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EXHIBIT 99.6
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "AGREEMENT") is dated as of October ___, 2001,
between Lumenon Innovative Lightwave Technology, Inc., a Delaware corporation
("DEBTOR"), Capital Ventures International and Castle Creek Technology Partners
LLC (collectively, "SECURED PARTY").
BACKGROUND
A. Pursuant to the certain Securities Purchase Agreement dated as of
July 25, 2000, as amended, (the "SECURITIES PURCHASE AGREEMENT"), Debtor has
issued to the Secured Party Amended and Restated Convertible Notes of even date
herewith in the aggregate principal amount of $__________ (as may be amended,
replaced or restated from time to time, the "NOTES").
B. In consideration for the Secured Party entering into the Securities
Purchase Agreement and agreements contemplated thereby, Debtor has agreed to
grant to Secured Party a security interest in and to all of Debtor's personal
property, as more fully described in this Agreement.
NOW, THEREFORE, in consideration of the promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. DEFINITIONS. All capitalized terms used herein without definitions
shall have the respective meanings provided therefor in the Securities Purchase
Agreement. The term "State", as used herein, means the State of Delaware. All
terms defined in the Uniform Commercial Code of the State and used herein shall
have the same definitions herein as specified therein. However, if a term is
defined in Article 9 of the Uniform Commercial Code of the State differently
than in another Article of the Uniform Commercial Code of the State, the term
has the meaning specified in Article 9. The term "OBLIGATIONS" as used herein,
means the payment, in lawful money of the United States, of all principal of and
interest (including interest on amounts in default) and premiums, if any, from
time to time due on the Notes, and the term "EVENT OF DEFAULT" as used herein,
means the failure of Debtor to pay any of the Obligations when due and payable.
2. GRANT OF SECURITY INTEREST. Debtor hereby grants to the Secured
Party, to secure the payment and performance in full of all of the Obligations,
a security interest in and so pledges and assigns to the Secured Party the
following properties, assets and rights, of Debtor, wherever located, whether
now owned or hereafter acquired or arising, and all proceeds and products
thereof (all of the same being hereinafter called the "COLLATERAL"): all
personal and fixture property of every kind and nature including without
limitation all goods (including inventory, equipment and any accessions
thereto), instruments (including promissory notes),
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documents, accounts (including health-care-insurance receivables), chattel paper
(whether tangible or electronic), deposit accounts, letter-of-credit rights
(whether or not the letter of credit is evidenced by a writing), commercial tort
claims, securities and all other investment property, supporting obligations,
any other contract rights or rights to the payment of money, insurance claims
and proceeds, and all general intangibles including, without limitation, all
payment intangibles, patents, patent applications, trademarks, trademark
applications, trade names, copyrights, copyright applications, software,
engineering drawings, service marks, customer lists, goodwill, and all licenses,
permits, agreements of any kind or nature pursuant to which Debtor possesses,
uses or has authority to possess or use property (whether tangible or
intangible) of others or others possess, use or have authority to possess or use
property (whether tangible or intangible) of Debtor, and all recorded data of
any kind or nature, regardless of the medium of recording including, without
limitation, all software, writings, plans, specifications and schematics. The
Secured Party acknowledges that the attachment of its security interest in any
commercial tort claim as original collateral is subject to Debtor's compliance
with Section 4.7.
3. AUTHORIZATION TO FILE FINANCING STATEMENTS. Debtor hereby
irrevocably authorizes the Secured Party at any time and from time to time to
file in any Uniform Commercial Code jurisdiction any initial financing
statements and amendments thereto that, (a) describe the Collateral (i) as all
assets of Debtor or words of similar effect, regardless of whether any
particular asset comprised in the Collateral falls within the scope of Article 9
of the Uniform Commercial Code of the State or such jurisdiction, or (ii) as
being of an equal or lesser scope or with greater detail, and (b) contain any
other information required by part 5 of Article 9 of the Uniform Commercial Code
of the State for the sufficiency or filing office acceptance of any financing
statement or amendment, including (i) whether Debtor is an organization, the
type of organization and any organization identification number issued to Debtor
and, (ii) in the case of a financing statement filed as a fixture filing or
indicating Collateral as as-extracted collateral or timber to be cut, a
sufficient description of real property to which the Collateral relates. Debtor
agrees to furnish any such information to the Secured Party promptly upon
request. Debtor also ratifies its authorization for the Secured Party to have
filed in any Uniform Commercial Code jurisdiction any like initial financing
statements or amendments thereto if filed prior to the date hereof.
