EXHIBIT 10.3

 

SECURITY AGREEMENT

 

This SECURITY AGREEMENT, dated as of June 22, 2015 (this “Agreement”), is among
MELA Sciences, Inc., a Delaware corporation (the “Company”), any Additional
Debtors (as such term is defined herein and, together with the Company, the
“Debtors”), and Broadfin Capital, LLC, as agent (the “Agent”) for the holders
(collectively, the “Purchasers”) of the Debt Securities (as defined in the
Purchase Agreement (as defined below)).

 

WITNESSETH:

 

WHEREAS, pursuant to that certain Securities Purchase Agreement dated June 22,
2015 (the “Purchase Agreement”) the Purchasers have severally agreed to extend
the loans to the Company evidenced by the Company’s 2.25% Senior Secured
Convertible Debentures due June 22, 2015 (the “Debentures”) and by the Notes (as
defined in the Purchase Agreement and, the Notes together with the Debentures,
the “Debt Securities”); and

 

WHEREAS, in order to induce the Purchasers to extend the loans evidenced by the
Debt Securities, each Debtor has agreed to execute and deliver this Agreement
and to grant the Agent, for the ratable benefit of the Purchasers, a security
interest in certain property of such Debtor to secure the prompt payment,
performance and discharge in full of all of the Company’s obligations under the
Debt Securities and the obligations of any Additional Debtors under the
Guarantee.

 

NOW, THEREFORE, in consideration of the agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:

 

1.          Certain Definitions. As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as “account”, “chattel paper”, “commercial tort claim”, “deposit account”,
“document”, “equipment”, “fixtures”, “general intangibles”, “goods”,
“instruments”, “inventory”, “investment property”, “letter-of-credit rights”,
“proceeds” and “supporting obligations”) shall have the respective meanings
given such terms in Article 9 of the UCC.

 

(a)          “Collateral” means the collateral in which the Agent is granted a
security interest by this Agreement and includes the following personal property
of the Debtors, whether presently owned or existing or hereafter acquired or
coming into existence, wherever situated, and all additions and accessions
thereto and all substitutions and replacements thereof, and all proceeds,
products and accounts thereof, including, without limitation, all proceeds from
the sale or transfer of the Collateral and of insurance covering the same and of
any tort claims in connection therewith, and all dividends, interest, cash,
notes, securities, equity interest or other property at any time and from time
to time acquired, receivable or otherwise distributed in respect of, or in
exchange for, any or all of the Pledged Securities (as defined below):

 

 

 

 

(i)          All goods, including, without limitation, (A) all machinery,
equipment, computers, motor vehicles, trucks, tanks, boats, ships, appliances,
furniture, special and general tools, fixtures, test and quality control devices
and other equipment of every kind and nature and wherever situated, together
with all documents of title and documents representing the same, all additions
and accessions thereto, replacements therefor, all parts therefor, and all
substitutes for any of the foregoing and all other items used and useful in
connection with any Debtor’s businesses and all improvements thereto; and (B)
all inventory;

 

(ii)         All contract rights and other general intangibles, including,
without limitation, all partnership interests, membership interests, stock or
other securities, other than Excluded Property, rights under any of the
Organizational Documents, agreements related to the Pledged Securities,
licenses, distribution and other agreements, computer software (whether
“off-the-shelf”, licensed from any third party or developed by any Debtor),
computer software development rights, leases, franchises, customer lists,
quality control procedures, grants and rights, goodwill, Intellectual Property
and income tax refunds;

 

(iii)        All accounts, together with all instruments, all documents of title
representing any of the foregoing, all rights in any merchandising, goods,
equipment, motor vehicles and trucks which any of the same may represent, and
all right, title, security and guaranties with respect to each account,
including any right of stoppage in transit;

 

(iv)        All documents, letter-of-credit rights, instruments and chattel
paper;

 

(v)         All commercial tort claims;

 

(vi)        All deposit accounts and all cash (whether or not deposited in such
deposit accounts);

 

(vii)       All investment property and all ownership and/or other equity
interests in each Subsidiary, including, without limitation, the Subsidiary
Equity Interests, and, in each case, all certificates representing such shares
and/or equity interests and, in each case, all rights, options, warrants, stock,
other securities and/or equity interests that may hereafter be received,
receivable or distributed in respect of, or exchanged for, any of the foregoing
and all rights arising thereunder or in connection therewith, including, but not
limited to, all dividends, interest and cash, other than Excluded Property
(collectively, the “Pledged Securities”);

 

(viii)      All supporting obligations; and

 

(ix)         All files, records, books of account, business papers, and computer
programs; and

 

(x)          the products and proceeds of all of the foregoing.

 

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Notwithstanding the foregoing, (A) nothing herein shall be deemed to constitute
the grant of a security interest in, or an assignment of, any asset (i) in which
a security interest or assignment is void by operation of applicable law, or is
otherwise prohibited by applicable law (in each case to the extent that such
applicable law is not overridden by Sections 9-406, 9-407 and/or 9-408 of the
UCC or other similar applicable law), or (ii) subject to any governmental
permit, approval or license not related to Intellectual Property, if and to the
extent that a security interest therein, or assignment thereof, is prohibited by
or in violation of (x) any applicable law, or (y) a term, provision or condition
of any such governmental permit, approval or license (unless in each case, such
applicable law, term, provision or condition would be rendered ineffective with
respect to the creation of such security interest pursuant to Sections 9-406,
9-407, 9-408 or 9-409 of the UCC); provided, however, that to the extent
permitted by applicable law, this Agreement shall create a valid security
interest in such asset and, to the extent permitted by applicable law, this
Agreement shall create a valid security interest in the proceeds of such asset
and (B) the Collateral does not include any Excluded Property.

 

(b)          “Event of Default” has the meaning ascribed to such term in the
Debentures.

 

(c)          “Excluded Property” means 35% of the equity interests in any
Subsidiary organized in a jurisdiction outside of the United States.

 

(d)          “Intellectual Property” means the collective reference to all
rights, priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, (i) all copyrights arising under the laws of the
United States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished, all
registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, (ii) all letters patent of
the United States, any other country or any political subdivision thereof, all
reissues and extensions thereof, and all applications for letters patent of the
United States or any other country and all divisions, continuations and
continuations-in-part thereof, (iii) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade dress,
service marks, logos, domain names and other source or business identifiers, and
all goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark Office
or in any similar office or agency of the United States, any State thereof or
any other country or any political subdivision thereof, or otherwise, and all
common law rights related thereto, (iv) all trade secrets arising under the laws
of the United States, any other country or any political subdivision thereof,
(v) all rights to obtain any reissues, renewals or extensions of the foregoing,
(vi) all licenses for any of the foregoing, and (vii) all causes of action for
infringement of the foregoing.

 

(e)          “Liens” has the meaning ascribed to such term in the Purchase
Agreement.

 

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(f)          “Majority in Interest” means, at any time of determination, the
majority in interest (based on then-outstanding principal amounts of Debt
Securities at the time of such determination) of the Purchasers.

 

(g)          “Necessary Endorsement” means undated stock powers endorsed in
blank or other proper instruments of assignment duly executed and such other
instruments or documents as the Agent may reasonably request.

