GUARANTY AND SECURITY AGREEMENT

 

among

 

CYTOMEDIX, INC., 

as Grantor,

 

and

 

THE OTHER PARTIES HERETO,

as Grantors and Guarantors,

 

and

 

DEERFIELD PRIVATE DESIGN FUND II, L.P.,

DEERFIELD PRIVATE DESIGN INTERNATIONAL II, L.P.,

DEERFIELD SPECIAL SITUATIONS FUND, L.P. and

DEERFIELD SPECIAL SITUATIONS INTERNATIONAL MASTER FUND, L.P.,

as Lenders

 

and

 

DEERFIELD MGMT, L.P.,

as Agent for the Lenders

 

March 31, 2014

 

 

 

 

GUARANTY AND SECURITY AGREEMENT

 

THIS GUARANTY AND SECURITY AGREEMENT dated as of March 31, 2014 (this
“Agreement”) is entered into among CYTOMEDIX, INC., a Delaware corporation
(“Borrower”), ALDAGEN, INC., a Delaware corporation (“AI”), CYTOMEDIX
ACQUISITION COMPANY, LLC (“CAC”) and any other Person who becomes a party hereto
pursuant to Section 7.16 (the “Grantors” and each, a “Grantor”), each other
Person signatory hereto as a “Guarantor” (as defined below), and DEERFIELD MGMT,
L.P., as Agent, DEERFIELD PRIVATE DESIGN FUND II, L.P., DEERFIELD PRIVATE DESIGN
INTERNATIONAL II, L.P., DEERFIELD SPECIAL SITUATIONS FUND, L.P. and DEERFIELD
SPECIAL SITUATIONS INTERNATIONAL MASTER FUND, L.P. (the “Lenders”).

 

RECITALS

 

A.           Lenders have agreed to extend credit to Borrower pursuant to the
Facility Agreement (defined below). Borrower is affiliated with each other
Grantor and Guarantor.

 

B.           Borrower, the other Grantors and the Guarantors are engaged in
interrelated businesses, and each Grantor and each Guarantor will derive
substantial direct and indirect benefit from extensions of credit under the
Facility Agreement.

 

C.           It is a condition precedent to Lenders’ obligation to extend credit
under the Facility Agreement that the Grantors and the Guarantors shall have
executed and delivered this Agreement to Lenders.

 

In consideration of the premises and to induce Lenders to enter into the
Facility Agreement and to induce Lenders to extend credit thereunder, each
Grantor and each Guarantor hereby agrees with Lenders as follows:

 

SECTION 1DEFINITIONS.

 

1.1          Unless otherwise defined herein, terms defined in the Facility
Agreement and used herein shall have the meanings given to them in the Facility
Agreement, and the following terms are used herein as defined in the UCC:
Accounts, Certificated Security, Chattel Paper, Commercial Tort Claims, Deposit
Accounts, Documents, Electronic Chattel Paper, Equipment, Farm Products, General
Intangibles, Goods, Health Care Insurance Receivables, Instruments, Inventory,
Leases, Letter-of-Credit Rights, Money, Payment Intangibles, Supporting
Obligations, and Tangible Chattel Paper.

 

1.2          When used herein the following terms shall have the following
meanings:

 

“Agreement” has the meaning set forth in the preamble of this Agreement.

 

“Agent” has the meaning set forth in Section 3.4.

 

“Borrower Obligations” means all Obligations of Borrower.

 

“Collateral” means all of Grantors’ assets, including without limitation, all of
Grantors’ right, title and interest in and to the following, whether now owned
or hereafter created, acquired or arising:

 

 

 

 

(a)all Goods, Accounts (including Health Care Insurance Receivables), Equipment,
Inventory, contract rights or rights to payment of money, Leases, license
agreements, franchise agreements, General Intangibles, Commercial Tort Claims,
Documents, Instruments (including any promissory notes), Chattel Paper (whether
Tangible Chattel Paper or electronic), Cash, Deposit Accounts, Intellectual
Property, securities accounts, fixtures, Letter-of-Credit Rights (whether or not
the letter of credit is evidenced by a writing), securities, and all other
Investment Property, Supporting Obligations, and financial assets, whether now
owned or hereafter acquired, wherever located;

 

(b)all of Grantors’ books and records relating to any of the foregoing;

 

(c)all of Grantors’ Pledged Notes; and

 

(d)           any and all claims, rights and interests in any of the above and
all substitutions for, additions, attachments, accessories, accessions and
improvements to and replacements, products, proceeds and insurance proceeds of
any or all of the foregoing.

 

Where the context requires, terms relating to the Collateral or any part
thereof, when used in relation to a Grantor, shall refer to such Grantor’s
Collateral or the relevant part thereof. Notwithstanding the foregoing,
“Collateral” shall not include Excluded Property.

 

“Control Agreement” means an agreement among a Grantor and Lenders (or an agent
thereof) and (i) the issuer of uncertificated securities with respect to
uncertificated securities in the name of such Grantor, (ii) a securities
intermediary with respect to securities, whether certificated or uncertificated,
securities entitlements and other financial assets held in a securities account
in the name of such Grantor, (iii) a futures commission merchant or clearing
house, as applicable, with respect to commodity accounts and commodity contracts
held by such Grantor, or (iv) a bank with respect to a Deposit Account; whereby,
among other things, the issuer, securities intermediary or futures commission
merchant, or bank limits any Lien that it may have in the applicable financial
assets or Deposit Account in a manner reasonably satisfactory to Lenders (or an
agent thereof), acknowledges the Lien of Lenders (or a representative thereof)
on such financial assets or Deposit Account, and agrees to follow the
instructions or entitlement orders of Lenders (or an agent thereof) without
further consent by such Grantor.

 

“Dollars” and “$” each mean lawful money of the United States of America.

 

“Equity Interest” means, with respect to a Person, all of the shares, options,
warrants, interests, participations, or other equivalents (regardless of how
designated) of or in such Person, whether voting or nonvoting, including capital
stock (or other ownership or profit interests or units), preferred stock, or any
other "equity security" (as such term is defined in Rule 3a 11-1 of the General
Rules and Regulations promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended).

 

“Excluded Property” means, collectively, (a) any permit, license or agreement
entered into by any Grantor (i) to the extent that any such permit, license or
agreement or any requirement of law applicable thereto prohibits the creation of
a Lien thereon, but only to the extent, and for as long as, such prohibition is
not terminated or rendered unenforceable or otherwise deemed ineffective by the
UCC or any other requirement of law, (ii) which would be abandoned, invalidated
or unenforceable as a result of the creation of a Lien in favor of Lenders or
(iii) to the extent that the creation of a Lien in favor of Lenders would result
in a breach or termination pursuant to the terms of or a default under any such
permit, license or agreement (other than to the extent that any such term would
be rendered ineffective pursuant to the Sections 9-406, 9-407, 9-408 or 9-409 of
the UCC or any other applicable law (including the Bankruptcy Code) or
principles of equity), (b) property owned by any Grantor that is subject to a
purchase money Lien or a capital lease permitted under the Facility Agreement if
the agreement pursuant to which such Lien is granted (or in the document
providing for such capital lease) prohibits or requires the consent of any
Person other than a Grantor and its Affiliates which has not been obtained as a
condition to the creation of any other Lien on such property, and (c) any
“intent to use” trademark applications for which a statement of use has not been
filed (but only until such statement is filed); provided, however, “Excluded
Property” shall not include any proceeds, products, substitutions or
replacements of Excluded Property (unless such proceeds, products, substitutions
or replacements would otherwise constitute Excluded Property).

 

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“Facility Agreement” means the Facility Agreement of even date herewith between
Borrower and Lenders, as amended, supplemented, restated or otherwise modified
from time to time.

 

“Grantor” has the meaning set forth in the preamble of this Agreement.

 

“Guarantor Obligations” means, collectively, with respect to each Guarantor, all
obligations and liabilities of each Guarantor to Lenders under this Agreement.

 

“Guarantors” means AI, CAC and any other Person who becomes a signatory to this
Agreement pursuant to Section 7.16.