4. OTHER ACTIONS. Further to insure the attachment, perfection and
first priority of, and the ability of the Secured Party to enforce, the Secured
Party's security interest in the Collateral, Debtor agrees, in each case at
Debtor's own expense, to take the following actions with respect to the
following Collateral:
4.1 PROMISSORY NOTES AND TANGIBLE CHATTEL PAPER. If Debtor
shall at any time hold or acquire any promissory notes or tangible chattel
paper, Debtor shall forthwith endorse, assign and deliver the same to the
Secured Party, accompanied by such instruments of transfer or assignment duly
executed in blank as the Secured Party may from time to time specify.
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4.2 DEPOSIT ACCOUNTS. For each deposit account that Debtor at
any time opens or maintains, Debtor shall, at the Secured Party's request and
option, pursuant to an agreement in form and substance satisfactory to the
Secured Party, either (a) cause the depositary bank to agree to comply at any
time with instructions from the Secured Party to such depositary bank directing
the disposition of funds from time to time credited to such deposit account,
without further consent of Debtor, or (b) arrange for the Secured Party to
become the customer of the depositary bank with respect to the deposit account,
with Debtor being permitted, only with the consent of the Secured Party, to
exercise rights to withdraw funds from such deposit account. The Secured Party
agrees with Debtor that the Secured Party shall not give any such instructions
or withhold any withdrawal rights from Debtor, unless an Event of Default has
occurred and is continuing. The provisions of this paragraph shall not apply to
(i) any deposit account for which Debtor, the depositary bank and the Secured
Party have entered into a cash collateral agreement specially negotiated among
Debtor, the depositary bank and the Secured Party for the specific purpose set
forth therein, (ii) any fiduciary deposit accounts, (iii) deposit accounts for
which the Secured Party is the depositary and (iv) deposit accounts specially
and exclusively used for payroll, payroll taxes and other employee wage and
benefit payments to or for the benefit of Debtor's salaried employees.
4.3 INVESTMENT PROPERTY. If Debtor shall at any time hold or
acquire any certificated securities, Debtor shall forthwith endorse, assign and
deliver the same to the Secured Party, accompanied by such instruments of
transfer or assignment duly executed in blank as the Secured Party may from time
to time specify. If any securities now or hereafter acquired by Debtor are
uncertificated and are issued to Debtor or its nominee directly by the issuer
thereof, Debtor shall immediately notify the Secured Party thereof and, at the
Secured Party's request and option, pursuant to an agreement in form and
substance satisfactory to the Secured Party, either (a) cause the issuer to
agree to comply with instructions from the Secured Party as to such securities,
without further consent of Debtor or such nominee, or (b) arrange for the
Secured Party to become the registered owner of the securities. If any
securities, whether certificated or uncertificated, or other investment property
now or hereafter acquired by Debtor are held by Debtor or its nominee through a
securities intermediary or commodity intermediary, Debtor shall immediately
notify the Secured Party thereof and, at the Secured Party's request and option,
pursuant to an agreement in form and substance satisfactory to the Secured
Party, either (i) cause such securities intermediary or (as the case may be)
commodity intermediary to agree to comply with entitlement orders or other
instructions from the Secured Party to such securities intermediary as to such
securities or other investment property, or (as the case may be) to apply any
value distributed on account of any commodity contract as directed by the
Secured Party to such commodity intermediary in each case without further
consent of Debtor or such nominee, or (ii) in the case of financial assets or
other investment property held through a securities intermediary, arrange for
the Secured Party to become the entitlement holder with respect to such
investment property, with Debtor being permitted, only with the consent of the
Secured Party, to exercise rights to withdraw or otherwise deal with such
investment property. The Secured Party agrees with Debtor that the Secured Party
shall not give any such entitlement orders or instructions or directions to any
such issuer, securities intermediary or commodity intermediary,
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and shall not withhold its consent to the exercise of any withdrawal or dealing
rights by Debtor, unless an Event of Default has occurred and is continuing. The
provisions of this paragraph shall not apply to any financial assets credited to
a securities account for which the Secured Party is the securities intermediary.
4.4 COLLATERAL IN THE POSSESSION OF A BAILEE. If any goods are
at any time in the possession of a bailee, Debtor shall promptly notify the
Secured Party thereof and, if requested by the Secured Party, shall promptly
obtain an acknowledgment from the bailee, in form and substance satisfactory to
the Secured Party, that the bailee holds such Collateral for the benefit of the
Secured Party and shall act upon the instructions of the Secured Party, without
the further consent of Debtor. The Secured Party agrees with Debtor that the
Secured Party shall not give any such instructions unless an Event of Default
has occurred and is continuing.
