SECURITY AGREEMENT
Security
Agreement (the “Agreement”) dated August ____, 2007 made by Patient Safety
Technologies, Inc., a Delaware corporation (“Debtor”), in favor of Xxxx Xxxxxx
Capital Partners, LLC, a Delaware limited liability company (the “Secured
Party”).
Debtor
hereby agrees in favor of Secured Party as follows:
1. In
consideration for loans made or to be made to Debtor by Secured Party evidenced
by the Promissory Note (the “Note”) dated the date hereof of Debtor in the
principal amount of Two Million Five Hundred Thirty Thousand Five Hundred Fifty
Eight Dollars and Forty Cents ($2,530,558.40), payable to the order of Secured
Party (such note, as amended, modified, supplemented, replaced or substituted
from time to time, being herein referred to as the “Note”), Debtor hereby grants
to Secured Party a continuing security interest in, lien upon and a right of
setoff against, and Debtor hereby assigns to Secured Party, all of Debtor's
right, title and interest in and to the Collateral described in Section 2,
to
secure the full and prompt payment, performance and observance of all present
and future indebtedness, obligations, liabilities and agreements of any kind
of
Debtor to Secured Party, now existing or hereafter arising under or in
connection with the Note or this Security Agreement (all of the foregoing being
herein referred to as the “Obligations”).
2. “Collateral”
means
all
of Debtor’s and Subsidiaries’ personal property, now owned or hereafter
acquired, including without limitation all Accounts, Letter-of-Credit Rights,
Supporting Obligations, Electronic Chattel Paper, Tangible Chattel Paper and
Instruments, as these terms are defined in the Uniform Commercial Code, together
with all Inventory, Equipment, Patents,
Trademarks and Additional Collateral and all products and proceeds of the
foregoing including, without limitation, proceeds of any insurance policies
insuring any of the foregoing, all as more fully described on Schedule A annexed
hereto. “Subsidiaries” means Surgicount Medical, Inc., a California corporation,
and Automotive Services Group, Inc., (formerly known as Xxxx Xxxxxx Xxxxxx
Merchant Capital, Inc.) a Delaware corporation, each a wholly-owned subsidiary
of the Debtor.
3. Debtor
hereby warrants, represents, covenants and agrees (as of the date hereof and
so
long as any Obligations remains outstanding) that: (a) the chief executive
office and other places of business of Debtor, the books and records relating
to
the Collateral (except for such records as are in the possession or control
of
Secured Party) and the Collateral are located at the address set forth below
and
Debtor will not change any of the same, or merge or consolidate with any person
or change its name or conduct its business under any trade, assumed or
fictitious name, without prior written notice to and consent of Secured Party;
(b) the Collateral is and will be used in the business of Debtor and not for
personal, family, household or farming use; (c) Debtor will not abandon or
assign, or lease, other than in the ordinary course of Debtor's business, nor
will Debtor suffer or permit any of the same to occur with respect to, any
Collateral, without prior written notice to and consent of Secured Party; (d)
Debtor will make payment or will provide for the payment, when due, of all
taxes, assessments or contributions or other public or private charges which
have been or may be levied or assessed against Debtor, whether with respect
to
the Collateral, to any wages or salaries paid by Debtor, or otherwise, will
deliver to Secured Party, on
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demand,
certificates or other evidence satisfactory to Secured Party attesting thereto
and shall cause Debtor's subsidiaries to take any such action as described
under
this section 3(d); (e) Debtor will use the Collateral for lawful purposes only,
with all reasonable care and caution and in conformity in all material respects
with all applicable laws, ordinances and regulations; (f) Debtor will, at
Debtor's sole cost and expense, keep the Collateral in good order, repair,
running condition and in substantially the same condition as on the date hereof,
reasonable wear and tear excepted, and Debtor will not, without the prior