 

“Identified Claims” means the Commercial Tort Claims described on Schedule 7 as
such schedule shall be supplemented from time to time in accordance with the
terms and conditions of this Agreement.

 

“Investment Property” means the collective reference to (a) all “investment
property” as such term is defined in Section 9-102(a)(49) of the UCC, (b) all
“financial assets” as such term is defined in Section 8-102(a)(9) of the UCC,
and (b) whether or not constituting “investment property” as so defined, all
Pledged Notes and all Pledged Equity.

 

“Issuers” means the collective reference to each issuer of Investment Property.

 

“Lien” means any pledge, hypothecation, assignment, charge, deposit arrangement,
encumbrance, easement, lien (statutory or otherwise), security interest or other
security arrangement and any other preference, priority or preferential
arrangement of any kind or nature whatsoever, including any conditional sale
contract or other title retention agreement.

 

“Paid in Full” means (a) all Secured Obligations (other than contingent claims
for indemnification or reimbursement not then asserted) have been repaid in full
in cash and have been fully performed, (b) all other Obligations (other than
contingent claims for indemnification or reimbursement not then asserted) under
the Facility Agreement and the other Loan Documents have been completely
discharged, and (c) all commitments of Lenders, if any, to extend credit that
would constitute Borrower Obligations have been terminated or have expired.

 

“Pledged Equity” means collectively, all Pledged Interests and Pledged Stock.

 

“Pledged Interests” shall mean, with respect to each limited liability company,
partnership or other organization listed on Schedule 1, the Equity Interests in
such limited liability company, partnership or other organization owned by a
Grantor and listed on Schedule 1, and the certificates, if any, representing
such interests and any interest of such Grantor, as applicable, on the books and
records of such limited liability company, partnership or other organization or
on the books and records of any securities intermediary pertaining to such
interests and the Equity Interests of any other Person whose Equity Interests
are at any time hereafter issued or granted to, or held by any Grantor, and all
dividends, distributions, cash, warrants, rights, options, instruments,
securities and other property or proceeds from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of such
interests.

 

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“Pledged Notes” means all promissory notes listed on Schedule 1A, all
intercompany notes at any time issued to any Grantor and all other promissory
notes issued to or held by any Grantor (other than promissory notes issued in
connection with extensions of trade credit by any Grantor in the ordinary course
of business).

 

“Pledged Stock” shall mean, with respect to each corporation listed on Schedule
1, the Equity Interests of such corporation owned by a Grantor and listed on
Schedule 1, and the certificates, if any, representing such shares and any
interest of such Grantor, as applicable, in the entries on the books of the
issuer of such shares or on the books of any securities intermediary pertaining
to such shares and the Equity Interests of any other Person whose Equity
Interests are at any time hereafter issued to or granted to or held by any
Grantor, and all dividends, distributions, cash, warrants, rights, options,
instruments, securities and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such shares.

 

“Proceeds” means all “proceeds” as such term is defined in Section 9-102(a)(64)
of the UCC and, in any event, shall include all dividends or other income from
the Investment Property, collections thereon or distributions or payments with
respect thereto.

 

“Receivable” means any right to payment for goods sold or leased or for services
rendered, whether or not such right is evidenced by an Instrument or Chattel
Paper and whether or not it has been earned by performance (including any
Accounts).

 

“Secured Obligations” means, collectively, the Borrower Obligations and
Guarantor Obligations.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“UCC” means the Uniform Commercial Code as the same may, from time to time, be
enacted and in effect in the State of New York; provided that, to the extent
that the Uniform Commercial Code is used to define any term herein or in any
Loan Document and such term is defined differently in different Articles or
Divisions of the Uniform Commercial Code, the definition of such term contained
in Article or Division 9 shall govern; provided further that, in the event that,
by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of, or remedies with respect to, Lenders’ Lien on any
Collateral is governed by the Uniform Commercial Code as enacted and in effect
in a jurisdiction other than the State of New York, the term “UCC” shall mean
the Uniform Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions thereof relating to such attachment,
perfection, priority or remedies and for purposes of definitions related to such
provisions.

 

SECTION 2GUARANTY.

 

2.1          Guaranty.

 

(a)          Each of the Guarantors hereby, jointly and severally,
unconditionally and irrevocably, as a primary obligor and not only a surety,
guarantees to Lenders and their successors and permitted assigns, the prompt and
complete payment and performance by Borrower of the Borrower Obligations when
due (whether at the stated maturity, by acceleration or otherwise).

 

(b)          The guaranty contained in this Section 2 is a guaranty of payment
and shall remain in full force and effect until all of the Secured Obligations
shall have been Paid in Full.

 

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(c)          No payment made by Borrower, any of the Guarantors, any other
guarantor or any other Person, or received or collected by Lenders from
Borrower, any of the Guarantors, any other guarantor or any other Person, by
virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
the Secured Obligations shall be deemed to modify, reduce, release or otherwise
affect the liability of any Guarantor hereunder which Guarantor shall,
notwithstanding any such payment (other than any payment received or collected
from such Guarantor in respect of the Secured Obligations), remain liable for
the Secured Obligations until the Secured Obligations are Paid in Full.

 

2.2          No Subrogation. Notwithstanding any payment made by any Guarantor
hereunder or any set-off or application of funds of any Guarantor by Lenders, no
Guarantor shall be entitled to be subrogated to any of the rights of Lenders
against Borrower or any Guarantor or any collateral security or guaranty or
right of offset held by Lenders for the payment of the Secured Obligations, nor
shall any Guarantor seek or be entitled to seek any contribution or
reimbursement from Borrower or any Guarantor in respect of payments made by such
Guarantor hereunder, until all of the Secured Obligations are Paid in Full. If
any amount shall be paid to any Guarantor on account of such subrogation rights
at any time when all of the Secured Obligations shall not have been Paid in
Full, such amount shall be held by such Guarantor in trust for Lenders,
segregated from other funds of such Guarantor, and shall, forthwith upon receipt
by such Guarantor, be turned over to Lenders in the exact form received by such
Guarantor (duly indorsed by such Guarantor to Lenders, if required by Lenders),
to be applied against the Secured Obligations, whether matured or unmatured, in
a manner consistent with the provisions of the Facility Agreement.

 

2.3          Amendments, etc. with respect to the Secured Obligations. Each
Guarantor shall remain obligated hereunder, without any reservation of rights
against any Guarantor and without notice to or further assent by any Guarantor,
notwithstanding the fact that: (a) any demand for payment of any of the Secured
Obligations made by Lenders may be rescinded by Lenders and any of the Secured
Obligations continued, (b) the Secured Obligations, or the liability of any
other Person upon or for any part thereof, or any collateral security or
guaranty therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by Lenders, or (c) the Facility
Agreement and the other Loan Documents and any other documents executed and
delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as Lenders may deem advisable from time to
time. Lenders shall have no obligation to protect, secure, perfect or insure any
Lien at any time held by it as security for the Secured Obligations or for the
guaranty contained in this Section 2 or any property subject thereto.

 

Lenders may, from time to time, in their reasonable discretion and without
notice to the Guarantors (or any of them), take any or all of the following
actions: (a) retain or obtain a security interest in any personal property of
the Grantors constituting Collateral to secure any of the Secured Obligations or
any obligation hereunder, (b) retain or obtain the primary or secondary
obligation of any obligor or obligors, in addition to the undersigned, with
respect to any of the Secured Obligations, (c) extend or renew any of the
Secured Obligations for one or more periods (whether or not longer than the
original period), alter or exchange any of the Secured Obligations, or release
or compromise any obligation of any of the undersigned hereunder or any
obligation of any nature of any other obligor with respect to any of the Secured
Obligations, (d) release any guaranty or right of offset or their security
interest in, or surrender, release or permit any substitution or exchange for,
all or any part of any personal property securing any of the Secured Obligations
or any obligation hereunder, or extend or renew for one or more periods (whether
or not longer than the original period) or release, compromise, alter or
exchange any obligations of any nature of any obligor with respect to any such
personal property, and (e) resort to the undersigned (or any of them) for
payment of any of the Secured Obligations when due, whether or not Lenders shall
have resorted to any personal property securing any of the Secured Obligations
or any obligation hereunder or shall have proceeded against any other of the
undersigned or any other obligor primarily or secondarily obligated with respect
to any of the Secured Obligations.