4.5 ELECTRONIC CHATTEL PAPER AND TRANSFERABLE RECORDS. If
Debtor at any time holds or acquires an interest in any electronic chattel paper
or any "transferable record," as that term is defined in Section 201 of the
federal Electronic Signatures in Global and National Commerce Act, or in Section
16 of the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction, Debtor shall promptly notify the Secured Party thereof and, at the
request of the Secured Party, shall take such action as the Secured Party may
reasonably request to vest in the Secured Party control, under Section 9-105 of
the Uniform Commercial Code, of such electronic chattel paper or control under
Section 201 of the federal Electronic Signatures in Global and National Commerce
Act or, as the case may be, Section 16 of the Uniform Electronic Transactions
Act, as so in effect in such jurisdiction, of such transferable record. The
Secured Party agrees with Debtor that the Secured Party will arrange, pursuant
to procedures satisfactory to the Secured Party and so long as such procedures
will not result in the Secured Party's loss of control, for Debtor to make
alterations to the electronic chattel paper or transferable record permitted
under Section 9-105 of the Uniform Commercial Code or, as the case may be,
Section 201 of the federal Electronic Signatures in Global and National Commerce
Act or Section 16 of the Uniform Electronic Transactions Act for a party in
control to make without loss of control, unless an Event of Default has occurred
and is continuing or would occur after taking into account any action by Debtor
with respect to such electronic chattel paper or transferable record.
4.6 LETTER OF CREDIT RIGHTS. If Debtor is at any time a
beneficiary under a letter of credit now or hereafter issued, Debtor shall
promptly notify the Secured Party thereof and, at the request and option of the
Secured Party, Debtor shall, pursuant to an agreement in form and substance
satisfactory to the Secured Party, either (i) arrange for the issuer and any
confirmer of such letter of credit to consent to an assignment to the Secured
Party of the proceeds of any drawing under the letter of credit or (ii) arrange
for the Secured Party to become the transferee beneficiary of the letter of
credit, with the Secured Party agreeing, in each case, that the proceeds of any
drawing under the letter of credit are applied as provided in the Notes.
4.7 COMMERCIAL TORT CLAIMS. If Debtor shall at any time hold or
acquire a commercial tort claim, Debtor shall immediately notify the Secured
Party in a writing
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signed by Debtor of the brief details thereof and grant to the Secured Party 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 Party.
4.8 OTHER ACTIONS AS TO ANY AND ALL COLLATERAL. Debtor further
agrees to take any other action reasonably requested by the Secured Party to
insure the attachment, perfection and first priority of, and the ability of the
Secured Party to enforce, the Secured Party's security interest in any and all
of the Collateral including, without limitation, (a) executing, delivering and,
where appropriate, filing financing statements and amendments relating thereto
under the Uniform Commercial Code, to the extent, if any, that Debtor's
signature thereon is required therefor, (b) causing the Secured Party's name to
be noted as secured party on any certificate of title for a titled good if such
notation is a condition to attachment, perfection or priority of, or ability of
the Secured Party to enforce, the Secured Party's security interest in such
Collateral, (c) complying with any provision of any statute, regulation or
treaty of the United States as to any Collateral if compliance with such
provision is a condition to attachment, perfection or priority of, or ability of
the Secured Party to enforce, the Secured Party's security interest in such
Collateral, (d) obtaining governmental and other third party consents and
approvals, including without limitation any consent of any licensor, lessor or
other person obligated on Collateral, (e) obtaining waivers from mortgagees and
landlords in form and substance satisfactory to the Secured Party and (f) taking
all actions required by any earlier versions of the Uniform Commercial Code or
by other law, as applicable in any relevant Uniform Commercial Code
jurisdiction, or by other law as applicable in any foreign jurisdiction.
5. RELATION TO OTHER SECURITY DOCUMENTS. The provisions of this
Agreement supplement the provisions of any real estate mortgage, deed of trust
or deed of hypothec granted by Debtor to the Secured Party and securing the
payment or performance of any of the Obligations. Nothing contained in any such
real estate mortgage, deed of trust or deed of hypothec shall derogate from any
of the rights or remedies of the Secured Party hereunder.
6. REPRESENTATIONS AND WARRANTIES CONCERNING COMPANY'S LEGAL STATUS.
Debtor has previously delivered to the Secured Party a certificate signed by
Debtor and entitled "Perfection Certificate" (the "PERFECTION CERTIFICATE").
