SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated effective as of October 29, 2004 (this
"Security Agreement"), is entered into by and between Laser Energetics, Inc., a
Florida corporation (the "Borrower"), and Arisawa Manufacturing Co., Ltd., a
Japanese corporation (the "Secured Party").
PRELIMINARY STATEMENTS.
1. Reference is made to the secured promissory note dated effective as of
October 29, 2004 made by Borrower in favor of and delivered to Secured Party in
the original principal amount of US One Million Ninety-Nine Thousand Seven
Hundred Eighteen Dollars ($1,099,718.00) (as modified and supplemented and in
effect from time to time, the "Note"). Capitalized terms used in this Security
Agreement and not otherwise defined herein shall have the respective meanings
set forth in the Note. It is a condition precedent to the funding of the Note
that the Borrower shall have granted the security interest contemplated by this
Security Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Secured Party to provide the principal sum to Borrower, Borrower hereby
agrees as follows:
1. Grant of Security. The Borrower hereby grants to the Secured Party a security
interest in the following collateral of the Borrower (the "Collateral"):
all inventory, work-in-progress, raw materials, equipment, accounts
(including but not limited to all health-care-insurance receivables),
chattel paper, instruments (including but not limited to all promissory
notes), letter-of-credit rights, letters of credit documents, deposit
accounts, investment property, money, other rights to payment and
performance, and general intangibles (including but not limited to all
software and all payment intangibles); and oil, gas and other minerals
before extraction; all oil, gas, other minerals and accounts constituting
as-extracted collateral; all fixtures; all timber to be cut; all
attachments, accessions, accessories, fittings, increases, tools, parts,
repairs, supplies, and commingled goods relating to the foregoing
property, and all additions, replacements of and substitutions for all or
any part of the foregoing property, all insurance refunds relating to the
foregoing property; all good will relating to the foregoing property; all
records and data and embedded software relating to the foregoing property;
and all equipment, inventory and software to utilize, create, maintain and
process any such records and data on electronic media; and all supporting
obligations relating to the foregoing property; all whether now existing
or hereafter arising, whether now owned or hereafter acquired or whether
now or hereafter subject to any rights in the foregoing property; and all
products and proceeds (including but not limited to all insurance
payments) of or relating to the foregoing property (the "Business
Assets"), and
all letters patent of the United States, all right, title and interest
therein and thereto, and all registrations and recordings thereof, which
are described in Schedule 1(b) annexed hereto and made a part hereof, all
reissues, continuations, continuations-in-part or extensions thereof and
all licenses thereof, and all products and proceeds of or relating to the
foregoing property (the "Patents").
2. Security for Obligations. The Collateral secures the prompt and complete
payment when due of the outstanding principal and interest on the Note and all
other indebtedness and other obligations of the Borrower now or hereafter
existing under the Note including, without limitation, principal, interest,
fees, expenses, reasonable costs and expenses of enforcement, and reasonable
attorneys' fees and expenses (collectively, the "Secured Obligations").
3. Borrower Remains Liable. Anything herein to the contrary notwithstanding, the
Secured Party shall not have any obligation or liability, nor shall the Secured
Party be obligated to perform any of the obligations or duties of the Borrower
by reason of the security interest granted to the Secured Party as contemplated
by this Security Agreement.
4. Representations and Warranties. Borrower represents and warrants to the
Secured Party as follows:
The Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida The chief place of business and
chief executive offices of the Borrower are located at the address(es) specified
on Schedule 4(a) hereto.
The Collateral constituting tangible personal property is located at, and at all
times while this Security Agreement remains in effect shall be located at, the
address(es) as specified on Schedule 4(b) hereto.
The Borrower owns its rights in the Collateral free and clear of any lien,
claim, encumbrance, license, right of first refusal or other restriction except
for the security interest created by this Security Agreement and the liens
specified on Schedule 4(c) hereto (the "Permitted Liens"). No effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except for financing
statements filed in favor of the Secured Party relating to this Security
Agreement and the Permitted Liens.
The Borrower conducts no business under any name or trade name other than its
proper corporate name.
Except for the Permitted Liens, this Security Agreement creates a valid first
priority lien in the Collateral, securing the payment of the Secured
Obligations. All other actions necessary or desirable to create such security
interest have been duly taken.