 

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2.4          Waivers. To the extent permitted by applicable law, each Guarantor
waives any and all notice of the creation, renewal, extension or accrual of any
of the Secured Obligations and notice of or proof of reliance by Lenders upon
the guaranty contained in this Section 2 or acceptance of the guaranty contained
in this Section 2. The Secured Obligations, and any of them, shall conclusively
be deemed to have been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon the guaranty contained in this Section 2,
and all dealings between Borrower and any of the Guarantors, on the one hand,
and Lenders, on the other hand, likewise shall be conclusively presumed to have
been had or consummated in reliance upon the guaranty contained in this Section
2. To the extent permitted by applicable law, each Guarantor waives (a)
diligence, presentment, protest, demand for payment and notice of default,
dishonor or nonpayment and all other notices whatsoever to or upon Borrower or
any of the Guarantors with respect to the Secured Obligations, (b) notice of the
existence or creation or non-payment of all or any of the Secured Obligations
and (c) all diligence in collection or protection of or realization upon any
Secured Obligations or any security for or guaranty of any Secured Obligations.

 

2.5          Payments. Each Guarantor hereby guaranties that payments hereunder
will be paid to Lenders without set-off or counterclaim in Dollars at the office
of Lenders specified in the Facility Agreement.

 

SECTION 3GRANT OF SECURITY INTEREST.

 

3.1          Grant. Each Grantor hereby assigns and transfers to Agent and
Lenders, and hereby grants to Agent and Lenders, a continuing security interest
in all of its Collateral, as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Secured Obligations. Notwithstanding the
foregoing, no Lien or security interest is hereby granted on any Excluded
Property.

 

3.2          Each Lender hereby appoints and authorizes Agent to enter into this
Agreement and to take all actions as Agent on its behalf and to exercise such
powers under the this Agreement on behalf of Lenders, together with all such
powers as are reasonably incidental thereto, for purposes of any and all matters
associated with the perfection of security interests in the Collateral granted
hereunder or under the other Loan Documents, including, but not limited to,
entering into Control Agreements on behalf of, and for the benefit of, the
Lenders. In performing its functions and duties under this Agreement, Agent
shall act solely as agent of Lenders and does not assume and shall not be deemed
to have assumed any obligation toward or relationship of agency or trust with or
for any Lender.

 

SECTION 4REPRESENTATIONS AND WARRANTIES.

 

To induce Lenders to enter into the Facility Agreement and to induce Lenders to
make extensions of credit to Borrower thereunder, each Grantor jointly and
severally hereby represents and warrants to Lenders that:

 

4.1          Title; No Other Liens. Except for Permitted Liens, the Grantors own
each item of the Collateral free and clear of any and all Liens of others. As of
the Closing Date, no effective financing statement or other public notice with
respect to all or any part of the Collateral is on file or of record in any
public office, except filings evidencing Permitted Liens.

 

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4.2          Perfected Liens. The security interests granted in the Collateral
pursuant to this Agreement (a) upon completion of the filings and other actions
specified on Schedule 2 (which filings and other documents referred to on
Schedule 2, have been delivered to Lenders in completed form) will constitute
valid perfected security interests in all of the Grantors’ rights in the
Collateral in favor of Lenders as collateral security for the Secured
Obligations, enforceable in accordance with the terms hereof and in accordance
with the terms of the Facility Agreement, to the extent such security interests
can be perfected by the filing of UCC financing statements (and, with respect to
Commercial Tort Claims, to the extent any Commercial Tort Claims are
sufficiently identified herein), and (b) shall be prior to all other Liens on
the Grantors’ rights in the Collateral (other than (x) motor vehicles and (y)
any Intellectual Property arising under laws other than those of the United
States) except for Permitted Liens having priority over Lenders’ Lien by
operation of law and/or pursuant to the Intercreditor Agreement, or permitted
pursuant to the Facility Agreement, upon (i) in the case of all Pledged Notes,
Pledged Equity and other pledged Investment Property, the delivery thereof to
Lenders of such Pledged Notes, Pledged Equity and other pledged Investment
Property consisting of instruments and certificates, in each case properly
endorsed for transfer to Lenders or in blank, (ii) in the case of all pledged
Investment Property not in certificated form and Deposit Accounts, the execution
of Control Agreements with respect to such Investment Property and Deposit
Accounts, (iii) in the case of all other Instruments and Tangible Chattel Paper
that are not Pledged Notes, Pledged Equity and other pledged Investment
Property, the delivery thereof to Lenders of such Instruments and Tangible
Chattel Paper, (iv) in the case of Letter-of-Credit Rights, the consent of the
issuer of such Letter-of-Credit Rights, (v) in the case of Intellectual
Property, to the extent not subject to Article 9 of the UCC, recordation of the
security interests granted hereunder in such Intellectual Property in the
applicable intellectual property registries, including but not limited to, the
United States Patent and Trademark Office and the United States Copyright
Office; and (vi) in the case of Money, upon Lenders taking possession of such
Money. As of the date hereof and except as set forth in this Section 4.2 or as
otherwise not required hereunder, all actions by each Grantor necessary to
perfect the Liens granted hereunder on the Collateral have been duly taken.

 

4.3          Grantor Information. On the date hereof, Schedule 3 sets forth (a)
each Grantor’s and each Guarantor’s jurisdiction of organization, (b) the
location of each Grantor’s and each Guarantor’s chief executive office, (c) each
Grantor’s and each Guarantor’s exact legal name as it appears on its
organizational documents and (d) each Grantor’s organizational identification
number (to the extent a Grantor or Guarantor is organized in a jurisdiction
which assigns such numbers) and federal employer identification number.

 

4.4          Collateral Locations. On the date hereof, Schedule 4 sets forth (a)
each place of business of each Grantor and each Guarantor (including its chief
executive office), (b) all locations where all Inventory and Equipment with a
book value in excess of $25,000 owned by each Grantor is kept (other than
Inventory or Equipment that is otherwise in transit or out for repair,
refurbishment or processing in the ordinary course of business or otherwise
disposed of in a transaction permitted by the Facility Agreement) and (c)
whether each such Collateral location and place of business (including each
Grantor’s chief executive office) is owned or leased (and if leased, specifies
the complete name and notice address of each lessor). On the Closing Date, no
Collateral (other than Inventory or Equipment that is otherwise in transit or
out for repair, refurbishment or processing in the ordinary course of business
or otherwise disposed of in a transaction permitted by the Facility Agreement)
with a book value greater than $25,000 is located outside the United States or
in the possession of any lessor, bailee, warehouseman or consignee, except as
indicated on Schedule 4.

 

4.5          Certain Property. None of the Collateral constitutes, or is the
Proceeds of, (a) Farm Products, (b) Health Care Insurance Receivables or (c)
vessels, aircraft or any other personal property subject to any certificate of
title or other registration statute of the United States, any State or other
jurisdiction, except for motor vehicles owned by the Grantors and used by
employees of the Grantors in the ordinary course of business.

 

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4.6          Investment Property.

 

(a)          The Pledged Equity pledged by each Grantor hereunder constitutes
all the issued and outstanding equity interests of each Issuer owned by such
Grantor.

 

(b)          All of the Pledged Equity has been duly and validly issued and, in
the case of shares of capital stock and membership interests, is fully paid and
nonassessable.

 

(c)          Each of the Pledged Notes constitutes the legal, valid and binding
obligation of the obligor with respect thereto, enforceable in accordance with
its terms.

 

(d)          Schedules 1 and 1A list all Investment Property owned by each
Grantor with a value greater than $25,000. Each Grantor is the record and
beneficial owner of, and has good and valid title to, the Investment Property
pledged by it hereunder, free of any and all Liens or options in favor of, or
claims of, any other Person, except Permitted Liens.

 

4.7          Receivables.

 

(a)          No material amount payable to a Grantor under or in connection with
any Receivable is evidenced by any Instrument or Chattel Paper which, to the
extent required hereunder, has not been delivered to Lenders.