Debtor represents and warrants to the Secured Party as follows: (a) Debtor's
exact legal name is that indicated on the Perfection Certificate and on the
signature page hereof, (b) Debtor is an organization of the type and organized
in the jurisdiction set forth in the Perfection Certificate, (c) the Perfection
Certificate accurately sets forth Debtor's organizational identification number
or accurately states that Debtor has none, (d) the Perfection Certificate
accurately sets forth Debtor's place of business or, if more than one, its chief
executive office as well as Debtor's mailing address if different and (e) all
other information set forth on the Perfection Certificate pertaining to Debtor
is accurate and complete.
7. COVENANTS CONCERNING COMPANY'S LEGAL STATUS. Debtor covenants with
the Secured Party as follows: (a) without providing at least 30 days prior
written notice to the Secured Party, Debtor will not change its name, its place
of business or, if more than one, chief
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executive office, or its mailing address or organizational identification number
if it has one, (b) if Debtor does not have an organizational identification
number and later, obtains one, Debtor shall forthwith notify the Secured Party
of such organizational identification number, and (c) Debtor will not change its
type of organization, jurisdiction of organization or other legal structure.
8. REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL, ETC. Debtor
further represents and warrants to the Secured Party as follows: (a) Debtor is
the owner of or has other rights in the Collateral, free from any adverse lien,
security interest or other encumbrance, except for the security interest created
by this Agreement and any liens in existence on the date hereof which are set
forth on Schedule A hereto, (b) none of the Collateral constitutes, or is the
proceeds of, "farm products" as defined in Section 9-102(a)(34) of the Uniform
Commercial Code of the State, (c) none of the account debtors or other persons
obligated on any of the Collateral is a governmental authority subject to the
Federal Assignment of Claims Act or like federal, state or local statute or rule
in respect of such Collateral, (d) Debtor holds no commercial tort claim except
as indicated on the Perfection Certificate, and (e) Debtor has at all times
operated its business in compliance with all applicable provisions of federal,
state and local statutes and ordinances dealing with the control, shipment,
storage or disposal of hazardous materials or substances and (f) all other
information set forth on the Perfection Certificate pertaining to the Collateral
is accurate and complete.
9. COVENANTS CONCERNING COLLATERAL, ETC. Debtor further covenants
with the Secured Party as follows: (a) the Collateral, to the extent not
delivered to the Secured Party pursuant to Section 4, will be kept at those
locations listed on the Perfection Certificate and Debtor will not remove the
Collateral from such locations, without providing at least 30 days prior written
notice to the Secured Party, (b) except for the security interest herein granted
and liens permitted in Section 8 hereof, and additional purchase money security
interests and/or equipment lease financing arrangements entered into in the
ordinary course of Debtor's business, Debtor shall be the owner of, or have
rights in, the Collateral free from any lien, security interest or other
encumbrance, and Debtor shall defend the same against all claims and demands of
all persons at any time claiming the same or any interests therein adverse to
the Secured Party, (c) Debtor shall not pledge, mortgage or create, or suffer to
exist a security interest in the Collateral in favor of any person other than
the Secured Party except for liens permitted in this Agreement, (d) Debtor will
keep the Collateral in good order and repair and will not use the same in
violation of law or any policy of insurance thereon, (e) Debtor will permit the
Secured Party, or its designee, to inspect the Collateral at any reasonable
time, wherever located, (f) Debtor will pay promptly when due all taxes,
assessments, governmental charges and levies upon the Collateral or incurred in
connection with the use or operation of such Collateral or incurred in
connection with this Agreement, (g) Debtor will continue to operate, its
business in compliance with all applicable provisions of federal, state and
local statutes and ordinances dealing with the control, shipment, storage or
disposal of hazardous materials or substances, and (h) Debtor will not sell or
otherwise dispose, or offer to sell or otherwise dispose, of the Collateral or
any interest therein except for (i) sales and leases of inventory and licenses
of general intangible in the ordinary course of business and (ii) so long as no
Event of Default has occurred and is continuing, sales or other dispositions of
obsolescent items of equipment in the ordinary course of business consistent
with past practices.
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10. INSURANCE.
10.1 MAINTENANCE OF INSURANCE. Debtor will maintain with
financially sound and reputable insurers insurance with respect to its
properties and business against such casualties and contingencies as shall be in
accordance with general practices of businesses engaged in similar activities in
similar geographic areas. Such insurance shall be in such minimum amounts that
Debtor will not, be deemed a co-insurer under applicable insurance laws,
regulations and policies and otherwise shall be in such amounts, contain such
terms, be in such forms and be for such periods as may be reasonably
satisfactory to the Secured Party. In addition, all such insurance shall be
payable to the Secured Party as loss payee under a standard loss payee clause.
