EXHIBIT 10.2
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of May 3, 2011, is made and given by AXOGEN
CORPORATION, a Delaware corporation (the “Grantor”), to LECTEC CORPORATION, a
Minnesota corporation, as collateral agent (in such capacity, the “Agent”) for
the Investors (as defined below) and as an Investor (the Agent and the Investors
being collectively referred to as the “Secured Parties”).
RECITALS
A. The Grantor will or may become, or is now, indebted to those parties listed
on Exhibit A hereto (each, an “Investor” and collectively, the “Investors”)
under the certain Subordinated Secured Convertible Promissory Note dated as of
May 3, 2011 in the original principal amount of $500,000 and those additional
Subordinated Secured Convertible Promissory Notes in such amounts and dated as
provided in Exhibit A, as such Exhibit A may be amended from time to time
(collectively, the “Notes”).
B. The Secured Parties have required the Grantor to execute this Security
Agreement and the Grantor has agreed to do so.
C. The Grantor finds it advantageous, desirable and in its best interests to
comply with the requirement that it execute and deliver this Security Agreement
to the Secured Parties.
NOW, THEREFORE, in consideration of the premises and in order to induce the
Agent and the other Secured Parties to extend credit accommodations to the
Grantor, the Grantor hereby agrees with the Agent for the Secured Parties’
benefit as follows:
Section 1. Defined Terms.
1(a) As used in this Agreement, the following terms shall have the meanings
indicated:
“Account” means a right to payment of a monetary obligation, whether or not
earned by performance, (i) for property that has been or is to be sold, leased,
licensed, assigned, or otherwise disposed of, (ii) for services rendered or to
be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a
secondary obligation incurred or to be incurred, (v) for energy provided or to
be provided, (vi) for the use or hire of a vessel under a charter or other
contract, (vii) arising out of the use of a credit or charge card or information
contained on or for use with the card, or (viii) as winnings in a lottery or
other game of chance operated, sponsored, licensed or authorized by a State or
governmental unit of a State, or person licensed or authorized to operate the
game by a State or governmental unit of a State. The term includes health-care
insurance receivables.
“Account Debtor” shall mean a Person who is obligated on or under any Account,
Chattel Paper, Instrument or General Intangible.

 

 

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“Chattel Paper” shall mean a record or records that evidence both a monetary
obligation and a security interest in specific goods, a security interest in
specific goods and software used in the goods, a security interest in specific
goods and license of software used in the goods, a lease of specific goods, or a
lease of specific goods and license of software used in the goods.
“Collateral” shall mean all property and rights in property now owned or
hereafter at any time acquired by the Grantor in or upon which a Security
Interest is granted to the Secured Parties by the Grantor under this Agreement.
“Current Loans” shall mean the indebtedness pursuant to (i) that certain
Convertible Promissory Note and Warrant Purchase Agreement, dated June 11, 2010,
as amended to date and (ii) the Existing Loan and Security Agreement.
“Deposit Account” shall mean any demand, time, savings, passbook or similar
account maintained with a bank.
“Document” shall mean a document of title or a warehouse receipt.
“Equipment” shall mean all machinery, equipment, motor vehicles, furniture,
furnishings and fixtures, including all accessions, accessories and attachments
thereto, and any guaranties, warranties, indemnities and other agreements of
manufacturers, vendors and others with respect to such Equipment.
“Event of Default” shall have the meaning given to such term in Section 18
hereof.
“Existing Loan and Security Agreement” shall mean collectively that certain Loan
and Security Agreement dated as of April 21, 2008, as amended, by and among
Oxford Finance LLC, a Delaware limited liability company (as successor in
interest to Oxford Finance Corporation, a Delaware corporation) (“Oxford”), as
agent and as a lender, and ATEL Ventures, Inc., as a lender and the “Loan
Documents” as defined therein.
“Financing Statement” shall have the meaning given to such term in Section 4
hereof.
“Fixtures” shall mean goods that have become so related to particular real
property that an interest in them arises under real property law.
“General Intangibles” shall mean any personal property (other than goods,
Accounts, Chattel Paper, Deposit Accounts, Documents, Instruments, Investment
Property, Letter of Credit Rights and money) including things in action,
contract rights, payment intangibles, software, corporate and other business
records, inventions, designs, patents, patent applications, service marks,
trademarks, tradenames, trade secrets, internet domain names, engineering
drawings, good will, registrations, copyrights, licenses, franchises, customer
lists, tax refund claims, royalties, licensing and product rights, rights to the
retrieval from third parties of electronically processed and recorded data and
all rights to payment resulting from an order of any court.

 

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“Instrument” shall mean a negotiable instrument or any other writing which
evidences a right to the payment of a monetary obligation and is not itself a
security agreement or lease and is of a type which is transferred in the
ordinary course of business by delivery with any necessary endorsement or
assignment.
“Inventory” shall mean goods, other than farm products, which are leased by a
person as lessor, are held by a person for sale or lease or to be furnished
under a contract of service, are furnished by a person under a contract of
service, or consist of raw materials, work in process, or materials used or
consumed in a business or incorporated or consumed in the production of any of
the foregoing and supplies, in each case wherever the same shall be located,
whether in transit, on consignment, in retail outlets, warehouses, terminals or
otherwise, and all property the sale, lease or other disposition of which has
given rise to an Account and which has been returned to the Grantor or
repossessed by the Grantor or stopped in transit.
“Investment Property” shall mean a security, whether certificated or
uncertificated, a security entitlement, a securities account and all financial
assets therein, a commodity contract or a commodity account.
“Letter of Credit Right” shall mean a right to payment or performance under a
letter of credit, whether or not the beneficiary has demanded or is at the time
entitled to demand payment or performance.
“Lien” shall mean any security interest, mortgage, pledge, lien, charge,
encumbrance, title retention agreement or analogous instrument or device
(including the interest of the lessors under capitalized leases), in, of or on
any assets or properties of the Person referred to.
“Notes” shall have the meaning indicated in Recital A.
“Obligations” shall mean (a) all principal of, and interest on, the Notes and
any extension, renewal or replacement thereof, (b) all liabilities of the
Grantor under this Agreement, and (c) in all of the foregoing cases whether due
or to become due, and whether now existing or hereafter arising or incurred.