 

(b)          No obligor on any Receivable is a Governmental Authority.

 

4.8          Intellectual Property. As of the date hereof: (a) Schedule 5 lists
all Intellectual Property that is registered or is the subject of an application
to register and owned by each Grantor in its own name on the date hereof; and
(b) except as set forth in Schedule 5 and except for non-exclusive licenses of
software and other Intellectual Property licensed in the ordinary course of
business, none of the Intellectual Property of any Grantor is the subject of any
licensing or franchise agreement pursuant to which such Grantor is the licensor
or franchisor.

 

4.9          Depositary and Other Accounts. Schedule 6 lists all banks and other
financial institutions at which any Grantor maintains deposit or other accounts
as of the Closing Date and such Schedule 6 correctly identifies the name,
address and telephone number of each depository, the name in which the account
is held, a description of the purpose of the account, and the complete account
number therefor.

 

4.10        Facility Agreement. Each Grantor and each Guarantor makes each of
the representations and warranties made by Borrower in Section 3.1 of the
Facility Agreement to the extent applicable to it on the date such Grantor or
Guarantor becomes a party hereto (which representations and warranties shall be
deemed to be renewed upon each borrowing under the Facility Agreement). Such
representations and warranties shall be incorporated herein by this reference as
if fully set forth herein.

 

SECTION 5COVENANTS.

 

Each Grantor covenants and agrees with Lenders that, from and after the date of
this Agreement until the Secured Obligations shall have been Paid in Full:

 

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5.1          Delivery of Instruments, Certificated Securities and Chattel Paper.
In the event that an Event of Default shall have occurred and be continuing,
upon the request of Lenders, any Instrument, certificated security or Chattel
Paper not theretofore delivered to Lenders and at such time being held by any
Grantor shall be promptly (and, in any event, within five (5) Business Days)
delivered to Lenders, duly indorsed in a manner satisfactory to Lenders, to be
held as Collateral pursuant to this Agreement and in the case of Electronic
Chattel Paper, the applicable Grantor shall cause Lenders to have control
thereof within the meaning set forth in Section 9-105 of the UCC.

 

5.2          Maintenance of Perfected Security Interest; Further Documentation.

 

(a)          The Grantors shall maintain the security interests created by this
Agreement as perfected security interests (to the extent such security interests
can be perfected by the filing of UCC financing statements (and, with respect to
Commercial Tort Claims, to the extent any Commercial Tort Claims are
sufficiently identified herein)) having at least the priority described in
Section 4.2, and shall defend such security interests against the claims and
demands of all Persons whomsoever.

 

(b)          Each Grantor will furnish to Lenders from time to time statements
and schedules further identifying and describing the assets and property of such
Grantor and such other reports in connection therewith as Lenders may reasonably
request, all in reasonable detail.

 

(c)          At any time and from time to time, upon the written request of
Lenders, and at its sole expense, each Grantor will promptly and duly execute
and deliver, and have recorded, such further instruments and documents and take
such further actions as Lenders may reasonably request for the purpose of
obtaining or preserving the full benefits of this Agreement and of the rights
and powers herein granted, including (i) filing any financing or continuation
statements under the UCC (or other similar laws) in effect in any jurisdiction
with respect to the security interests created hereby, (ii) in the case of
Investment Property and any other relevant Collateral, taking any such requested
actions necessary to enable Lenders to obtain “control” (within the meaning of
the applicable UCC) with respect to such Investment Property or other Collateral
to the extent required to be pledged hereunder; and (iii) if requested by
Lenders, delivering, to the extent permitted by law, any original motor vehicle
certificates of title received by such Grantor from the applicable secretary of
state or other Governmental Authority after information reflecting Lenders’
security interest has been recorded in such motor vehicles to the extent
required to be pledged thereunder.

 

5.3          Changes in Locations, Name, etc. Such Grantor shall not, except
upon 10 Business Days’ prior written notice to Lenders (or such lesser notice as
Lenders may agree to in their sole discretion) and delivery to Lenders of (a)
all additional financing statements and other documents reasonably requested by
Lenders as to the validity, perfection and priority of the security interests
provided for herein and (b) if applicable, a written supplement to Schedule 4
showing any additional location at which Inventory or Equipment with a book
value in excess of $25,000 shall be kept (other than Inventory or Equipment that
is otherwise in transit or out for repair, refurbishment or processing in the
ordinary course of business or otherwise disposed of in a transaction permitted
by the Facility Agreement):

 

(i)           permit any of the Inventory or Equipment with a book value greater
than $25,000 in the aggregate to be kept at a location subject to the possession
or control of any warehouse, consignee, bailee, or any of the Grantors’ agents
or processors other than those listed on Schedule 4, other than the Inventory or
Equipment that is otherwise in transit or out for repair, refurbishment or
processing in the ordinary course of business or otherwise disposed of in a
transaction permitted by the Facility Agreement;

 

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(ii)          change its jurisdiction of organization or the location of its
chief executive office from that specified on Schedule 3 or in any subsequent
notice delivered pursuant to this Section 5.3; or

 

(iii)         change its name, identity or corporate structure.

 

5.4          Notices. The Grantors will advise Lenders promptly, in reasonable
detail, of:

 

(a)          any Lien (other than Permitted Liens) on any of the Collateral; and

 

(b)          the occurrence of any other event which would reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the Liens created hereby.

 

5.5          Investment Property.

 

(a)          If a Grantor shall become entitled to receive or shall receive any
certificate, option or rights in respect of the Equity Interests of any Issuer,
whether in addition to, in substitution of, as a conversion of, or in exchange
for, any of the Pledged Equity, or otherwise in respect thereof, such Equity
Interests shall be Pledged Equity (to the extent consistent with the percentage
of the Grantor’s Equity Interests in such Issuer pledged hereunder, as set forth
on Schedule 1) and Grantor shall accept the same as the agent of Lenders, hold
the same in trust for Lenders and deliver the same forthwith to Lenders in the
exact form received, duly indorsed by such Grantor to Lenders, if required by
Lenders, together with an undated instrument of transfer covering such
certificate duly executed in blank by such Grantor and with, if Lenders so
request, signature guarantied, to be held by Lenders, subject to the terms
hereof, as additional Collateral for the Secured Obligations.

 

(b)          Upon the occurrence and during the continuance of an Event of
Default and the request of Lenders, (i) any sums paid upon or in respect of the
Investment Property upon the liquidation or dissolution of any Issuer shall be
paid over to Lenders to be held by it hereunder as additional Collateral for the
Secured Obligations, and (ii) in case any distribution of capital shall be made
on or in respect of the Investment Property, or any property shall be
distributed upon or with respect to the Investment Property, pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization thereof, the property so distributed shall, unless otherwise
subject to a perfected Lien in favor of Lenders, be delivered to Lenders to be
held by them hereunder as additional Collateral for the Secured Obligations.
Upon the occurrence and during the continuance of an Event of Default, if any
sums of money or property so paid or distributed in respect of the Investment
Property shall be received by a Grantor, such Grantor shall, at the request of
Lenders and until such money or property is paid or delivered to Lenders, hold
such money or property in trust for Lenders, segregated from other funds of such
Grantor, as additional Collateral for the Secured Obligations.

 

(c)          Without the prior written consent of Lenders, each Grantor will not
(i) vote to enable, or take any other action, to permit any Issuer to issue any
Equity Interests of any nature or to issue any other securities or interests
convertible into or granting the right to purchase or exchange for any Equity
Interests of any nature of any Issuer, except, in each case, as permitted by the
Facility Agreement, (ii) sell, assign, transfer, exchange, or otherwise dispose
of, or grant any option with respect to, the Investment Property or Proceeds
thereof (except pursuant to a transaction permitted by the Facility Agreement)
other than, with respect to Investment Property not constituting Pledged Equity
or Pledged Notes, any such action which is not prohibited by the Facility
Agreement, (iii) create, incur or permit to exist any Lien or option in favor
of, or any claim of any Person with respect to, any of the Investment Property
or Proceeds thereof, or any interest therein, except for Permitted Liens, or
(iv) enter into any agreement or undertaking restricting the right or ability of
such Grantor or Lenders to sell, assign or transfer any of the Investment
Property or Proceeds thereof, except with respect to Permitted Liens and any
such action which is not prohibited by the Facility Agreement.