written consent of Secured Party, alter or remove any identifying symbol or
number upon any of the Collateral; (g) Secured Party shall during the business
hours of the Debtor have free access to and right of inspection of any
Collateral and any papers, instruments and records pertaining thereto (and
the
right to make extracts from and to receive from Debtor originals or true copies
of such records, papers and instruments upon request therefor) and Debtor hereby
grants to Secured Party a security interest in all such records, papers and
instruments to secure the payment, performance and observance of the
Obligations; (h) Debtor
will, at its sole cost and expense, perform all acts and execute all documents
requested by Secured Party from time to time to evidence, perfect, maintain
or
enforce Secured Party's security interest granted herein or otherwise in
furtherance of the provisions of this Security Agreement; (i) at any time and
from time to time, Debtor shall, at its sole cost and expense, execute and
deliver to Secured Party such financing statements pursuant to the Uniform
Commercial Code (“UCC”), applications for certificate of title and other papers,
documents or instruments as may be requested by Secured Party in connection
with
this Security Agreement, and to the extent permitted by applicable law, Debtor
hereby authorizes Secured Party to execute and file at any time and from time
to
time one or more financing statements or copies thereof or of this Security
Agreement with respect to the Collateral signed only by Secured Party; (j)
Debtor assumes all responsibility and liability arising from the Collateral;
(k)
the Secured Party may, only upon giving Debtor forty five calendar days’ notice,
upon the occurrence and during the continuance of a Default (as hereinafter
defined), in its name or Debtor's or otherwise, notify any account debtor or
obligor of any Account, Contract, Document, Instrument, Chattel paper or general
intangible included in the Collateral to make payment to Secured Party; (l)
in
its discretion, Secured Party may, only upon giving Debtor twenty calendar
days’
notice, upon the occurrence and during the continuance of a Default, demand,
xxx
for, collect or receive any money or property at any time payable or receivable
on account of or in exchange for, or make any compromise or settlement deemed
desirable by Secured Party with respect to, any Collateral, and/or extend the
time of payment, arrange for payment in installments, or otherwise modify the
terms of, or release, any of the Obligations and/or the Collateral, or any
obligor, maker, endorser, acceptor, surety or guarantor of, or any party to,
any
of the Obligations or the Collateral;
(m) upon
giving Debtor twenty calendar days’ notice, Secured Party may, at any time and
from time to time, for the account of Debtor, pay any amount or do any act
required of Debtor hereunder and which Debtor fails to do or pay, and any such
payment shall be deemed an advance by Secured Party to Debtor payable on demand
together with interest at the highest rate then payable on any of the
Obligations; (n) upon the occurrence and during the continuance of a Default,
any proceeds of the Collateral received by Debtor shall not be commingled with
other property of Debtor, but shall be segregated, held by Debtor in trust
for
Secured Party, and immediately delivered to Secured Party in the form received,
duly endorsed in blank where appropriate to effectuate the provisions hereof,
the same to be held by Secured Party as additional Collateral hereunder or,
at
Secured Party's option, to be applied to payment of the Obligations, whether
or
not due and in any order; and (o) in its sole discretion, Secured Party may,
at
any time and from time to time, assign, transfer or deliver to any transferee
of
any Obligations, any Collateral, whereupon Secured Party shall be fully
discharged from all responsibility and the transferee shall be vested with
all
powers and rights of Secured Party hereunder with respect thereto, but Secured
Party shall retain all rights and powers with respect to any Collateral not
assigned, transferred or delivered.
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4. The
term
Default as used in this Security Agreement shall mean any “Event of Default”, as
such term is defined in the Note.
