EXHIBIT 4.5
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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 $1,000,000, 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 $1,200,000).
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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
California 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 Articles of Incorporation as amended through the
date hereof; (c) subject to Section 2 hereof, 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) other than as contemplated by Section 2 hereof, we will keep the
Collateral free and clear of all attachments, levies, taxes, liens, security
interests and encumbrances of every kind and nature, 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) subject to Section 2 hereof, 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 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. Subject to Section 2 hereof and 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 Event
of Default as defined in the Convertible Term Note issued by the Borrower to
Laurus on the date hereof.
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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, subject to
Section 2 hereof, 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 and the declaration by Laurus of all Obligations
immediately due and payable, 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.
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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, 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:_______________________________
Name:_____________________________
Title:______________________________
Address: 221 Lathrop Way Suite I
Sacramento, CA 95815
Attention: Chief Financial Officer
Facsimile: (916) 646-0207
Dated as of: April 27th, 2004
ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By:____________________________
Name: David Grin
Title: Director
Address: 825 Third Avenue, 14th Floor
New York, New York 10022