 

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(d)          In the case of each Grantor which is an Issuer, such Issuer agrees
that (i) it will be bound by the terms of this Agreement relating to the Pledged
Equity issued by it and will comply with such terms insofar as such terms are
applicable to it, (ii) it will notify Lenders promptly in writing of the
occurrence of any of the events described in Sections 5.5(a) and 5.5(b) of this
Agreement with respect to the Pledged Equity issued by it and (iii) the terms of
Sections 6.3(c) and 6.7 of this Agreement shall apply to such Grantor with
respect to all actions that may be required of it pursuant to Section 6.3(c) or
6.7 of this Agreement regarding the Pledged Equity issued by it.

 

5.6          Receivables. Other than in the ordinary course of business
consistent with its past practice or with respect to amounts which are not
material to such Grantor, each Grantor will not (a) grant any extension of the
time of payment of any Receivable, (b) compromise or settle any Receivable for
less than the full amount thereof, (c) release, wholly or partially, any Person
liable for the payment of any Receivable, (d) allow any credit or discount
whatsoever on any Receivable or (e) amend, supplement or modify any Receivable
in any manner that would reasonably be expected to adversely affect the value
thereof in any material respect.

 

5.7          Intellectual Property. Except as expressly permitted by the
Facility Agreement,

 

(a)          Each Grantor (either itself or through licensees) will (i) continue
to use each trademark (owned by such Grantor) material to its business, in order
to maintain such material trademark in full force free from any claim of
abandonment for non-use, (ii) maintain as in the past the quality of products
and services offered under such trademark, (iii) use such material trademark
with the appropriate notice of registration and all other notices and legends
required by applicable law, (iv) not adopt or use any mark which is confusingly
similar or a colorable imitation of such material trademark unless Lenders shall
obtain a perfected security interest in such mark pursuant to this Agreement and
(v) not (and not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby such material trademark becomes invalidated
or impaired in any way.

 

(b)          Each Grantor (either itself or through licensees) will not do any
act, or omit to do any act, whereby any patent owned by such Grantor material to
its business may become forfeited, abandoned or dedicated to the public.

 

(c)          Each Grantor (either itself or through licensees) (i) will employ
each copyright owned by such Grantor material to its business and (ii) will not
(and will not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby any material portion of such copyrights may
become invalidated or otherwise impaired, and (iii) will not (either itself or
through licensees) do any act whereby any material portion of such copyrights
may fall into the public domain.

 

(d)          Each Grantor (either itself or through licensees) will not
knowingly do any act that uses any Intellectual Property material to its
business to infringe the intellectual property rights of any other Person.

 

(e)          Each Grantor will notify Lenders promptly if it knows, or has
reason to know, that any application or registration relating to any material
Intellectual Property may become forfeited, abandoned or dedicated to the
public, or of any determination or development (including the institution of, or
any such determination or development in, any proceeding in the United States
Patent and Trademark Office, the United States Copyright Office or any court or
tribunal in any country) regarding, such Grantor’s ownership of, or the validity
of, any material Intellectual Property or such Grantor’s right to register the
same or to own and maintain the same, that would reasonably be expected to have
a Material Adverse Effect.

 

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(f)           Whenever a Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark Office,
the United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, such Grantor shall promptly report
such filing to Lenders. Upon the request of Lenders, such Grantor shall execute
and deliver, and have recorded, any and all agreements, instruments, documents,
and papers as Lenders may request to evidence Lenders’ security interest in any
copyright, patent or trademark and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby.

 

(g)          Such Grantor will take all reasonable and necessary steps to
maintain and pursue each application (and to obtain the relevant registration)
and to maintain each registration of all material Intellectual Property owned by
it.

 

(h)          In the event that any material Intellectual Property is infringed
upon or misappropriated or diluted by a third party, such Grantor shall (i) take
such actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify Lenders
after it learns thereof and sue for infringement, misappropriation or dilution,
to seek injunctive relief where appropriate and to recover any and all damages
for such infringement, misappropriation or dilution.

 

5.8          Deposit Accounts / Securities Accounts. On and after the date
hereof, no Grantor shall open any Deposit Account or Securities Account unless
such Grantor shall have given to Lenders 10 calendar days’ prior written notice
(or such lesser notice as the Lenders may agree to in their sole discretion) of
its intention to open any such new Deposit Account or Securities Account. With
respect to each Deposit Account or Securities Account located in the United
States, upon request of the Lenders, such Grantor shall, and shall cause the
bank, financial institution or securities intermediary at which such account is
to be opened to, enter into a Control Agreement. The provisions of this
Section 5.8 requiring Control Agreements shall not apply to Deposit Accounts
exclusively used for payroll, payroll taxes and other employee wage and benefit
payments to or for the benefit of Grantors’ employees and identified to Lenders
by Grantors as such; provided, however, that at all times that any Secured
Obligations remain outstanding, Grantors shall maintain one or more separate
Deposit Accounts to hold any and all amounts to be used for payroll, payroll
taxes and other employee wage and benefit payments, and shall not commingle any
monies allocated for such purposes with funds in any other Deposit Account.

 

5.9          Other Matters.

 

(a)          Each Grantor authorizes Lenders to, at any time and from time to
time, file financing statements, continuation statements, and amendments thereto
that describe the Collateral as “all assets” of each Grantor, or words of
similar effect, and which contain any other information required pursuant to the
UCC for the sufficiency of filing office acceptance of any financing statement,
continuation statement or amendment, and each Grantor agrees to furnish any such
information to Lenders promptly upon request. Any such financing statement,
continuation statement or amendment may be signed by Lenders on behalf of any
Grantor and may be filed at any time in any jurisdiction.

 

(b)          Each Grantor shall, at any time and from time and to time, take
such steps as the Required Lenders may reasonably request for Lenders to insure
the continued perfection and priority of Lenders’ security interest in any of
the Collateral and of the preservation of its rights therein.

 

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(c)          If any Grantor shall at any time, acquire a Commercial Tort Claim
in excess of $25,000, such Grantor shall promptly notify Lenders thereof in
writing and supplement Schedule 7, therein providing a reasonable description
and summary thereof, and upon delivery thereof to Lenders, such Grantor shall be
deemed to thereby grant to Lenders (and such Grantor hereby grants to Lenders) a
Lien in and to such Commercial Tort Claim and all proceeds thereof, all upon the
terms of and governed by this Agreement.

 

5.10        Facility Agreement. Each of the Grantors covenants that it will,
and, if necessary, will cause or enable Borrower to, fully comply with each of
the covenants and other agreements set forth in the Facility Agreement.

 

5.11        Insurance. Each Grantor shall:

 

(a)          Keep the Collateral properly housed and insured for the full
insurable value thereof against loss or damage by fire, theft, explosion,
sprinklers, collision (in the case of motor vehicles) and such other risks as
are customarily insured against by Persons engaged in businesses similar to that
of such Grantor, with such companies, in such amounts, with such deductibles,
and under policies in such form, as shall be reasonably satisfactory to Lenders.
Original (or certified) copies of certificates of insurance have been delivered
to Lenders, together with evidence of payment of all premiums therefor, and each
such policy shall contain an endorsement, in form and substance reasonably
acceptable to Lenders, showing loss under such insurance policies payable to
Lenders.

 

(b)          Maintain, at its expense, such public liability and third party
property damage insurance as is customary for Persons engaged in businesses
similar to that of such Grantor with such companies and in such amounts, with
such deductibles and under policies in such form as shall be reasonably
satisfactory to Lenders and original (or certified) copies of certificates of
insurance have been delivered to Lenders, together with evidence of payment of
all premiums therefor and; each such policy shall include an endorsement,
reasonably satisfactory to Lenders, showing Lenders as additional insured
thereunder.

