PATENT SECURITY AgREEMENT
THIS PATENT SECURITY AGREEMENT (this "Security Agreement") made as of this
26th day of June 2002, by THE XXXXXX FAMILY REVOCABLE TRUST (together with any
successor trust(s) heretofore or hereafter formed pursuant to trust documents
originally executed by Xxxxxx Xxxxxx, including without limitation The Xxxx
Xxxxxx Q-TIP Trust, The Xxxxx Xx Xxxxx Q-TIP Trust, The Xxxxxx Family Q-TIP
Trust and The Xxxxxx Family By-Pass Trust, the "Grantor") in favor of LASALLE
BUSINESS CREDIT, INC., as Agent ("Agent").
W I T N E S S E T H
WHEREAS, Agent, Standard Federal Bank National Association, as lender
("Lender"), Medical Technology Systems, Inc. ("MTS") and MTS Packaging Systems,
Inc. ("Packaging", and together with MTS, the "Borrowers"), and the Guarantors
named therein are parties to that certain Loan and Security Agreement of even
date herewith (as amended, restated or otherwise modified from time to time, the
"Loan Agreement") and other related loan documents of even date herewith
(collectively, with the Loan Agreement, and as each may be amended or otherwise
modified from time to time, the "Financing Agreements"), which Financing
Agreements provide (i) for Agent and/or Lender to, from time to time, extend
credit to or for the account of the Borrowers and, as a condition to such
extensions of credit, (ii) Grantor assigns and grants to Agent, for its benefit
and for the benefit of Lender, of a security interest in certain of Grantor's
assets, including, without limitation, its patents and patent applications;
WHEREAS, Grantor is a shareholder of MTS;
WHEREAS, Grantor has heretofore granted MTS a license to the Patents (as
hereinafter defined) and is paid royalties for MTS's use of the Patents;
WHEREAS, the Borrowers' business is dependent on its ability to use the
Patents;
WHEREAS, it is a condition to the extension of the financial accommodations
under the Loan Agreement that Grantor execute this Agreement;
WHEREAS, Grantor desires to fulfill the condition set forth in the
preceding whereas clause and it will derive benefit from the extension of
financial accommodations to the Borrowers by the Agent;
NOW, THEREFORE, in consideration of the premises set forth herein and for
other good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, Grantor agrees as follows:
1. Incorporation of Financing Agreements. The Financing Agreements and the
terms and provisions thereof are hereby incorporated herein in their entirety by
this reference thereto. All terms capitalized but not otherwise defined herein
shall have the same meanings herein as in the Loan Agreement.
2. Grant and Reaffirmation of Grant of Security Interests. To secure the
complete and timely payment and satisfaction of the Liabilities, Grantor hereby
grants to Agent, for its benefit and for the benefit of Lender, and hereby
reaffirms its prior grant pursuant to the Financing Agreements of, a continuing
security interest in Grantor's entire right, title and interest in and to all of
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its now owned or existing and hereafter acquired or arising patents, patent
applications and rights under patent license agreements, whether as licensee or
licensor, including, without limitation, the inventions and improvements
described and claimed therein, all patentable inventions and those patents and
patent applications listed on Schedule A attached hereto and made a part hereof
and all patents and the reissues, divisions, continuations, renewals, extensions
and continuations-in-part of any of the foregoing, and all income, royalties,
damages and payments now or hereafter due and/or payable under or with respect
to any of the foregoing, including, without limitation, damages and payments for
past, present and future infringements of any of the foregoing and the right to
xxx for past, present and future infringements of any of the foregoing (all of
the foregoing are sometimes hereinafter individually and/or collectively
referred to as the "Patents").
3. Warranties and Representations. Grantor warrants and represents to Agent
that:
(a) no Patent has been adjudged invalid or unenforceable by a court of
competent jurisdiction nor has any such Patent been cancelled, in whole or
in part and each such Patent is presently subsisting;
(b) Grantor is the sole and exclusive owner of the entire and
unencumbered right, title and interest in and to each Patent, free and
clear of any liens, charges and encumbrances, including without limitation,
shop rights and covenants by Grantor not to xxx third persons, other than
liens in favor of the Subordinated Lender, which are junior and subordinate
to the liens created hereunder and under the Loan Agreement in favor of the
Agent an Permitted Liens;
(c) Grantor has no notice of any suits or actions commenced or
threatened with reference to any Patent; and
(d) Grantor has the unqualified right to execute and deliver this
Security Agreement and perform its terms.