Without limiting the foregoing, Debtor will (i) keep all of its physical
property insured with casualty or physical hazard insurance on an "all risks"
basis, with broad form flood and earthquake coverages and electronic data
processing coverage, with a full replacement cost endorsement and an "agreed
amount" clause in an amount equal to 100% of the full replacement cost of such
property, (ii) maintain all such workers' compensation or similar insurance as
may be required by law and (iii) maintain, in amounts and with deductibles equal
to those generally maintained by businesses engaged in similar activities in
similar geographic areas, general public liability insurance against claims of
bodily injury, death or property damage occurring, on, in or about the
properties of Debtor; business interruption insurance; and product liability
insurance.
10.2 INSURANCE PROCEEDS. The proceeds of any casualty insurance
in respect of any casualty loss of any of the Collateral shall, subject to the
rights, if any, of other parties with a prior interest in the property covered
thereby, (i) so long as no Event of Default has occurred and is continuing, be
disbursed to Debtor for direct application by Debtor solely to the repair or
replacement of Debtor's property so damaged or destroyed, but only to the extent
of the replacement cost of such property and (ii) in all other circumstances
(including any excess from clause (i) of this Section 10.2), be held by the
Secured Party as cash collateral for the Obligations. The Secured Party may, at
its sole option, disburse from time to time all or any part of such proceeds so
held as cash collateral, upon such terms and conditions, as the Secured Party
may reasonably prescribe, for direct application by Debtor solely to the repair
or replacement of Debtor's property so damaged or destroyed, or the Secured
Party may apply all or any part of such proceeds to the Obligations.
10.3 NOTICE OF CANCELLATION, ETC. All policies of insurance
shall provide for at least thirty (30) days prior written cancellation notice to
the Secured Party. In the event of failure by Debtor to provide and maintain
insurance as herein provided, the Secured Party may, at its option, provide such
insurance and charge the amount thereof to Debtor. Debtor shall furnish the
Secured Party with certificates of insurance and policies evidencing compliance
with the foregoing insurance provision.
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11. COLLATERAL PROTECTION EXPENSES: PRESERVATION OF COLLATERAL.
11.1 EXPENSES INCURRED BY SECURED PARTY. In its
discretion, the Secured Party may discharge taxes and other encumbrances at any
time levied or placed on any of the Collateral, make repairs thereto and pay any
necessary filing fees or, if the debtor fails to do so, insurance premiums.
Debtor agrees to reimburse the Secured Party on demand for any and all
expenditures so made. The Secured Party shall have no obligation to Debtor to
make any such expenditures, nor shall the making thereof relieve Debtor of any
default.
11.2 SECURED PARTY'S OBLIGATIONS AND DUTIES. Anything
herein to the contrary notwithstanding, Debtor shall remain liable under each
contract or agreement comprised in the Collateral to be observed or performed by
Debtor thereunder. The Secured Party shall not 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 Secured Party of any payment relating to any of
the Collateral, nor shall the Secured Party be obligated in any manner to
perform any of the obligations of 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 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 Secured Party or to which the Secured Party may be entitled at
any time or times. The Secured Party's sole duty with respect to the custody,
safe keeping and physical preservation of the Collateral in its possession,
under Section 9-207 of the Uniform Commercial Code of the State or otherwise,
shall be to deal with such Collateral in the same manner as the Secured Party
deals with similar property for its own account.
12. SECURITIES AND DEPOSITS. The Secured Party may at any time
following and during the continuance of an Event of Default, at its option,
transfer to itself or any nominee any securities constituting Collateral,
receive any income thereon and hold such income as additional Collateral or
apply it to the Obligations. Whether or not any Obligations are due, the Secured
Party may, following and during the continuance of an Event of Default, demand,
xxx for, collect, or make any settlement or compromise which it deems desirable
with respect to the Collateral. Regardless of the adequacy of Collateral or any
other security for the Obligations, any deposits or other sums at any time
credited by or due from the Secured Party to Debtor may at any time be applied
to or set off against any of the Obligations then due and owing.
13. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED
ON COLLATERAL. If an Event of Default shall have occurred and be continuing,
Debtor shall, at the request of the Secured Party, notify account debtors and
other persons obligated on any of the Collateral of the security interest of the
Secured Party in any account, chattel paper, general intangible, instrument or
other Collateral and that payment thereof is to be made directly to the Secured
Party or to any financial institution designated by the Secured Party as the
Secured Party's agent therefor, and the Secured Party may itself if an Event of
Default shall have occurred and be continuing, without notice to or demand upon
Debtor, so notify account debtors and other persons obligated on Collateral.
