COVENANTS AND WARRANTIES. Debtor represents, warrants to, and covenants and agrees with Secured Party, as follows:
(a) Except as set forth in the Assignment Agreement or in this Security Agreement, Debtor is and will continue to be the sole and exclusive owner of the entire legal and beneficial right, title and interest in and to the ASNAP Patent and the Baxter Patents, free and clear of any lien, charge, security interest or other encumbrance, except for the security interest and assignment created by this Security Agreement and the Assignment Agreement. Debtor will defend its right, title and interests in and to the ASNAP Patent, the Baxter Patents and the Collateral against claims of any third parties;
(b) Performance of this Security Agreement does not conflict with or result in a breach of any agreement to which Debtor is a party or by which Debtor is bound;
(c) Debtor shall take any and all such actions (including but not limited to institution and maintenance of suits, proceedings or actions) as are necessary and appropriate to properly maintain, protect, preserve, care for and enforce the ASNAP Patent, the Baxter Patents and the Collateral. However, Debtor shall not be required to incur costs or take other actions when, in the exercise of its reasonable business judgment, such costs or other actions would not be advisable. Without limiting the generality of the foregoing, Debtor shall pay when due such fees, taxes and other expenses which shall be incurred, which shall accrue, and/or which shall come due with respect to any of the Collateral, including but not limited to all prosecution, maintenance, and annuity fees related to the ASNAP Patent or the Baxter Patents. Debtor shall not abandon or dedicate to the public any of the ASNAP Patent or Baxter Patents or related patent rights, nor do any act nor omit to do any act if such act or omission is of a character that tends to cause or contribute to the abandonment or dedication to the public of the ASNAP Patent or Baxter Patents or related patent right or loss of or adverse effect on any rights in the ASNAP Patent or Baxter Patents or related patent right;
(d) Debtor shall in the future use statutory and other appropriate symbols, notices or legends of the ASNAP Patent or Baxter Patents pending or issued consistent with notice practice;
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(e) Debtor shall do all things which are necessary and appropriate to insure that each licensee of any portion of the ASNAP Patent or Baxter Patents, in its use of any or all of the Collateral in its business, shall: (a) comply fully with all applicable license agreements; and (b) satisfy and perform all the same obligations set forth herein (with respect to Debtor’s use of the Collateral) as fully as though such obligations were set forth with respect to such licensee’s use of the licensed Collateral;
(f) To the knowledge of Debtor, there is at present no infringement or unauthorized or improper use of the ASNAP Patent or Baxter Patents or the patent rights related thereto. In the event any such infringement or unauthorized or improper use by any third party has been made and/or reasonably established by Debtor, Debtor shall promptly notify Secured Party and Debtor shall take action against such infringement or unauthorized or improper use. However, Debtor shall not be required to incur costs or take other actions when, in the exercise of its reasonable business judgment, such costs or other actions would not be advisable;
(g) Debtor hereby authorizes Secured Party to cause this Security Agreement to be recorded with the United States Patent and Trademark Office and appropriate state agencies;
(h) During the term of this Security Agreement, Debtor will not sell, transfer, assign or otherwise encumber any interest in the Collateral, except (i) licenses or other assignments granted by Debtor in the ordinary and normal course of its business or as set forth in this Security Agreement or that do not, in the aggregate, impair the Collateral and, provided, further, that any such licenses or other assignments are made in a manner permitted by the Assignment Agreement, and (ii) subject to Debtor's execution of appropriate documents, in form acceptable to Secured Party, to perfect or continue the perfection of Secured Party’s interest in the Collateral as well as any other interest held by Secured Party, transfers to Affiliates (as defined in the Assignment Agreement) of Debtor; and
(i) Debtor shall not enter into any agreement that would materially impair or conflict with Debtor's obligations hereunder without Secured Party’s prior written consent. For purposes of this subsection, Debtor's entering into license or assignment agreements in the ordinary course of business shall not be deemed to materially impair or conflict with Debtor's obligations hereunder, provided the foregoing is entered into in a manner permitted by the Assignment Agreement.
3. SECURED PARTY'S RIGHTS. Secured Party shall have the right, but not the obligation, to take, at Debtor's sole expense, any actions that Debtor is required under this Security Agreement to take but which Debtor fails to take, after fifteen (15) days' notice to Debtor. Debtor shall reimburse and indemnify Secured Party for all reasonable costs and reasonable expenses incurred in the reasonable exercise of its rights under this provision.
4. INSPECTION RIGHTS. Debtor hereby grants to Secured Party and its employees, representatives and agents the right to visit, during reasonable hours upon prior reasonable and no less than three business days advance written notice to Debtor, any of Debtor's plants and facilities that manufacture, install or store products (or that have done so during the prior six-month period) utilizing, in whole or in part, any of the ASNAP Collateral or Baxter Collateral, and to inspect the products and quality control records relating thereto upon reasonable written notice to Debtor and as often as may be reasonably requested.
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5. FURTHER ASSURANCES; ATTORNEY IN FACT.