4. Restrictions on Future Agreements. Grantor agrees that, until the
Liabilities shall have been paid and satisfied in full and the Financing
Agreements shall have been terminated, Grantor shall not, without the prior
written consent of Agent, sell or assign its interest in any Patent or enter
into any other agreement with respect to any Patent which would affect the
validity or enforcement of the rights transferred to Agent under this Security
Agreement.
5. New Patents. Grantor represents and warrants that, based on a diligent
investigation by Grantor, the Patents listed on Schedule A constitute all of the
federally registered Patents and Patent applications now owned by Grantor. If,
before the Liabilities shall have been satisfied in full or before the Financing
Agreements have been terminated, Grantor shall (i) become aware of any existing
Patents of which Grantor has not previously informed Agent, (ii) obtain rights
to any new patentable inventions or Patents, or (iii) become entitled to the
benefit of any Patents, which benefit is not in existence on the date hereof,
which are being licensed or are to be licensed to MTS or any of its
Subsidiaries, the provisions of this Security Agreement above shall
automatically apply thereto and Grantor shall give to Agent prompt written
notice thereof. Grantor hereby authorizes Agent to modify this Security
Agreement by amending Schedule A to include any such Patents.
6. Royalties; Terms. The term of this Security Agreement shall extend until
the earlier of (i) the expiration of each of the Patents, and (ii) the payment
and satisfaction in full of the Liabilities and the termination of the Financing
Agreements. Grantor agrees that, during the continuance of an Event of Default,
the use by Agent of all Patents shall be without any liability for royalties or
other related charges from Agent to Grantor.
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7. Release of Security Interest. This Security Agreement is made for
Collateral purposes only. Upon payment and satisfaction in full of the
Liabilities and termination of the Financing Agreements, Agent shall take such
actions as may be necessary or proper to terminate the security interests
created hereby and pursuant to the Financing Agreements
8. Expenses. All expenses incurred in connection with the performance of
any of the agreements set forth herein shall be borne by Grantor. All fees,
costs and expenses, of whatever kind or nature, including reasonable attorneys'
fees and legal expenses, actually incurred by Agent and/or Lender in connection
with the filing or recording of any documents (including all taxes in connection
therewith) in public offices, the payment or discharge of any taxes, reasonable
counsel fees actually incurred, maintenance fees, encumbrances or otherwise in
protecting, maintaining or preserving the Patents or in defending or prosecuting
any actions or proceedings arising out of or related to the Patents shall be
borne by and paid by Grantor and until paid shall constitute Liabilities.
9. Duties of Grantor. Grantor shall have the duty (i) to file and prosecute
diligently any patent applications pending as of the date hereof or hereafter
until the Liabilities shall have been paid and satisfied in full and the
Financing Agreements have been terminated, (ii) to make application on
unpatented but patentable inventions, as commercially reasonable, (iii) to
preserve and maintain all rights in the Patents, as commercially reasonable and
(iv) to ensure that the Patents are and remain enforceable, as commercially
reasonable. Any expenses incurred in connection with Grantor's obligations under
this Section 9 shall be borne by Grantor.
10. Agent's Right to Xxx. During the continuance of an Event of Default,
Agent shall have the right, but shall in no way be obligated, to bring suit in
its own name to enforce the Patents and, if Agent shall commence any such suit,
Grantor shall, at the request of Agent, do any and all lawful acts and execute
any and all proper documents required by Agent in aid of such enforcement and
Grantor shall promptly, upon demand, reimburse and indemnify Agent for all costs
and expenses actually incurred by Agent in the exercise of its rights under this
Section 10.
11. Waivers. No course of dealing between Grantor and Agent, nor any
failure to exercise, nor any delay in exercising, on the part of Agent, any
right, power or privilege hereunder or under the Financing Agreements 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.
12. Severability. The provisions of this Security Agreement are severable,
and if any clause or provision shall be held invalid and unenforceable in whole
or in part in any jurisdiction, then such invalidity or unenforceability shall
affect only such clause or provision, or part thereof, in such jurisdiction, and
shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Security Agreement in any
jurisdiction.
