EXHIBIT 4.5
OPHTHALMIC IMAGING SYSTEMS
SECURITY AGREEMENT
To: Laurus Master Fund, Ltd.
c/o Onshore Corporate Services, Ltd.
P.O. Box 1234 G.T
Queensgate House
South Church Street
Grand Cayman, Cayman Islands
Gentlemen:
1. To secure the payment of all Obligations (as hereafter defined), we
hereby grant to you a continuing security interest in all of the following
property now owned or at any time hereafter acquired by us, or in which we now
have or at any time in the future may acquire any right, title or interest (the
"Collateral"): all accounts, inventory, equipment, goods, documents, instruments
(including, without limitation, promissory notes), contract rights, general
intangibles (including, without limitation, payment intangibles and an absolute
right to license on terms no less favorable than those current in effect among
our affiliates, but not own intellectual property), chattel paper, supporting
obligations, investment property, letter-of-credit rights, trademarks and
tradestyles in which we now have or hereafter may acquire any right, title or
interest, all proceeds and products thereof (including, without limitation,
proceeds of insurance) and all additions, accessions and substitutions thereto
or therefor. In the event we wish to finance the acquisition of any hereafter
acquired equipment and have obtained a commitment from a financing source to
finance such equipment from an unrelated third party, you agree to release your
security interest on such hereafter acquired equipment so financed by such third
party financing source.
The term "Obligations" as used herein shall mean and include all debts,
liabilities and obligations owing by (a) us to you hereunder and under the
Convertible Term Note dated as of the date hereof made by us in favor of you in
the original principal amount of $1,200,000, as amended, modified and
supplemented from time to time or otherwise (as amended, modified and
supplemented from time to time, the "Note ").
2. Laurus Master Fund, Ltd. ("Laurus") does hereby wholly subordinate
payment of the Obligations of Ophthalmic Imaging Systems ("Borrower") to Laurus
(referred to as "Subordinated Indebtedness") to any and all indebtedness of
Borrower in existence on the date hereof to each of (i) Bank Leumi Le-Israel
B.M. pursuant to that certain Commercial Security Agreement dated as of April
30, 2003 in respect of a limited guarantee issued by the Borrower to Bank Leumi
Le-Israel in the amount of $900,000 (the "Leumi Debt") and (ii) United Mizrahi
Bank pursuant to that certain secured debenture dated as of December 9, 2002 in
respect of a issued by the Borrower to United Bank Mizrahi in an amount up to
$800,000 (the "Mizrahi Debt"), arising directly from the Leumi Debt or the
Mizrahi Debt, (hereinafter referred to as "Superior Indebtedness"). So long as
Borrower is indebted to either of Bank Leumi-Le-Israel B.M. or United Bank
Mizrahi on account of Superior Indebtedness, the parties hereto undertake and
agree as follows:
3. Subordinated Indebtedness shall, at all times and in all respects be
wholly subordinate and inferior in right of payment to the Superior Indebtedness
(not to exceed a maximum amount inclusive of all currently outstanding
principal, interests, fees costs and expenses relating to the Superior
Indebtedness on the date hereof of $1,400,000 ).
