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Exhibit 10.9
REIMBURSEMENT AND SECURITY AGREEMENT
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THIS REIMBURSEMENT AND SECURITY AGREEMENT ("Security Agreement") is
made as of this 30TH day of April, 1999, by OXYNET, INC., an Ohio corporation
formerly known as CERAM OXYGEN TECHNOLOGIES, INC. ("Debtor"), to and in favor of
MG GENERON, INC., a Delaware corporation ("Secured Party").
WITNESSETH:
WHEREAS, Debtor is the exclusive licensee of certain patented and other
proprietary technology in the field of oxygen concentration/generation (the
"Licensed Technology") licensed to Debtor pursuant to a certain License
Agreement dated February 28, 1997, as amended by an Amendment to License
Agreement dated March 31, 1998 (as amended, the "CeramPhysics License") by and
between Debtor and CeramPhysics, Inc., an Ohio corporation ("CeramPhysics").
WHEREAS, pursuant to a certain Exclusive License Agreement by and among
Debtor, Secured Party and NetMed, Inc., an Ohio corporation ("NetMed"), of even
date herewith (the "Generon License"), Debtor granted to Secured Party certain
exclusive rights in and to certain "Licensed Technology" as more fully described
and defined in the Generon License, and Debtor, Secured Party and NetMed
contemporaneously entered into a certain Intellectual Property Development and
Ownership Agreement in connection therewith (the "Development Agreement").
WHEREAS, pursuant to the CeramPhysics License, Debtor is required to
make certain payments to CeramPhysics including, but not limited to, payments of
royalties, and the failure by Debtor to make the required payments under the
CeramPhysics License may result in termination of the CeramPhysics License and
may jeopardize the Secured Party's exclusive rights to use the Licensed
Technology.
WHEREAS, it is in the best interest of the Secured Party for Debtor to
meet its payment obligations under the CeramPhysics License so that Secured
Party may maintain its use of the technology licensed to Debtor under the
Generon License, and Generon would not enter into the Generon License without
assurances of uninterrupted use of the technology licensed thereunder.
WHEREAS, pursuant to the terms of this Agreement, Debtor has given the
Secured Party the right, in its sole discretion, to satisfy Debtor's payment
obligations under the CeramPhysics License for and on behalf of Debtor in the
event that, for any reason, Debtor falls to meet its payment obligations under
the CeramPhysics License, upon the condition that Debtor grants to and creates
in favor of the Secured Party a present first lien and security interest in
Debtor's license of the Licensed Technology to secure any such future advances.
NOW, THEREFORE, to induce the Secured Party to enter into the Generon
License and the Development Agreement, and to pay the consideration set forth in
Section 3 of the Development Agreement, and for and in consideration of any
amounts paid by the Secured Party
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to CeramPhysics at anytime during the term of the Generon License for or in the
name of Debtor, and intending to be legally bound hereby, Debtor agrees as
follows:
1. GRANT OF SECURITY INTEREST.
As security for the full and faithful performance of the duties and
obligations of the Secured Party and NetMed under the Generon License and the
Development Agreement, and for the repayment in full of any amounts paid to
CeramPhysics for or on behalf of Debtor under the CeramPhysics License, Debtor
hereby conveys, assigns, pledges, mortgages, transfers, and grants to the
Secured Party, and its successors and assigns, a first lien on and security
interest in and to, the following (which shall be referred to herein as the
"Collateral"):
(a) The CeramPhysics License, and all proceeds thereof including,
without limitation, all rights of Debtor as the exclusive licensee of
CeramPhysics' patent, oxygen concentration/generation technology, confidential
information, and proprietary material as more fully set forth in the
CeramPhysics License, including, without limitation, all interests, proceeds,
royalties, recoveries, income, and license and sublicense fees associated
therewith; and
(b) All other intellectual property and related rights of Debtor in
and related to the Licensed Technology, including, without limitation,
confidential or proprietary information, know-how, trade secrets, secret
formulas, technical information, computer software, programs, source code,
object code, tape disks and related materials, patents and applications
therefor, copyright registrations and applications therefor, trademarks, service
marks, trade names and all names used or usable by Debtor in connection with the
CeramPhysics License, and all goodwill related to the foregoing.
2. REIMBURSEMENT AGREEMENT.
(a) Debtor hereby grants to the Secured Party the right, in Secured
Party's sole discretion, to cure any monetary default under the CeramPhysics
License for and on behalf of Debtor. For purposes hereof, Debtor hereby appoints
and constitutes the Secured Party as Debtor's attorney-in-fact for making any
such payments. Debtor hereby covenants and agrees to inform the Secured Party in
writing of any payment due to CeramPhysics that Debtor has not paid or cannot
for any reason pay on a timely basis, and to notify the Secured Party
immediately of any claim, demand or other request for payment by CeramPhysics or
notice of default from CeramPhysics for any reason.