 

5.12        Lenders May Purchase Insurance. If a Grantor at any time or times
hereafter shall fail to obtain or maintain any of the policies of insurance
required above under Section 5.11 (and provide evidence thereof to Lenders
promptly following receipt of written request therefor from Lenders) or to pay
any premium relating thereto, then Lenders, without waiving or releasing any
obligation or default by such Grantor hereunder, may (but shall be under no
obligation to) obtain and maintain such policies of insurance and pay such
premiums and take such other actions with respect thereto as Lenders deems
advisable upon notice to such Grantor. Such insurance, if obtained by Lenders,
may, but need not, protect such Grantor’s interests or pay any claim made by or
against such Grantor with respect to the Collateral. Such insurance may be more
expensive than the cost of insurance such Grantor may be able to obtain on its
own and may be cancelled only upon such Grantor providing evidence that it has
obtained the insurance as required above. All sums disbursed by Lenders in
connection with any such actions, shall constitute Secured Obligations payable
upon demand.

  

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SECTION 6REMEDIAL PROVISIONS.

 

6.1          Certain Matters Relating to Receivables.

 

(a)          At any time and from time to time after the occurrence and during
the continuance of an Event of Default, Lenders shall have the right to make
test verifications of the Receivables in any manner and through any medium that
they reasonably considers advisable, and each Grantor shall furnish all such
assistance and information as Lenders may reasonably require in connection with
such test verifications. At any time and from time to time after the occurrence
and during the continuance of an Event of Default, upon request of the Required
Lenders and at the expense of the relevant Grantor, such Grantor shall cause
independent public accountants or others satisfactory to Lenders to furnish to
Lenders reports showing reconciliations, agings and test verifications of, and
trial balances for, the Receivables.

 

(b)          Lenders hereby authorize each Grantor to collect such Grantor’s
Receivables, and Lenders may curtail or terminate such authority at any time
after the occurrence and during the continuance of an Event of Default. If
required by Lenders at any time after the occurrence and during the continuance
of an Event of Default, provided that a release pursuant to Section 7.17 shall
not have occurred, any payments of Receivables, when collected by any Grantor,
(i) shall be forthwith (and, in any event, within two Business Days) deposited
by such Grantor in the exact form received, duly indorsed by such Grantor to
Lenders (if required by Lenders) and upon notice to such Grantor, in a
collateral account maintained under the sole dominion and control of Lenders,
subject to withdrawal by Lenders only as provided in Section 6.4, and (ii) until
so turned over after such request by Lenders, shall be held by such Grantor in
trust for Lenders, segregated from other funds of such Grantor. Each such
deposit of Proceeds of Receivables shall be accompanied by a report identifying
in reasonable detail the nature and source of the payments included in the
deposit.

 

(c)          At any time and from time to time after the occurrence and during
the continuance of an Event of Default, at the request of Lenders, each Grantor
shall deliver to Lenders all original and other documents evidencing, and
relating to, the agreements and transactions which gave rise to the Receivables,
including all original orders, invoices and shipping receipts.

 

(d)          Each Grantor hereby irrevocably authorizes and empowers Lenders, in
Lenders’ sole discretion, at any time after the occurrence and during the
continuance of an Event of Default, following Lenders’ concurrent notice to such
Grantor, to assert, either directly or on behalf of such Grantor, any claim such
Grantor may from time to time have against the sellers under or with respect to
any agreements assigned or collaterally assigned to Lenders and to receive and
collect any and all damages, awards and other monies resulting therefrom and to
apply the same to the Secured Obligations in such order as Lenders may determine
in their discretion. After the occurrence and during the continuance of an Event
of Default, each Grantor hereby irrevocably makes, constitutes and appoints
Lenders as its true and lawful attorneys in fact for the purpose of enabling
Lenders to assert and collect such claims and to apply such monies in the manner
set forth above, which appointment, being coupled with an interest, is
irrevocable.

 

6.2          Communications with Obligors; Grantors Remain Liable.

 

(a)          Lenders in their own name or in the name of others may at any time
after the occurrence and during the continuance of an Event of Default
communicate with obligors under the Receivables to verify with them to Lenders’
satisfaction the existence, amount and terms of any Receivables.

 

(b)          Upon the written request of Lenders at any time after the
occurrence and during the continuance of an Event of Default, each Grantor shall
notify obligors on the Receivables that the Receivables have been assigned to
Lenders and that payments in respect thereof shall be made directly to Lenders.

 

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(c)          Anything herein to the contrary notwithstanding, each Grantor shall
remain liable in respect of each of the Receivables to observe and perform all
the conditions and obligations to be observed and performed by it thereunder,
all in accordance with the terms of any agreement giving rise thereto. Lenders
shall have no obligation or liability under any Receivable (or any agreement
giving rise thereto) by reason of or arising out of this Agreement or the
receipt by Lenders of any payment relating thereto, nor shall Lenders be
obligated in any manner to perform any of the obligations of any Grantor under
or pursuant to any Receivable (or any agreement giving rise thereto), to make
any payment, to make any inquiry as to the nature or the sufficiency of any
payment received by it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.

 

(d)          After the occurrence and during the continuance of an Event of
Default, for the purpose of enabling Lenders to exercise rights and remedies
under this Agreement, each Grantor hereby grants to Lenders an irrevocable,
nonexclusive license (exercisable without payment of royalty or other
compensation to such Grantor) to use, license or sublicense any Intellectual
Property now owned or hereafter acquired by such Grantor, and wherever the same
may be located, and including in such license access to all media in which any
of the licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof.

 

6.3          Investment Property.

 

(a)          Unless an Event of Default shall have occurred and be continuing
and Lenders shall have given written notice to the relevant Grantor of Lenders’
intent to exercise their corresponding rights pursuant to Section 6.3(b), such
Grantor shall be permitted to receive all cash dividends and distributions paid
in respect of the Pledged Equity and all payments made in respect of the Pledged
Notes, to the extent permitted in the Facility Agreement, and to exercise all
voting and other rights with respect to the Investment Property; provided, that
no vote shall be cast or other right exercised or action taken which would
reasonably be expected to materially impair the Collateral or which would be
inconsistent with or result in any violation of any provision of the Facility
Agreement, this Agreement or any other Loan Document.

 

(b)          If an Event of Default shall occur and be continuing and Lenders
shall give notice of Lenders’ intent to exercise such rights to the relevant
Grantor, (i) Lenders shall have the right to receive any and all cash dividends
and distributions, payments or other Proceeds paid in respect of the Investment
Property and make application thereof to the Secured Obligations in such order
as Lenders may determine in their discretion, (ii) Lenders shall have the right
to cause any or all of the Investment Property to be registered in the name of
Lenders or their nominee and (iii) Lenders or their nominee may exercise (x) all
voting and other rights pertaining to such Investment Property at any meeting of
holders of the Equity Interests of the relevant Issuer or Issuers or otherwise
(or by written consent) and (y) any and all rights of conversion, exchange and
subscription and any other rights, privileges or options pertaining to such
Investment Property as if they were the absolute owner thereof (including the
right to exchange at their discretion any and all of the Investment Property
upon the merger, consolidation, reorganization, recapitalization or other
fundamental change in the corporate or other structure of any Issuer, or upon
the exercise by any Grantor or Lenders of any right, privilege or option
pertaining to such Investment Property, and in connection therewith, the right
to deposit and deliver any and all of the Investment Property with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as Lenders may determine), all without liability
except to account for property actually received by them, but Lenders shall have
no duty to any Grantor to exercise any such right, privilege or option and shall
not be responsible for any failure to do so or delay in so doing.

 

15

 

 

(c)          After the occurrence and during the continuance of an Event of
Default, each Grantor, upon notice from Lenders, hereby authorizes and instructs
each Issuer of the Investment Property pledged by such Grantor hereunder to (i)
comply with any instruction received by it from Lenders in writing that (x)
states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each Issuer
shall be fully protected in so complying and (ii) unless otherwise expressly
permitted hereby, pay any dividends, distributions or other payments with
respect to the Investment Property directly to Lenders.

