SECURITY AGREEMENT
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THIS SECURITY AGREEMENT (this "AGREEMENT") is made this 18th day of
September, 2002, by and between WORLDWIDE MEDICAL CORPORATION, a Delaware
corporation ("BORROWER") and ZIEGLER HEALTHCARE FUND I, L.P., a Delaware limited
partnership ("SECURED PARTY").
R E C I T A L S:
WHEREAS, Borrower is borrowing One Million Six Hundred Fifty Thousand
Dollars ($1,650,000) (the "LOAN") from Secured Party evidenced by a promissory
note of even date herewith (the "NOTE"), a Loan Agreement dated of even date
herewith (the "LOAN AGREEMENT") and certain other agreements and instruments
(collectively, with the Note, the Loan Agreement and this Agreement, the "LOAN
DOCUMENTS");
WHEREAS, to induce Secured Party to make the Loan to Borrower upon the
terms and conditions set forth in the Loan Agreement and other Loan Documents
and as security for the payment and performance of Borrower's obligations to
Secured Party under the Loan Agreement and the other Loan Documents, it is the
intent of Borrower to pledge and to grant to Secured Party for the benefit of
Secured Party, a security interest in certain property of Borrower and to create
such a security interest as hereinafter provided;
WHEREAS, capitalized terms used herein but not defined herein shall have
the meanings as set forth in the Loan Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
ARTICLE I
GRANT OF SECURITY INTEREST.; COLLATERAL
1.1. GRANT OF SECURITY INTEREST. Borrower hereby pledges and grants to
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Secured Party for the benefit of Secured Party, a first priority lien and
security interest in and to the property described in Section 1.2 below
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(collectively and severally, the "COLLATERAL") to secure payment and performance
of the Loan Obligations of Borrower to Secured Party.
1.2. COLLATERAL. The Collateral shall consist of all of Borrower's
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tangible and intangible property, including, without limitation, all such
property located at 13 Spectrum Pointe Drive, Lake Forest, California 92630, all
of Borrower's interest in and to all of the issued and outstanding common stock
(the "SAI COMMON STOCK") of Spectrum Analytics, Inc., a California corporation
and a wholly-owned subsidiary of Borrower ("SAI"), and all other tangible and
intangible personal property of Borrower wherever located, whether now owned or
hereafter acquired, and any additions, replacements, accessions, or
substitutions thereof and all cash and non-cash proceeds and products thereof as
set forth on Exhibit A hereto.
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1.3. Assignment of SAI Common Stock; Grant of Control. As
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further collateral security for Borrower's payment to Secured Party of the Loan
Obligations, Borrower hereby assigns the SAI Common Stock to Lender and has
caused the SAI Common Stock to be registered to list Secured Party as a Pledgee
on the books and records of SAI, it being Borrower's intention thereby to grant
Secured Party "control" over the SAI Common Stock within the meaning of Article
8 and Article 9 of the Uniform Commercial Code as in effect from time-to-time in
the State of California (the "UCC").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
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warrants to Secured Party that at all times from the date of this Agreement to
and including the date payment and performance of the Loan Obligations has been
completed in full:
(a) Borrower is a corporation duly organized, validly existing, in good
standing and possessing all powers and authority to own its property and to
conduct the business in which it is engaged as well as all other rights and
privileges generally granted by the State of Delaware. Borrower has the full
right and power to grant the security interest contemplated hereunder and there
are no presently existing security interests in the Collateral or any part
thereof.
(b) There is no action, suit or proceeding pending or threatened
against Borrower or the Guarantors that might adversely affect the Collateral,
or Borrower's rights and interests therein.
(c) Borrower warrants that Collateral consisting of contract rights,
chattel paper, accounts, or general intangibles is (i) genuine and enforceable
in accordance with its terms, except as limited by law; (ii) not subject to any
defense, set-off, claim or counterclaim (other than write-offs in the ordinary
course of business) of a material nature against Borrower, except as to which
Borrower has notified Secured Party in writing prior to the execution of this
Agreement; and (iii) not subject to any other circumstances that would impair
the validity, enforceability, value, or amount of such Collateral.