No authorization, approval or other action by, and no notice to or filing with,
any governmental authority is required for the grant by the Borrower of the
security interest granted hereby or for the execution, delivery or performance
of this Security Agreement by the Borrower.
5. Further Assurances. The Borrower agrees that from time to time, at the
expense of the Borrower, the Borrower will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Secured Party may reasonably request, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Secured Party to exercise and enforce its rights
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and remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Borrower shall execute and file such financing
or continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as the Secured Party may
reasonably request, in order to perfect and preserve the security interest
granted or purported to be granted hereby. In addition, the Borrower shall
execute and file at the Secured Party's request any instruments or notices
required to be filed with the United States Patent and Trademark Office or any
other governmental office or agency to perfect and protect any security interest
granted or purported to be granted hereby. The Borrower agrees to give the
Secured Party notice of any new intellectual property rights related to the
Collateral.
The Borrower hereby authorizes the Secured Party to file one or more financing
or continuation statements, and amendments thereto pursuant to the Uniform
Commercial Code, relative to all or any part of the Collateral without the
signature of the Borrower where permitted by law. A carbon, photographic or
other reproduction of this Security Agreement, as executed by all parties, or
any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
The Borrower shall immediately notify the Secured Party, by written notice, if
at any time any material portion of the Collateral shall be moved or transferred
from, or no longer be located at, the address(es) as specified on Schedule 4(b)
hereto.
The Borrower shall defend the Collateral against all claims and demands of all
persons (other than the Secured Party) claiming an interest therein. The
Borrower shall pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims against, the
Collateral, except to the extent that there is a good faith contest of the
validity thereof.
6. Remedies. If any Event of Default (as defined in the Note) shall have
occurred and is then continuing, the Secured Party may exercise in respect of
the Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code (the "Code").
7. Amendments; Etc. No amendment or waiver of any provision of this Security
Agreement or consent to any departure by the Borrower herefrom shall in any
event be effective unless the same shall be in writing and signed by the Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
8. Notices. All notices and other communications required or permitted hereunder
shall be in writing and shall be (i) mailed by registered or certified mail,
postage prepaid, (ii) delivered by reliable overnight courier service, or (iii)
otherwise delivered by hand or by messenger, addressed (A) if to the Lender, c/o
X.X. Xxxxxxxx, 000 Xxxx Xxxxx Xxxx, #0, Xxxxx, Xxx Xxxxxx 00000, with a copy to
Xxxxx & XxXxxxxx, 000 Xxxxxxxxxxx Xxxxxx, XX, Xxxxxxxxxx, XX 00000-0000, Attn:
Xxxxx X. X'Xxxxx, Esq., or (B) if to the Company, to 0000 Xxxxxxxxxxxx Xxxx,
Xxxxx 000, Xxxxxxxxxxx, Xxx Xxxxxx 00000, Attn: Xxxxxx Xx. Xxxxxx, CEO, with a
copy to Xxxxx & Xxxxx, 000 Xxxxx Xxxxx, Xxxxxxxxxxxxx, Xxx Xxxxxx 00000, or at
such other address as the Company shall have furnished to the Purchaser in
writing. All such notices and communications shall be effective upon receipt.
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9. Continuing Security Interest. This Agreement shall create a continuing
security interest in the Collateral and shall (1) remain in full force and
effect until payment in full of the Secured Obligations, (2) be binding upon the
Borrower, its permitted successors and assigns, and (3) inure to the benefit of
the Secured Party and its permitted successors, transferees and assigns. Upon
the payment in full of the Secured Obligations, the security interest granted
hereby shall terminate and all rights to the Collateral shall revert to the
Borrower. Upon any such termination, the Secured Party shall, at the Borrower's
expense, promptly execute and deliver to the Borrower such documents as the
Borrower may reasonably request to evidence such termination.
10. Continuous Perfection. On March 31, 2004, Borrower issued its secured
convertible promissory note to Secured Party in the aggregate principal amount
of One Million Seventy Thousand Dollars ($1,070,000) (the "March 31 Note").
Simultaneously with the execution and delivery of the Note, the Secured Party
shall cancel the March 31 Note and the Borrower and the Secured Party shall
terminate the loan agreement between them dated March 31, 2004. The Collateral
securing the Note is exactly the same as the collateral that secured the March
31 Note. Secured Party filed a financing statement (number 20040655433X) April
2, 2004 in the State of Florida (the "Financing Statement") to perfect Secured
Party's security interest in and to the collateral which secured the obligations
of Borrower under the March 31 Note. Borrower and Secured Party intend for the
Secured Party to have and enjoy a continuously perfected security interest in
and to the Collateral notwithstanding the cancellation of the March 31 Note.