 

6.4          Proceeds to be Turned Over to Lenders. In addition to the rights of
Lenders specified in Section 6.1 with respect to payments of Receivables, if an
Event of Default shall occur and be continuing, all Proceeds received by any
Grantor consisting of cash, checks and other cash equivalent items shall be held
by such Grantor in trust for Lenders, segregated from other funds of such
Grantor, and shall, upon written request of Lenders, forthwith upon receipt by
such Grantor, be turned over to Lenders in the exact form received by such
Grantor (duly indorsed by such Grantor to Lenders, if required). All Proceeds
received by Lenders hereunder shall be held by Lenders in a collateral account
maintained under their sole dominion and control. All Proceeds, while held by
Lenders in any collateral account (or by such Grantor in trust for Lenders)
established pursuant hereto, shall continue to be held as collateral security
for the Secured Obligations and shall not constitute payment thereof until
applied as provided in Section 6.5.

 

6.5          Application of Proceeds. Lenders may apply all or any part of
Proceeds from the sale of, or other realization upon, all or any part of the
Collateral in payment of the Secured Obligations in such order as the Lenders
shall determine in their discretion. Any part of such funds which Lenders elect
not so to apply and deem not required as collateral security for the Secured
Obligations shall be paid over from time to time by Lenders to the applicable
Grantor or to whomsoever may be lawfully entitled to receive the same. Any
balance of such Proceeds remaining after the Secured Obligations shall have been
Paid in Full shall be paid over to the applicable Grantor or to whomsoever may
be lawfully entitled to receive the same.

 

6.6          Code and Other Remedies. If an Event of Default shall occur and be
continuing, Lenders may exercise, in addition to all other rights and remedies
granted to them in this Agreement and in any other instrument or agreement
securing, evidencing or relating to the Secured Obligations, all rights and
remedies of a secured party under the UCC or any other applicable law. Without
limiting the generality of the foregoing, Lenders, without demand of performance
or other demand, presentment, protest, advertisement or notice of any kind
(except any notice required by law referred to below) to or upon any Grantor or
any other Person (all and each of which demands, defenses (other than defense of
payment), advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
options to purchase, or otherwise dispose of and deliver the Collateral or any
part thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any exchange, broker’s board or office of
Lenders or elsewhere upon such terms and conditions as they may deem advisable
and at such prices as they may deem best, for cash or on credit or for future
delivery with assumption of any credit risk. Lenders shall have the right upon
any such public sale or sales, and, to the extent permitted by law, upon any
such private sale or sales, to purchase the whole or any part of the Collateral
so sold, free of any right or equity of redemption in any Grantor, which right
or equity is hereby waived and released. Each Grantor further agrees, at
Lenders’ request, to assemble the Collateral and make it available to Lenders at
places which Lenders shall reasonably select, whether at such Grantor’s premises
or elsewhere in connection with the exercise of Lenders’ remedies hereunder.
Lenders shall apply the net proceeds of any action taken by it pursuant to this
Section 6.6, after deducting all reasonable documented out-of-pocket costs and
expenses of every kind incurred in connection therewith or incidental to the
care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of Lenders hereunder, to the payment in whole or in
part of the Secured Obligations, in such order as the Lenders may elect in their
discretion, and, only after such application and after the payment by Lenders of
any other amount required by any provision of law, need Lenders account for the
surplus, if any, to any Grantor. To the extent permitted by applicable law, each
Grantor waives all claims, damages and demands it may acquire against Lenders
arising out of the exercise by them of any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least 10 calendar days
before such sale or other disposition.

 

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6.7          Private Sale. Each Grantor recognizes that Lenders may be unable to
effect a public sale of any or all the Pledged Equity, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. Lenders shall be
under no obligation to delay a sale of any of the Pledged Equity for the period
of time necessary to permit the Issuer thereof to register such securities or
other interests for public sale under the Securities Act, or under applicable
state securities laws, even if such Issuer would agree to do so.

 

  Each Grantor agrees to use its commercially reasonable efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged Equity pursuant to this Section 6.7 valid and
binding and in compliance with applicable law. Each Grantor further agrees that
a breach of any of the covenants contained in this Section 6.7 will cause
irreparable injury to Lenders, that Lenders have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in this Section 6.7 shall be specifically enforceable against such
Grantor, and such Grantor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except for a
defense that no Event of Default has occurred under the Facility Agreement.

 

6.8          Deficiency. Each Grantor shall remain liable for any deficiency if
the proceeds of any sale or other disposition of the Collateral are insufficient
to pay the Secured Obligations in full and the fees and disbursements of any
attorneys employed by Lenders to collect such deficiency.

 

SECTION 7MISCELLANEOUS.

 

7.1          Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 5.6 of the Facility Agreement.

 

7.2          Notices. All notices, requests and demands to or upon Lenders or
any Grantor hereunder shall be addressed to such party and effected in the
manner provided for in Section 5.1 of the Facility Agreement and each Grantor
hereby appoints the Borrower as its agent to receive notices hereunder.

 

7.3          Indemnification by Grantors. Each Grantor and each Guarantor agrees
to jointly and severally indemnify, pay, and hold Lenders and their Affiliates,
officers, directors, employees, agents, and attorneys (the “Indemnitees”)
harmless against losses and liabilities to the extent set forth in Section 5.11
of the Facility Agreement, the terms of which are incorporated herein by
reference as though set forth fully herein. The provisions in this Section 7.3
shall survive repayment of all Secured Obligations (and all commitments of
Lenders, if any, to extend credit that would constitute Borrower Obligations
have been terminated or have expired), any foreclosure under, or any
modification, release or discharge of, any or all of the Collateral, and
termination of this Agreement.

 

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7.4          Enforcement Expenses.

 

(a)          Each Grantor and each Guarantor agrees, on a joint and several
basis, to pay or reimburse on demand Lenders for all reasonable out-of-pocket
documented costs and expenses incurred in collecting against any Guarantor under
the guaranty contained in Section 2 or otherwise enforcing or preserving any
rights under this Agreement and the other Loan Documents.

 

(b)          Each Grantor and each Guarantor agrees to pay, and to save Lenders
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all stamp, excise, sales or other taxes which may be
payable or determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Agreement.

 

(c)          The agreements in this Section 7.4 shall survive repayment of all
Secured Obligations (and all commitments of Lenders, if any, to extend credit
that would constitute Borrower Obligations have been terminated or have
expired), any foreclosure under, or any modification, release or discharge of,
any or all of the Collateral, and termination of this Agreement.

 

7.5          Captions. Section captions used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.

 

7.6          Nature of Remedies. All Secured Obligations of each Grantor and
rights of Lenders expressed herein or in any other Loan Document shall be in
addition to and not in limitation of those provided by applicable law. No
failure to exercise and no delay in exercising, on the part of Lenders, any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.

 

7.7          Counterparts; Effectiveness. This Agreement and any amendments,
waivers, consents or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one in the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto.

 

7.8          Severability. The invalidity, illegality or unenforceability in any
jurisdiction of any provision under this Agreement or any of the other Loan
Documents shall not affect or impair the remaining provisions in this Agreement
or any of the other Loan Documents.

 

7.9          Entire Agreement. This Agreement and the other Loan Documents to
which the parties hereto are parties embody the entire agreement among the
parties hereto and supersede all prior commitments, agreements, representations
and understandings, whether oral or written, relating to the subject matter
hereof, and may not be contradicted or varied by evidence of prior,
contemporaneous, or subsequent oral agreements or discussions of the parties
hereto. All Exhibits, Schedules and Annexes referred to herein are incorporated
in this Agreement by reference and constitute a part of this Agreement. If any
provision contained in this Agreement conflicts with any provision of the
Facility Agreement, then with regard to such conflicting provisions, the
Facility Agreement shall govern and control.

 

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7.10        Successors; Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns except that Grantors and Guarantors may not assign their
rights or obligations hereunder without the written consent of Lenders and any
such purported assignment without such written consent shall be void.

 

7.11        Applicable Law. THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS
TO WHICH THE GRANTORS AND GUARANTORS ARE A PARTY WHICH DOES NOT EXPRESSLY SET
FORTH APPLICABLE LAW SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAW PRINCIPLES.