ARTICLE III
COVENANTS OF BORROWER
3.1. Covenants of Borrower and the Guarantors. So long as the Note
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remains unpaid, Borrower shall:
(a) ensure that all acts that may be necessary to maintain, preserve
and protect the Collateral are done;
(b) perform all of its obligations hereunder and under the other Loan
Documents when due and before any such obligations are delinquent;
(c) procure, execute and deliver from time to time any
endorsements, assignments, financing statements or other writings deemed
necessary or appropriate by Secured Party to perfect, maintain and protect its
interest hereunder and the priority thereof;
(d) except as otherwise approved in writing by Secured Party, not
surrender, sell, encumber, assign, pledge or otherwise dispose of or transfer
the Collateral and keep the Collateral free of all levies and security interests
or other liens or charges;
(e) pay all taxes, assessments, charges, encumbrances and liens
now or hereafter imposed upon or affecting the Collateral prior to the time the
same becomes delinquent;
(f) permit Secured Party and/or its authorized representatives access
to inspect and copy Borrower's books and records related to the Collateral.
(G) not amend, modify or supplement any lease, contract or agreement
contained in Collateral or waive any provision therein, without prior written
consent of Secured Party; and
(H) with respect to any Collateral that is instruments, chattel paper
and negotiable documents, properly assign to, and, to the extent necessary to
perfect Secured Party's interest therein, deposit originals with to be held by
Secured Party, unless Secured Party shall hereafter otherwise direct or consent
in writing.
ARTICLE IV
DEFAULT AND REMEDIES
4.1. EVENTS OF DEFAULT. The occurrence of any of the following events
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shall constitute an event of default under the terms of this Agreement (an
"EVENT OF DEFAULT"):
(a) any representation or warranty of Borrower contained herein or
otherwise made in connection with the transactions contemplated by this
Agreement shall be false or misleading in any material respect on the date as of
which made;
(b) Borrower shall fail to perform or observe any of the terms,
provisions, covenants, conditions, agreements or obligations contained in this
Agreement within five (5) days of the date such performance or observation was
due; or
(c) an "Event of Default" shall occur under the Loan Agreement.
4.2. REMEDIES. Upon an Event of Default that is not cured within the
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applicable time period provided in Section 4.1 above, if any cure period is
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available, Secured Party may and without notice to or demand on Borrower and in
addition to all rights and remedies available to Secured Party under the terms
of this Agreement and the other Loan Documents, do any one or more of the
following:
(a) foreclose or otherwise enforce Secured Party's security interest in
any manner permitted by law, or provided for in this Agreement;
(b) extend the time of payment of, compromise, or settle for cash,
credit, or otherwise upon any terms, any part or al of the Collateral;
(c) take possession of and endorse in the name of Borrower, as
appropriate, any notes, checks, money orders, drafts, cash, insurance payments,
and any other instruments received in payment of the Collateral, or any part
thereof; collect, sue for, and give satisfactions for, monies due on account of
the Collateral; and withdraw any claims, suits, or proceedings pertaining to, or
arising out of Borrower's, and/or Secured Party's right to the Collateral;
(d) recover from Borrower all costs and expenses including, without
limitation, reasonable attorneys' fees (including, without limitation, the
reasonable estimate of the allocable costs of in-house legal counsel and staff),
incurred or paid by Secured Party in exercising any right, power or remedy
provided by this Agreement or by law.
(e) notify the account and contract Borrowers obligated on any or all
of the Collateral to make payment thereof directly to Secured Party and Secured
Party may take control of all proceeds of any such Collateral, which rights
Secured Party may exercise at any time. The cost of such collection and
enforcement, including attorneys' fees and expenses, shall be borne solely by
Borrower whether the same is incurred by Secured Party or Borrower. If a Default
should occur or upon demand of Secured Party, Borrower will, upon receipt of all
checks, drafts, cash and other remittances in payment on Collateral, deposit the
same in a special Secured Party account maintained with a bank of Secured
Party's choice, over which Secured Party also has the power of withdrawal.
Borrower agrees to do whatever is necessary to establish a lock-box/blocked
account.
4.3. ADDITIONAL REMEDIES. If a Default should occur, no discount,
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credit, or allowance shall be granted by Borrower to any account or contract
Borrower and no return of merchandise shall be accepted by Borrower without
Secured Party's consent. Secured Party may, after Default, settle or adjust
disputes and claims directly with account contract Borrowers for amounts and
upon terms that Secured Party considers advisable, and in such cases Secured
Party will credit the Loan Obligations with the net amounts received by Secured
Party, after deducting all of the expenses incurred by Secured Party. Borrower
agrees to indemnify and defend Secured Party and hold it harmless with respect
to any claim or proceeding arising out of any matter related to collection of
Collateral.
ARTICLE V
MISCELLANEOUS
5.1. UNIFORM COMMERCIAL CODE FILINGS. Secured Party is hereby
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authorized, without further action of Borrower, and in its own name and on
behalf of Borrower, to file any and all Uniform Commercial Code financing
statements and other documents deemed by Secured Party to be necessary to
protect Secured Party's property interests in the Collateral.