After the making of such a request or the giving of any such notification,
Debtor shall hold any proceeds of collection of accounts, chattel paper, general
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intangibles, instruments and other Collateral received by Debtor as trustee for
the Secured Party without commingling the same with other funds of Debtor and
shall turn the same over to the Secured Party in the identical form received,
together with any necessary endorsements or assignments. The Secured Party shall
apply the proceeds of collection of accounts, chattel paper, general
intangibles, instruments and other Collateral received by the Secured Party to
the Obligations, such proceeds to be immediately entered after final payment in
cash or other immediately available funds of the items giving rise to them.
14. POWER OF ATTORNEY.
14.1 APPOINTMENT AND POWERS OF SECURED PARTY. Debtor
hereby irrevocably constitutes and appoints the Secured Party and any officer or
agent thereof, with full power of substitution, as its true and lawful attorneys
-in-fact with full irrevocable power and authority in the place and stead of
Debtor or in the Secured Party's own name, for the purpose of carrying out the
terms of this Agreement, to take any and all appropriate action and to execute
any and all documents and instruments that may be necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, hereby gives said attorneys the power and right, on behalf of
Debtor, without notice to or assent by Debtor, to do the following:
(a) upon the occurrence and during the
continuance of an Event of Default, generally to sell,
transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral in such manner as
is consistent with the Uniform Commercial Code of the State
and as fully and completely as though the Secured Party
were the absolute owner thereof for all purposes, and to do
at Debtor's expense, at any time, or from time to time, all
acts and things which the Secured Party deems necessary to
protect, preserve or realize upon the Collateral and the
Secured Party's security interest therein, in order to
effect the intent of this Agreement, all as fully and
effectively as Debtor might do, including, without
limitation, (i) the filing and prosecuting of registration
and transfer applications with the appropriate federal or
local agencies or authorities with respect to trademarks,
copyrights and patentable inventions and processes, (ii)
upon written notice to Debtor, the exercise of voting
rights with respect to voting securities, which rights may
be exercised, if the Secured Party so elects, with a view
to causing the liquidation in a commercially reasonable
manner of assets of the issuer of any such securities and
(iii) the execution, delivery and recording, in connection
with any sale or other disposition of any Collateral, of
the endorsements, assignments or other instruments of
conveyance or transfer with respect to such Collateral; and
(b) to the extent that Debtor's authorization
given in Section 3 is not sufficient, to file such
financing statements with respect hereto, with
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or without Debtor's signature, or a photocopy of this
Agreement in substitution for a financing statement, as the
Secured Party may deem appropriate and to execute in
Debtor's name such financing statements and amendments
thereto and continuation statements which may require
Debtor's signature.
14.2 RATIFICATION BY COMPANY. To the extent permitted by
law, Debtor hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
14.3 NO DUTY ON SECURED PARTY. The powers conferred on
the Secured Party hereunder are solely to protect its interests in the
Collateral and shall not impose any duty upon it to exercise any such powers.
The Secured Party shall be accountable only for the amounts that it actually
receives as a result of the exercise of such powers and neither it nor any of
its officers, directors, employees or agents shall be responsible to Debtor for
any act or failure to act, except for the Secured Party's own gross negligence
or willful misconduct.
15. REMEDIES. If an Event of Default shall have occurred and be
continuing, the Secured Party may, by delivery of a Default Notice to Debtor,
declare this Agreement to be in default, and the Secured Party shall thereafter
have in any jurisdiction in which enforcement hereof is sought, in addition to
all other rights and remedies, the rights and remedies of a secured party under
the Uniform Commercial Code of the State or of any jurisdiction in which
Collateral is located, including, without limitation, the right to take
possession of the Collateral, and for that purpose the Secured Party may, so far
as Debtor can give authority therefor, enter upon any premises on which the
Collateral may be situated and remove the same therefrom. The Secured Party may
in its discretion require Debtor to assemble all or any part of the Collateral
at such location or locations within the jurisdiction(s) of Debtor's principal
office(s) or at such other locations as the Secured Party may reasonably
designate. Unless the Collateral is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, the Secured
Party shall give to Debtor at least ten (10) Business Days prior written notice
of the time and place of any public sale of Collateral or of the time after
which any private sale or any other intended disposition is to be made. Debtor
hereby acknowledges that ten (10) Business Days prior written notice of such
sale or sales shall be reasonable notice. In addition, Debtor waives any and all
rights that, it may have to a judicial hearing in advance of the enforcement of
any of the Secured Party's rights hereunder, including, without limitation, its
right following an Event of Default to take immediate possession of the
Collateral and to exercise its rights with respect thereto.