 

(h)          “Obligations” means all of the liabilities and obligations
(primary, secondary, direct, contingent, sole, joint or several) due or to
become due, or that are now or may be hereafter contracted or acquired, or owing
to, of any Debtor to the Purchasers, under this Agreement, the Debt Securities,
the Subsidiary Guarantee (to be entered into pursuant to the terms of the
Purchase Agreement by any Additional Debtors) (the “Guarantee”) and any other
instruments, agreements or other documents executed and/or delivered in
connection herewith or therewith, in each case, whether now or hereafter
existing, voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others, and whether
or not from time to time decreased or extinguished and later increased, created
or incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from any of the Purchasers as a preference, fraudulent
transfer or otherwise as such obligations may be amended, supplemented,
converted, extended or modified from time to time. Without limiting the
generality of the foregoing, the term “Obligations” shall include, without
limitation: (i) principal of, and interest on the Debt Securities and the loans
extended pursuant thereto; (ii) any and all other fees, indemnities, costs,
obligations and liabilities of the Debtors from time to time under or in
connection with this Agreement, the Debt Securities, the Guarantee and any other
instruments, agreements or other documents executed and/or delivered in
connection herewith or therewith; and (iii) all amounts (including but not
limited to post-petition interest) in respect of the foregoing that would be
payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Debtor.

 

(i)          “Organizational Documents” means with respect to any Debtor, the
documents by which such Debtor was organized (such as a certificate of
incorporation, certificate of limited partnership or articles of organization,
and including, without limitation, any certificates of designation for preferred
stock or other forms of preferred equity) and which relate to the internal
governance of such Debtor (such as bylaws, a partnership agreement or an
operating, limited liability or members agreement).

 

(j)          “Permitted Liens” has the meaning ascribed to such term in the
Debentures.

 

(k)          “Pledged Interests” has the meaning ascribed to such term in
Section 4(j).

 

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(l)          “Pledged Securities” has the meaning ascribed to such term in
Section 1(a).

 

(m)          “UCC” means the Uniform Commercial Code of the State of New York
and or any other applicable law of any state or states which has jurisdiction
with respect to all, or any portion of, the Collateral or this Agreement, from
time to time.

 

2.          Grant of Security Interest in Collateral. As an inducement for the
Purchasers to extend the loans evidenced by the Debt Securities and to secure
the complete and timely payment, performance and discharge in full, as the case
may be, of all of the Obligations, each Debtor hereby unconditionally and
irrevocably pledges, grants and hypothecates to the Agent, for the ratable
benefit of the Purchasers, a security interest in and to, a lien upon and a
right of set-off against all of their respective right, title and interest of
whatsoever kind and nature in and to, the Collateral (a “Security Interest” and,
collectively, the “Security Interests”).

 

3.          Delivery of Certain Collateral. Contemporaneously or prior to the
execution of this Agreement, each Debtor shall deliver or cause to be delivered
to the Agent any and all certificates and other instruments or documents
representing any of the Collateral, together with all Necessary Endorsements. If
and when the Collateral includes Pledged Securities, each Debtor shall deliver
or cause to be delivered to the Agent any and all certificates and other
instruments representing or evidencing such Pledged Securities, together with
all Necessary Endorsements and each Organizational Document governing such
Pledged Securities.

 

4.          Representations, Warranties, Covenants and Agreements of the
Debtors. Except as set forth under the corresponding section of the disclosure
schedules delivered to the Agent concurrently herewith (the “Disclosure
Schedules”), which Disclosure Schedules shall be deemed a part hereof, each
Debtor represents and warrants to, and covenants and agrees with, the Agent and
the Purchasers as follows:

 

(a)          Each Debtor has the requisite corporate, partnership, limited
liability company or other entity power and authority to enter into this
Agreement and otherwise to carry out its obligations hereunder. The execution,
delivery and performance by each Debtor of this Agreement and the filings
contemplated herein have been duly authorized by all necessary action on the
part of such Debtor and no further action is required by such Debtor. This
Agreement has been duly executed by each Debtor. This Agreement constitutes the
legal, valid and binding obligation of each Debtor, enforceable against each
Debtor in accordance with its terms except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization and similar laws of general
application relating to or affecting the rights and remedies of creditors and by
general principles of equity.

 

(b)          The Debtors have no place of business or offices where their
respective books of account and records are kept (other than temporarily at the
offices of its attorneys or accountants) or places where Collateral is stored or
located, except as set forth on Schedule 4.(b) attached hereto. Except as
disclosed on Schedule 4.(b), (i) no Debtor owns any real property and (ii) none
of the Collateral is in the possession of any consignee, bailee, warehouseman,
agent or processor.

 

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(c)          Except for Permitted Liens, each of the Debtors is the sole owner
of the Collateral it purports to own (except for non-exclusive licenses granted
by any Debtor in the ordinary course of business), free and clear of any Liens
and is fully authorized to grant the Security Interests. Except as set forth on
Schedule 4.(c) attached hereto, there is not on file in any governmental or
regulatory authority, agency or recording office an effective financing
statement, security agreement, license or transfer or any notice of any of the
foregoing (other than those that will be filed in favor of the Agent pursuant to
this Agreement) covering or affecting any of the Collateral. Except as set forth
on Schedule 4.(c) attached hereto and except pursuant to this Agreement, as long
as this Agreement shall be in effect, the Debtors shall not execute and shall
not knowingly permit to be on file in any such office or agency any other
financing statement or other document or instrument (except to the extent filed
or recorded in favor of the Agent pursuant to the terms of this Agreement).

 

(d)          No written claim has been received that any material portion of
Collateral or any Debtor's use of any material portion of Collateral violates
the rights of any third party. There has been no adverse decision to any
Debtor's claim of ownership rights in or exclusive rights to use the Collateral
in any jurisdiction or to any Debtor's right to keep and maintain such
Collateral in full force and effect, and there is no legal proceeding involving
said rights pending or, to the best knowledge of any Debtor, threatened in
writing before any court, judicial body, administrative or regulatory agency,
arbitrator or other governmental authority.

 

(e)          Each Debtor shall at all times maintain its books of account and
records relating to the Collateral at its principal place of business and its
Collateral at the locations set forth on Schedule 4.(b) attached hereto and may
not relocate such books of account and records or tangible Collateral unless it
delivers to the Agent at least 10 days prior to such relocation (i) written
notice of such relocation and the new location thereof (which must be within the
United States) and (ii) evidence that appropriate financing statements under the
UCC and other necessary documents have been filed and recorded and other steps
have been taken to perfect the Security Interests to create in favor of the
Agent, for the ratable benefit of the Purchasers, a valid, perfected and
continuing perfected first priority lien in the Collateral, subject to Permitted
Liens.

 

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(f)          This Agreement creates in favor of the Agent, for the ratable
benefit of the Purchasers, a valid security interest in the Collateral located
in the United States, subject only to Permitted Liens, securing the payment and
performance of the Obligations. Upon making the filings described in this
Agreement, all security interests created hereunder in any Collateral located in
the United States which may be perfected by filing Uniform Commercial Code
financing statements will have been duly perfected. Except for the filing of the
Uniform Commercial Code financing statements referred to in the immediately
following paragraph, the recordation of the Intellectual Property Security
Agreement (as defined in Section 4(p) hereof) with respect to copyrights and
copyright applications in the United States Copyright Office referred to in
paragraph (m), the execution and delivery of deposit account control agreements
satisfying the requirements of Section 9-104(a)(2) of the UCC with respect to
each deposit account of the Debtors, and the delivery of the certificates and
other instruments provided in Section 3, no action is necessary to create,
perfect or protect the security interests created hereunder in Collateral
located in the United States. Without limiting the generality of the foregoing,
except for the filing of said financing statements, the recordation of said
Intellectual Property Security Agreement and the execution and delivery of said
deposit account control agreements, no consent of any third parties and no
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for (i) the execution,
delivery and performance of this Agreement, (ii) the creation or perfection of
the Security Interests created hereunder in the Collateral located in the United
States or (iii) the enforcement of the rights of the Agent and the Purchasers
hereunder, other than consents from holders of Permitted Liens obtained in
writing and delivered to the Agent prior to the date of this Agreement.