5.2. FURTHER ASSURANCES. At any time and from time to time, at the
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expense of Borrower, Borrower promptly shall execute and deliver all further
instruments and documents, and will take all further action, that may reasonably
be necessary or desirable, or that Secured Party may request, in order to
perfect and protect the pledge and grant of security interest made by this
Agreement or to enable Secured Party to exercise and enforce its rights and
remedies under this Agreement with respect to any Collateral.
5.3. CUMULATIVE RIGHTS. The rights, powers and remedies of Secured
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Party under this Agreement shall be in addition to all rights, powers and
remedies given to Secured Party by virtue of any statute or rule of law, the
Note, the other Loan Documents or any other agreement contemplated hereunder,
all of which rights, powers and remedies shall be cumulative and may be
exercised successively or concurrently without impairing Secured Party's
security interest in the Collateral.
5.4. COLLATERAL DUTIES. Secured Party shall have no custodial or
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ministerial duties to perform with respect to Collateral pledged except as set
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forth herein; and by way of explanation and not by way of limitation, Secured
Party shall incur no liability for any of the following: (i) loss or
depreciation of Collateral, (ii) failure to present any paper for payment or
protest, to protest or give notice of nonpayment, or any other notice with
respect to any paper or Collateral, (iii) failure to ascertain, notify Borrower
of, or take any action in connection with any conversion, call, redemption,
retirement or any other event relating to any of the Collateral, or failure to
notify any party hereto that Collateral should be presented or surrendered for
any such reason. Borrower acknowledges that Secured Party is not an investment
advisor or insurer with respect to the Collateral; and Secured Party has no duty
to advise Borrower of any actual or anticipated changes in the value of the
Collateral
5.5. CONTINUING SECURITY INTEREST. This Agreement shall create a
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continuing security interest in the Collateral and shall remain in full force
and effect unto payment in full of the Loan Obligations. This Agreement shall
terminate and be of no further force and effect upon the payment in full of the
Loan Obligations by Borrower.
5.6. WAIVER. No remedy conferred upon, or reserved to, Secured Party
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in this Agreement or any of the other Loan Documents is intended to be exclusive
of any other remedy or remedies, and each and every remedy shall be cumulative
and shall be in addition to every other remedy given hereunder or now or
hereafter existing in law or in equity. Exercise or omission to exercise any
right of Secured Party shall not affect any subsequent right of Secured Party to
exercise the same. No course of dealing between Borrower and Secured Party or
any delay on Secured Party's part in exercising any rights shall operate as a
waiver of any of Secured Party's rights. No waiver of any Default under this
Agreement or any of the other Loan Documents shall extend to or shall affect any
subsequent or other then existing Default or shall impair any rights, remedies
or powers of Secured Party.
5.7. HEADINGS. The headings of the Sections of this Agreement are for
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convenience of reference only, are not to be considered a part hereof, and shall
not limit or otherwise affect any of the terms hereof.
5.8. SURVIVAL OF COVENANTS. All covenants, agreements, representations
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and warranties made herein and in certificates or reports delivered pursuant
hereto and all other information heretofore or hereafter supplied to Secured
Party in connection with the Loan and Borrower, whether written or unwritten,
shall be deemed to have been material and relied on by Secured Party,
notwithstanding any investigation made by or on behalf of Secured Party, and
shall survive the execution and delivery to Secured Party of the Note and this
Agreement.
5.9. NOTICES, ETC. Any notice or other communication required or
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permitted to be given by this Agreement or by applicable law shall be given as
described in the Loan Agreement.
5.10. BENEFITS. All of the terms and provisions of this Agreement
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shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns. No Person other than Borrower or Secured Party shall be
entitled to rely upon this Agreement or be entitled to the benefits of this
Agreement.
5.11. SUPERSEDES PRIOR AGREEMENTS; COUNTERPARTS. This Agreement and
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the Loan Documents referred to herein supersede and incorporate all
representations, promises, and statements, oral or written, made by Secured
Party in connection with the Loan. This Agreement may not be varied, altered, or
amended except by a written instrument executed by an authorized officer of each
of Secured Party and Borrower. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered, shall be an original,
but such counterparts shall together constitute one and the same instrument.
5.12. CONSTRUCTION OF PROVISIONS OF THIS AGREEMENT. Secured Party has
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not agreed to make any loan other than that specifically described herein. All
requirements herein shall be deemed material to Secured Party. Except as
specified herein, all conditions and requirements must be satisfied by Borrower
prior to the Closing Date. Whenever this Agreement refers to a matter being
"satisfactory" to Secured Party, subject to Secured Party's "approval" or
"consent," at Secured Party's "option," at Secured Party's "determination,"
"required" by Secured Party, at Secured Party's "request," as Secured Party
shall "deem necessary," or similar terminology, it is deemed that each of the
aforesaid shall be in the sole discretion of Secured Party, and if any term or
condition requires Secured Party's approval, consent, or satisfaction (the
"SECURED PARTY'S APPROVAL"), Secured Party's Approval shall not be implied, but
shall be evidenced only by a written notice from Secured Party specifically
addressed to the particular requirement or condition and expressing Secured
Party's Approval.
5.13. CONTROLLING LAW. THE VALIDITY, INTERPRETATION, ENFORCEMENT AND
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EFFECT OF THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW JERSEY. SECURED PARTY'S PRINCIPAL PLACE OF BUSINESS
IS LOCATED IN THE STATE OF NEW JERSEY, AND BORROWER AGREES THAT THIS AGREEMENT
SHALL BE HELD BY SECURED PARTY AT SUCH PRINCIPAL PLACE OF BUSINESS, AND THE
HOLDING OF THIS AGREEMENT BY SECURED PARTY THEREAT SHALL CONSTITUTE SUFFICIENT
MINIMUM CONTACTS OF BORROWER WITH THE STATE OF NEW JERSEY FOR THE PURPOSE OF
CONFERRING JURISDICTION UPON THE FEDERAL AND STATE COURTS PRESIDING IN SUCH
STATE AND THE COUNTY OF SECURED PARTY'S PRINCIPAL PLACE OF BUSINESS. BORROWER
CONSENTS THAT ANY LEGAL ACTION OR PROCEEDING ARISING HEREUNDER MAY BE BROUGHT IN
THE FEDERAL AND STATE COURTS PRESIDING IN SUCH COUNTY AND STATE AND ASSENTS AND
SUBMITS TO THE PERSONAL JURISDICTION OF ANY SUCH COURT IN ANY ACTION OR
PROCEEDING INVOLVING THIS AGREEMENT. NOTHING HEREIN SHALL LIMIT THE
JURISDICTION OF ANY OTHER COURT.
5.14. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE
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LAW, BORROWER HEREBY WAIVES ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY ON ANY
CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING OUT
OF OR IN ANY WAY RELATED TO THIS AGREEMENT, THE LOAN DOCUMENTS OR THE LOAN, OR
(B) IN ANY WAY CONNECTED WITH OR PERTAINING OR RELATED TO OR INCIDENTAL TO ANY
DEALINGS OF SECURED PARTY AND/OR BORROWER WITH RESPECT TO THE LOAN DOCUMENTS OR
IN CONNECTION WITH THIS AGREEMENT OR THE EXERCISE OF EITHER PARTY'S RIGHTS AND
REMEDIES UNDER THIS AGREEMENT OR OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP
OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. BORROWER
AGREES THAT SECURED PARTY MAY FILE A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY, AND BARGAINED AGREEMENT OF BORROWER
IRREVOCABLY TO WAIVE ITS RIGHTS TO TRIAL BY JURY AS AN INDUCEMENT OF SECURED
PARTY TO MAKE THE LOAN, AND THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY
DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN BORROWER AND SECURED PARTY SHALL
INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT
A JURY.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
BORROWER:
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WORLDWIDE MEDICAL CORPORATION,
a Delaware corporation
By: /s/ Daniel G. McGuire
____________________________________
Name: Daniel G. McGuire
Title: President
SECURED PARTY:
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ZIEGLER HEALTHCARE FUND I, L.P.,
a Delaware limited partnership
By: /s/ Douglas Korey
____________________________________
Name: Douglas A. Korey
Title: Member
EXHIBIT A
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1. ACCOUNTS. All accounts, as that term is defined in Article 9 of the UCC,
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and in any event shall include any right to payment held by Borrower, whether in
the form of accounts receivable, notes, drafts, acceptances, letters of credit
(including proceeds of letters of credit) or other forms obligations and
receivables now owned or hereafter received or acquired by or belonging or owing
to Borrower (including, without limitation, under any trade name, style or
division thereof) for Inventory (as defined below) sold or leased or services
rendered by it whether or not earned by performance, together with all
guarantees and security therefor and all Proceeds thereof, whether cash Proceeds
(as defined below) or otherwise, including, without limitation, all right title
and interest of Borrower in the Inventory which gave rise to any such accounts,
including, without limitation, unpaid seller's rights of rescission, replevin,
reclamation and stoppage in transit and rights to returned, reclaimed, rejected
or repossessed Inventory or other goods (collectively, "ACCOUNTS").