(b) In the event that the Secured Party makes any payment hereunder
to CeramPhysics, the Secured Party shall notify Debtor in writing, accompanied
by a demand for reimbursement of the amounts paid. Debtor shall repay such
amounts paid within ten (10) business days after the date of such payment, with
interest at a rate per annum equal to the prime rate (as published in THE WALL
STREET JOURNAL on the date of the payment by the Secured Party to CeramPhysics)
plus four percent (4%) through the date of repayment.
(c) Debtor's failure to repay any amounts due under Section 2(b)
above within ten business (10) days as provided above, or CeramPhysics refusal
to accept any payment
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tendered by Generon pursuant to the terms hereof, and/or any breach or default
under the Generon License and/or the Development Agreement which remains uncured
after forty-five (45) days following notice by Generon to the Secured Party
thereof or that Debtor has not commenced and is diligently pursuing a cure where
the breach or default cannot be cured within such period, shall constitute an
"Event of Default" hereunder and shall entitle the Secured Party, without
further notice to Debtor, to pursue the remedies of a Secured Party described in
Section 6(a) hereof, and in that regard, the Secured Party shall be entitled to
recover, in addition to all amounts due and owing, any and all fees and expenses
(including attorneys' fees and expenses) incurred in pursuit of the remedies so
provided.
3. DUTIES OF DEBTOR. Debtor shall have the following duties and
responsibilities:
(a) To promptly notify the Secured Party of any notice by
CeramPhysics to Debtor of any default, event of default, event which with the
passage of time could give rise to a default or event of default, or other
breach by Debtor in the performance and observance of any of the terms,
covenants, representations or warranties of the CeramPhysics License.
(b) Debtor shall not assign the CeramPhysics License or otherwise
transfer its interest in the Licensed Technology or terminate, cancel, modify,
change, alter or amend the CeramPhysics License, either orally or in writing,
without the prior written consent of the Secured Party.
4. REPRESENTATIONS, COVENANTS, AND WARRANTIES. Debtor represents,
warrants, covenants and agrees that:
(a) Debtor owns and will continue to own all right, title and
interest in and to the Licensed Technology as set forth in the CeramPhysics
License, free and clear of all claims, security interests, liens, encumbrances,
agreement and rights of third parties, and will defend such licensed rights
against the claims and demands of all persons.
(b) The CeramPhysics License is in full force and effect and has not
been modified or amended in any manner, except as heretofore disclosed to the
Secured Party in writing.
(c) Debtor has the full power and authority to extend the rights
granted herein to Secured Party and has not made and will not make during the
term of this Security Agreement any commitment to another party inconsistent
with or in derogation of such rights.
(d) All payments due and payable to CeramPhysics pursuant to the
CeramPhysics License have been paid in full to the extent payable before the
date of this Security Agreement.
(e) No consent or approval of CeramPhysics or any other third party
is required in order to effectuate the terms hereof or to permit Debtor to grant
the security interest described above or to perform hereunder.
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5. PROVISIONS APPLICABLE TO PROTECTION OF FIRST PRIORITY LIENS.
(a) UCC FINANCING STATEMENTS. In connection herewith, Debtor shall
execute and deliver to the Secured Party such financing statements, assignments,
acknowledgements, and other documents as are necessary or required to perfect
the Secured Party's first lien and security interest in the Collateral. Debtor
shall further execute and/or cause to be filed all such other documents
(including, without limitation, all those required by subsection (b) hereof) as
may be necessary or desirable to perfect or maintain, to the extent and in the
manner herein provided, the first priority security interests of the Secured
Party in the Collateral granted hereunder at all times fully perfected and in
full force and effect. Debtor shall cause to be delivered on the date hereof
opinions of counsel, in form and substance acceptable to the Secured Party, with
respect to the validity, priority and perfection of the liens created hereunder.
(b) FURTHER ASSURANCES. Debtor represents and agrees that it will,
at its own expense, from time to time at the request of the Secured Party,
execute, file, record, and/or deliver to the Secured Party (or cause the same to
occur) such instruments, notices, assignments, bills, financing statements,
continuation statements, and other documents and amendments thereto, necessary
to perfect and preserve the priority of, said first priority security interests
on and in the Collateral and each item thereof.