 

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“Permitted Lien” shall mean: (a) any Liens in respect of the notes issued in
connection with that certain Convertible Promissory Note and Warrant Purchase
Agreement, dated June 11, 2010, as amended to date; (b) first priority liens in
favor of Oxford , as agent pursuant to the Existing Loan and Security Agreement;
(c) Liens for taxes, fees, assessments or other governmental charges or levies,
either not delinquent or being contested in good faith by appropriate
proceedings; (d) Liens (i) upon or in any Equipment acquired or held by Grantor
to secure the purchase price of such Equipment or indebtedness incurred solely
for the purpose of financing the acquisition of such Equipment or (ii) existing
on such Equipment at the time of its acquisition, provided that the Lien is
confined solely to the Equipment so acquired, improvements thereon and the
Proceeds (as defined in the UCC) of such Equipment; (e) leases or subleases and
licenses or sublicenses granted to others in the ordinary course of Grantor’s
business if such are otherwise permitted under this Security Agreement and do
not interfere in any material respect with the business of Grantor; (f) any
right, title or interest of a licensor under a license provided that such
license or sublicense does not prohibit the grant of the security interest
granted hereunder; (g) Liens arising from judgments, decrees or attachments
which do not constitute an Event of Default hereunder; (h) easements,
reservations, rights-of-way, restrictions, minor defects or irregularities in
title and other similar Liens affecting real property not interfering in any
material respect with the ordinary conduct of the business of Grantor; (i) Liens
in favor of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods; (j) Liens
arising solely by virtue of any statutory or common law provision relating to
banker’s liens, rights of setoff or similar rights and remedies as to deposit
accounts or other funds maintained with a creditor depository institution;
(k) Liens on equipment leased by Grantor pursuant to an operating lease in the
ordinary course of Grantor’s business (including proceeds thereof and accessions
thereto), all incurred solely for the purpose of financing the lease of such
equipment (including Liens arising from UCC financing statements regarding such
leases); (l) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s,
landlord’s liens or other like Liens arising in the ordinary course of business
which are not overdue for a period of more than 30 days or which are being
contested in good faith by appropriate proceedings and for which appropriate
reserves have been made therefor; (m) pledges or deposits in connection with
workers’ compensation, unemployment insurance and other social security
legislation and deposits securing liability to insurance carriers under
insurance or self-insurance arrangements; (n) deposits to secure the performance
of tenders, bids or leases, trade contracts (other than for borrowed money),
statutory obligations, surety, stay and appeal bonds, performance and return of
money bonds, government contracts and other obligations of a like nature; and
(o) any Lien approved in advance in writing by the Requisite Investors (as
defined in the Notes).
“Person” shall mean any individual, corporation, partnership, limited
partnership, limited liability company, joint venture, firm, association, trust,
unincorporated organization, government or governmental agency or political
subdivision or any other entity, whether acting in an individual, fiduciary or
other capacity.
“Required Investors” shall mean Investors holding the higher of (i) 66 2/3% of
the aggregate outstanding principal amount of the Notes and (ii) the percentage
required in the Note Purchase Agreement to be entered into by the Investors with
the Grantor upon execution of such agreement.

 

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“Security Interest” shall have the meaning given such term in Section 2 hereof.
1(b) All other terms used in this Agreement which are not specifically defined
herein shall have the meaning assigned to such terms in Article 9 of the Uniform
Commercial Code as in effect in the State of Delaware.
1(c) Unless the context of this Agreement otherwise clearly requires, references
to the plural include the singular, the singular, the plural and “or” has the
inclusive meaning represented by the phrase “and/or.” The words “include,”
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation.” The words “hereof,” “herein,” “hereunder” and similar terms in this
Agreement refer to this Agreement as a whole and not to any particular provision
of this Agreement. References to Sections are references to Sections in this
Security Agreement unless otherwise provided.
Section 2. Grant of Security Interest. As security for the payment and
performance of all of the Obligations, the Grantor hereby grants to the Agent on
behalf of and for the benefit of the Secured Parties a security interest (the
“Security Interest”) in all of the Grantor’s right, title, and interest in and
to the following, whether now or hereafter owned, existing, arising or acquired
and wherever located:
2(a) All Accounts.
2(b) All Chattel Paper.
2(c) All Deposit Accounts.
2(d) All Documents.
2(e) All Equipment.
2(f) All Fixtures.
2(g) All General Intangibles.
2(h) All Instruments.
2(i) All Inventory.
2(j) All Investment Property.
2(k) All Letter of Credit Rights.
2(l) To the extent not otherwise included in the foregoing, all other rights to
the payment of money, including rents and other sums payable to the Grantor
under leases, rental agreements and other Chattel Paper; all books,
correspondence, credit files, records, invoices, bills of lading, and other
documents relating to any of the foregoing, including, without limitation, all
tapes, cards, disks, computer software, computer runs, and other papers and
documents in the possession or control of the Grantor; all rights in, to and
under all policies insuring the life of any officer, director, stockholder or
employee of the Grantor, the proceeds of which are payable to the Grantor; all
accessions and additions to, parts and appurtenances of, substitutions for and
replacements of any of the foregoing; and all proceeds (including insurance
proceeds) and products thereof.

 