16. STANDARDS FOR EXERCISING REMEDIES. To the extent that
applicable law imposes duties on the Secured Party to exercise remedies in a
commercially reasonable manner, Debtor acknowledges and agrees that it is not
commercially unreasonable for the Secured Party (a) to fail to incur expenses
reasonably deemed significant by the Secured Party to prepare Collateral for
disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (b) to fail to obtain
third party consents for
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access to Collateral to be disposed of, or to obtain or, if not required by
other law, to fail to obtain governmental or third party consents for the
collection or disposition of Collateral to be collected or disposed of, (c) to
fail to exercise collection remedies against account debtors or other persons
obligated on Collateral or to remove liens or encumbrances on or any adverse
claims against Collateral, (d) to exercise collection remedies against account
debtors and other persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (e) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (f) to contact other
persons, whether or not in the same business as Debtor, for expressions of
interest in acquiring all or any portion of the Collateral, (g) to hire one or
more professional auctioneers to assist in the disposition of Collateral,
whether or not the collateral is of a specialized nature, (h) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capability of
doing so, or that match buyers and sellers of assets, (i) to dispose of assets
in wholesale rather than retail markets, (j) to disclaim disposition warranties,
(k) to purchase insurance or credit enhancements to insure the Secured Party
against risks of loss, collection or disposition of Collateral or to provide to
the Secured Party a guaranteed return from the collection or disposition of
Collateral, or (l) to the extent deemed appropriate by the Secured Party, to
obtain the services of other brokers, investment bankers, consultants and other
professionals to assist the Secured Party in the collection or disposition of
any of the Collateral. Debtor acknowledges that the purpose of this Section 16
is to provide non-exhaustive indications of what actions or omissions by the
Secured Party would not be commercially unreasonable in the Secured Party's
exercise of remedies against the Collateral and that other actions or omissions
by the Secured Party shall not be deemed commercially unreasonable solely on
account of not being indicated in this Section 16. Without limitation upon the
foregoing, nothing contained in this Section 16 shall be construed to grant any
rights to Debtor or to impose any duties on the Secured Party that would not
have been granted or imposed by this Agreement or by applicable law in the
absence of this Section 16.
17. NO WAIVER BY SECURED PARTY, ETC. The Secured Party shall
not be deemed to have waived any of its rights upon or under the Obligations or
the Collateral unless such waiver shall be in writing and signed by the Secured
Party. No delay or omission on the part of the Secured Party in exercising any
right shall operate as a waiver of such right or any other right. A waiver on
any one occasion shall not be construed as a bar to or waiver of any right on
any future occasion. All rights and remedies of the Secured Party with respect
to the Obligations or the Collateral, whether evidenced hereby or by any other
instrument or papers, shall be cumulative and may be exercised singularly,
alternatively, successively or concurrently at such time or at such times as the
Secured Party deems expedient.
18. SURETYSHIP WAIVERS BY COMPANY. Debtor waives demand,
notice, protest, notice of acceptance of this Agreement, notice of loans made,
credit extended, Collateral received or delivered or other action taken in
reliance hereon and all other demands and notices of any description. With
respect to both the Obligations and the Collateral, Debtor assents to any
extension or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of or failure to perfect any security interest
in any Collateral, to the addition
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or release of any party or person primarily or secondarily liable, to the
acceptance of partial payment thereon and the settlement, compromising or
adjusting of any thereof, all in such manner and at such time or times as the
Secured Party may deem advisable. The Secured Party shall have no duty as to the
collection or protection of the Collateral or any income thereon, nor as to the
preservation of rights against prior parties, nor as to the preservation of any
rights pertaining thereto beyond the safe custody thereof as set forth in
Section 11.2. Debtor further waives any and all other suretyship defenses.
19. MARSHALING. The Secured Party shall not be required to
marshal any present or future collateral security (including but not limited to
this Agreement and the Collateral) for, or other assurances of payment of, the
Obligations or any of them or to resort to such collateral security or other
assurances of payment in any particular order, and all of its rights hereunder
and in respect of such collateral security and other assurances of payment shall
be cumulative and in addition to all other rights, however existing or arising.