(a) On a continuing basis for the purpose of perfecting and maintaining the perfection of Secured Party's security interest in the Collateral, Debtor will make, execute, acknowledge and deliver, and file and record in the proper filing and recording places in the United States, all such instruments, including appropriate financing and continuation statements, and take all such action as may reasonably be necessary or advisable, or as reasonably requested by Secured Party, which Secured Party reasonably identifies as material to the operation of Debtor's business on an on-going basis or the value of the Collateral, and otherwise to carry out the intent and purposes of this Security Agreement, or for assuring and confirming to Secured Party the grant or perfection of a security interest in the Collateral.
(b) Debtor hereby irrevocably appoints Secured Party as Debtor's attorney-in-fact, with full authority in the place and stead of Debtor and in the name of Debtor, from time to time in Secured Party’s discretion, to take any action and to execute any instrument which Secured Party may reasonably deem necessary or advisable to accomplish the purposes of this Security Agreement, including (i) to file, in its reasonable discretion, one or more financing or continuation statements and amendments thereto, relative to the Collateral without the signature of Debtor where permitted by law and (ii) to transfer the Collateral into the name of Secured Party or a third party to the extent permitted under the UCC provided that Secured Party agrees that it shall not exercise its powers as attorney-in-fact under this Section except upon the occurrence and during the continuation of an Event of Default (as hereinafter defined).
6. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an "Event of Default" under this Security Agreement:
(a) Debtor breaches any warranty or agreement made by Debtor in this Security Agreement or breaches any other provision of this Security Agreement and, as to any breach that is capable of immediate cure, Debtor fails to cure such breach within thirty (20) days after written notice of such breach is given to Debtor (it being understood and agreed that no such notice and opportunity to cure shall be provided with respect to any breach that is not capable of immediate cure);
(b) Debtor fails to pay the Promissory Note when same (or any portion thereof) becomes due and owing; and
(c) Debtor fails to make any payments due under the terms of the Assignment Agreement or any other agreement (other than the Promissory Note) executed pursuant to the terms of the Settlement Agreement and fails to cure such monetary default within ten (10) days from the date of written notice of same, or if Debtor breaches any non-monetary provision of the Assignment Agreement or any other agreement executed pursuant to the terms of the Settlement Agreement and fails to (i) cure such monetary default within twenty (20) days from the date of the written notice of same or (ii) if such non-monetary default is not of the nature than can reasonably be cured within twenty (20) days and promptly commences to cure the default within twenty (20) days and promptly completes such cure thereafter.
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7. REMEDIES. Upon the occurrence and during the continuance of an Event of Default:
(a) Secured Party shall have the right to exercise all the remedies of a secured party under the UCC, including, without limitation, the right to require Debtor to assemble the Collateral and any tangible property in which Secured Party has a security interest and to make it available to Secured Party at a place designated by Secured Party. Secured Party shall have a nonexclusive, royalty free license or other right, solely pursuant to the provisions of this Section, to use, without charge, the Collateral, to the extent reasonably necessary to permit Secured Party to exercise its rights and remedies pursuant to this Section, including, without limitation, the completion of production, advertising for sale and the sale of the Collateral and, in connection with Secured Party's exercise of its rights hereunder, Debtor's rights under all licenses and all franchise agreements which constitute Collateral shall inure to the benefit of Secured Party. Debtor will pay any expenses (including reasonable attorneys' fees) incurred by Secured Party in connection with the exercise of any of Secured Party’s rights hereunder, including, without limitation, any expense incurred in disposing of the Collateral. All of Secured Party’s rights and remedies with respect to the Collateral shall be cumulative.
(b) Secured Party may notify any obligors with respect to the Collateral of Secured Party’s security interest and that such obligors are to make payments directly to Secured Party. Secured Party may send this notice in Debtor’s name or in Secured Party’s name, and, at Secured Party’s request, Debtor will join in Secured Party’s notice, provide written confirmation of Secured Party’s security interest and request that payment be sent to Secured Party. Secured Party may enforce this obligation by specific performance. Secured Party may collect all amounts due from such obligors. Upon and after notification by Secured Party to Debtor, Debtor shall hold any proceeds and collections of any of the Collateral in trust for Secured Party and shall not commingle such proceeds or collections with any other of Debtor’s funds, and Debtor shall deliver all such proceeds to Secured Party immediately upon Debtor’s receipt thereof in the identical form received and duly endorsed or assigned to Secured Party.
(c) Secured Party will give to Debtor reasonable notice of the time and place of any public sale of Collateral, or part thereof, or of the time after which any private sale or other intended disposition thereof is to be made. Such requirement of reasonable notice shall be met if such notice is delivered to the address of Debtor set forth in this Security Agreement at least fifteen (15) calendar days before the time of the proposed sale or disposition. Any such sale may take place from Debtor’s location or such other location as Secured Party may designate. Debtor shall remain liable for any deficiency in payment of the Indebtedness after any such sale.
(d) Nothing herein shall be construed as obligating Secured Party to take any of the foregoing actions at any time.
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