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Section 3. Grantor Remains Liable. Anything herein to the contrary
notwithstanding, (a) the Grantor shall remain liable under the Accounts, Chattel
Paper, General Intangibles and other items included in the Collateral to the
extent set forth therein to perform all of its duties and obligations thereunder
to the same extent as if this Agreement had not been executed, (b) the exercise
by the Agent of any of its rights hereunder shall not release the Grantor from
any of its duties or obligations under the Accounts or any other items included
in the Collateral, and (c) the Secured Parties and the Agent shall have no
obligation or liability under Accounts, Chattel Paper, General Intangibles and
other items included in the Collateral by reason of this Agreement, nor shall
the Secured Parties or the Agent be obligated to perform any of the obligations
or duties of the Grantor thereunder or to take any action to collect or enforce
any claim for payment assigned hereunder.
Section 4. Title to Collateral. The Grantor has (or will have at the time it
acquires rights in Collateral hereafter acquired or arising) and will maintain
so long as the Security Interest may remain outstanding, title to each item of
Collateral (including the proceeds and products thereof), free and clear of all
Liens except the Security Interest and Permitted Liens. The Grantor will defend
the Collateral against all material claims or demands of all Persons (other than
the Agent) claiming the Collateral or any interest therein. Except as listed on
Schedule 4, as of the date of execution of this Security Agreement, no effective
financing statement or other similar document used to perfect and preserve a
security interest under the laws of any jurisdiction (a “Financing Statement”)
covering all or any part of the Collateral is on file in any recording office,
except such as may have been filed in favor of the Agent relating to this
Agreement.
Section 5. Disposition of Collateral. The Grantor will not sell, lease or
otherwise dispose of, or discount or factor with or without recourse, any
Collateral, except for sales of items of Inventory in the ordinary course of
business and will not exclusively license all or substantially all of its
intellectual property rights.
Section 6. Names, Offices, Locations, Jurisdiction of Organization. The
Grantor’s legal name (as set forth in its constituent documents filed with the
appropriate governmental official or agency) is as set forth in the opening
paragraph hereof. The jurisdiction of organization of the Grantor is the state
of Delaware, and the organizational number of the Grantor is set forth on the
signature page of this Agreement. The Grantor will from time to time at the
request of the Agent provide the Secured Parties with current good standing
certificates and/or state-certified constituent documents from the appropriate
governmental officials. The chief place of business and chief executive office
of Grantor are located at its address set forth on the signature page hereof.
The Grantor will not locate or relocate any item of Collateral into any
jurisdiction in which an additional Financing Statement would be required to be
filed to maintain the Agent’s perfected security interest in such Collateral.
The Grantor will not change its name, the location of its chief place of
business and chief executive office or its corporate structure (including
without limitation, its jurisdiction of organization) unless the Agent has been
given at least 30 days prior written notice thereof and the Grantor has executed
and delivered to the Agent such Financing Statements and other instruments
required or appropriate to continue the perfection of the Security Interest.

 

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Section 7. Rights to Payment. Except as the Grantor may otherwise advise the
Agent in writing, each Account, Chattel Paper, Document, General Intangible and
Instrument constituting or evidencing Collateral is (or, in the case of all
future Collateral, will be when arising or issued) the valid, genuine and
legally enforceable obligation of the Account Debtor or other obligor named
therein or in the Grantor’s records pertaining thereto as being obligated to pay
or perform such obligation. Without the Agent’s prior written consent, the
Grantor will not agree to any modifications or amendments increasing the amounts
owed under the Current Loans. The Grantor will perform and comply in all
material respects with all its obligations under any items included in the
Collateral and exercise promptly and diligently its rights thereunder.
Section 8. Further Assurances; Attorney-in-Fact.
8(a) The Grantor agrees that from time to time, at its expense, it will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or that the Agent may reasonably request, in order
to perfect and protect the Security Interest granted or purported to be granted
hereby or to enable the Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral (but any failure to request or assure
that the Grantor execute and deliver such instrument or documents or to take
such action shall not affect or impair the validity, sufficiency or
enforceability of this Agreement and the Security Interest, regardless of
whether any such item was or was not executed and delivered or action taken in a
similar context or on a prior occasion). Without limiting the generality of the
foregoing, the Grantor will, promptly and from time to time at the request of
the Agent: (i) execute and file such Financing Statements or continuation
statements in respect thereof, or amendments thereto, and such other instruments
or notices (including fixture filings with any necessary legal descriptions as
to any goods included in the Collateral which the Agent determines might be
deemed to be fixtures, and instruments and notices with respect to vehicle
titles), as may be necessary or desirable, or as the Agent may request, in order
to perfect, preserve, and enhance the Security Interest granted or purported to
be granted hereby; (ii) obtain from any bailee holding any item of Collateral an
acknowledgement, in form satisfactory to the Agent that such bailee holds such
collateral for the benefit of the Agent; (iii) obtain from any securities
intermediary, or other party holding any item of Collateral, control agreements
in form satisfactory to the Agent; (iv) and deliver and pledge to the Agent, all
Instruments and Documents, duly indorsed or accompanied by duly executed
instruments of transfer or assignment, with full recourse to the Grantor, all in
form and substance satisfactory to the Agent; and (v) obtain waivers, in form
satisfactory to the Agent, of any claim to any Collateral from any landlords or
mortgagees of any property where any Inventory or Equipment is located.

 

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8(b) The Grantor hereby authorizes the Agent to file one or more Financing
Statements or continuation statements in respect thereof, and amendments
thereto, relating to all or any part of the Collateral without the signature of
the Grantor where permitted by law. The Grantor irrevocably waives any right to
notice of any such filing. A photocopy or other reproduction of this Agreement
or any Financing Statement covering the Collateral or any part thereof shall be
sufficient as a Financing Statement where permitted by law.
8(c) The Grantor will furnish to the Agent from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Agent may reasonably request,
all in reasonable detail and in form and substance reasonably satisfactory to
the Agent.
8(d) In furtherance, and not in limitation, of the other rights, powers and
remedies granted to the Agent in this Agreement, the Grantor hereby appoints the
Agent the Grantor’s attorney-in-fact, with full authority in the place and stead
of Grantor and in the name of Grantor or otherwise, from time to time in the
Agent’s good faith discretion, to take any action (including the right to
collect on any Collateral) and to execute any instrument that the Agent may
reasonably believe is necessary or advisable to accomplish the purposes of this
Agreement, in a manner consistent with the terms hereof.
Section 9. Taxes and Claims. The Grantor will promptly pay all taxes and other
governmental charges levied or assessed upon or against any Collateral or upon
or against the creation, perfection or continuance of the Security Interest, as
well as all other claims of any kind (including claims for labor, material and
supplies) against or with respect to the Collateral, except to the extent
(a) such taxes, charges or claims are being contested in good faith by
appropriate proceedings, (b) such proceedings do not involve any material danger
of the sale, forfeiture or loss of any of the Collateral or any interest therein
and (c) such taxes, charges or claims are adequately reserved against on the
Grantor’s books in accordance with generally accepted accounting principles.
Section 10. Books and Records. The Grantor will keep and maintain at its own
cost and expense satisfactory and complete records of the Collateral, including
a record of all payments received and credits granted with respect to all
Accounts, Chattel Paper and other items included in the Collateral.
Section 11. Inspection, Reports, Verifications. The Grantor will at all
reasonable times permit the Agent or its representatives to examine or inspect
any Collateral, any evidence of Collateral and the Grantor’s books and records
concerning the Collateral, wherever located. The Grantor will from time to time
when requested by the Agent furnish to the Agent a report on its Accounts,
Chattel Paper, General Intangibles and Instruments, naming the Account Debtors
or other obligors thereon, the amount due and the aging thereof. The Agent or
its designee is authorized to contact Account Debtors and other Persons
obligated on any such Collateral from time to time to verify the existence,
amount and/or terms of such Collateral.
Section 12. Notice of Loss. The Grantor will promptly notify the Agent of any
loss of or material damage to any material item of Collateral or of any
substantial adverse change, known to Grantor, in any material item of Collateral
or the prospect of payment or performance thereof.