13. Modification. This Security Agreement cannot be altered, amended or
modified in any way, except as specifically provided in Section 5 hereof or by a
writing signed by the parties hereto.
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14. Cumulative Remedies; Power of Attorney; Effect on Financing Agreements.
All of Agent's rights and remedies with respect to the Patents, whether
established hereby or by the Financing Agreements, or by any other agreements or
by law shall be cumulative and may be exercised singularly or concurrently.
Grantor hereby authorizes Agent during the continuance of an Event of Default,
to make, constitute and appoint any officer or agent of Agent as Agent may
select, in its sole discretion, as Grantor's true and lawful attorney-in-fact,
with power to (i) endorse Grantor's name on all applications, documents, papers
and instruments necessary or desirable for Agent in the use of the Patents or
(ii) take any other actions with respect to the Patents as Agent deems to be in
the best interest of Agent, or (iii) grant or issue any exclusive or
non-exclusive license under the Patents to anyone, or (iv) assign, pledge,
convey or otherwise transfer title in or dispose of the Patents to anyone.
Grantor hereby ratifies all that such attorney shall lawfully do or cause to be
done by virtue hereof. This power of attorney shall be irrevocable until the
Liabilities shall have been paid and satisfied in full and the Financing
Agreements have been terminated. Grantor acknowledges and agrees that this
Security Agreement is not intended to limit or restrict in any way the rights
and remedies of Agent under the Financing Agreements but rather is intended to
facilitate the exercise of such rights and remedies. Agent shall have, in
addition to all other rights and remedies given it by the terms of this Security
Agreement and the Financing Agreements, all rights and remedies allowed by law
and the rights and remedies of a secured party under the Uniform Commercial Code
as enacted in the Commonwealth of Pennsylvania.
15. Binding Effect; Benefits. This Security Agreement shall be binding upon
Grantor and its respective successors and assigns, and shall inure to the
benefit of Agent and its successors, nominees and assigns.
16. Governing Law. This Security Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania and
applicable federal law.
17. Headings. Paragraph headings used herein are for convenience only and
shall not modify the provisions which they precede.
18. Further Assurances. Grantor agrees to execute and deliver such further
agreements, instruments and documents, and to perform such further acts, as
Agent shall reasonably request from time to time in order to carry out the
purpose of this Security Agreement and agreements set forth herein.
19. Survival of Representations. All representations and warranties of
Grantor contained in this Security Agreement shall survive the execution and
delivery of this Security Agreement and shall be remade on the date of each
borrowing under the Financing Agreements
IN WITNESS WHEREOF, Grantor has duly executed this Security Agreement as of
the date first written above.
THE XXXXXX FAMILY REVOCABLE TRUST
u/a/d July 10, 1992, as amended
By________________________________
Its Trustee
Agreed and Accepted
As of the Date First Written Above
LASALLE BUSINESS CREDIT, INC.
By____________________________
Its____________________________
SCHEDULE A
PATENTS
Patent Description U.S. Patent No. Issue Date
------------------ --------------- ----------
PATENT APPLICATIONS
Patent Application Description U.S. Patent Application No. Date Applied
------------------------------ --------------------------- ------------
PATENT LICENSES
Description of License U.S. Patent No. Issue Date
---------------------- --------------- ----------
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COMMONWEALTH OF PHILADELPHIA :
: SS.
COUNTY OF PHILADELPHIA :
On this, the ____ day of June, 2002, before me, a Notary Public, personally
appeared ____________, who acknowledged himself to be a Vice President of
LaSalle Business Credit, Inc., and that he as such officer, being duly
authorized to do so, executed the foregoing instrument for the purposes therein
contained by signing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
____________________________
Notary Public
My commission expires
COMMONWEALTH OF PHILADELPHIA :
: SS.
COUNTY OF PHILADELPHIA :
On this, the __ day of June, 2002, before me, a Notary Public, personally
appeared Xxxx Xxxxxx who acknowledged himself to be the trustee of the Xxxxxx
Family Trust, a Florida trust, and that he as such officer, being duly
authorized to do so, executed the foregoing instrument for the purposes therein
contained by signing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
____________________________
Notary Public
My commission expires