4. We hereby represent, warrant and covenant to you that: (a) we are a
company validly existing, in good standing and formed under the laws of the
State of Delaware and we will provide you thirty (30) days' prior written notice
of any change in our state of formation; (b) our legal name is Ophthalmic
Imaging Systems, as set forth in our Certificate of Incorporation as amended
through the date hereof; (c) we are the lawful owner of the Collateral and have
the sole right to grant a security interest therein and will defend the
Collateral against all claims and demands of all persons and entities; (d) we
will keep the Collateral free and clear of all attachments, levies, taxes,
liens, security interests and encumbrances of every kind and nature
("Encumbrances"), other than Permitted Encumbrances (as hereinafter defined),
except to the extent said Encumbrance does not secure indebtedness in excess of
$50,000 and such Encumbrance is removed or otherwise released within 10 days of
the creation thereof; (e) we will at our own cost and expense keep the
Collateral in good state of repair (ordinary wear and tear excepted) and will
not waste or destroy the same or any part thereof other than ordinary course
discarding of items no longer used or useful in our business; (f) we will not
without your prior written consent, sell, exchange, lease or otherwise dispose
of the Collateral, whether by sale, lease or otherwise, except for the sale of
inventory in the ordinary course of business and for the disposition or transfer
in the ordinary course of business during any fiscal year of obsolete and
worn-out equipment having an aggregate fair market value of not more than
$25,000 and only to the extent that (i) the proceeds of any such disposition are
used to acquire replacement Collateral which is subject to your first priority
security interest or are used to repay Obligations or to pay general corporate
expenses, or (ii) following the occurrence of an Event of Default which
continues to exist the proceeds of which are remitted to you to be held as cash
collateral for the Obligations; (g) we will insure the Collateral in your name
against loss or damage by fire, theft, burglary, pilferage, loss in transit and
such other hazards as you shall specify in amounts and under policies by
insurers acceptable to you and all premiums thereon shall be paid by us and the
policies delivered to you. If we fail to do so, you may procure such insurance
and the cost thereof shall constitute Obligations; (h) we will at all reasonable
times allow you or your representatives free access to and the right of
inspection of the Collateral; (i) we hereby indemnify and save you harmless from
all loss, costs, damage, liability and/or expense, including reasonable
attorneys' fees, that you may sustain or incur to enforce payment, performance
or fulfillment of any of the Obligations and/or in the enforcement of this
Agreement or in the prosecution or defense of any action or proceeding either
against you or us concerning any matter growing out of or in connection with
this Agreement, and/or any of the Obligations and/or any of the Collateral
except to the extent caused by your own gross negligence or willful misconduct.;
5. Following the occurrence and during the continuance of an Event of
Default, you shall have the right to instruct all of our account debtors to
remit payments on all accounts in accordance with your express written
instructions. You shall have full power and authority to collect each account,
through legal action or otherwise, and may settle, compromise, or assign (in
whole or in part) the claim for any account, or otherwise exercise any other
right now existing or hereafter arising with respect to any account if such
action will facilitate collection.
6. We shall be in default under this Agreement upon the happening of any
of the following events or conditions, each such event or condition an "Event of
Default" (a) we shall fail to pay when due or punctually perform any of the
Obligations; (b) any covenant, warranty, representation or statement made or
furnished to you by us or on our behalf was false in any material respect when
made or furnished; (c) the loss, theft, substantial damage, destruction, sale or
encumbrance to or of any of the Collateral or the making of any levy, seizure or
attachment thereof or thereon except to the extent said levy, seizure or
attachment does not secure indebtedness in excess of $50,000 and such levy,
seizure or attachment has not been removed or otherwise released within 10 days
of the creation or the assertion thereof; (d) we shall become insolvent, cease
operations, dissolve, terminate our business existence, make an assignment for
the benefit of creditors, suffer the appointment of a receiver, trustee,
liquidator or custodian of all or any part of our property; (e) any proceedings
under any bankruptcy or insolvency law shall be commenced by or against us and
if commenced against us shall not be dismissed within 30 days; (f) we shall
repudiate, purport to revoke or fail to perform any
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of our obligations under the Note; or (g) an Event of Default shall have
occurred under and as defined in the Note.
7. Upon the occurrence of any Event of Default and at any time thereafter,
you may declare all Obligations immediately due and payable and you shall have
the remedies of a secured party provided in the Uniform Commercial Code as in
effect in the State of New York, this Agreement and other applicable law. Upon
the occurrence of any Event of Default and at any time thereafter, you will have
the right to take possession of the Collateral and to maintain such possession
on our premises or to remove the Collateral or any part thereof to such other
premises as you may desire. Upon your request, we shall assemble the Collateral
and make it available to you at a place designated by you. If any notification
of intended disposition of any Collateral is required by law, such notification,
if mailed, shall be deemed properly and reasonably given if mailed at least ten
(10) days before such disposition, postage prepaid, addressed to us either at
our address shown herein or at any address appearing on your records for us. Any
proceeds of any disposition of any of the Collateral shall be applied by you to
the payment of all expenses in connection with the sale of the Collateral,
including reasonable attorneys' fees and other legal expenses and disbursements
and the reasonable expense of retaking, holding, preparing for sale, selling,
and the like, and any balance of such proceeds may be applied by you toward the
payment of the Obligations in such order of application as you may elect, and we
shall be liable for any deficiency.