5. Upon
the
occurrence and during the continuance of any Default, Secured Party may, upon
giving ten days’ notice or
demand
to Debtor, declare any Obligations immediately due and payable and Secured
Party
shall have the following rights and remedies (to the extent permitted by
applicable law) in addition to all rights and remedies of a Secured party under
the UCC or of Secured Party under the Obligations, all such rights and remedies
being cumulative, not exclusive and enforceable alternatively, successively
or
concurrently:
Secured
Party may, only upon giving Debtor forty five days’ notice, with or without
judicial process or the aid and assistance of others, (i) enter upon any
premises in which any Collateral may be located and, without resistance or
interference by Debtor, take possession of the Collateral, and (ii) sell,
resell, lease, assign and deliver, grant options for or otherwise dispose of
any
part or all of the Collateral in its then condition or following any
commercially reasonable preparation or processing, at public sale or proceedings
or otherwise, by one or more contracts, in one or more parcels, at the same
or
different times, with or without having the Collateral at the place of sale
or
other disposition, for cash and/or credit, and upon any terms, at reasonable
place(s) and time(s), and by otherwise complying with applicable statutes
requiring reasonable notice of sale or other disposition to Debtor. Debtor
hereby agrees that the sending of fifteen days' notice by ordinary mail, postage
prepaid, to any address of Debtor set forth in this Security Agreement shall
be
deemed reasonable notice thereof. If any Collateral is sold by Secured Party
upon credit or for future delivery, Secured Party shall not be liable for the
failure of the purchaser to pay for same and in such event Secured Party may
resell or otherwise dispose of such Collateral. Secured Party may buy any part
or all of the Collateral at any public sale. Secured Party may apply the cash
proceeds actually received from any sale or other disposition to the Obligations
in such order and as to principal or interest as Secured Party may desire;
and
Debtor shall remain liable and will pay Secured Party on demand any deficiency
remaining, together with interest thereon at the highest rate then payable
on
the Obligations, with any surplus to be paid to Debtor, subject to any duty
of
Secured Party imposed by law to the holder of any subordinate security interest
in the Collateral known to Secured Party.
6. Secured
Party's prior recourse to any Collateral shall not constitute a condition of
any
demand, suit or proceeding for payment or collection of the Obligations nor
shall any demand, suit or proceeding for payment or collection of the
Obligations constitute a condition of any recourse by Secured Party to the
Collateral. Any suit or proceeding by Secured Party to recover any of the
Obligations shall not be deemed a waiver of, or bar against, subsequent
proceedings by Secured Party with respect to any other Obligations and/or with
respect to the Collateral. No act, omission or delay by Secured Party shall
constitute a waiver of its rights and remedies hereunder or otherwise. No single
or partial waiver by Secured Party of any covenant, warranty, representation,
Default or right or remedy which he may have shall operate as a waiver of any
other covenant, warranty, representation, Default, right or remedy or of the
same covenant, warranty, representation, Default, right or remedy on a future
occasion. Debtor hereby waives presentment, notice of dishonor and protest
of
all instruments included in or evidencing any Obligations or Collateral, and
all
other notices and demands whatsoever (except as expressly provided
herein).
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7. Secured
Party may assign its rights and obligation hereunder to any Affiliate of Secured
Party provided that such Affiliate assumes all of the liabilities or obligations
of Secured Party hereunder. For purposes of this section, “Affiliate” of any
person means any other person or entity which, directly or indirectly, controls
or is controlled by that person, or is under common control with that person
or
entity. “Control” (including, with correlative meaning, the terms “controlled
by” and “under common control with”), as used with respect to any person or
entity, means the possession, directly or indirectly, of the power to direct
or
cause the direction of the management and policies of such person or entity,
whether through the ownership of voting securities, by contract or
otherwise.
8. The
security interest granted herein shall have priority only over the security
interests subsequently granted by the Debtor to any party; provided however
that
the Secured Party shall subordinate this security interest in favor of any
lender who provides financing to the Debtor of up to $2,000,000 in the form
of a
new credit facility and/or a replacement credit facility.
9. All
terms
herein shall have the meanings as defined in the UCC, unless the context
otherwise requires. No provision hereof shall be modified, altered, waived,
released, terminated or limited except by a written instrument expressly
referring to this Security Agreement and to such provision, and executed by
the
party to be charged. The execution and delivery of this Security Agreement
has
been authorized by the Board of Directors of Debtor. This Security Agreement
and
all Obligations 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, its executors, administrators, successors,
endorsees and assigns. This Security Agreement and the Obligations shall be
governed in all respects by the laws of the State of Delaware applicable to
contracts executed and to be performed in such state. If any term of this
Security Agreement shall be held to be invalid, illegal or unenforceable, the
validity of all other terms hereof shall in no way be affected thereby. Secured
Party is authorized to annex hereto any schedules referred to herein. Debtor
acknowledges receipt of a copy of this Security Agreement.
[Signature
page follows.]
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IN
WITNESS WHEREOF, the undersigned has executed or caused this security agreement
to be executed in the State of California on the date first above set
forth.
PATIENT SAFETY TECHNOLOGIES, INC. | |
By:
Name:
Xxxxxxx
X. Xxxxx
Title:
Chief Executive Officer
|
|
XXXX XXXXXX CAPITAL PARTNERS, LLC | |
By:
Name:
Title:
Managing Member
|
Location
of books and records relating to Collateral:
00000
Xxxx Xxxx, Xxxxx 000, Xxxxxxxx, XX 00000
All
locations of Collateral:
00000
Xxxx Xxxx, Xxxxx 000, Xxxxxxxx, XX 00000
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SCHEDULE
A
Accounts means
“Accounts” as defined in the Uniform Commercial Code.
Additional
Collateral
means
(a) all “Securities Entitlements,” “Investment Property,” “Financial Assets,”
Commercial Tort Claims and “Documents” as those terms are defined in the Uniform
Commercial Code as of the date hereof, whether now existing or hereafter
acquired or arising, (b) all securities, bills of lading, dock warrants, dock
receipts, warehouse receipts or orders for the delivery of goods, and any other
documents which in the regular course of business or financing are treated
as
adequately evidencing that the persons in possession of them are entitled to
receive, hold, and dispose of the goods they cover; (c) all motor vehicles,
whether now owned or hereafter acquired by the Debtor, and all accessions and
additions thereto, replacements therefor, and substitutions therefor; (d) all
“General Intangibles” as that term is defined in the Uniform Commercial Code as
of the date hereof, whether presently owned or hereafter acquired, including,
without limitation, Payment Intangibles and Software (as those terms are defined
in the Uniform Commercial Code), all choses in action, causes of action, and
all
other intangible personal property of the Debtor, including, without limitation,
corporate or other business records, inventions, designs, patents, patent
applications, trademarks, servicemarks, tradenames, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, tax refund
claims, credit files, computer programs, printouts and other computer materials
and records, guaranty claims, security interests or other property held by
or
granted to Debtor to secure payment of any obligation of any obligor of Debtor
and any and all of the rights of Debtor of whatever nature under any and all
contracts, agreements, or leases (whether of real or personal property) to
which
the Debtor is or may become a party, including without limitation all of the
rights of Debtor to enforce all of the provisions of, and to obtain payments
or
other performance due under, all contracts, agreements, or leases; (e) all
of
Debtor’s rights (including rights as licensee and lessee) with respect to all
patents, trademarks, copyrights and other intellectual property rights,
know-how, technology, computer hardware and software and all rights with respect
thereto including, any and all licenses, options, warranties, service contracts,
program services, test rights, maintenance rights, support rights, improvement
rights, renewal rights and indemnifications, and any substitutions,
replacements, additions or model conversions of any of the foregoing, and
further including (i) computer and other electronic data processing hardware,
including all integrated computer systems, central processing units, memory
units, display terminals, printers, computer elements, card readers, tape
drives, hard and soft disk drives, cables, electrical supply hardware,
generators, power equalizers, accessories, peripheral devices and other related
computer hardware, (ii) all Software and all software programs designed for
use
on the computers and electronic data processing hardware described in clause
(i)
above, including all operating system software, utilities and application
programs in any form (source code and object code in magnetic tape, disk or
hard
copy format or any other listings whatsoever (iii) any firmware associated
with
any of the foregoing; and (iv) any documentation for hardware, Software and
firmware described in clauses (i), (ii) and (iii) above, including flow charts,
logic diagrams, manuals, specifications, training materials, charts and pseudo
codes, (f) all monies, securities and other property of the Debtor, and the
proceeds thereof, now or hereafter held or received by or in transit to the
Investor whether for safekeeping, custody, pledge, transmission, collection
or
otherwise, and also in and to any and all deposits, general or special, and
credits of the Debtor with, and any and all claims of the Debtor against, the
Bank now or at any time hereafter existing, and (g) intellectual property
rights.
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Electronic
Chattel Paper
means
“Electronic Chattel Paper” as defined in the Uniform Commercial
Code.
Equipment means
all
Equipment, as that term is defined in the Uniform Commercial Code as of the
date
hereof, of Debtor, whether presently owned or hereafter acquired, and including,
without limitation, machinery, furniture, furnishings, and fixtures, and any
and
all goods used or bought for use in or being used or for use in the conduct
of
Debtor’s business and all goods used or bought for use in Debtor’s business
which are not included within the definition of Inventory, and all accessions
and additions thereto, replacements therefor, and substitutions therefor,
supplies and motor vehicles, now owned and hereafter acquired, present and
future, by the Debtor of whatsoever name, nature, kind or description, wherever
located, and all additions and accessions thereto and replacements or
substitutions therefor, and all pro-ceeds thereof and all proceeds of any
insurance thereon.
Inventory
means
all “Inventory” as that term is defined in the Uniform Commercial Code as of the
date hereof, including, without limitation, any and all goods, merchandise
or
other personal property, wherever located and whether or not in transit, now
owned or hereafter acquired by the Debtor, which is or may at any time be held
for sale or lease, or furnished or to be furnished under any contract of service
or held as raw materials, work in process, supplies or materials used or
consumed in the Debtor’s business, and all such property the sale or other
disposition of which has given rise to Accounts, Chattel Paper, Documents,
or
Instruments and which has been returned to or repossessed or stopped in transit
by the Debtor.
Letter-of-Credit
Rights
means
“Letter-of-Credit Rights” as defined in the Uniform Commercial
Code.
Patents
mean all
of the Debtor’s right, title and interest, present and future, in and to (a) all
letters patent of the United States or any other country, all right, title
and
interest therein and thereto, and all registrations and recordings thereof,
including without limitation applications, registrations and recordings in
the
United States Patent and Trademark Office or in any similar office or agency
of
the United States and State thereof or any other country or any political
subdivision thereof, all whether now owned or hereafter acquired by the Debtor;
and (b) all reissues, continuations, continuations-in-part or extensions thereof
and all li-censes thereof; and all proceeds of the foregoing and all proceeds
of
any insurance on the foregoing.
Supporting
Obligations
means
“Supporting Obligations” as defined in the Uniform Commercial Code.
Tangible
Chattel Paper
means
“Tangible Chattel Paper” as defined in the Uniform Commercial Code.
Trademarks
mean all
of the Debtor’s right, title and interest, present and future, in and to (a) all
trademarks, trade names, trade styles, service marks, prints and labels on
which
said trademarks, trade names, trade styles and service marks have appeared
or
appear, designs and general intangibles of like nature, now existing or
hereafter adopted or acquired, all right, title and interest therein and
thereto, and all registrations and recordings thereof, including without
limitation applications, registrations and recordings in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof, or any other country or any political subdivision
thereof, all whether now owned or hereafter acquired by the Debtor; (b) all
reissues, ex-tensions or renewals thereof and all licenses thereof; and (c)
the
goodwill of the business symbolized by each of the Trademarks, and all customer
lists and other records of the Debtor relating to the distribution of products
bearing the Trademarks; and all proceeds of the foregoing and all proceeds
of
any insurance on the foregoing.
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