6. REMEDIES, APPLICATION OF MONEYS.
(a) REMEDIES. Upon the occurrence of any Event of Default, the
Secured Party shall have such rights and remedies in respect of the Collateral
or any portion thereof as provided by applicable law, including, without
limitation, the Uniform Commercial Code as enacted in any jurisdiction, and such
other rights and remedies in respect thereof which a secured party may have at
law or in equity or under this Security Agreement.
(b) APPLICATION OF MONEYS. The Secured Party shall apply any
proceeds of any realization on Collateral to the satisfaction of the amounts due
and owing to the Secured Party, with any remainder being paid to Debtor. Nothing
herein shall be deemed to preclude the Secured Creditor from bidding on the
Collateral at any sale pursuant to the enforcement of the Secured Party's rights
and remedies hereunder.
(c) DEFICIENCY. If proceeds referred to in subsection (b) above are
insufficient to pay the obligations in full, Debtor shall continue to be liable
for the entire deficiency.
7. CARE OF COLLATERAL BY SECURED PARTY. The Secured Party shall not
have the duty to take any action necessary to preserve Debtor's right, title or
interest to or in any Collateral against any other party.
8. REMEDIES CUMULATIVE. No remedy herein conferred upon the Secured
Party is intended to be exclusive of any other remedy and each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
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9. REMEDIES NOT WAIVED. No course of dealing between Debtor and the
Secured Party or any delay on the part of any of them in exercising any rights
or remedies hereunder or under applicable law shall operate as a waiver of any
rights or remedies of any of them, whether arising hereunder or under any other
agreement between the parties.
10. DEFEASANCE. Upon termination of the Generon License and the
indefeasible payment in full of all obligations of Debtor to the Secured Party,
this Security Agreement shall terminate and be of no further force and effect;
and in such event, the Secured Party at Debtor's expense will take all action
necessary to terminate the security interests of the Secured Party in the
Collateral. Until such time, however, this Security Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
11. NO DISCHARGE. The obligations of Debtor to the Secured Party shall
be absolute and unconditional and shall remain in full force and effect without
regard to, and shall not be released, discharged or in any way affected by: (a)
any exercise or nonexercise of any right, remedy, power or privilege under or in
respect of this Security Agreement or applicable law, or any waiver, consent,
extension, indulgence or other action or inaction in respect of any thereof, or
(b) any other action or thing (other than payment) or omission or delay to do
any other action or thing which may or might in any manner or to any extent
otherwise operate as a discharge of Debtor as a matter of law.
12. AMENDMENT; WAIVER. No amendment or waiver of any provision of this
Security Agreement nor consent to any departure by Debtor therefrom shall in any
event be effective unless the same shall be in writing.
13. SEVERABILITY. Any provision of this Security Agreement prohibited
by the laws of any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition, or modified to conform with such laws,
without invalidating the remaining provisions of this Security Agreement, and
any such prohibition in any jurisdiction shall not invalidate such provisions in
any other jurisdiction. All rights, remedies and powers provided in this
Security Agreement may be exercised only to the extent that the exercise thereof
does not violate any applicable provision of law, and all the provisions of this
Security Agreement are intended to be subject to all applicable mandatory
provisions of law which may be controlling and to be limited to the extent
necessary so that they will not render this Security Agreement illegal, invalid,
unenforceable, in whole or in part, or not entitled to be recorded, registered,
or filed under the provisions of any applicable law.
14. ASSIGNEES. Any permitted assignee of or successor to a party hereto
shall succeed to all rights and benefits, and be bound by all obligations,
inuring to such party.
15. GOVERNING LAW. This Security Agreement shall be construed in
accordance with and governed by the laws, including equitable principles but
without regard to principles of conflict of laws, of the State of Ohio.
16. HEADINGS. The section headings in this Security Agreement are for
convenience only and shall not affect the construction hereof.
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17. Notices. Any notice hereunder shall be in writing and shall be
conclusively deemed to have been received by a party hereto and to be effective
on the day on which delivered to such party at its address set forth on the
signature pages hereto (or at such other address as such party shall specify to
the other parties hereto in writing), or, if sent by certified mail, on the
third business day after the day on which mailed, addressed to such party at
such address.
18. COUNTERPARTS. This Security Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument.
IN WITNESS WHEREOF, Debtor has caused this Security Agreement to be
duly executed and delivered as of the day and year first above written.
OxyNet, Inc..
By. /s/ Xxxxx X. Xxxxxxxx
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Title: President
MG Generon, Inc.
By. /s/ Xxxxx X. Xxxxx
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Title: VP and General Manager
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