 

7.12        Consent to Jurisdiction. GRANTORS AND GUARANTORS HEREBY CONSENT TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN NEW YORK COUNTY,
STATE OF NEW YORK AND IRREVOCABLY AGREE THAT, SUBJECT TO LENDERS’ ELECTION, ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS TO WHICH THE GRANTORS ARE A PARTY SHALL BE LITIGATED IN SUCH
COURTS. GRANTORS AND GUARANTORS EXPRESSLY SUBMIT AND CONSENT TO THE JURISDICTION
OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE OF FORUM NON CONVENIENS. GRANTORS
AND GUARANTORS HEREBY WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREE
THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON GRANTORS AND GUARANTORS BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWER,
AT THE ADDRESS SET FORTH IN THE FACILITY AGREEMENT AND SERVICE SO MADE SHALL BE
COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

7.13        Waiver of Jury Trial. GRANTORS, GUARANTORS AND LENDERS HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. GRANTORS,
GUARANTORS AND LENDERS ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN
ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. GRANTORS,
GUARANTORS AND LENDERS WARRANT AND REPRESENT THAT EACH HAS HAD THE OPPORTUNITY
OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

7.14        Set-off. Each Grantor agrees that Lenders have all rights of set-off
and bankers’ lien provided by applicable law, and in addition thereto, each
Grantor agrees that at any time any Event of Default exists, Lenders may apply
to the payment of any Secured Obligations in such order as Lenders may determine
in their reasonable discretion, whether or not then due, any and all balances,
credits, deposits, accounts or moneys of such Grantor then or thereafter with
Lenders. Lenders hereby agree that they shall endeavor to notify each Grantor of
any such set-off or any such application, but failure to notify shall have no
adverse determination or effect hereunder.

 

7.15        Acknowledgements. Each Grantor and each Guarantor hereby
acknowledges that:

 

(a)          it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a party;

 

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(b)          Lenders have no fiduciary relationship with or duty to any Grantor
or Guarantor arising out of or in connection with this Agreement or any of the
other Loan Documents, and the relationship between the Grantors and Guarantors,
on the one hand, and Lenders, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and

 

(c)          no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among the
Grantors, Guarantors and Lenders.

 

7.16        Additional Grantors/Guarantors. The Grantors shall cause each
Person, upon becoming a Subsidiary of a Grantor, to guaranty Borrower’s
performance of the Borrower Obligations and grant to Lenders a security interest
in the personal property of such Person (to the extent such personal property
would constitute Collateral) to secure its performance under the Facility
Agreement (to the extent a party thereto) and Borrower’s performance of the
Borrower Obligations by becoming a party to this Agreement. Upon execution and
delivery by such Person of a joinder agreement in the form of Annex I hereto,
such Person shall become a Grantor and Guarantor for all purposes of this
Agreement.

 

7.17        Releases.

 

(a)          At such time as the Secured Obligations have been Paid in Full, the
Collateral shall be automatically released from the Liens created hereby, and
this Agreement and all guarantees and obligations (other than those expressly
stated to survive such termination) of Lenders and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors. At the
request and sole expense (to the extent reasonable, documented and
out-of-pocket) of any Grantor following any such termination, Lenders shall
promptly deliver to the Grantors any Collateral held by Lenders hereunder, and
execute and deliver to the Grantors such documents (including authorization to
file UCC termination statements) as the Grantors shall reasonably request to
evidence such termination.

 

(b)          If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Facility Agreement,
then Lenders, at the request and sole expense (to the extent reasonable,
documented and out-of-pocket) of such Grantor, shall execute and deliver to such
Grantor all releases or other documents reasonably necessary or desirable for
the release of the Liens created hereby on such Collateral. At the request and
sole expense (to the extent reasonable, documented and out-of-pocket) of
Borrower, a Grantor shall be released from its obligations hereunder in the
event that all the equity interests of such Grantor shall be sold, transferred
or otherwise disposed of in a transaction permitted by the Facility Agreement;
provided that Borrower shall have delivered to Lenders, with reasonable notice
prior to the date of the proposed release, a written request for release
identifying the relevant Grantor and the terms of the sale or other disposition
in reasonable detail, including the price thereof and estimated expenses in
connection therewith, together with a certification by Borrower stating that
such transaction is in compliance with the Facility Agreement and the other Loan
Documents.

 

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7.18        Obligations and Liens Absolute and Unconditional. Each Grantor and
each Guarantor understands and agrees that the obligations of each Grantor under
this Agreement shall be construed as continuing, absolute and unconditional
without regard to (a) the validity or enforceability of any Loan Document, any
of the Secured Obligations or any other collateral security therefor or guaranty
or right of offset with respect thereto at any time or from time to time held by
Lenders, (b) any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or be asserted by
any Grantor, Guarantor or any other Person against Lenders, or (c) any other
circumstance whatsoever (with or without notice to or knowledge of any Grantor
or Guarantor) which constitutes, or might be construed to constitute, an
equitable or legal discharge of any Grantor or Guarantor for the Secured
Obligations, in bankruptcy or in any other instance. When making any demand
hereunder or otherwise pursuing its rights and remedies hereunder against any
Grantor or Guarantor, Lenders may, but shall be under no obligation to, make a
similar demand on or otherwise pursue such rights and remedies as they may have
against any other Grantor or Guarantor or any other Person or against any
collateral security or guaranty for the Secured Obligations or any right of
offset with respect thereto, and any failure by Lenders to make any such demand,
to pursue such other rights or remedies or to collect any payments from any
other Grantor or Guarantor or any other Person or to realize upon any such
collateral security or guaranty or to exercise any such right of offset, or any
release of any other Grantor or Guarantor or any other Person or any such
collateral security, guaranty or right of offset, shall not relieve any Grantor
or Guarantor of any obligation or liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of Lenders against any Grantor or Guarantor. For the purposes
hereof “demand” shall include the commencement and continuance of any legal
proceedings.

 

7.19        Reinstatement. In the event that any payment in respect of the
Secured Obligations, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.

 

[Signatures Immediately Follow]

 

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IN WITNESS WHEREOF, each of the undersigned has caused this Guaranty and
Security Agreement to be duly executed and delivered as of the date first above
written.

 

Grantors AND GUARANTORS: CYTOMEDIX, INC.,   as Grantor         By: /s/ Martin
Rosendale   Name: Martin Rosendale   Title: Chief Executive Officer        
ALDAGEN, INC., as Grantor and Guarantor         By: /s/ Martin Rosendale   Name:
Martin Rosendale   Title: Chief Executive Officer         CYTOMEDIX ACQUISITION
COMPANY, LLC, as Grantor and Guarantor         By: /s/ Martin Rosendale   Name:
Martin Rosendale   Title: Chief Executive Officer       LENDERS: DEERFIELD
PRIVATE DESIGN INTERNATIONAL II, L.P.         By:  Deerfield Mgmt., L.P.,
General Partner   By:  J.E. Flynn Capital LLC, General Partner         By: /s/
David J. Clark   Name: David J. Clark   Title: General Counsel & Authorized
Signatory         DEERFIELD PRIVATE DESIGN FUND II, L.P.         By:  Deerfield
Mgmt., L.P., General Partner   By:  J.E. Flynn Capital LLC, General Partner    
    By:   /s/ David J. Clark   Name: David J. Clark   Title: General Counsel &
Authorized Signatory

 

 

 

 

  DEERFIELD SPECIAL SITUATIONS, L.P.         By:  Deerfield Mgmt., L.P., General
Partner   By:  J.E. Flynn Capital LLC, General Partner         By: /s/ David J.
Clark   Name: David J. Clark   Title: General Counsel & Authorized Signatory    
    DEERFIELD SPECIAL SITUATIONS INTERNATIONAL MASTER FUND, L.P.        
By:  Deerfield Mgmt., L.P., General Partner   By:  J.E. Flynn Capital LLC,
General Partner         By: /s/ David J. Clark   Name: David J. Clark   Title:
General Counsel & Authorized Signatory

 

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AGENT: DEERFIELD MGMT., L.P.       By:  J.E. Flynn Capital LLC, General Partner
        By: /s/ David J. Clark   Name:   David J. Clark   Title:  General
Counsel & Authorized Signatory