 

(g)          Each Debtor hereby authorizes the Agent to file one or more
financing statements under the UCC, with respect to the Security Interests, with
the proper filing and recording agencies in any jurisdiction deemed proper by
it.

 

(h)          The execution, delivery and performance of this Agreement by the
Debtors does not (i) violate any of the provisions of any Organizational
Documents of any Debtor or any judgment, decree, order or award of any court,
governmental body or arbitrator or any applicable law, rule or regulation
applicable to any Debtor or (ii) conflict with, or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any material
agreement, or credit facility, to which any Debtor is a party or by which any
property or asset of any Debtor is bound or affected. If any, all required
consents (including, without limitation, from stockholders or creditors of any
Debtor) necessary for any Debtor to enter into and perform its obligations
hereunder have been obtained.

 

(i)          The capital stock and other equity interests listed on Schedule
4.(i) hereto (the “Subsidiary Equity Interests”) represent all of the capital
stock and other equity interests of the Subsidiaries, and represent all capital
stock and other equity interests owned, directly or indirectly, by the Debtors.
All of the Subsidiary Equity Interests are validly issued, fully paid and
nonassessable. Each Debtor that is indicated on Schedule 4.(i) to be the owner
of Subsidiary Equity Interests is the legal and beneficial owner of such
Subsidiary Equity Interests, free and clear of any lien, security interest or
other encumbrance except for the security interests created by this Agreement
and other Permitted Liens.

 

(j)          The ownership and other equity interests in partnerships and
limited liability companies (if any) included in the Collateral (the “Pledged
Interests”) by their express terms do not provide that they are securities
governed by Article 8 of the UCC and are not held in a securities account or by
any financial intermediary.

 

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(k)          Except for Permitted Liens, each Debtor shall at all times maintain
the liens and Security Interests provided for hereunder as valid and perfected
first priority liens and security interests in the Collateral located in the
United States in favor of the Agent until this Agreement and the Security
Interest hereunder shall be terminated pursuant to Section 14 hereof. Each
Debtor hereby agrees to defend the same against the claims of any and all
persons and entities. Each Debtor shall safeguard and protect all Collateral for
the account of the Agent. At the request of the Agent, each Debtor will
authorize the Agent at any time or from time to time as reasonably necessary one
or more financing statements pursuant to the UCC in form reasonably satisfactory
to the Agent and will pay the cost of filing the same in all public offices
wherever filing is, or is deemed by the Agent to be, necessary to effect the
rights and obligations provided for herein. Without limiting the generality of
the foregoing, each Debtor shall pay all fees, taxes and other amounts necessary
to maintain the Collateral and the Security Interests hereunder, and each Debtor
shall obtain and furnish to the Agent from time to time, upon reasonable
request, such releases and/or subordinations of claims and liens which may be
required to maintain the priority of the Security Interests hereunder.

 

(l)          No Debtor will transfer, pledge, hypothecate, encumber, license,
sell or otherwise dispose of any of the Collateral (except for non-exclusive
licenses granted by a Debtor in its ordinary course of business, sales of
inventory by a Debtor in its ordinary course of business and other Collateral
which is no longer useful or material to a Debtor’s business) without the prior
written consent of a Majority in Interest.

 

(m)          Each Debtor shall keep and preserve its equipment, inventory and
other tangible Collateral in good condition, repair and order, subject to
ordinary wear and tear, and shall not operate or locate any such Collateral (or
cause to be operated or located) in any area excluded from insurance coverage.

 

(n)          Each Debtor shall maintain with financially sound and reputable
insurers, insurance with respect to the Collateral, including Collateral
hereafter acquired, against loss or damage of the kinds and in the amounts
customarily insured against by entities of established reputation having similar
properties similarly situated and in such amounts as are customarily carried
under similar circumstances by other such entities and otherwise as is prudent
for entities engaged in similar businesses but in any event sufficient to cover
the full replacement cost thereof. Each Debtor shall cause each insurance policy
issued in connection herewith to provide, and the insurer issuing such policy to
certify to the Agent, that (a) the Agent will be named as lender loss payee and
additional insured under each such insurance policy; (b) if such insurance be
proposed to be cancelled or materially changed for any reason whatsoever, such
insurer will promptly notify the Agent and such cancellation or material change
shall not be effective as to the Agent for at least thirty (30) days after
receipt by the Agent of such notice, unless the effect of such change is to
extend or increase coverage under the policy; and (c) the Agent will have the
right (but no obligation) at its election to remedy any default in the payment
of premiums within thirty (30) days of notice from the insurer of such default.
If no Event of Default exists and if the aggregate insurance policy proceeds
arising out of any claim or series of related claims do not exceed $100,000,
loss payments in each instance will be applied by the Debtors to the repair
and/or replacement of property with respect to which the loss was incurred to
the extent reasonably feasible, and any loss payments or the balance thereof
remaining, to the extent not so applied, shall be payable to the Debtors;
provided, however, that payments received by the Debtors after an Event of
Default occurs and is continuing or in excess of $100,000 for any occurrence or
series of related occurrences shall be paid to the Agent and, if received by the
Debtors, shall be held in trust for the Purchasers and immediately paid over to
the Agent unless otherwise directed in writing by the Agent. Copies of such
policies or the related certificates, in each case, naming the Agent as lender
loss payee and additional insured shall be delivered to the Agent at least
annually and at the time any new policy of insurance is issued.

 

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(o)          Each Debtor shall, within ten (10) days of obtaining knowledge
thereof, advise the Agent promptly, in sufficient detail, of any material
adverse change in the Collateral as a whole, and of the occurrence of any event
which would have a material adverse effect on the value of the Collateral as a
whole or on the Agent’s security interest therein.

 

(p)          Each Debtor shall promptly execute and deliver to the Agent such
further deeds, mortgages, assignments, security agreements, financing statements
or other instruments, documents, certificates and assurances and take such
further action as the Agent may from time to time reasonably request to perfect,
protect or enforce the Agent’s security interest in the Collateral including,
without limitation, if applicable, the execution and delivery of a separate
security agreement with respect to each Debtor’s Intellectual Property
(“Intellectual Property Security Agreement”) in which the Agent has been granted
a security interest hereunder, substantially in a form reasonably acceptable to
the Agent, which Intellectual Property Security Agreement, other than as stated
therein, shall be subject to all of the terms and conditions hereof.

 

(q)          Each Debtor shall permit the Agent and its representatives and
agents to inspect the Collateral during normal business hours and upon at least
two (2) Business Day’s prior notice, and to make copies of records pertaining to
the Collateral as may be reasonably requested by the Agent from time to time.

 

(r)          Each Debtor shall take all steps reasonably necessary to diligently
pursue and seek to preserve, enforce and collect any rights, claims, causes of
action and accounts receivable in respect of the Collateral.

 

(s)          Each Debtor shall promptly notify the Agent in sufficient detail
upon becoming aware of any attachment, garnishment, execution or other legal
process levied against any Collateral and of any other information received by
such Debtor that may reasonably be expected to materially and adversely affect
the value of the Collateral as a whole, the Security Interest or the rights and
remedies of the Agent and the Purchasers hereunder.

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(t)          All information heretofore, herein or hereafter supplied to the
Agent or the Purchasers by or on behalf of any Debtor with respect to the
Collateral is accurate and complete in all material respects as of the date
furnished.

 

(u)          The Debtors shall at all times preserve and keep in full force and
effect their respective valid existence and good standing and any rights and
franchises material to its business.

 

(v)         No Debtor will change its name, type of organization, jurisdiction
of organization, organizational identification number (if it has one), legal or
corporate structure, or identity, unless it provides at least 10 days prior
written notice to the Agent of such change and, at the time of such written
notification, such Debtor provides any financing statements or fixture filing
necessary to perfect and continue the perfection of the Security Interests
granted and evidenced by this Agreement.

 

(w)          Except in the ordinary course of business, no Debtor will consign
any of its inventory or sell any of its inventory on bill and hold, sale or
return, sale on approval, or other conditional terms of sale without the consent
of the Agent, which consent shall not be unreasonably withheld.

 

(x)          No Debtor will relocate its chief executive office to a new
location without (i) providing 30 days prior written notification thereof to the
Agent and (ii) providing any financing statements or fixture filings necessary
to perfect and continue the perfection of the Security Interests granted and
evidenced by this Agreement.

 

(y)          Each Debtor was organized and remains organized solely under the
laws of the state set forth next to such Debtor’s name in Schedule 4.(y)
attached hereto, which Schedule 4.(y) sets forth each Debtor’s organizational
identification number or, if any Debtor does not have one, states that one does
not exist.

 

(z)           (i) The actual name of each Debtor is the name set forth in
Schedule 4.(y) attached hereto; (ii) no Debtor has any trade names except as set
forth on Schedule 4.(z) attached hereto; (iii) no Debtor has used any name other
than that stated in the preamble hereto or as set forth on Schedule 4.(z) for
the preceding five years; and (iv) no entity has merged into any Debtor or been
acquired by any Debtor within the past five years except as set forth on
Schedule 4.(z).

 

(aa)         At any time and from time to time that any Collateral consists of
instruments, certificated securities or other items that require or permit
possession by the secured party to perfect the security interest created hereby,
the applicable Debtor shall deliver such Collateral to the Agent.

 

(bb)         Each Debtor, in its capacity as issuer, shall comply with any and
all orders and instructions of Agent regarding the Pledged Interests consistent
with the terms of this Agreement without the further consent of any Debtor as
contemplated by Section 8-106 (or any successor section) of the UCC. Further, no
Debtor shall enter into any agreement with any person or entity other than Agent
that would confer “control”, within the meaning of Article 8 of the UCC, of any
Pledged Interests.

 

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(cc)         Each Debtor shall cause all tangible chattel paper constituting
Collateral to be delivered to the Agent, or, if such delivery is not possible,
then to cause such tangible chattel paper to contain a legend noting that it is
subject to the security interest created by this Agreement. To the extent that
any Collateral consists of electronic chattel paper, the applicable Debtor shall
cause the underlying chattel paper to be “marked” within the meaning of Section
9-105 of the UCC (or successor section thereto).

 

(dd)         If there is any investment property or deposit account included as
Collateral that (i) can be perfected by “control” through an account control
agreement, and (ii) at any time has a balance (in either cash or value of
investment property, or both) exceeding $25,000, the applicable Debtor shall
cause such an account control agreement, in form and substance in each case
satisfactory to the Agent, to be entered into and delivered to the Agent for the
ratable benefit of the Purchasers, unless the Major Investors waive the
foregoing requirement with respect to any such investment property or deposit
account otherwise constituting Collateral; provided, that (x) as of the date of
this Agreement, Debtor is not required to provide an account control agreement
over the account maintained by Debtor with J.P. Morgan in Germany as of the date
of this Agreement (the “Germany Account”), (y) Debtor shall notify the Agent at
any time that the Germany Account has a balance (in either cash or value of
investment property, or both) exceeding $1,000,000 (a “Germany Account Notice”),
and (z) Debtor shall cause an account control agreement, in form and substance
satisfactory to the Agent, to be entered into and delivered to the Agent for the
ratable benefit of the Purchasers in respect of the Germany Account upon
instructions from the Agent to do so given by the Agent to Debtor at any time
after Debtor is obligated to deliver a Germany Account Notice pursuant to the
preceding clause (y).

 

(ee)         To the extent that any Collateral consists of letter-of-credit
rights, the applicable Debtor shall cause the issuer of each underlying letter
of credit to consent to an assignment of the proceeds thereof to the Agent, for
the ratable benefit of the Purchasers.

 

(ff)         To the extent that any Collateral is in the possession of any third
party, the applicable Debtor shall join with the Agent in notifying such third
party of the Agent’s security interest in such Collateral and shall use
commercially reasonable efforts to obtain an acknowledgement and agreement from
such third party with respect to the Collateral, in form and substance
reasonably satisfactory to the Agent.

 

(gg)         If any Debtor shall at any time hold or acquire a commercial tort
claim, such Debtor shall promptly notify the Agent in a writing signed by such
Debtor of the particulars thereof and grant to the Agent, for the ratable
benefit of the Purchasers, in such writing a security interest therein and in
the proceeds thereof, all upon the terms of this Agreement, with such writing to
be in form and substance satisfactory to the Agent.

 

11

 

 

(hh)         Each Debtor shall immediately provide written notice to the Agent
of any and all accounts which arise out of contracts with any governmental
authority and, to the extent necessary to perfect or continue the perfected
status of the Security Interests in such accounts and proceeds thereof, shall
execute and deliver to the Agent an assignment of claims for such accounts and
cooperate with the Agent in taking any other steps required, in its judgment,
under the Federal Assignment of Claims Act or any similar federal, state or
local statute or rule to perfect or continue the perfected status of the
Security Interests in such accounts and proceeds thereof.

 

(ii)          Each Debtor shall cause each wholly-owned Subsidiary that is
organized in a jurisdiction within the United States to promptly become a party
hereto (an “Additional Debtor”), by executing and delivering an Additional
Debtor Joinder in substantially the form of Annex A attached hereto and comply
with the provisions hereof applicable to the Debtors. Concurrent therewith, the
Additional Debtor shall deliver replacement schedules for, or supplements to all
other Schedules to (or referred to in) this Agreement, as applicable, which
replacement schedules shall supersede, or supplements shall modify, the
Schedules then in effect. The Additional Debtor shall also deliver such opinions
of counsel, authorizing resolutions, good standing certificates, incumbency
certificates, organizational documents, financing statements and other
information and documentation as the Agent may reasonably request. Upon delivery
of the foregoing to the Agent, the Additional Debtor shall be and become a party
to this Agreement with the same rights and obligations as the Debtors, for all
purposes hereof as fully and to the same extent as if it were an original
signatory hereto and shall be deemed to have made the representations,
warranties and covenants set forth herein as of the date of execution and
delivery of such Additional Debtor Joinder, and all references herein to the
“Debtors” shall be deemed to include each Additional Debtor.

 

(jj)           Each Debtor shall vote the Pledged Securities to comply with the
covenants and agreements set forth herein and in the Debt Securities.

 

(kk)         Each Debtor shall register the pledge of the applicable Pledged
Securities on the books of such Debtor. Each Debtor shall notify each issuer of
Pledged Securities to register the pledge of the applicable Pledged Securities
in the name of the Agent on the books of such issuer. Further, except with
respect to certificated securities delivered to the Agent, the applicable Debtor
shall deliver to Agent an acknowledgement of pledge (which, where appropriate,
shall comply with the requirements of the relevant UCC with respect to
perfection by registration) signed by the issuer of the applicable Pledged
Securities, which acknowledgement shall confirm that: (a) it has registered the
pledge on its books and records; and (b) at any time directed by Agent during
the continuation of an Event of Default, such issuer will transfer the record
ownership of such Pledged Securities into the name of any designee of Agent,
will take such steps as may be necessary to effect the transfer, and will comply
with all other instructions of Agent regarding such Pledged Securities without
the further consent of the applicable Debtor.

 

12

 

 

(ll)         In the event that, upon an occurrence of an Event of Default, Agent
shall sell all or any of the Pledged Securities to another party or parties
(herein called the “Transferee”) or shall purchase or retain all or any of the
Pledged Securities, each Debtor shall, to the extent applicable: (i) deliver to
Agent or the Transferee, as the case may be, the articles of incorporation,
bylaws, minute books, stock certificate books, corporate seals, deeds, leases,
indentures, agreements, evidences of indebtedness, books of account, financial
records and all other Organizational Documents and records of the Debtors and
their direct and indirect subsidiaries; (ii) use its best efforts to obtain
resignations of the persons then serving as officers and directors of the
Debtors and their direct and indirect subsidiaries, if so requested; and (iii)
use its best efforts to obtain any approvals that are required by any
governmental or regulatory body in order to permit the sale of the Pledged
Securities to the Transferee or the purchase or retention of the Pledged
Securities by Agent and allow the Transferee or Agent to continue the business
of the Debtors and their direct and indirect subsidiaries.

 

(mm)         Without limiting the generality of the other obligations of the
Debtors hereunder, each Debtor shall promptly (i) cause to be registered at the
United States Copyright Office all of its material copyrights, (ii) cause the
security interest contemplated hereby with respect to all Intellectual Property
registered at the United States Copyright Office or United States Patent and
Trademark Office to be duly recorded at the applicable office, and (iii) give
the Agent notice whenever it acquires (whether absolutely or by license) or
creates any additional material Intellectual Property on a quarterly basis.

 

(nn)         Each Debtor will from time to time, at the joint and several
expense of the Debtors, promptly execute and deliver all such further
instruments and documents, and take all such further action as the Agent may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Agent and the
Purchasers to exercise and enforce their rights and remedies hereunder and with
respect to any Collateral or to otherwise carry out the purposes of this
Agreement.

 

(oo)         Schedule 4.(oo) attached hereto lists all of the patents, patent
applications, trademarks, trademark applications, registered copyrights, and
domain names owned by any of the Debtors as of the date hereof. Schedule 4.(oo)
lists all material licenses in favor of any Debtor for the use of any patents,
trademarks, copyrights and domain names as of the date hereof. All United States
material patents and trademarks of the Debtors have been duly recorded at the
United States Patent and Trademark Office and all material copyrights of the
Debtors have been duly recorded at the United States Copyright Office.

 

(pp)         Except as set forth on Schedule 4.(pp) attached hereto, none of the
account debtors or other persons or entities obligated on any of the Collateral
is a governmental authority covered by the Federal Assignment of Claims Act or
any similar federal, state or local statute or rule in respect of such
Collateral.

 

(qq)         Until the Obligations shall have been paid and performed in full
(other than inchoate indemnification obligations), the Company covenants that it
shall promptly cause any Additional Debtor to enter into a Subsidiary Guarantee
in favor of the Agent, for the ratable benefit of the Purchasers, in the form of
Exhibit F to the Purchase Agreement.

13

 

 

5.           Effect of Pledge on Certain Rights. The parties hereto agree that,
if any of the Collateral subject to this Agreement consists of nonvoting equity
or ownership interests (regardless of class, designation, preference or rights)
that may be converted into voting equity or ownership interests upon the
occurrence of certain events (including, without limitation, upon the transfer
of all or any of the other stock or assets of the issuer), the pledge of such
equity or ownership interests pursuant to this Agreement or the enforcement of
any of Agent’s rights hereunder shall not be deemed to be the type of event
which would trigger such conversion rights, notwithstanding any provisions in
the Organizational Documents or agreements to which any Debtor is subject or to
which any Debtor is party.

 

6.           Defaults. The following events shall be “Events of Default”:

 

(a)          The occurrence of an Event of Default under the Debt Securities;

 

(b)          Any representation or warranty of any Debtor in this Agreement
shall prove to have been incorrect in any material respect when made;

 

(c)          The failure by any Debtor to observe or perform any of its
obligations hereunder for ten (10) days after delivery to such Debtor of notice
of such failure by the Agent unless such default is capable of cure but cannot
be cured within such time frame and such Debtor is all commercially reasonable
efforts to cure same in a timely fashion; or

 

(d)          Any provision of this Agreement is at any time for any reason
declared to be null and void, any Debtor contests the validity or enforceability
of this Agreement, any Debtor governmental authority having jurisdiction over
any Debtor commences any proceeding seeking to establish the invalidity or
unenforceability of this Agreement, or any Debtor denies that any Debtor has any
liability or obligation purported to be created under this Agreement.

 

7.           Duty To Hold In Trust.

 

(a)          Upon the occurrence of any Event of Default and at any time
thereafter that such Event of Default remains continuing, each Debtor shall,
upon receipt of any revenue, income, dividend, interest or other sums subject to
the Security Interests, whether payable pursuant to the Debt Securities or
otherwise, or of any check, draft, note, trade acceptance or other instrument
evidencing an obligation to pay any such sum, hold the same in trust for the
Purchasers and shall forthwith endorse and transfer any such sums or
instruments, or both, to the Agent, for the ratable benefit of the Purchasers,
for application to the satisfaction of the Obligations (and if any Debt
Securities are not outstanding, pro-rata in proportion to the initial purchases
of the remaining Debt Securities).

14

 

 

(b)          If any Debtor shall become entitled to receive or shall receive any
securities or other property (including, without limitation, shares of Pledged
Securities or instruments representing Pledged Securities acquired after the
date hereof, or any options, warrants, rights or other similar property or
certificates representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of such Debtor or any of its direct
or indirect subsidiaries) in respect of the Pledged Securities (whether as an
addition to, in substitution of, or in exchange for, such Pledged Securities or
otherwise), such Debtor agrees to (i) accept the same as the agent of the
Purchasers; (ii) hold the same in trust on behalf of and for the benefit of the
Purchasers; and (iii) to deliver any and all certificates or instruments
evidencing the same to Agent on or before the close of business on the fifth
business day following the receipt thereof by such Debtor, in the exact form
received together with the Necessary Endorsements, to be held by Agent subject
to the terms of this Agreement as Collateral.

 

8.           Rights and Remedies Upon Default.

 

(a)          Upon the occurrence of any Event of Default and at any time
thereafter that such Event of Default remains continuing, the Purchasers, acting
through the Agent, shall have the right to exercise all of the remedies
conferred hereunder and under the Debt Securities, and the Purchasers, acting
through the Agent, shall have all the rights and remedies of a secured party
under the UCC. Without limitation, the Agent, for the benefit of the Purchasers,
shall have the following rights and powers:

 

(i)         The Agent shall have the right to take possession of the Collateral
and, for that purpose, enter, with the aid and assistance of any person, any
premises where the Collateral, or any part thereof, is or may be placed and
remove the same, and each Debtor shall assemble the Collateral and make it
available to the Agent at places which the Agent shall reasonably select,
whether at such Debtor's premises or elsewhere, and make available to the Agent,
without rent, all of such Debtor’s respective premises and facilities for the
purpose of the Agent taking possession of, removing or putting the Collateral in
saleable or disposable form.

 

(ii)         Upon notice to the Debtors by Agent, all rights of each Debtor to
exercise the voting and other consensual rights which it would otherwise be
entitled to exercise and all rights of each Debtor to receive the dividends and
interest which it would otherwise be authorized to receive and retain, shall
cease. Upon such notice, Agent shall have the right to receive, for the ratable
benefit of the Purchasers, any interest, cash dividends or other payments on the
Collateral and, at the option of Agent, to exercise in such Agent’s discretion
all voting rights pertaining thereto. Without limiting the generality of the
foregoing, Agent shall have the right (but not the obligation) to exercise all
rights with respect to the Collateral as it were the sole and absolute owner
thereof, including, without limitation, to vote and/or to exchange, at its sole
discretion, any or all of the Collateral in connection with a merger,
reorganization, consolidation, recapitalization or other readjustment concerning
or involving the Collateral or any Debtor or any of its direct or indirect
subsidiaries.

 

15

 

 

(iii)         The Agent shall have the right to use the Collateral and shall
have the right to assign, sell, lease or otherwise dispose of and deliver all or
any part of the Collateral, at public or private sale or otherwise, either with
or without special conditions or stipulations, for cash or on credit or for
future delivery, in such parcel or parcels and at such time or times and at such
place or places, and upon such terms and conditions as the Agent may deem
commercially reasonable, all without (except as shall be required by applicable
statute and cannot be waived) advertisement or demand upon or notice to any
Debtor or right of redemption of a Debtor, which are hereby expressly waived.
Upon each such sale, lease, assignment or other transfer of Collateral, the
Agent, for the ratable benefit of the Purchasers, may, unless prohibited by
applicable law which cannot be waived, purchase all or any part of the
Collateral being sold, free from and discharged of all trusts, claims, right of
redemption and equities of any Debtor, which are hereby waived and released.

 

(iv)        The Agent shall have the right (but not the obligation) to notify
any account debtors and any obligors under instruments or accounts to make
payments directly to the Agent, on behalf of the Purchasers, and to enforce the
Debtors’ rights against such account debtors and obligors.

 

(v)         The Agent, for the ratable benefit of the Purchasers, may (but is
not obligated to) direct any financial intermediary or any other person or
entity holding any investment property to transfer the same to the Agent, on
behalf of the Purchasers, or its designee.

 

(vi)        The Agent may (but is not obligated to) transfer any or all
Intellectual Property registered in the name of any Debtor at the United States
Patent and Trademark Office and/or Copyright Office into the name of the
Purchasers or any designee or any purchaser of any Collateral.

 

(b)          The Agent shall comply with any applicable law in connection with a
disposition of Collateral and such compliance will not be considered adversely
to affect the commercial reasonableness of any sale of the Collateral. The Agent
may sell the Collateral without giving any warranties and may specifically
disclaim such warranties. If the Agent sells any of the Collateral on credit,
the Debtors will only be credited with payments actually made by the purchaser.
In addition, each Debtor waives any and all rights that it may have to a
judicial hearing in advance of the enforcement of any of the Agent’s rights and
remedies hereunder, including, without limitation, its right following an Event
of Default to take immediate possession of the Collateral and to exercise its
rights and remedies with respect thereto.

 

16

 

 

(c)          For the purpose of enabling the Agent to further exercise rights
and remedies under this Section 8 or elsewhere provided by agreement or
applicable law, each Debtor hereby grants to the Agent, for the ratable benefit
of the Purchasers an irrevocable, nonexclusive license (exercisable without
payment of royalty or other compensation to such Debtor) to use, license or
sublicense following an Event of Default, any Intellectual Property now owned or
hereafter acquired by such Debtor, 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.

 

9.          Applications of Proceeds. The proceeds of any such sale, lease or
other disposition of the Collateral hereunder or from payments made on account
of any insurance policy insuring any portion of the Collateral shall be applied
first, to the expenses of retaking, holding, storing, processing and preparing
for sale, selling, and the like (including, without limitation, any taxes, fees
and other costs incurred in connection therewith) of the Collateral, to the
reasonable attorneys’ fees and expenses incurred by the Agent in enforcing its
and the Purchasers’ rights hereunder and in connection with collecting, storing
and disposing of the Collateral, and then to satisfaction of the Obligations pro
rata among the Purchasers (based on then-outstanding principal amounts of Debt
Securities at the time of any such determination), and to the payment of any
other amounts required by applicable law, after which the Purchasers shall pay
to the applicable Debtor any surplus proceeds. If, upon the sale, license or
other disposition of the Collateral, the proceeds thereof are insufficient to
pay all amounts to which the Agent and the Purchasers are legally entitled, the
Debtors will be liable for the deficiency, together with interest thereon, at
the rate of 12% per annum or the lesser amount permitted by applicable law (the
“Default Rate”), and the reasonable fees of any attorneys employed by the Agent
and the Purchasers to collect such deficiency. To the extent permitted by
applicable law, each Debtor waives all claims, damages and demands against the
Agent and the Purchasers arising out of the repossession, removal, retention or
sale of the Collateral, unless due solely to the gross negligence or willful
misconduct of the Agent and the Purchasers as determined by a final judgment
(not subject to further appeal) of a court of competent jurisdiction.

 

10.         Securities Law Provision. Each Debtor recognizes that Agent may be
limited in its ability to effect a sale to the public of all or part of the
Pledged Securities by reason of certain prohibitions in the Securities Act of
1933, as amended, or other federal or state securities laws (collectively, the
“Securities Laws”), and may be compelled to resort to one or more sales to a
restricted group of purchasers who may be required to agree to acquire the
Pledged Securities for their own account, for investment and not with a view to
the distribution or resale thereof. Each Debtor agrees that sales so made may be
at prices and on terms less favorable than if the Pledged Securities were sold
to the public, and that Agent has no obligation to delay the sale of any Pledged
Securities for the period of time necessary to register the Pledged Securities
for sale to the public under the Securities Laws. Each Debtor shall cooperate
with Agent in its attempt to satisfy any requirements under the Securities Laws
(including, without limitation, registration thereunder if requested by Agent)
applicable to the sale of the Pledged Securities by Agent.

 

17

 

 

11.         Costs and Expenses. Each Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements
pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Agent. The Debtors will also, upon demand, pay to the
Agent the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel, which the Agent, for the benefit of the
Purchasers, may incur in connection with the creation, perfection, protection,
foreclosure, collection or enforcement of the Security Interest and the
preparation, administration, continuance, amendment or enforcement of this
Agreement and pay to the Agent the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel, which the Agent, for
the benefit of the Purchasers, and the Purchasers may incur in connection with
(i) the enforcement of this Agreement, (ii) the custody or preservation of, or
the sale of, collection from, or other realization upon, any of the Collateral,
or (iii) the exercise or enforcement of any of the rights of the Purchasers
under the Debt Securities. Until so paid, any fees payable hereunder shall be
added to the principal amount of the Debt Securities and shall bear interest at
the Default Rate.

 

12.         Responsibility for Collateral. The Debtors assume all liabilities
and responsibility in connection with all Collateral, and the Obligations shall
in no way be affected or diminished by reason of the loss, destruction, damage
or theft of any of the Collateral or its unavailability for any reason. Without
limiting the generality of the foregoing, (a) neither the Agent nor any
Purchaser (i) has any duty (either before or after an Event of Default) to
collect any amounts in respect of the Collateral or to preserve any rights
relating to the Collateral, or (ii) has any obligation to clean-up or otherwise
prepare the Collateral for sale, and (b) each Debtor shall remain obligated and
liable under each contract or agreement included in the Collateral to be
observed or performed by such Debtor thereunder. Neither the Agent nor any
Purchaser shall have any obligation or liability under any such contract or
agreement by reason of or arising out of this Agreement or the receipt by the
Agent or any Purchaser of any payment relating to any of the Collateral, nor
shall the Agent or any Purchaser be obligated in any manner to perform any of
the obligations of any Debtor under or pursuant to any such contract or
agreement, to make inquiry as to the nature or sufficiency of any payment
received by the Agent or any Purchaser in respect of the Collateral or as to the
sufficiency of any performance by any party under any such contract or
agreement, 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 the Agent or to which the Agent or any Purchaser may be entitled at
any time or times.

 

13.         Security Interests Absolute. All rights of the Agent and the
Purchasers and all of the Obligations are absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement,
the Debt Securities or any agreement entered into in connection with the
foregoing, or any portion hereof or thereof; (b) any change in the time, manner
or place of payment or performance of, or in any other term of, all or any of
the Obligations, or any other amendment or waiver of or any consent to any
departure from the Debt Securities or any other agreement entered into in
connection with the foregoing; (c) any exchange, release or nonperfection of any
of the Collateral, or any release or amendment or waiver of or consent to
departure from any other collateral for, or any guarantee, or any other
security, for all or any of the Obligations; (d) any action by the Agent and the
Purchasers to obtain, adjust, settle and cancel in its sole discretion any
insurance claims or matters made or arising in connection with the Collateral;
or (e) any other circumstance which might otherwise constitute any legal or
equitable defense available to a Debtor, or a discharge of all or any part of
the Security Interests granted hereby. Until the Obligations shall have been
paid and performed in full (other than inchoate indemnification obligations),
the rights of the Agent and the Purchasers shall continue even if the
Obligations are barred for any reason, including, without limitation, the
running of the statute of limitations or bankruptcy. Each Debtor expressly
waives presentment, protest, notice of protest, demand, notice of nonpayment and
demand for performance. In the event that at any time any transfer of any
Collateral or any payment received by the Agent and the Purchasers hereunder
shall be deemed by final order of a court of competent jurisdiction to have been
a voidable preference or fraudulent conveyance under the bankruptcy or
insolvency laws of the United States, or shall be deemed to be otherwise due to
any party other than the Agent and the Purchasers, then, in any such event, each
Debtor’s obligations hereunder shall survive cancellation of this Agreement, and
shall not be discharged or satisfied by any prior payment thereof and/or
cancellation of this Agreement, but shall remain a valid and binding obligation
enforceable in accordance with the terms and provisions hereof. Each Debtor
waives all right to require the Agent and the Purchasers to proceed against any
other person or entity or to apply any Collateral which the Agent and the
Purchasers may hold at any time, or to marshal assets, or to pursue any other
remedy.

 

18

 

 

14.         Term of Agreement. This Agreement and the Security Interests shall
terminate on the date on which all payments under the Debt Securities have been
paid in full and all other Obligations have been paid or discharged (other than
inchoate indemnification obligations); provided, however, that all indemnities
of the Debtors contained in this Agreement shall survive and remain operative
and in full force and effect regardless of the termination of this Agreement.

 

15.         Power of Attorney; Further Assurances.

 

(a)          Each Debtor authorizes the Agent, and does hereby make, constitute
and appoint the Agent and its officers, agents, successors or assigns with full
power of substitution, as such Debtor’s true and lawful attorney-in-fact, with
power, in the name of the Agent or such Debtor, to, after the occurrence and
during the continuance of an Event of Default, (i) endorse any note, checks,
drafts, money orders or other instruments of payment (including payments payable
under or in respect of any policy of insurance) in respect of the Collateral
that may come into possession of the Agent; (ii) to sign and endorse any
financing statement pursuant to the UCC or any invoice, freight or express bill,
bill of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts, and other
documents relating to the Collateral; (iii) to pay or discharge taxes, liens,
security interests or other encumbrances at any time levied or placed on or
threatened against the Collateral; (iv) to demand, collect, receipt for,
compromise, settle and sue for monies due in respect of the Collateral; (v) to
transfer any Intellectual Property or provide licenses respecting any
Intellectual Property; and (vi) generally, at the option of the Agent, and at
the expense of the Debtors, at any time, or from time to time, to execute and
deliver any and all documents and instruments and to do all acts and things
which the Agent deems necessary to protect, preserve and realize upon the
Collateral and the Security Interests granted therein in order to effect the
intent of this Agreement and the Debt Securities all as fully and effectually as
the Debtors might or could do; and each Debtor hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof. This power of
attorney is coupled with an interest and shall be irrevocable for the term of
this Agreement and thereafter as long as any of the Obligations (other than
inchoate indemnification obligations) shall be outstanding. The designation set
forth herein shall be deemed to amend and supersede any inconsistent provision
in the Organizational Documents or other documents or agreements to which any
Debtor is subject or to which any Debtor is a party. Without limiting the
generality of the foregoing, after the occurrence and during the continuance of
an Event of Default, each Purchaser is specifically authorized to execute and
file any applications for or instruments of transfer and assignment of any
patents, trademarks, copyrights or other Intellectual Property with the United
States Patent and Trademark Office and the United States Copyright Office.

 

19

 

 

(b)          On a continuing basis, each Debtor will make, execute, acknowledge,
deliver, file and record, as the case may be, with the proper filing and
recording agencies in any jurisdiction, including, without limitation, the
jurisdictions indicated on Schedule 4.(y) attached hereto, all such instruments,
and take all such action as may reasonably be requested by the Agent, to perfect
the Security Interests granted hereunder and otherwise to carry out the intent
and purposes of this Agreement, or for assuring and confirming to the Agent the
grant or perfection of a perfected security interest in all the Collateral under
the UCC.

 

(c)          Each Debtor hereby irrevocably appoints the Agent as such Debtor’s
attorney-in-fact, with full authority in the place and instead of such Debtor
and in the name of such Debtor, from time to time in the Agent’s discretion, to
take any action and to execute any instrument which the Agent may deem necessary
or advisable to accomplish the purposes of this Agreement, including the filing,
in its sole discretion, of one or more financing or continuation statements and
amendments thereto, relative to any of the Collateral without the signature of
such Debtor where permitted by law, which financing statements may (but need
not) describe the Collateral as “all assets” or “all personal property” or words
of like import, and ratifies all such actions taken by the Agent. This power of
attorney is coupled with an interest and shall be irrevocable for the term of
this Agreement and thereafter as long as any of the Obligations shall be
outstanding.

 

16.         Notices. All notices, requests, demands and other communications
hereunder shall be subject to the notice provision of the Purchase Agreement.

 

17.         Other Security. To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Agent shall have the right, in its sole discretion, to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Purchasers’ rights and
remedies hereunder.

 

18.         [Reserved]

 

20

 

 

19.         Miscellaneous.

 

(a)          No course of dealing between the Debtors, on the one hand, and the
Agent and the Purchasers, on the other hand, nor any failure to exercise, nor
any delay in exercising, on the part of the Agent or any of the Purchasers, any
right, power or privilege hereunder or under the Debt Securities shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.

 

(b)          All of the rights and remedies of the Agent and the Purchasers with
respect to the Collateral, whether established hereby or by the Debt Securities
or by any other agreements, instruments or documents or by law shall be
cumulative and may be exercised singly or concurrently.

 

(c)          This Agreement, together with the exhibits and schedules hereto,
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been
merged into this Agreement and the exhibits and schedules hereto. No provision
of this Agreement may be waived, modified, supplemented or amended except in a
written instrument signed, in the case of an amendment, by the Debtors and the
Purchasers holding 67% or more of the principal amount of Debt Securities then
outstanding, or, in the case of a waiver, by the party against whom enforcement
of any such waived provision is sought; provided, however, unanimous consent
shall be required for any amendment that would adversely affect any Purchaser.

 

(d)          If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

 

(e)          No waiver of any default with respect to any provision, condition
or requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right.

 

(f)          This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns. No Debtor may assign
this Agreement or any rights or obligations hereunder without the prior written
consent of each Purchaser (other than by merger). The Purchasers are third-party
beneficiaries of this Agreement. Any Purchaser may assign any or all of its
rights under this Agreement to any Person (as defined in the Purchase Agreement)
to whom such Purchaser assigns or transfers any Obligations, provided such
transferee agrees in writing to be bound, with respect to the transferred
Obligations, by the provisions of this Agreement that apply to the “Purchasers.”

 

21

 

 

(g)          Each party shall take such further action and execute and deliver
such further documents as may be necessary or appropriate in order to carry out
the provisions and purposes of this Agreement.

 

(h)         Except to the extent mandatorily governed by the jurisdiction or
situs where the Collateral is located, all questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of New York, without regard to the principles of conflicts of law
thereof. Except to the extent mandatorily governed by the jurisdiction or situs
where the Collateral is located, each Debtor agrees that all proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and the Debt Securities (whether brought against
a party hereto or its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced exclusively in the
state and federal courts sitting in the City of New York, Borough of Manhattan.
Except to the extent mandatorily governed by the jurisdiction or situs where the
Collateral is located, each Debtor hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby.

 

(i)          This Agreement may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original and, all of which
taken together shall constitute one and the same Agreement. In the event that
any signature is delivered by facsimile transmission, such signature shall
create a valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.

 

(j)          All Debtors shall jointly and severally be liable for the
obligations of each Debtor to the Agent and the Purchasers hereunder.

 

22

 

 

(k)          Each Debtor shall indemnify, reimburse and hold harmless the Agent
and the Purchasers and their respective partners, members, shareholders,
officers, directors, employees and agents (and any other persons with other
titles that have similar functions) (collectively, “Indemnitees”) from and
against any and all losses, claims, liabilities, damages, penalties, suits,
costs and expenses, of any kind or nature, (including fees relating to the cost
of investigating and defending any of the foregoing) imposed on, incurred by or
asserted against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages, penalties, suits, costs and expenses which result
from the gross negligence or willful misconduct of the Indemnitee as determined
by a final, nonappealable decision of a court of competent jurisdiction. This
indemnification provision is in addition to, and not in limitation of, any other
indemnification provision in the Debt Securities, the Purchase Agreement or any
other agreement, instrument or other document executed or delivered in
connection herewith or therewith.

 

(l)          Nothing in this Agreement shall be construed to subject Agent or
any Purchaser to liability as a partner in any Debtor or any of its direct or
indirect subsidiaries that is a partnership or as a member in any Debtor or any
of its direct or indirect subsidiaries that is a limited liability company, nor
shall Agent or any Purchaser be deemed to have assumed any obligations under any
partnership agreement or limited liability company agreement, as applicable, of
any such Debtor or any of its direct or indirect subsidiaries or otherwise,
unless and until the Agent or any such Purchaser exercises its right to be
substituted for such Debtor as a partner or member, as applicable, pursuant
hereto.

 

(m)          To the extent that the grant of the security interest in the
Collateral and the enforcement of the terms hereof require the consent, approval
or action of any partner or member, as applicable, of any Debtor or any direct
or indirect subsidiary of any Debtor or compliance with any provisions of any of
the Organizational Documents, the Debtors hereby grant such consent and approval
and waive any such noncompliance with the terms of said documents.

 

[SIGNATURE PAGE FOLLOWS]

 

23

 

 

EXHIBIT 10.3

 

IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed on the day and year first above written.

 

  MELA SCIENCES, INC.         By:       Michael R. Stewart     Chief Executive
Officer         agent:       BROADFIN CAPITAL, LLC         By:       Name:

 

 

 

 

ANNEX A

to

SECURITY

AGREEMENT

 

FORM OF ADDITIONAL DEBTOR JOINDER

 

to that certain Security Agreement dated as of June 22, 2015 made by MELA
Sciences, Inc. (the “Company”) and its subsidiaries party thereto from time to
time, as Debtors, to and in favor of the Agent identified therein (the “Security
Agreement”), relating to the Company’s 2.25% Senior Secured Convertible
Debentures due June 22, 2020 and 9% Senior Secured Notes

 

Reference is made to the Security Agreement as defined above; capitalized terms
used herein and not otherwise defined herein shall have the meanings given to
such terms in, or by reference in, the Security Agreement.

 

The undersigned hereby agrees that upon delivery of this Additional Debtor
Joinder to the Agent referred to above, the undersigned shall (a) be an
Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the same
extent as if the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth therein as of the date
of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE
AGENT, FOR THE RATABLE BENEFIT OF THE PURCHASERS, A SECURITY INTEREST IN THE
COLLATERAL AS MORE FULLY SET FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES
AND AGREES TO THE WAIVER OF JURY TRIAL PROVISIONS SET FORTH THEREIN.

 

Attached hereto are supplemental and/or replacement Schedules to the Security
Agreement, as applicable.

 

The undersigned shall deliver an executed copy of this Joinder to the Agent, and
the Agent may rely on the matters set forth herein on or after the date hereof.
This Joinder shall not be modified, amended or terminated without the prior
written consent of the Agent.

 

 

 

 

IN WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
the name and on behalf of the undersigned.

 

  [INSERT NAMES OF ADDITIONAL DEBTORS]         By:       Name:     Title:      
  Dated:  ______ __, 20__