8. If we default in the performance or fulfillment of any of the terms,
conditions, promises, covenants, provisions or warranties on our part to be
performed or fulfilled under or pursuant to this Agreement, you may, at your
option without waiving your right to enforce this Agreement according to its
terms, immediately or at any time thereafter and without notice to us, perform
or fulfill the same or cause the performance or fulfillment of the same for our
account and at our sole cost and expense, and the cost and expense thereof
(including reasonable attorneys' fees) shall be added to the Obligations and
shall be payable on demand with interest thereon at the highest rate permitted
by law or, at your option, debited by you from the Pledged Account.
9. Upon an Event of Default we appoint you, any of your officers,
employees or any other person or entity whom you may designate as our attorney,
with power to execute such documents in our behalf and to supply any omitted
information and correct patent errors in any documents executed by us or on our
behalf; to file financing statements against us covering the Collateral; to sign
our name on public records; and to do all other things you deem necessary to
carry out this Agreement. We hereby ratify and approve all acts of the attorney
and neither you nor the attorney will be liable for any acts of commission or
omission, nor for any error of judgment or mistake of fact or law other than
gross negligence or willful misconduct. This power being coupled with an
interest, is irrevocable so long as any Obligations remain unpaid.
10. No delay or failure on your part in exercising any right, privilege or
option hereunder shall operate as a waiver of such or of any other right,
privilege, remedy or option, and no waiver whatever shall be valid unless in
writing, signed by you and then only to the extent therein set forth, and no
waiver by you of any default shall operate as a waiver of any other default or
of the same default on a future occasion. Your books and records containing
entries with respect to the Obligations shall be admissible in evidence in any
action or proceeding, shall be binding upon us for the purpose of establishing
the items therein set forth and shall constitute prima facie proof thereof. You
shall have the right to enforce any one or more of the remedies available to
you, successively, alternately or concurrently. We agree to join with you in
executing financing statements or other instruments to the extent required by
the Uniform Commercial Code in form satisfactory to you and in executing such
other documents or instruments as may be required or deemed necessary by you for
purposes of affecting or continuing your security interest in the Collateral.
11. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York and cannot be terminated orally. All of the
rights, remedies, options, privileges and elections given to you hereunder shall
enure to the benefit of your successors and assigns. The term "you" as herein
used shall include your company, any parent of your company, any of your
subsidiaries and any co-subsidiaries of your parent, whether now existing or
hereafter created or acquired, and all of the terms, conditions, promises,
covenants,
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provisions and warranties of this Agreement shall enure to the benefit of and
shall bind the representatives, successors and assigns of each of us and them.
You and we hereby (a) waive any and all right to trial by jury in litigation
relating to this Agreement and the transactions contemplated hereby and we agree
not to assert any counterclaim in such litigation, (b) submit to the
nonexclusive jurisdiction of any New York State court sitting in the borough of
Manhattan, the city of New York and (c) waive any objection you or we may have
as to the bringing or maintaining of such action with any such court.
12. All notices from you to us shall be sufficiently given if mailed or
delivered to us at our address set forth below.
Very truly yours,
OPHTHALMIC IMAGING SYSTEMS
By:
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Name:
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Title:
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Address: 221 Lathrop Way Suite I
Sacramento, CA 95815
Attention: Chief Financial Officer
Facsimile: (916) 646-0207
Dated as of: September 25th, 2003
ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By:
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Name: David Grin
Title: Director
Address: 825 Third Avenue, 14th Floor
New York, New York 10022