To the extent that it lawfully may, Debtor hereby agrees that it will not invoke
any law relating to the marshalling of collateral which might cause delay in or
impede the enforcement of the Secured Party's rights under this Agreement or
under any other instrument creating or evidencing any of the Obligations or
under which any of the Obligations is outstanding or by which any of the
Obligations is secured or payment thereof is otherwise assured, and, to the
extent that it lawfully may, Debtor hereby irrevocably waives the benefits of
all such laws.
20. PROCEEDS OF DISPOSITIONS; EXPENSES. Debtor shall pay to the
Secured Party on demand any and all expenses, including reasonable attorneys'
fees and disbursements, incurred or paid by the Secured Party in protecting,
preserving or enforcing the Secured Party's rights under or in respect of any of
the Obligations or any of the Collateral. After deducting all of said expenses,
the residue of any proceeds of collection or sale of the Obligations or
Collateral shall, to the extent actually received in cash, be applied to the
payment of the Obligations in such order or preference as the Secured Party may
determine, proper allowance and provision being made for any Obligations not
then due. Upon the final payment and satisfaction in full of all of the
Obligations and after making any payments required by Sections 9-608(a)(1)(C) or
9615(a)(3) of the Uniform Commercial Code of the State, any excess shall be
returned to Debtor, and Debtor shall remain liable for any deficiency in the
payment of the Obligations.
21. OVERDUE AMOUNTS. Until paid, all amounts due and payable by
Debtor hereunder shall be a debt secured by the Collateral and shall bear,
whether before or after judgment, interest at the rate of interest for overdue
principal set forth in the Note.
22. GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT IS
INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING
EFFECT TO ITS CONFLICT OF LAWS PROVISIONS. Debtor agrees that any suit for the
enforcement of this Agreement may be brought in the courts of the State or any
federal court sitting therein and consents to the non-exclusive jurisdiction of
such court and to service of process in any such suit being made upon
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Debtor by mail at the address specified in Article X of the Note. Debtor hereby
waives any objection that it may now or hereafter have to the venue of any such
suit or any such court or that such suit is brought in an inconvenient court.
23. WAIVER OF JURY TRIAL. DEBTOR WAIVES ITS RIGHT TO A JURY
TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law,
Debtor waives any right which it may have to claim or recover in any litigation
referred to in the preceding sentence any special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages. Debtor (i) certifies that neither the Secured Party nor any
representative, agent or attorney of the Secured Party has represented,
expressly or otherwise, that the Secured Party would not, in the event of
litigation, seek to enforce the foregoing waivers and (ii) acknowledges that, in
entering into the Securities Purchase Agreement, the Secured Party is relying
upon, among other things, the waivers and certifications contained in this
Section 23.
24. MISCELLANEOUS. The headings of each section of this
Agreement are for convenience only and shall not define or limit the provisions
thereof. This Agreement and all rights and obligations hereunder shall be
binding upon Debtor and its respective successors and assigns, and shall inure
to the benefit of the Secured Party and its successors and assigns. If any term
of this Agreement shall be held to be invalid, illegal or unenforceable, the
validity of all other terms hereof shall in no way be affected thereby, and this
Agreement shall be construed and be enforceable as if such invalid, illegal or
unenforceable term had not been included herein. No amendment, modification,
termination or waiver of any provision of this Agreement shall be effective
unless the same shall be in writing and signed by the Debtor and the Secured
Party. This Agreement constitutes the complete agreement of the parties with
respect to the Collateral currently located or to be located within the
jurisdiction of the United States. This Agreement may be executed in any number
of separate counterparts, each of which shall collectively and separately
constitute one agreement. Debtor acknowledges receipt of a copy of this
Agreement.
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IN WITNESS WHEREOF, intending to be legally bound, Debtor has caused
this Agreement to be duly executed as of the date first above written.
LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
By: _______________________________
Name:__________________________
Title:_________________________
Accepted:
CAPITAL VENTURES INTERNATIONAL
By: Heights Capital Management, Inc., its
authorized agent
By: _____________________________
Name: __________________________
Title: __________________________
CASTLE CREEK TECHNOLOGY
PARTNERS LLC
By: _____________________________
Name: __________________________
Title: __________________________
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CERTIFICATE OF ACKNOWLEDGMENT
COMMONWEALTH [OR STATE OF]_________________________ :
: ss
COUNTY OF__________________________________________ :
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this ____ day of October, 2001, personally appeared [ to me known
personally, and who, being by me duly sworn, deposes and says that he is the
________________ of Lumenon Innovative Lightwave Technology, Inc., and that said
instrument was signed and sealed on behalf of said corporation by authority of
its Board of Directors, and said * acknowledged said instrument to be the free
act and deed of said corporation.
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Notary Public
My commission expires:
