Exhibit 10.11
INTELLECTUAL PROPERTY SECURITY AGREEMENT
INTELLECTUAL PROPERTY SECURITY AGREEMENT (this "Agreement" dated as of May
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30, 2006, by and among Pediatric Prosthetics, Inc., an Idaho corporation (the
"Company"), and the secured parties signatory hereto and their respective
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endorsees, transferees and assigns (collectively, the "Secured Party").
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W I T N E S S E T H :
WHEREAS, pursuant to a Securities Purchase Agreement, dated the date
hereof, between Company and the Secured Party (the "Purchase Agreement"),
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Company has agreed to issue to the Secured Party and the Secured Party has
agreed to purchase from Company certain of Company's 6% Callable Secured
Convertible Notes, due three years from the date of issue (the "Notes"), which
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are convertible into shares of Company's Common Stock, par value $.001 per share
(the "Common Stock"). In connection therewith, Company shall issue the Secured
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Party certain Common Stock purchase warrants (the "Warrants"); and
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WHEREAS, in order to induce the Secured Party to purchase the Notes,
Company has agreed to execute and deliver to the Secured Party this Agreement
for the benefit of the Secured Party and to grant to it a first priority
security interest in certain Intellectual Property (defined below) of Company to
secure the prompt payment, performance and discharge in full of all of Company's
obligations under the Notes and exercise and discharge in full of Company's
obligations under the Warrants; and
NOW, THEREFORE, in consideration of the agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are
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defined in the Purchase Agreement and used herein are so used as so
defined; and the following terms shall have the following meanings:
"Software Intellectual Property" shall mean:
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(a) all software programs (including all source code, object code
and all related applications and data files), whether now owned,
upgraded, enhanced, licensed or leased or hereafter acquired by the
Company, above;
(b) all computers and electronic data processing hardware and
firmware associated therewith;
(c) all documentation (including flow charts, logic diagrams,
manuals, guides and specifications) with respect to such software,
hardware and firmware described in the preceding clauses (a) and (b);
and
(d) all rights with respect to all of the foregoing, including,
without limitation, any and all upgrades, modifications, copyrights,
licenses, options, warranties, service contracts, program services,
test rights, maintenance rights, support rights, improvement rights,
renewal rights and indemnifications and substitutions, replacements,
additions, or model conversions of any of the foregoing.
"Copyrights" shall mean (a) all copyrights, registrations and
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applications for registration, issued or filed, including any
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reissues, extensions or renewals thereof, by or with the United States
Copyright Office or any similar office or agency of the United States,
any state thereof, or any other country or political subdivision
thereof, or otherwise, including, all rights in and to the material
constituting the subject matter thereof, including, without
limitation, any referred to in Schedule B hereto, and (b) any rights
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in any material which is copyrightable or which is protected by common
law, United States copyright laws or similar laws or any law of any
State, including, without limitation, any thereof referred to in
Schedule B hereto.
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"Copyright License" shall mean any agreement, written or oral,
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providing for a grant by the Company of any right in any Copyright,
including, without limitation, any thereof referred to in Schedule B
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hereto.
"Intellectual Property" shall mean, collectively, the Software
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Intellectual Property, Copyrights, Copyright Licenses, Patents, Patent
Licenses, Trademarks, Trademark Licenses and Trade Secrets.
"Obligations" means all of the Company's obligations under this
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Agreement and the Notes, in each case, whether now or hereafter
existing, voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or
extinguished and later decreased, created or incurred, and all or any
portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered
directly or indirectly from the Secured Party as a preference,
fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to time.
"Patents" shall mean (a) all letters patent of the United States
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or any other country or any political subdivision thereof, and all
reissues and extensions thereof, including, without limitation, any
thereof referred to in Schedule B hereto, and (b) all applications for
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letters patent of the United States and all divisions, continuations
and continuations-in-part thereof or any other country or any
political subdivision, including, without limitation, any thereof
referred to in Schedule B hereto.
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"Patent License" shall mean all agreements, whether written or
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oral, providing for the grant by the Company of any right to
manufacture, use or sell any invention covered by a Patent, including,
without limitation, any thereof referred to in Schedule B hereto.
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"Security Agreement" shall mean the Security Agreement, dated the
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date hereof between Company and the Secured Party.
"Trademarks" shall mean (a) all trademarks, trade names,
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corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos and other source or business
identifiers, and the goodwill associated therewith, now existing or
hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, whether 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, or otherwise, including, without
limitation, any thereof referred to in Schedule B hereto, and (b) all
reissues, extensions or renewals thereof.
"Trademark License" shall mean any agreement, written or oral,
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providing for the grant by the Company of any right to use any
Trademark, including, without limitation, any thereof referred to in
Schedule B hereto.
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"Trade Secrets" shall mean common law and statutory trade secrets
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and all other confidential or proprietary or useful information and
all know-how obtained by or used in or contemplated at any time for
use in the business of the Company (all of the foregoing being
collectively called a "Trade Secret"), whether or not such Trade
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Secret has been reduced to a writing or other tangible form, including
all documents and things embodying, incorporating or referring in any
way to such Trade Secret, all Trade Secret licenses, including each
Trade Secret license referred to in Schedule B hereto, and including
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the right to ▇▇▇ for and to enjoin and to collect damages for the
actual or threatened misappropriation of any Trade Secret and for the
breach or enforcement of any such Trade Secret license.
2. Grant of Security Interest. In accordance with Section 3(m) of the
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Security Agreement, to secure the complete and timely payment, performance
and discharge in full, as the case may be, of all of the Obligations, the
Company hereby, unconditionally and irrevocably, pledges, grants and
hypothecates to the Secured Party, a continuing security interest in, a
continuing first lien upon, an unqualified right to possession and
disposition of and a right of set-off against, in each case to the fullest
extent permitted by law, all of the Company's right, title and interest of
whatsoever kind and nature in and to the Intellectual Property (the
"Security Interest").
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3. Representations and Warranties. The Company hereby represents and
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warrants, and covenants and agrees with, the Secured Party as follows:
(a) The Company has the requisite corporate power and authority
to enter into this Agreement and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by the
Company of this Agreement and the filings contemplated therein have
been duly authorized by all necessary action on the part of the
Company and no further action is required by the Company. This
Agreement constitutes a legal, valid and binding obligation of the
Company enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement
of creditor's rights generally.
(b) The Company represents and warrants that it has no place of
business or offices where its respective books of account and records
are kept (other than temporarily at the offices of its attorneys or
accountants) or places where the Intellectual Property is stored or
located, except as set forth on Schedule A attached hereto;
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(c) The Company is the sole owner of the Intellectual Property
(except for non-exclusive licenses granted by the Company in the
ordinary course of business), free and clear of any liens, security
interests, encumbrances, rights or claims, and is fully authorized to
grant the Security Interest in and to pledge the Intellectual
Property, except as set forth on Schedule D. There is not on file in
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any governmental or regulatory authority, agency or recording office
an effective financing statement, security agreement, license or
transfer or any notice of any of the foregoing (other than those that
have been filed in favor of the Secured Party pursuant to this
Agreement) covering or affecting any of the Intellectual Property,
except as set forth on Schedule D. So long as this Agreement shall be
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in effect, the Company shall not execute and shall not knowingly
permit to be on file in any such office or agency any such financing
statement or other document or instrument (except to the extent filed
or recorded in favor of the Secured Party pursuant to the terms of
this Agreement), except as set forth on Schedule D or for a financing
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statement covering assets acquired by the Company after the date
hereof.
(d) The Company shall at all times maintain its books of account
and records relating to the Intellectual Property at its principal
place of business and its Intellectual Property at the locations set
forth on Schedule A attached hereto and may not relocate such books of
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account and records unless it delivers to the Secured Party at least
30 days prior to such relocation (i) written notice of such relocation
and the new location thereof (which must be within the United States)
and (ii) evidence that the necessary documents have been filed and
recorded and other steps have been taken to perfect the Security
Interest to create in favor of the Secured Party valid, perfected and
continuing first priority liens in the Intellectual Property to the
extent they can be perfected through such filings.
(e) This Agreement creates in favor of the Secured Party a valid
security interest in the Intellectual Property securing the payment
and performance of the Obligations and, upon making the filings
required hereunder, a perfected first priority security interest in
such Intellectual Property to the extent that it can be perfected
through such filings.
(f) Upon request of the Secured Party, the Company shall execute
and deliver any and all agreements, instruments, documents, and papers
as the Secured Party may request to evidence the Secured Party's
security interest in the Intellectual Property and the goodwill and
general intangibles of the Company relating thereto or represented
thereby, and the Company hereby appoints the Secured Party its
attorney-in-fact to execute and file all such writings for the
foregoing purposes, all acts of such attorney being hereby ratified
and confirmed; such power being coupled with an interest is
irrevocable until the Obligations have been fully satisfied and are
paid in full.
(g) Except as set forth on Schedule D, the execution, delivery
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and performance of this Agreement does not conflict with or cause a
breach or default, or an event that with or without the passage of
time or notice, shall constitute a breach or default, under any
agreement to which the Company is a party or by which the Company is
bound. No consent (including, without limitation, from stock holders
or creditors of the Company) is required for the Company to enter into
and perform its obligations hereunder.
(h) The Company shall at all times maintain the liens and
Security Interest provided for hereunder as valid and perfected first
priority liens and security interests in the Intellectual Property to
the extent they can be perfected by filing in favor of the Secured
Party until this Agreement and the Security Interest hereunder shall
terminate pursuant to Section 11. The Company hereby agrees to defend
the same against any and all persons. The Company shall safeguard and
protect all Intellectual Property for the account of the Secured
Party. Without limiting the generality of the foregoing, the Company
shall pay all fees, taxes and other amounts necessary to maintain the
Intellectual Property and the Security Interest hereunder, and the
Company shall obtain and furnish to the Secured Party from time to
time, upon demand, such releases and/or subordinations of claims and
liens which may be required to maintain the priority of the Security
Interest hereunder.
(i) The Company will not transfer, pledge, hypothecate, encumber,
license (except for non-exclusive licenses granted by the Company in
the ordinary course of business), sell or otherwise dispose of any of
the Intellectual Property without the prior written consent of the
Secured Party, which consent will not be unreasonably withheld.
(j) The Company shall, within ten (10) days of obtaining
knowledge thereof, advise the Secured Party promptly, in sufficient
detail, of any substantial change in the Intellectual Property, and of
the occurrence of any event which would have a material adverse effect
on the value of the Intellectual Property or on the Secured Party's
security interest therein.
(k) The Company shall permit the Secured Party and its
representatives and agents to inspect the Intellectual Property at any
time, and to make copies of records pertaining to the Intellectual
Property as may be requested by the Secured Party from time to time.
(l) The Company will take all steps reasonably necessary to
diligently pursue and seek to preserve, enforce and collect any
rights, claims, causes of action and accounts receivable in respect of
the Intellectual Property.
(m) The Company shall promptly notify the Secured Party in
sufficient detail upon becoming aware of any attachment, garnishment,
execution or other legal process levied against any Intellectual
Property and of any other information received by the Company that may
materially affect the value of the Intellectual Property, the Security
Interest or the rights and remedies of the Secured Party hereunder.
(n) All information heretofore, herein or hereafter supplied to
the Secured Party by or on behalf of the Company with respect to the
Intellectual Property is accurate and complete in all material
respects as of the date furnished.
(o) Schedule A attached hereto contains a list of all of the
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subsidiaries of Company.
(p) Schedule B attached hereto includes all Licenses, and all
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Patents and Patent Licenses, if any, owned by the Company in its own
name as of the date hereof. Schedule B hereto includes all Trademarks
and Trademark Licenses, if any, owned by the Company in its own name
as of the date hereof. Schedule B hereto includes all Copyrights and
Copyright Licenses, if any, owned by the Company in its own name as of
the date hereof. Schedule B hereto includes all Trade Secrets and
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Trade Secret Licenses, if any, owned by the Company as of the date
hereof. To the best of the Company's knowledge, each License, Patent,
Trademark, Copyright and Trade Secret is valid, subsisting, unexpired,
enforceable and has not been abandoned. Except as set forth in
Schedule B, none of such Licenses, Patents, Trademarks, Copyrights and
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Trade Secrets is the subject of any licensing or franchise agreement.
To the best of the Company's knowledge, no holding, decision or
judgment has been rendered by any Governmental Body which would limit,
cancel or question the validity of any License, Patent, Trademark,
Copyright and Trade Secrets . Except as set forth in Schedule B, no
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action or proceeding is pending (i) seeking to limit, cancel or
question the validity of any License, Patent, Trademark, Copyright or
Trade Secret, or (ii) which, if adversely determined, would have a
material adverse effect on the value of any License, Patent,
Trademark, Copyright or Trade Secret. The Company has used and will
continue to use for the duration of this Agreement, proper statutory
notice in connection with its use of the Patents, Trademarks and
Copyrights and consistent standards of quality in products leased or
sold under the Patents, Trademarks and Copyrights.
(q) With respect to any Intellectual Property:
(i) such Intellectual Property is subsisting and has not
been adjudged invalid or unenforceable, in whole or in part;
(ii) such Intellectual Property is valid and enforceable;
(iii) the Company has made all necessary filings and
recordations to protect its interest in such Intellectual
Property, including, without limitation, recordations of all of
its interests in the Patents, Patent Licenses, Trademarks and
Trademark Licenses in the United States Patent and Trademark
Office and in corresponding offices throughout the world and its
claims to the Copyrights and Copyright Licenses in the United
States Copyright Office and in corresponding offices throughout
the world;
(iv) other than as set forth in Schedule B, the Company is
the exclusive owner of the entire and unencumbered right, title
and interest in and to such Intellectual Property and no claim
has been made that the use of such Intellectual Property
infringes on the asserted rights of any third party; and
(v) the Company has performed and will continue to perform
all acts and has paid all required fees and taxes to maintain
each and every item of Intellectual Property in full force and
effect throughout the world, as applicable.
(r) Except with respect to any Trademark or Copyright that the
Company shall reasonably determine is of negligible economic value to
the Company, the Company shall:
(i) maintain each Trademark and Copyright in full force free
from any claim of abandonment for non-use, maintain as in the
past the quality of products and services offered under such
Trademark or Copyright; employ such Trademark or Copyright with
the appropriate notice of registration; not adopt or use any ▇▇▇▇
which is confusingly similar or a colorable imitation of such
Trademark or Copyright unless the Secured Party shall obtain a
perfected security interest in such ▇▇▇▇ pursuant to this
Agreement; and not (and not permit any licensee or sublicensee
thereof to) do any act or knowingly omit to do any act whereby
any Trademark or Copyright may become invalidated;
(ii) not, except with respect to any Patent that it shall
reasonably determine is of negligible economic value to it, do
any act, or omit to do any act, whereby any Patent may become
abandoned or dedicated; and
(iii) notify the Secured Party immediately if it knows, or
has reason to know, that any application or registration relating
to any Patent, Trademark or Copyright may become abandoned or
dedicated, or of any adverse determination or development
(including, without limitation, the institution of, or any such
determination or development in, any proceeding in the United
States Patent and Trademark Office, United States Copyright
Office or any court or tribunal in any country) regarding its
ownership of any Patent, Trademark or Copyright or its right to
register the same or to keep and maintain the same.
(s) Whenever the Company, either by itself or through any agent,
employee, licensee or designee, shall file an application for the
registration of any Patent, Trademark or Copyright with the United
States Patent and Trademark Office, United States Copyright Office or
any similar office or agency in any other country or any political
subdivision thereof or acquire rights to any new Patent, Trademark or
Copyright whether or not registered, report such filing to the Secured
Party within five business days after the last day of the fiscal
quarter in which such filing occurs.
(t) The Company shall take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United
States Patent and Trademark Office, United States Copyright Office or
any similar office or agency in any other country or any political
subdivision thereof, to maintain and pursue each application (and to
obtain the relevant registration) and to maintain each registration of
the Patents, Trademarks and Copyrights, including, without limitation,
filing of applications for renewal, affidavits of use and affidavits
of incontestability.
(u) In the event that any Patent, Trademark or Copyright included
in the Intellectual Property is infringed, misappropriated or diluted
by a third party, promptly notify the Secured Party after it learns
thereof and shall, unless it shall reasonably determine that such
Patent, Trademark or Copyright is of negligible economic value to it,
which determination it shall promptly report to the Secured Party,
promptly ▇▇▇ for infringement, misappropriation or dilution, to seek
injunctive relief where appropriate and to recover any and all damages
for such infringement, misappropriation or dilution, or take such
other actions as it shall reasonably deem appropriate under the
circumstances to protect such Patent, Trademark or Copyright. If the
Company lacks the financial resources to comply with this Section
3(t), the Company shall so notify the Secured Party and shall
cooperate fully with any enforcement action undertaken by the Secured
Party on behalf of the Company.
4. Defaults. The following events shall be "Events of Default":
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(a) The occurrence of an Event of Default (as defined in the
Notes) under the Notes;
(b) Any representation or warranty of the Company in this
Agreement or in the Security Agreement shall prove to have been
incorrect in any material respect when made;
(c) The failure by the Company to observe or perform any of its
obligations hereunder or in the Security Agreement for ten (10) days
after receipt by the Company of notice of such failure from the
Secured Party; and
(d) Any material breach of, or default under, the Warrants.
5. Duty To Hold In Trust. Upon the occurrence of any Event of Default
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and at any time thereafter, the Company shall, upon receipt by it of any
revenue, income or other sums subject to the Security Interest, whether
payable pursuant to the Notes or otherwise, or of any check, draft, note,
trade acceptance or other instrument evidencing an obligation to pay any
such sum, hold the same in trust for the Secured Party and shall forthwith
endorse and transfer any such sums or instruments, or both, to the Secured
Party for application to the satisfaction of the Obligations.
6. Rights and Remedies Upon Default. Upon occurrence of any Event of
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Default and at any time thereafter, the Secured Party shall have the right
to exercise all of the remedies conferred hereunder and under the Notes,
and the Secured Party shall have all the rights and remedies of a secured
party under the UCC and/or any other applicable law (including the Uniform
Commercial Code of any jurisdiction in which any Intellectual Property is
then located). Without limitation, the Secured Party shall have the
following rights and powers:
(a) The Secured Party shall have the right to take possession of
the Intellectual Property and, for that purpose, enter, with the aid
and assistance of any person, any premises where the Intellectual
Property, or any part thereof, is or may be placed and remove the
same, and the Company shall assemble the Intellectual Property and
make it available to the Secured Party at places which the Secured
Party shall reasonably select, whether at the Company's premises or
elsewhere, and make available to the Secured Party, without rent, all
of the Company's respective premises and facilities for the purpose of
the Secured Party taking possession of, removing or putting the
Intellectual Property in saleable or disposable form.
(b) The Secured Party shall have the right to operate the
business of the Company using the Intellectual Property and shall have
the right to assign, sell, lease or otherwise dispose of and deliver
all or any part of the Intellectual Property, at public or private
sale or otherwise, either with or without special conditions or
stipulations, for cash or on credit or for future delivery, in such
parcel or parcels and at such time or times and at such place or
places, and upon such terms and conditions as the Secured Party may
deem commercially reasonable, all without (except as shall be required
by applicable statute and cannot be waived) advertisement or demand
upon or notice to the Company or right of redemption of the Company,
which are hereby expressly waived. Upon each such sale, lease,
assignment or other transfer of Intellectual Property, the Secured
Party may, unless prohibited by applicable law which cannot be waived,
purchase all or any part of the Intellectual Property being sold, free
from and discharged of all trusts, claims, right of redemption and
equities of the Company, which are hereby waived and released.
7. Applications of Proceeds. The proceeds of any such sale, lease or
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other disposition of the Intellectual Property hereunder shall be applied
first, to the expenses of retaking, holding, storing, processing and
preparing for sale, selling, and the like (including, without limitation,
any taxes, fees and other costs incurred in connection therewith) of the
Intellectual Property, to the reasonable attorneys' fees and expenses
incurred by the Secured Party in enforcing its rights hereunder and in
connection with collecting, storing and disposing of the Intellectual
Property, and then to satisfaction of the Obligations, and to the payment
of any other amounts required by applicable law, after which the Secured
Party shall pay to the Company any surplus proceeds. If, upon the sale,
license or other disposition of the Intellectual Property, the proceeds
thereof are insufficient to pay all amounts to which the Secured Party is
legally entitled, the Company will be liable for the deficiency, together
with interest thereon, at the rate of 15% per annum (the "Default Rate"),
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and the reasonable fees of any attorneys employed by the Secured Party to
collect such deficiency. To the extent permitted by applicable law, the
Company waives all claims, damages and demands against the Secured Party
arising out of the repossession, removal, retention or sale of the
Intellectual Property, unless due to the gross negligence or willful
misconduct of the Secured Party.
8. Costs and Expenses. The Company agrees to pay all out-of-pocket
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fees, costs and expenses incurred in connection with any filing required
hereunder, including without limitation, any financing statements,
continuation statements, partial releases and/or termination statements
related thereto or any expenses of any searches reasonably required by the
Secured Party. The Company shall also pay all other claims and charges
which in the reasonable opinion of the Secured Party might prejudice,
imperil or otherwise affect the Intellectual Property or the Security
Interest therein. The Company will also, upon demand, pay to the Secured
Party the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents,
which the Secured Party may incur in connection with (i) the enforcement of
this Agreement, (ii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Intellectual
Property, or (iii) the exercise or enforcement of any of the rights of the
Secured Party under the Notes. Until so paid, any fees payable hereunder
shall be added to the principal amount of the Notes and shall bear interest
at the Default Rate.
9. Responsibility for Intellectual Property. The Company assumes all
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liabilities and responsibility in connection with all Intellectual
Property, and the obligations of the Company hereunder or under the Notes
and the Warrants shall in no way be affected or diminished by reason of the
loss, destruction, damage or theft of any of the Intellectual Property or
its unavailability for any reason.
10. Security Interest Absolute. All rights of the Secured Party and
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all Obligations of the Company hereunder, shall be absolute and
unconditional, irrespective of: (a) any lack of validity or enforceability
of this Agreement, the Notes, the Warrants or any agreement entered into in
connection with the foregoing, or any portion hereof or thereof; (b) any
change in the time, manner or place of payment or performance of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Notes, the Warrants or
any other agreement entered into in connection with the foregoing; (c) any
exchange, release or nonperfection of any of the Intellectual Property, or
any release or amendment or waiver of or consent to departure from any
other Intellectual Property for, or any guaranty, or any other security,
for all or any of the Obligations; (d) any action by the Secured Party to
obtain, adjust, settle and cancel in its sole discretion any insurance
claims or matters made or arising in connection with the Intellectual
Property; or (e) any other circumstance which might otherwise constitute
any legal or equitable defense available to the Company, or a discharge of
all or any part of the Security Interest granted hereby. Until the
Obligations shall have been paid and performed in full, the rights of the
Secured Party shall continue even if the Obligations are barred for any
reason, including, without limitation, the running of the statute of
limitations or bankruptcy. The Company expressly waives presentment,
protest, notice of protest, demand, notice of nonpayment and demand for
performance. In the event that at any time any transfer of any Intellectual
Property or any payment received by the Secured Party hereunder shall be
deemed by final order of a court of competent jurisdiction to have been a
voidable preference or fraudulent conveyance under the bankruptcy or
insolvency laws of the United States, or shall be deemed to be otherwise
due to any party other than the Secured Party, then, in any such event, the
Company's obligations hereunder shall survive cancellation of this
Agreement, and shall not be discharged or satisfied by any prior payment
thereof and/or cancellation of this Agreement, but shall remain a valid and
binding obligation enforceable in accordance with the terms and provisions
hereof. The Company waives all right to require the Secured Party to
proceed against any other person or to apply any Intellectual Property
which the Secured Party may hold at any time, or to marshal assets, or to
pursue any other remedy. The Company waives any defense arising by reason
of the application of the statute of limitations to any obligation secured
hereby.
11. Term of Agreement. This Agreement and the Security Interest shall
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terminate on the date on which all payments under the Notes have been made
in full and all other Obligations have been paid or discharged. Upon such
termination, the Secured Party, at the request and at the expense of the
Company, will join in executing any termination statement with respect to
any financing statement executed and filed pursuant to this Agreement.
12. Power of Attorney; Further Assurances.
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(a) The Company authorizes the Secured Party, and does hereby
make, constitute and appoint it, and its respective officers, agents,
successors or assigns with full power of substitution, as the
Company's true and lawful attorney-in-fact, with power, in its own
name or in the name of the Company, to, after the occurrence and
during the continuance of an Event of Default, (i) endorse any notes,
checks, drafts, money orders, or other instruments of payment
(including payments payable under or in respect of any policy of
insurance) in respect of the Intellectual Property that may come into
possession of the Secured Party; (ii) to sign and endorse any UCC
financing statement or any invoice, freight or express ▇▇▇▇, ▇▇▇▇ of
lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts,
and other documents relating to the Intellectual Property; (iii) to
pay or discharge taxes, liens, security interests or other
encumbrances at any time levied or placed on or threatened against the
Intellectual Property; (iv) to demand, collect, receipt for,
compromise, settle and ▇▇▇ for monies due in respect of the
Intellectual Property; and (v) generally, to do, at the option of the
Secured Party, and at the Company's expense, at any time, or from time
to time, all acts and things which the Secured Party deems necessary
to protect, preserve and realize upon the Intellectual Property and
the Security Interest granted therein in order to effect the intent of
this Agreement, the Notes and the Warrants, all as fully and
effectually as the Company might or could do; and the Company hereby
ratifies all that said attorney shall lawfully do or cause to be done
by virtue hereof. This power of attorney is coupled with an interest
and shall be irrevocable for the term of this Agreement and thereafter
as long as any of the Obligations shall be outstanding.
(b) On a continuing basis, the Company will make, execute,
acknowledge, deliver, file and record, as the case may be, in the
proper filing and recording places in any jurisdiction, including,
without limitation, the jurisdictions indicated on Schedule C,
attached hereto, all such instruments, and take all such action as may
reasonably be deemed necessary or advisable, or as reasonably
requested by the Secured Party, to perfect the Security Interest
granted hereunder and otherwise to carry out the intent and purposes
of this Agreement, or for assuring and confirming to the Secured Party
the grant or perfection of a security interest in all the Intellectual
Property.
(c) The Company hereby irrevocably appoints the Secured Party as
the Company's attorney-in-fact, with full authority in the place and
stead of the Company and in the name of the Company, from time to time
in the Secured Party's discretion, to take any action and to execute
any instrument which the Secured Party may deem necessary or advisable
to accomplish the purposes of this Agreement, including the filing, in
its sole discretion, of one or more financing or continuation
statements and amendments thereto, relative to any of the Intellectual
Property without the signature of the Company where permitted by law.
13. Notices. All notices, requests, demands and other communications
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hereunder shall be in writing, with copies to all the other parties hereto,
and shall be deemed to have been duly given when (i) if delivered by hand,
upon receipt, (ii) if sent by facsimile, upon receipt of proof of sending
thereof, (iii) if sent by nationally recognized overnight delivery service
(receipt requested), the next business day or (iv) if mailed by first-class
registered or certified mail, return receipt requested, postage prepaid,
four days after posting in the U.S. mails, in each case if delivered to the
following addresses:
If to the Company: Pediatric Prosthetics, Inc.
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▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (281)
With a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
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Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Secured Party: AJW Partners, LLC
AJW Offshore, Ltd.
AJW Qualified Partners, LLC
New Millennium Capital Partners, II, LLC
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Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Ingersoll, LLP
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Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esquire
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
14. Other Security. To the extent that the Obligations are now or
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hereafter secured by property other than the Intellectual Property or by
the guarantee, endorsement or property of any other person, firm,
corporation or other entity, then the Secured Party shall have the right,
in its sole discretion, to pursue, relinquish, subordinate, modify or take
any other action with respect thereto, without in any way modifying or
affecting any of the Secured Party's rights and remedies hereunder.
15. Miscellaneous.
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(a) No course of dealing between the Company and the Secured
Party, nor any failure to exercise, nor any delay in exercising, on
the part of the Secured Party, any right, power or privilege hereunder
or under the Notes 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.
(b) All of the rights and remedies of the Secured Party with
respect to the Intellectual Property, whether established hereby or by
the Notes or by any other agreements, instruments or documents or by
law shall be cumulative and may be exercised singly or concurrently.
(c) This Agreement and the Security Agreement constitute the
entire agreement of the parties with respect to the subject matter
hereof and is intended to supersede all prior negotiations,
understandings and agreements with respect thereto. Except as
specifically set forth in this Agreement, no provision of this
Agreement may be modified or amended except by a written agreement
specifically referring to this Agreement and signed by the parties
hereto.
(d) In the event that any provision of this Agreement is held to
be invalid, prohibited or unenforceable in any jurisdiction for any
reason, unless such provision is narrowed by judicial construction,
this Agreement shall, as to such jurisdiction, be construed as if such
invalid, prohibited or unenforceable provision had been more narrowly
drawn so as not to be invalid, prohibited or unenforceable. If,
notwithstanding the foregoing, any provision of this Agreement is held
to be invalid, prohibited or unenforceable in any jurisdiction, such
provision, as to such jurisdiction, shall be ineffective to the extent
of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other
provisions of this Agreement and without affecting the validity or
enforceability of such provision or the other provisions of this
Agreement in any other jurisdiction.
(e) No waiver of any breach or default or any right under this
Agreement shall be considered valid unless in writing and signed by
the party giving such waiver, and no such waiver shall be deemed a
waiver of any subsequent breach or default or right, whether of the
same or similar nature or otherwise.
(f) This Agreement shall be binding upon and inure to the benefit
of each party hereto and its successors and assigns.
(g) Each party shall take such further action and execute and
deliver such further documents as may be necessary or appropriate in
order to carry out the provisions and purposes of this Agreement.
(h) This Agreement shall be construed in accordance with the laws
of the State of New York, except to the extent the validity,
perfection or enforcement of a security interest hereunder in respect
of any particular Intellectual Property which are governed by a
jurisdiction other than the State of New York in which case such law
shall govern. Each of the parties hereto irrevocably submit to the
exclusive jurisdiction of any New York State or United States Federal
court sitting in Manhattan county over any action or proceeding
arising out of or relating to this Agreement, and the parties hereto
hereby irrevocably agree that all claims in respect of such action or
proceeding may be heard and determined in such New York State or
Federal court. The parties hereto agree that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner
provided by law. The parties hereto further waive any objection to
venue in the State of New York and any objection to an action or
proceeding in the State of New York on the basis of forum non
conveniens.
(i) EACH PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO
BE ALL ENCOMPASSING OF ANY DISPUTES THAT MAY BE FILED IN ANY COURT AND
THAT RELATE TO THE SUBJECT MATER OF THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES
THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO
A BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY RELIED ON THIS
WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL
CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH
PARTY FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY HAS KNOWINGLY AND
VOLUNTARILY WAIVES ITS RIGHTS TO A JURY TRIAL FOLLOWING SUCH
CONSULTATION. THIS WAIVER IS IRREVOCABLE, MEANING THAT,
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS AND SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT. IN THE EVENT OF A LITIGATION, THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
(j) This Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original and,
all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation
of the party executing (or on whose behalf such signature is executed)
the same with the same force and effect as if such facsimile signature
were the original thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
PEDIATRIC PROSTHETICS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇
Chief Executive Officer
AJW PARTNERS, LLC
By: SMS Group, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
AJW OFFSHORE, LTD.
By: First Street Manager II, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
AJW QUALIFIED PARTNERS, LLC
By: AJW Manager, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager