptly register or cause to
be
registered (to the extent not already registered) the most recent version of
any
Copyright and any Copyright License and any Patent, Patent License, Trademark
or
Trademark License, which, individually or in the aggregate, is material to
the
conduct of Debtor’s business, with the United States Copyright Office or Patent
and Trademark Office or appropriate overseas patent, copyright, or trademark
office, as applicable, including, without limitation, in all such cases, the
filing of applications for renewal, affidavits of use, affidavits of
noncontestability and opposition and interference and cancellation proceedings.
Debtor shall register or cause to be registered with the United States Copyright
Office or Patent and Trademark Office, as applicable, those additional rights
and interests developed or acquired by Debtor after the date of this Security
Agreement, including, without limitation, any additions to the rights and
interests of Debtor listed on Schedule A hereto
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5.8 Notification
Regarding Changes in Intellectual Property. Debtor
shall promptly advise Secured Party of any subsequent ownership right or
interest of the Debtor in or to any Copyright, Patent, Trademark, Technical
Disclosure, Trade Secret or License not specified on Schedule A hereto and
shall
permit Secured Party to amend such Schedule, as necessary, to reflect any
addition or deletion to such ownership rights.
5.9 Defense
of Intellectual Property. Debtor
shall (i) protect, defend and maintain the validity and enforceability of the
Copyrights, Patents and Trademarks, (ii) use its best efforts to detect
infringements of the Copyrights, Patents and Trademarks and promptly advise
Secured Party in writing of material infringements detected and (iii) diligently
pay maintenance and registration fees and not allow any Copyrights, Patents
or
Trademarks to be abandoned, forfeited or dedicated to the public without the
written consent of Secured Party.
5.10 Further
Assurances; Pledge of Instruments. At
any
time and from time to time, upon the written request of Secured Party, and
at
the sole expense of Debtor, Debtor shall promptly and duly execute and deliver
any and all such further instruments and documents and take such further action
as Secured Party may reasonably deem necessary or desirable to obtain the full
benefits of this Security Agreement, including, without limitation, facilitating
the filing of UCC-1 Financing Statements in all applicable jurisdictions and
this Security Agreement (and any amendment hereto) with the United States
Copyright Office and/or Patent and Trademark Office, as applicable.
6. RIGHTS
AND REMEDIES UPON DEFAULT.
(a) Beginning
on the date which is thirty (30) business days after any Event of Default shall
have occurred and while such Event of Default is continuing, Secured Party
may
exercise in addition to all other rights and remedies granted to it under this
Security Agreement, all rights and remedies of a secured party under the
UCC.
(b) Debtor
also agrees to pay all fees, costs and expenses of Secured Party, including,
without limitation, reasonable attorneys fees, incurred in connection with
the
enforcement of any of its rights and remedies hereunder.
(c) Debtor
hereby waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
(d) The
Proceeds of any sale, disposition or other realization upon all or any part
of
the Collateral shall be distributed by Secured Party in the following order
of
priorities:
FIRST,
to
Secured Party in an amount sufficient to pay in full the reasonable costs of
Secured Party in connection with such sale, disposition or other realization,
including all fees, costs, expenses, liabilities and advances incurred or made
by Secured Party in connection therewith, including, without limitation,
reasonable attorneys’ fees;
SECOND,
to
Secured Party in an amount equal to the then unpaid Secured Obligations;
and
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FINALLY,
upon
payment in full of the Secured Obligations, to Debtor or its representatives,
in
accordance with the UCC or as a court of competent jurisdiction may
direct.
7. INDEMNITY.
Debtor
agrees to defend, indemnify and hold harmless Secured Party and its officers,
employees, and agents against (a) all obligations, demands, claims, and
liabilities claimed or asserted by any other party in connection with the
transactions contemplated by this Security Agreement and (b) all losses or
expenses in any way suffered, incurred, or paid by Secured Party as a result
of
or in any way arising out of, following or consequential to transactions between
Secured Party and Debtor, whether under this Security Agreement or otherwise
(including without limitation, reasonable attorneys fees and expenses), except
for losses arising from or out of Secured Party’s gross negligence or willful
misconduct.
8. LIMITATION
ON SECURED PARTY’S
DUTY IN RESPECT OF COLLATERAL. Secured
Party shall be deemed to have acted reasonably in the custody, preservation
and
disposition of any of the Collateral if it takes such action as Debtor requests
in writing, but failure of Secured Party to comply with any such request shall
not in itself be deemed a failure to act reasonably, and no failure of Secured
Party to do any act not so requested shall be deemed a failure to act
reasonably.
9. REINSTATEMENT.
This
Security Agreement shall remain in full force and effect and continue to be
effective should any petition be filed by or against Debtor for liquidation
or
reorganization, should Debtor become insolvent or make an assignment for the
benefit of creditors or should a receiver or trustee be appointed for all or
any
significant part of Debtor’s property and assets, and shall continue to be
effective or be reinstated, as the case may be, if at any time payment and
performance of the Secured Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored
or
returned by any obligee of the Secured Obligations, whether as a “voidable
preference,” “fraudulent conveyance,” or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Secured Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
10. MISCELLANEOUS.
10.1 No
Waiver; Cumulative Remedies.
(a) Secured
Party shall not by any act, delay, omission or otherwise be deemed to have
waived any of its respective rights or remedies hereunder, nor shall any single
or partial exercise of any right or remedy hereunder on any one occasion
preclude the further exercise thereof or the exercise of any other right or
remedy.
(b) The
rights and remedies hereunder provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights and remedies
provided by law.
(c) None
of
the terms or provisions of this Security Agreement may be waived, altered,
modified or amended except by an instrument in writing, duly executed by Debtor
and Secured Party.
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10.2 Termination
of this Security Agreement. Subject
to Section 9 hereof, this Security Agreement shall terminate upon the payment
and performance in full of the Secured Obligations.
10.3 Successor
and Assigns. This
Security Agreement and all obligations of Debtor hereunder shall be binding
upon
the successors and assigns of Debtor, and shall, together with the rights and
remedies of Secured Party hereunder, inure to the benefit of Secured Party,
any
future holder of any of the indebtedness and their respective successors and
assigns. No sales of participations, other sales, assignments, transfers or
other dispositions of any agreement governing or instrument evidencing the
Secured Obligations or any portion thereof or interest therein shall in any
manner affect the lien granted to Secured Party hereunder.
10.4 Governing
Law. In
all
respects, including all matters of construction, validity and performance,
this
Security Agreement and the Secured Obligations arising hereunder shall be
governed by, and construed and enforced in accordance with, the laws of the
State of California applicable to contracts made and performed in such state,
without regard to the principles thereof regarding conflict of
laws.
IN
WITNESS WHEREOF, each
of
the parties hereto has caused this Security Agreement to be executed and
delivered by its duly authorized officer on the date first set forth
above.
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INTEGRATED
SURGICAL SYSTEMS, INC.
(DEBTOR)
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| /s/ Xx. Xxxxxx Xxxxxxx | ||
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By:
Xx. Xxxxxx Xxxxxxx, CEO
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ACCEPTED
AND ACKNOWLEDGED BY:
NOVATRIX
BIOMEDICAL, INC. (SECURED
PARTY)
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/s/
Xx. Xxxxxxx Xxxx
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By:
Xx. Xxxxxxx Xxxx, CEO
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