2. CHATTEL PAPER. All chattel paper, as that term is defined in Article 9
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of the UCC, and in any event, shall include any writing or writings which
evidence both a monetary obligation and a security interest in or a lease of
specific goods, whether now or hereafter held by Borrower (collectively "CHATTEL
PAPER").
3. DOCUMENTS. All documents, as that term is defined in Article 9 of the
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UCC (collectively, "DOCUMENTS").
4. EQUIPMENT. All equipment, as that term is defined in Article 9 of the
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UCC, and, in any event, shall include, without limitation, all healthcare and
diagnostic related equipment, furnishings, and computers, and other electronic
data processing and other office equipment, and any and all additions,
substitutions and replacements of any of the foregoing, wherever located,
together with all attachments, components, parts equipment and accessories
installed thereon or affixed thereto, and all Contracts, contract rights and
Chattel Paper arising out of any lease of any of the foregoing (collectively,
"EQUIPMENT").
5. FIXTURES. All fixtures as such term is defined in Article 9 of the UCC
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("FIXTURES.")
6. GENERAL INTANGIBLES. All general intangibles as such term is defined in
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Article 9 of the UCC, and, in any event, shall include all right title and
interest which Borrower may now or hereafter have in or under any contract, all
customer lists, trademarks, patent rights in intellectual property, interests in
corporations, limited liability companies, partnerships, joint ventures, and
other business associations, licenses, permits, copyrights, trade secrets,
proprietary or confidential information, inventions (whether or not patented or
patentable), technical information, procedures, designs, knowledge, know-how,
software, data bases, data, skill, expertise, recipes, experience, processes,
models, drawings, blueprints, catalogs, materials and records, FDA approvals
(including, without limitation, the FDA approved 510(k) over the counter
clearances), permits and authorizations, unfilled customer purchase orders,
goodwill (including, without limitation, the goodwill associated with any
trademark, trademark registration or trademark licensed under any trademark
license), claims in or under insurance policies, including unearned premiums,
uncertificated securities, deposit accounts, rights to receive tax refunds and
other payments and rights of indemnification (collectively, "GENERAL
INTANGIBLES").
7. GOODS. All goods as such term is defined in Article 2 of the UCC
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("GOODS.")
8. INSTRUMENTS. All instruments, as such term is defined in Article 9 of
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the UCC, and, in any event, shall include any negotiable instrument or
certificated security, as defined in Article 8 of the UCC, or any other writing
which evidences a right to any payment owed to Borrower (collectively,
"INSTRUMENTS").
9. INVENTORY. All inventory, as such term is defined in Article 9 of the
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UCC, wherever located, and in any event, shall include all inventory,
merchandise, goods and other personal property which are held by or on behalf of
Borrower for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
material used or consumed or to be used or consumed in Borrower's business, or
the processing, packaging, promotion, delivery or shipping of the same, and all
finished goods, whether or not the same is in transit or in the constructive,
actual or exclusive occupancy or possession of Borrower or is held by Borrower
by others for Borrower's account, including, without limitation, all goods
covered by purchase orders and contracts with suppliers and all goods billed and
held by suppliers and all inventory which may be located on premises of Borrower
or of any carriers, forwarding agents, truckers, warehousemen, vendors, selling
agents or other Persons (collectively, "INVENTORY").
10. PROCEEDS. All proceeds as such term is defined in Article 9 of the UCC,
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and, in any event, shall include (any and all Accounts, Chattel Paper,
Instruments, cash and other proceeds payable to Debtor from time to time in
respect of any of the foregoing collateral security, (b) any and all proceeds of
any insurance, including, without limitation, the Key Man Insurance Policies,
indemnity, warrant or guaranty payable to Borrower from time-to time with
respect to any of the collateral security, (c) any and all payments (in any form
whatsoever) made or due and payable to Borrower from time-to -time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the collateral security by any governmental body, authority,
bureau or agency (or any Person acting under color of governmental authority),
(d) any and all other amounts from time-to-time paid or payable under or in
connection with any of the collateral security, and (e) any proceeds from a sale
of assets of Borrower or a Change in Control of Borrower (collectively,
"PROCEEDS").
11. OTHER RIGHTS. All rights arising under private label contracts,
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distribution agreements and escrow accounts of Borrower.
12. SAI COMMON STOCK. All of Borrower's rights in and to the SAI Common
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Stock.