Borrower agrees that, notwithstanding the cancellation of the March 31 Note,
Secured Party shall not file any termination statement with respect to the
Financing Statement as a consequence of such cancellation. The parties intend
that the Financing Statement shall remain effective and continue to perfect the
security interest granted in the Collateral by this Security Agreement. On April
14, 2004, the United States Patent and Trademark Office recorded at reel/ frame
015201/0436 the security agreement by and between Borrower and Secured Party to
perfect Secured Party's security interest in and to the intellectual property
which secured the obligations of Borrower under the March 31 Note (the "Prior
Security Agreement"). The parties intend that Secured Creditor have and enjoy a
continuously perfected security interest in and to the intellectual property
covered by the Prior Security Agreement and this Security Agreement
notwithstanding the cancellation of the March 31 Note, and the parties shall
take any action required by Section 5 above to ensure the continuity of such
perfection.
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11. Governing Law; Terms. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
NEW YORK STATE PRINCIPLES OF CONFLICT OF LAWS EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW JERSEY. Unless otherwise defined herein
or in the Note, terms used in Article 9 of the Uniform Commercial Code Law in
the State of New York are used herein as therein defined.
12. Miscellaneous. This Security Agreement is in addition to and not in
limitation of any other rights and remedies the Secured Party may have by virtue
of any other document executed by the Borrower or by law or otherwise. If any
provision of this Security Agreement is contrary to applicable law or general
principles of equity, such provision shall be deemed ineffective without
invalidating the remaining provisions hereof. The Secured Party shall not by any
delay or omission be deemed to have waived any of its rights or remedies
hereunder. A waiver by the Secured Party of any right or remedy hereunder on any
one occasion shall not be construed as a bar to or waiver of any such right or
remedy which the Secured Party would have had on any future occasion nor shall
the Secured Party be liable for exercising or failing to exercise any such right
or remedy.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed and delivered on the date first above written.
LASER ENERGETICS, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Founder, President & CEO
ARISAWA MANUFACTURING CO., LTD.
By: /s/ Sanji Arisawa
-------------------------------
Name: Sanji Arisawa
Title: President & CEO
SCHEDULE 1
To Security Agreement
PATENTS
Patent No. Title U.S. Expiration Date
5,331,652 Solid State Laser having Closed Cycle Gas March 2013
Cooled Construction
5,235,606 Amplification of Ultrashort Pulses with Nd: October 2011
Glass Amplifiers Pumped by Alexandrite Free
Running Laser
5,142,548 Broadband Tuning and Laser Line Narrowing April 2010
Utilizing Birefringent Laser Hosts
5,009,658 Dual Frequency Laser Lithotripter (1) April 2009
4,949,346 Conductively Cooled, Diode-Pumped Solid August 2009
State Slab Laser
4,944,567 Laser Imaging Fiber Optic Delivery System November 2007
4,933,946 Conductively Cooled Solid State Slab Laser August 2009
4,858,242 Improved Unitary Solid-State Laser March 2005
4,835,786 Unitary Solid State Laser March 2005
4,791,927 Dual-Wavelength Laser Scalpel Background of December 2005
the Invention
4,734,913 Unitary Solid-State Laser December 2005
4,713,824 Noble-Metal Overcoated, Front Surface December 2004
Silver Reflectors
4,713,820 Thermal Lensing-Compensated Lanthanum August 0000
Xxxxxxxxx Laser
Patent No. Title U.S. Expiration Date
5,321,711 Segmented Solid State Laser Gain Media with August 2012
Gradient Dopy Level
4,809,283 Method of manufacturing chromium-doped Year 2006
berylliym aluminate laser rod and lasers
incorporating the rods therein
(1) Joint Ownership with Xxxx Xxxxx Endoscopy
SCHEDULE 4
to Security Agreement
(a) Place of Business (Chief Place of Business and Chief Executive Office):
0000 Xxxxxx Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxxx, Xxx Xxxxxx 00000
(b) Location of Collateral
0000 Xxxxxx Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxxx, Xxx Xxxxxx 00000
(c) Permitted Liens
Commerce Bank (Business Assets) - maximum principal amount of $500,000.00
