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 (the "Grantor") in
favor of EUREKA I, L.P., as collateral agent (in such capacity, "Collateral
Agent").
W I T N E S S E T H
WHEREAS, Medical Technology Systems, Inc. ("MTS") has entered into that
certain Securities Purchase Agreement of even date herewith with Eureka I, L.P.,
as purchaser (the "Purchaser") and Collateral Agent (as amended, restated or
otherwise modified from time to time, the "Purchase Agreement"), providing,
subject to the terms and conditions thereof, for the purchase from MTS by the
Purchaser of, among other things, $4,000,000 aggregate principal amount of Notes
(as defined in the Purchase Agreement);
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 business of MTS is dependent on its ability to use the Patents
and Grantor will be directly benefited by the purchase of the Notes from MTS by
the Purchaser;
WHEREAS, to induce the Purchaser to enter into the Purchase Agreement with
the Company and to purchase the Notes, the Grantor has agreed to execute and
deliver this Security Agreement and to assign and grant to Collateral Agent, for
its benefit and for the benefit of the Noteholders, a security interest in
certain of the Grantor's assets, including, without limitation, its patents and
patent applications;
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. Certain Definitions. All capitalized terms used but not otherwise
defined herein shall have the meaning herein as in the Purchase Agreement.
2. Grant of Security Interests. To secure the complete and timely payment
and satisfaction of the Liabilities, Grantor hereby grants to Collateral Agent,
as agent for itself and the Noteholders, a continuing security interest in
Grantor's entire right, title and interest in and to all of 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").
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The term "Liability" or "Liabilities" shall mean the indebtedness and
liabilities of MTS to the Collateral Agent and/or the Noteholders under this
Agreement, the Notes, the Purchase Agreement and the Security Documents (as
defined in the Purchase Agreement), including but not limited to all obligations
to perform acts or refrain from taking any action and any obligations of MTS
owing to the Collateral Agent and/or the Noteholders.
3. Intercreditor Agreement. The priority of the security interests granted
hereby, the exercise by the Collateral Agent of any of its rights or remedies
hereunder, and the covenants of the Grantor contained herein (in each case
whether or not so expressed) are subject in all respects to the Intercreditor
Agreement (as such term is defined in the Purchase Agreement). Any reference to
property in the possession of, or to property secured or to be secured to, the
Collateral Agent will be deemed to refer to, or to be satisfied by, property in
the possession of or secured to the "Senior Lender" under the Intercreditor
Agreement. The security interests created in favor of the Collateral Agent
hereunder are subordinate and junior to the security interests created in favor
of the Senior Lender (as such term is defined in the Intercreditor Agreement).
4. Warranties and Representations. Grantor warrants and represents to
Collateral 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
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.
5. Restrictions on Future Agreements. Grantor agrees that, until the
Liabilities shall have been paid and satisfied in full, Grantor shall not,
without the prior written consent of Collateral 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 Collateral Agent under this Security Agreement.
6. 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, Grantor shall (i)
become aware of any existing Patents of which Grantor has not previously
informed Collateral 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.
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7. 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. Grantor agrees that, during the
continuance of an Event of Default, the use by the Collateral Agent of all
Patents shall be without any liability for royalties or other related charges
from Collateral Agent to Grantor.
8. Release of Security Interest. This Security Agreement is made for
Collateral purposes only. Upon payment and satisfaction in full of the
Liabilities, Collateral Agent shall take such actions as may be necessary or
proper to terminate the security interests created hereby.
9. 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 Collateral Agent 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.
10. 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, (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 10 shall be borne by Grantor.
11. Agent's Right to Xxx. During the continuance of an Event of Default and
at the direction of the Required Noteholders and subject to the Intercreditor
Agreement, Collateral 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
Collateral Agent shall commence any such suit, Grantor shall, at the request of
Collateral Agent, do any and all lawful acts and execute any and all proper
documents required by Collateral Agent in aid of such enforcement and Grantor
shall promptly, upon demand, reimburse and indemnify Collateral Agent for all
costs and expenses actually incurred by Collateral Agent in the exercise of its
rights under this Section 11.
12. Waivers. No course of dealing between Grantor and Collateral Agent, nor
any failure to exercise, nor any delay in exercising, on the part of Collateral
Agent, any right, power or privilege hereunder 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.
13. 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.
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14. Modification. This Security Agreement cannot be altered, amended or
modified in any way, except as specifically provided in Section 6 hereof or by a
writing signed by the parties hereto.
15. Cumulative Remedies; Power of Attorney; Effect on Financing Agreements.
All of Collateral Agent's rights and remedies with respect to the Patents,
whether established hereby, or by any other agreements or by law shall be
cumulative and may be exercised singularly or concurrently. Grantor hereby
authorizes Collateral Agent during the continuance of an Event of Default and at
the direction of the Required Noteholders and subject to the Intercreditor
Agreement, to make, constitute and appoint any officer or agent of Collateral
Agent as Collateral 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
Collateral Agent in the use of the Patents or (ii) take any other actions with
respect to the Patents as Collateral Agent deems to be in the best interest of
Collateral 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. Grantor acknowledges and agrees that this
Security Agreement is not intended to limit or restrict in any way the rights
and remedies of the Collateral Agent and the Noteholders under the Purchase
Agreement but rather is intended to facilitate the exercise of such rights and
remedies. Collateral Agent and the Noteholders shall have, in addition to all
other rights and remedies given to them by the terms of this Security Agreement,
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.
16. Binding Effect; Benefits. This Security Agreement shall be binding upon
Grantor and its respective successors and assigns, and shall inure to the
benefit of the Collateral Agent, the Noteholders and their respective
successors, nominees and assigns.
17. 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.
18. Headings. Paragraph headings used herein are for convenience only and
shall not modify the provisions which they precede.
19. Further Assurances. Grantor agrees to execute and deliver such further
agreements, instruments and documents, and to perform such further acts, as
Collateral Agent (at the direction of the Required Noteholders) shall reasonably
request from time to time in order to carry out the purpose of this Security
Agreement and agreements set forth herein.
20. Survival of Representations. All representations and warranties of
Grantor contained in this Security Agreement shall survive the execution and
delivery of this Security Agreement.
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IN WITNESS WHEREOF, Grantor has duly executed this Security Agreement as of
the date first written above.
THE XXXXXX FAMILY REVOCABLE TRUST
By _______________________________________
Its Trustee
Agreed and Accepted
As of the Date First Written Above
EUREKA I, L.P., as Collateral Agent
By: EUREKA MANAGEMENT, L.P.,
its sole general partner
By: BERWIND CAPITAL PARTNERS, LLC,
its sole general partner
By:______________________________
Xxxxxxxxx X. Xxxxx,
President
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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STATE OF NEW YORK :
: SS.
COUNTY OF NEW YORK :
On this, the ____ day of June, 2002, before me, a Notary Public, personally
appeared Xxxxxxxxx X. Xxxxx, who acknowledged herself to be the President of
Berwind Capital Partners, LLC, and that she 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 herself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
____________________________
Notary Public
My commission expires
STATE OF NEW YORK :
: SS.
COUNTY OF NEW YORK :
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 Revocable 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