 

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Section 13. Insurance. The Grantor has the insurance policies described in
Exhibit B in place and shall provide that each such policy shall not be canceled
or allowed to lapse unless at least 30 days prior written notice is given to the
Agent.
Section 14. Lawful Use; Fair Labor Standards Act. The Grantor will use and keep
the Collateral, and will require that others use and keep the Collateral, only
for lawful purposes, without violation of any federal, state or local law,
statute or ordinance. All Inventory of the Grantor as of the date of this
Agreement that was produced by the Grantor or with respect to which the Grantor
performed any manufacturing or assembly process was produced by the Grantor (or
such manufacturing or assembly process was conducted) in compliance in all
material respects with all requirements of the Fair Labor Standards Act, and all
Inventory produced, manufactured or assembled by the Grantor after the date of
this Agreement will be so produced, manufactured or assembled, as the case may
be.
Section 15. Action by the Agent. If the Grantor at any time fails to perform or
observe any of the foregoing agreements, the Agent shall have (and the Grantor
hereby grants to the Agent) the right, power and authority (but not the duty) to
perform or observe such agreement on behalf and in the name, place and stead of
the Grantor (or, at the Agent’s option, in the Agent’s name) and to take any and
all other actions which the Agent may reasonably deem necessary to cure or
correct such failure (including, without limitation, the payment of taxes, the
satisfaction of Liens, the procurement and maintenance of insurance, the
execution of assignments, security agreements and Financing Statements, and the
indorsement of instruments); and the Grantor shall thereupon pay to the Agent on
demand the amount of all monies expended and all costs and expenses (including
reasonable attorneys’ fees and legal expenses) incurred by the Agent in
connection with or as a result of the performance or observance of such
agreements or the taking of such action by the Agent, together with interest
thereon from the date expended or incurred at the highest lawful rate then
applicable to any of the Obligations, and all such monies expended, costs and
expenses and interest thereon shall be part of the Obligations secured by the
Security Interest.
Section 16. Insurance Claims. As additional security for the payment and
performance of the Obligations, the Grantor hereby assigns to the Agent any and
all monies (including proceeds of insurance and refunds of unearned premiums)
due or to become due under, and all other rights of the Grantor with respect to,
any and all policies of insurance now or at any time hereafter covering the
Collateral or any evidence thereof or any business records or valuable papers
pertaining thereto. At any time, whether before or after the occurrence of any
Event of Default, the Agent may (but need not), in the Agent’s name or in
Grantor’s name, execute and deliver proofs of claim, receive all such monies,
indorse checks and other instruments representing payment of such monies, and
adjust, litigate, compromise or release any claim against the issuer of any such
policy. Notwithstanding any of the foregoing, so long as no Event of Default
exists the Grantor shall be entitled to all insurance proceeds with respect to
Equipment or Inventory provided that such proceeds are applied to the cost of
replacement Equipment or Inventory.

 

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Section 17. The Agent’s Duties. The powers conferred on the Agent hereunder are
solely to protect its and the Secured Parties’ interest in the Collateral and
shall not impose any duty upon it to exercise any such powers. The Agent shall
be deemed to have exercised reasonable care in the safekeeping of any Collateral
in its possession if such Collateral is accorded treatment substantially equal
to the safekeeping which the Agent accords its own property of like kind. Except
for the safekeeping of any Collateral in its possession and the accounting for
monies and for other properties actually received by it hereunder, the Agent
shall have no duty, as to any Collateral, as to ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not the Agent has or is deemed to
have knowledge of such matters, or as to the taking of any necessary steps to
preserve rights against any Persons or any other rights pertaining to any
Collateral. The Agent will take action in the nature of exchanges, conversions,
redemptions, tenders and the like requested in writing by the Grantor with
respect to the Collateral in the Agent’s possession if the Agent in its
reasonable judgment determines that such action will not impair the Security
Interest or the value of the Collateral, but a failure of the Agent to comply
with any such request shall not of itself be deemed a failure to exercise
reasonable care with respect to the taking of any necessary steps to preserve
rights against any Persons or any other rights pertaining to any Collateral.
Section 18. Default. Each of the following occurrences shall constitute an Event
of Default under this Agreement: (a) the failure of the Grantor to pay when due
any of the Obligations; (b) the failure of the Grantor to perform any agreement
of the Grantor contained herein, in the Notes or the Current Loans; (c) any
statement, representation or warranty of the Grantor made herein or at any time
furnished to any Secured Party is untrue in any respect as of the date made;
(d) the entry of any final nonappealable judgment against the Grantor in excess
of one hundred thousand dollars ($100,000); (e) the Grantor becomes insolvent or
is generally not paying its debts as they become due; (f) the appointment of or
assignment to a custodian, as that term is defined in the United States
Bankruptcy Code, for any property of the Grantor, or encumbrance, levy, seizure
or attachment of any portion of the Collateral; (g) the commencement of any
proceeding or the filing of a petition by or against the Grantor under the
provisions of the United States Bankruptcy Code for liquidation, reorganization
or adjustment of debts or under any insolvency law or other statute or law
providing for the modification or adjustment of the rights of creditors, and an
order for relief is entered or such proceeding shall not be dismissed or
discharged within 90 days of commencement; or (h) dissolution or transfer of a
substantial part of the property of the Grantor.
Section 19. Remedies on Default. Upon the occurrence of an Event of Default and
at any time during the continuance thereof:
19(a) The Agent may exercise and enforce any and all rights and remedies
available upon default to a secured party under Article 9 of the Uniform
Commercial Code as in effect in the State of Delaware.

 

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19(b) The Agent shall have the right to enter upon and into and take possession
of all or such part or parts of the properties of the Grantor, including lands,
plants, buildings, Equipment, Inventory and other property as may be necessary
or appropriate in the judgment of the Agent to permit or enable the Agent to
manufacture, produce, process, store or sell or complete the manufacture,
production, processing, storing or sale of all or any part of the Collateral, as
the Agent may elect, and to use and operate said properties for said purposes
and for such length of time as the Agent may deem necessary or appropriate for
said purposes without the payment of any compensation to the Grantor therefor.
The Agent may require the Grantor to, and the Grantor hereby agrees that it
will, at its expense and upon request of the Agent forthwith, assemble all or
part of the Collateral as directed by the Agent and make it available to the
Agent at a place or places to be designated by the Agent.
19(c) Any disposition of Collateral may be in one or more parcels at public or
private sale, at any of the Agent’s offices or elsewhere, for cash, on credit,
or for future delivery, and upon such other terms as the Agent may reasonably
believe are commercially reasonable. The Agent shall not be obligated to dispose
of Collateral regardless of notice of sale having been given, and the Agent may
adjourn any public or private sale from time to time by announcement made at the
time and place fixed therefor, and such disposition may, without further notice,
be made at the time and place to which it was so adjourned.
19(d) The Agent is hereby granted a license or other right to use, without
charge, all of the Grantor’s property, including, without limitation, all of the
Grantor’s labels, trademarks, copyrights, patents and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale and selling any Collateral, and the
Grantor’s rights under all licenses and all franchise agreements shall inure to
the Agent’s benefit.
19(e) If notice to the Grantor of any intended disposition of Collateral or any
other intended action is required by law in a particular instance, such notice
shall be deemed commercially reasonable if given in the manner specified for the
giving of notice in Section 24 hereof at least ten calendar days prior to the
date of intended disposition or other action, and the Agent may exercise or
enforce any and all other rights or remedies available by law or agreement
against the Collateral, against the Grantor, or against any other Person or
property. The Agent (i) may dispose of the Collateral in its then present
condition or following such preparation and processing as the Agent deems
commercially reasonable, (ii) shall have no duty to prepare or process the
Collateral prior to sale, (iii) may disclaim warranties of title, possession,
quiet enjoyment and the like, and (iv) may comply with any applicable state or
federal law requirements in connection with a disposition of the Collateral and
none of the foregoing actions shall be deemed to adversely affect the commercial
reasonableness of the disposition of the Collateral.

 

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Section 20. Remedies as to Certain Rights to Payment. Upon the occurrence of an
Event of Default and at any time thereafter the Agent may notify any Account
Debtor or other Person obligated on any Accounts or other Collateral that the
same have been assigned or transferred to the Agent and that the same should be
performed as requested by, or paid directly to, the Agent, as the case may be.
The Grantor shall join in giving such notice, if the Agent so requests. The
Agent may, in the Agent’s name or in the Grantor’s name, demand, sue for,
collect or receive any money or property at any time payable or receivable on
account of, or securing, any such Collateral or grant any extension to, make any
compromise or settlement with or otherwise agree to waive, modify, amend or
change the obligation of any such Account Debtor or other Person. If any
payments on any such Collateral are received by the Grantor after an Event of
Default has occurred, such payments shall be held in trust by the Grantor as the
property of the Agent and shall not be commingled with any funds or property of
the Grantor and shall be forthwith remitted to the Agent for application on the
Obligations.
Section 21. Application of Proceeds. All cash proceeds received by the Agent in
respect of any sale of, collection from, or other realization upon all or any
part of the Collateral may, in the discretion of the Agent, be held by the Agent
as collateral for, or then or at any time thereafter be applied in whole or in
part by the Agent against, all or any part of the Obligations (including,
without limitation, any expenses of the Agent payable pursuant to Section 22
hereof).
Section 22. Costs and Expenses; Indemnity. The Grantor will pay or reimburse the
Agent on demand for all reasonable documented out-of-pocket expenses (including
in each case all filing and recording fees and taxes and all reasonable fees and
expenses of counsel and of any experts and agents) incurred by the Agent in
connection with the satisfaction, foreclosure or enforcement of the Security
Interest and this Agreement, and all such costs and expenses shall be part of
the Obligations secured by the Security Interest. The Grantor shall indemnify
and hold the Agent harmless from and against any and all claims, losses and
liabilities (including reasonable attorneys’ fees) growing out of or resulting
from this Agreement and the Security Interest hereby created (including
enforcement of this Agreement) or the Agent’s actions pursuant hereto, except
claims, losses or liabilities resulting from the Agent’s gross negligence or
willful misconduct as determined by a final judgment of a court of competent
jurisdiction. Any liability of the Grantor to indemnify and hold the Agent
harmless pursuant to the preceding sentence shall be part of the Obligations
secured by the Security Interest. The obligations of the Grantor under this
Section shall survive any termination of this Agreement.
Section 23. Waivers; Remedies; Marshalling. This Agreement can be waived,
modified, amended, terminated or discharged, and the Security Interest can be
released, only explicitly in a writing signed by the Agent, Required Investors
and the Grantor. A waiver so signed shall be effective only in the specific
instance and for the specific purpose given. Mere delay or failure to act shall
not preclude the exercise or enforcement of any rights and remedies available to
the Agent. All rights and remedies of the Agent shall be cumulative and may be
exercised singly in any order or sequence, or concurrently, at the Agent’s
option, and the exercise or enforcement of any such right or remedy shall
neither be a condition to nor bar the exercise or enforcement of any other. The
Grantor hereby waives all requirements of law, if any, relating to the
marshalling of assets which would be applicable in connection with the
enforcement by the Agent of its remedies hereunder, absent this waiver.
Section 24. Notices. Any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, facsimile transmission, overnight courier or United States mail
(postage prepaid) addressed to such party at the address specified on the
signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by facsimile transmission, from the first business
day after the date of sending if sent by overnight courier, or from four days
after the date of mailing if mailed.

 

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Section 25. Grantor Acknowledgments. The Grantor hereby acknowledges that (a) it
has been advised by counsel in the negotiation, execution and delivery of this
Agreement, (b) neither the Agent nor any Secured Party has a fiduciary
relationship to the Grantor, the relationship being solely that of debtor and
creditor, and (c) no joint venture exists between the Grantor and the Agent or
any Secured Party.
Section 26. Representations and Warranties. The Grantor hereby represents and
warrants to the Agent and the Secured Parties that:
26(a) The Grantor is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and has the
corporate power and authority and the legal right to own and operate its
properties and to conduct the business in which it is currently engaged.
26(b) The Grantor has the power and authority and the legal right to execute and
deliver, and to perform its obligations under, this Agreement and has taken all
necessary corporate action to authorize such execution, delivery and
performance.
26(c) This Agreement constitutes a legal, valid and binding obligation of the
Grantor enforceable in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors’ rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
26(d) The execution, delivery and performance of this Agreement will not
(i) violate any provision of any law, statute, rule or regulation or any order,
writ, judgment, injunction, decree, determination or award of any court,
governmental agency or arbitrator presently in effect having applicability to
the Grantor, (ii) violate or contravene any provision of the Certificate of
Incorporation or bylaws of the Grantor, or (iii) result in a breach of or
constitute a default under any indenture, loan or credit agreement or any other
agreement, lease or instrument to which the Grantor is a party or by which it or
any of its properties may be bound or result in the creation of any Lien
thereunder. The Grantor is not in default under or in violation of any such law,
statute, rule or regulation, order, writ, judgment, injunction, decree,
determination or award or any such indenture, loan or credit agreement or other
agreement, lease or instrument in any case in which the consequences of such
default or violation could have a material adverse effect on the business,
operations, properties, assets or condition (financial or otherwise) of the
Grantor.
26(e) Except for filings, recordings and registrations to perfect the Security
Interest, no order, consent, approval, license, authorization or validation of,
or filing, recording or registration with, or exemption by, any governmental or
public body or authority is required on the part of the Grantor to authorize, or
is required in connection with the execution, delivery and performance of, or
the legality, validity, binding effect or enforceability of, this Agreement.

 

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26(f) There are no actions, suits or proceedings pending or, to the knowledge of
the Grantor, threatened against or affecting the Grantor or any of its
properties before any court or arbitrator, or any governmental department,
board, agency or other instrumentality which, if determined adversely to the
Grantor, would have a material adverse effect on the business, operations,
property or condition (financial or otherwise) of the Grantor or on the ability
of the Grantor to perform its obligations hereunder.
Section 27. Continuing Security Interest. This Agreement shall (a) create a
continuing security interest in the Collateral and shall remain in full force
and effect until payment in full of the Obligations and the expiration of the
obligations, if any, of the Agent and the Secured Parties to extend credit
accommodations to the Grantor, (b) be binding upon the Grantor, its successors
and assigns, and (c) inure to the benefit of, and be enforceable by, the Agent
and its successors, transferees, and assigns.
Section 28. Termination of Security Interest. Upon payment in full of the
Obligations and the expiration of any obligation of the Agent and the Secured
Parties to extend credit accommodations to the Grantor, the Security Interest
granted hereby shall terminate. Upon any such termination, the Agent will return
to the Grantor such of the Collateral then in the possession of the Agent as
shall not have been sold or otherwise applied pursuant to the terms hereof and
execute and deliver to the Grantor such documents as the Grantor shall
reasonably request to evidence such termination. Any reversion or return of
Collateral upon termination of this Agreement and any instruments of transfer or
termination shall be at the expense of the Grantor and shall be without warranty
by, or recourse on, the Agent. As used in this Section, “Grantor” includes any
assigns of Grantor, any Person holding a subordinate security interest in any of
the Collateral or whoever else may be lawfully entitled to any part of the
Collateral.
Section 29. The Agent.
29(a) Each Investor hereby appoints LecTec Corporation as its contractual
representative (herein referred to as the “Agent”) hereunder, and each of the
Investors irrevocably authorizes the Agent to act as the contractual
representative of such Investor with the rights and duties expressly set forth
herein. The Agent agrees to act as such contractual representative upon the
express conditions in this Section 27. Notwithstanding the use of the defined
term “Agent,” it is expressly understood and agreed that the Agent shall not
have any fiduciary responsibilities to any Investor by reason of this Agreement
and that the Agent is merely acting as the contractual representative of the
Investors with only those duties as are expressly set forth in this Agreement.
In its capacity as the Investors’ contractual representative, the Agent (i) does
not hereby assume any fiduciary duties to any of the Investors, (ii) is a
“representative” of the Investors within the meaning of the term “secured party”
as defined in the Delaware Uniform Commercial Code and (iii) is acting as an
independent contractor, the rights and duties of which are limited to those
expressly set forth in this Agreement. Each of the Investors hereby agrees to
assert no claim against the Agent on any agency theory or any other theory of
liability for breach of fiduciary duty, all of which claims each Investor hereby
waives.

 

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29(b) The Agent shall have and may exercise such powers under this Agreement as
are specifically delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. The Agent shall have no implied
duties to the Investors and no obligation to the Investors to take any action
thereunder except any action specifically provided by this Agreement to be taken
by the Agent.
29(c) Neither the Agent nor any of its directors, officers, agents or employees
shall be liable to the Grantor or any Investor for any action taken or omitted
to be taken hereunder or in connection herewith except to the extent such action
or inaction is determined in a final non-appealable judgment by a court of
competent jurisdiction to have arisen from the gross negligence or willful
misconduct of the Agent or any its directors, officers, agents or employees, as
the case may be.
29(d) Neither the Agent nor any of its directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire into or verify
(a) any statement, warranty or representation made in connection with any Note
or any borrowing hereunder; (b) the performance or observance of any of the
covenants or agreements of under this Agreement and the Notes; (c) the existence
or possible existence of any Event of Default; (d) the validity, enforceability,
effectiveness, sufficiency or genuineness of any document or any other
instrument or writing furnished in connection therewith; (e) the value,
sufficiency, creation, perfection or priority of the Security Interest; or
(f) the financial condition of the Grantor.
29(e) The Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder in accordance with written instructions signed
by the Required Investors, and such instructions and any action taken or failure
to act pursuant thereto shall be binding on all of the Investors. The Investors
hereby acknowledge that the Agent shall be under no duty to take any
discretionary action permitted to be taken by it pursuant to the provisions of
this Agreement unless the Required Investors request in writing that it take
such action. The Agent shall be fully justified in failing or refusing to take
any action hereunder unless it is first indemnified to its satisfaction by the
Investors pro rata against any and all liability, cost and expense that it may
incur by reason of taking or continuing to take any such action.
29(f) The Agent may execute any of its duties as Agent hereunder by or through
employees, agents and attorneys-in-fact and shall not be answerable to the
Investors, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any employees, agents or
attorneys-in-fact selected by it with reasonable care. The Agent shall be
entitled to advice of counsel concerning the contractual arrangement between the
Agent and the Investors and all matters pertaining to the Agent’s duties
hereunder.
29(g) The Agent shall be entitled to rely upon any Note, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex, electronic mail
message, statement, paper or document it believes to be genuine and correct and
to have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.

 

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29(h) The Investors agree to reimburse and indemnify the Agent ratably in
proportion to their aggregate outstanding principal amount of the Notes (i) for
any amounts not reimbursed by the Grantor for which the Agent is entitled to
reimbursement by the Grantor under this Agreement, (ii) for any other expenses
incurred by the Agent on behalf of the Investors, in connection with the
preparation, execution, delivery, administration and enforcement of this
Agreement (including, without limitation, for any expenses incurred by the Agent
in connection with any dispute between the Agent and any Investor or between two
or more of the Investors) and (iii) for any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever that may be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of this
Agreement or any other document delivered in connection therewith or the
transactions contemplated thereby (including, without limitation, for any such
amounts incurred by or asserted against the Agent in connection with any dispute
between the Agent and any Investor or between two or more of the Investors), or
the enforcement of any of the terms of this Agreement, provided that no Investor
shall be liable for any of the foregoing to the extent any of the foregoing is
found in a final non-appealable judgment by a court of competent jurisdiction to
have resulted from the gross negligence or willful misconduct of the Agent. The
obligations of the Investors under this Section shall survive payment of the
Obligations and termination of this Agreement.
29(i) The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Event of Default hereunder unless the Agent has received
written notice from an Investor or the Grantor referring to this Agreement
describing such Event of Default and stating that such notice is a “notice of
default.” In the event that the Agent receives such a notice, the Agent shall
give prompt notice thereof to the Investors; provided that the Agent shall have
no duty to disclose, and shall not be liable for the failure to disclose, any
information relating to the Grantor that is communicated to or obtained by the
bank serving as Agent or any of its affiliates in any capacity.
29(j) In the event the Agent is a Investor, the Agent shall have the same rights
and powers hereunder with respect to its Note as any Investor and may exercise
the same as though it were not the Agent, and the term “Investor” or “Investors”
shall, at any time when the Agent is an Investor, unless the context otherwise
requires, include the Agent in its individual capacity. The Agent and its
affiliates may accept deposits from, lend money to and generally engage in any
kind of trust, debt, equity or other transaction, in addition to those
contemplated by this Agreement, with the Grantor in which the Grantor is not
restricted hereby from engaging with any other Person.
29(k) Each Investor acknowledges that it has, independently and without reliance
upon the Agent or any other Investor and based on the financial statements
prepared by the Grantor and such other documents and information as it has
deemed appropriate, made its own credit analysis and decision to extend credit
accommodations to the Grantor. Each Investor also acknowledges that it will,
independently and without reliance upon the Agent or any other Investor and
based on such documents and information as it deems appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement. Except for any notice expressly required to be furnished to the
Investors by the Agent hereunder, the Agent shall have no duty or responsibility
(either initially or on a continuing basis) to provide any Investor with any
notice, report, document, credit information or other information concerning the
affairs, financial condition or business of the Grantor or any of its affiliates
that may come into the possession of the Agent (whether or not in its respective
capacity as Agent) or any of their affiliates.

 

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29(l) Each Investor further acknowledges that it has had the opportunity to be
represented by legal counsel in connection with its execution of this Agreement,
that it has made its own evaluation of all applicable laws and regulations
relating to the transactions contemplated hereby and that the counsel to the
Agent represents only the Agent and not the Investors in connection with this
Agreement and the transactions contemplated hereby.
29(m) The Agent may resign at any time by giving written notice thereof to the
Investors and the Grantor, such resignation to be effective upon the appointment
of a successor Agent or, if no successor Agent has been appointed, forty-five
days after the retiring Agent gives notice of its intention to resign. Upon any
such resignation or removal, the Required Investors shall have the right to
appoint, on behalf of the Grantor and the Investors, a successor Agent. If no
successor Agent is so appointed by the Required Investors within thirty days
after the resigning Agent’s giving notice of its intention to resign, then the
resigning Agent may appoint, on behalf of the Grantor and the Investors, a
successor Agent. Notwithstanding the previous sentence, the Agent may at any
time without the consent of the Grantor or any Investor appoint any of its
affiliates that is a commercial bank as a successor Agent hereunder. If the
Agent has resigned or been removed and no successor Agent has been appointed,
the Investors may perform all the duties of the Agent hereunder and the Grantor
shall make all payments in respect of the Obligations to the applicable Investor
and for all other purposes shall deal directly with the Investors. No successor
Agent shall be deemed to be appointed hereunder until such successor Agent has
accepted the appointment. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
resigning or removed Agent. Upon the effectiveness of the resignation of the
Agent, the resigning Agent shall be discharged from its duties and obligations
hereunder. After the effectiveness of the resignation of an Agent, the
provisions of this Section 29 shall continue in effect for the benefit of such
Agent in respect of any actions taken or omitted to be taken by it while it was
acting as the Agent hereunder.
29(n) The Investors hereby empower and authorize the Agent to execute and
deliver to the Grantor on their behalf the collateral documents, all related
financing statements and any financing statements, agreements, documents or
instruments that are necessary or appropriate to effect the purposes of the
collateral documents.
29(o) The Investors hereby empower and authorize the Agent to execute and
deliver to the Grantor on their behalf any agreements, documents or instruments
that are necessary or appropriate to effect any releases of Collateral that the
Required Investors have approved in writing by the terms hereof or otherwise.

 

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Section 30. Governing Law and Construction. THE VALIDITY, CONSTRUCTION AND
ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
DELAWARE, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, EXCEPT
TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
MANDATORILY GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
DELAWARE. Whenever possible, each provision of this Agreement and any other
statement, instrument or transaction contemplated hereby or relating hereto
shall be interpreted in such manner as to be effective and valid under such
applicable law, but, if any provision of this Agreement or any other statement,
instrument or transaction contemplated hereby or relating hereto shall be held
to be prohibited or invalid under such applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement or any other statement, instrument or transaction contemplated hereby
or relating hereto.
Section 31. Consent to Jurisdiction. AT THE OPTION OF THE AGENT, THIS AGREEMENT
MAY BE ENFORCED IN ANY FEDERAL COURT OR DELAWARE STATE COURT; AND THE GRANTOR
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT
THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT.1 IN THE EVENT THE GRANTOR COMMENCES
ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT,
THE AGENT AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF
THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
Section 32. Waiver of Notice and Hearing. THE GRANTOR HEREBY WAIVES ALL RIGHTS
TO A JUDICIAL HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE AGENT OF ITS
RIGHTS TO POSSESSION OF THE COLLATERAL WITHOUT JUDICIAL PROCESS OR OF ITS RIGHTS
TO REPLEVY, ATTACH, OR LEVY UPON THE COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.
THE GRANTOR ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF ITS CHOICE WITH
RESPECT TO THIS PROVISION AND THIS AGREEMENT.
Section 33. Waiver of Jury Trial. EACH OF THE GRANTOR AND THE AGENT, BY ITS
ACCEPTANCE OF THIS AGREEMENT, IRREVOCABLY WAIVES 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.

 

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Section 34. Subordination. THE SECURITY INTEREST GRANTED HEREIN (AND ALL PAYMENT
AND ENFORCEMENT PROVISIONS HEREIN) IS SUBJECT TO THE SUBORDINATION AGREEMENT
(THE “SUBORDINATION AGREEMENT”) BY AND AMONG LECTEC CORPORATION, AXOGEN
CORPORATION, OXFORD FINANCE LLC (AS SUCCESSOR IN INTEREST TO OXFORD FINANCE
CORPORATION), IN ITS CAPACITY AS AGENT AND AS A LENDER AND ATEL VENTURES, INC.,
AS A LENDER, DATED AS OF MAY 3, 2011. IN THE EVENT OF ANY INCONSISTENCY BETWEEN
THIS AGREEMENT AND THE SUBORDINATION AGREEMENT, THE TERMS OF THE SUBORDINATION
AGREEMENT SHALL CONTROL.
Section 35. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.
Section 36. General. All representations and warranties contained in this
Agreement or in any other agreement between the Grantor and the Agent shall
survive the execution, delivery and performance of this Agreement and the
creation and payment of the Obligations. The Grantor waives notice of the
acceptance of this Agreement by the Agent. Captions in this Agreement are for
reference and convenience only and shall not affect the interpretation or
meaning of any provision of this Agreement.
Section 37. Additional Investors. The parties hereto agree that Exhibit A may be
amended from time to time to include additional Notes and additional Investor(s)
as agreed to by the Grantor and the Agent and as confirmed by the Grantor, the
Agent and such additional Investor(s) by the execution of a revised Exhibit A.
Upon such execution, such additional Investor(s) shall become parties to this
Security Agreement as if such Investor(s) had originally executed this
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the Grantor has caused this Security Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.

            AXOGEN CORPORATION
      /s/ Karen Zaderej       Karen Zaderej, CEO   

Address for Grantor:
13859 Progress Blvd.
Suite 100
Alachu, Florida 32615
Email: kzaderej@axogeninc.com
Address for the Agent:
LecTec Corporation
1407 South Kings Highway
Texarkana, Texas 75501
Email: ceo@lectec.com
Acknowledged and Agreed:
LECTEC CORPORATION,
as Agent and an Investor

     
/s/ Greg Freitag
 
Greg Freitag, CEO
   

[Signature Page to Security Agreement]

 

 

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EXHIBIT A
INVESTORS AND NOTES
Exhibit A to the Security Agreement dated as of May 3, 2011 (the “Security
Agreement”) made and given by Axogen Corporation, a Delaware corporation (the
“Grantor”), to LecTec Corporation, a Minnesota corporation, as collateral agent
(in such capacity, the “Agent”) for the Investors (as defined in the Security
Agreement), and as an Investor is hereby updated as follows:

                  Investor Name   Date of Note     Amount of Note  
LecTec Corporation
  May 3, 2011   $ 500,000    
LecTec Corporation
  May 31, 2011   $ 2,000,000  

Agreed to and accepted by the Agent and the Grantor as of May 3, 2011.

         
AXOGEN CORPORATION
      LECTEC CORPORATION
 
       
/s/ Karen Zaderej
      /s/ Greg Freitag
 
       
Karen Zaderej, CEO
      Greg Freitag, CEO

The undersigned agrees to become a party to the Security Agreement as an
Investor and to be bound by each and all of the terms of the Security Agreement,
in each case as if the undersigned had originally executed the Security
Agreement in such capacity.

 

 

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EXHIBIT B
INSURANCE POLICIES

                                          Policy   Carrier   Policy #     Period
    Amount     Deductible    
Workers Compensation
  CNA Insurance     2064583115       6/1/10 – 6/1/11     $ 1,000,000       0    
Auto Liability
  CNA Insurance     2091148732       6/1/10 – 6/1/11     $ 1,000,000     $ 1,000
   
General Liability
  CNA Insurance     2064583132       6/1/10 – 6/1/11     $ 1M/$2M     $ 1,000  
 
Umbrella
  CNA Insurance     2097171662       6/1/10 – 6/1/11     $ 4,000,000     $ 1,000
   
Property -
  CNA Insurance     2064583132       6/1/10 – 6/1/11     $ 132,000     $ 1,000  
Property -
  Landmark     LHD367761       6/1/10 – 6/1/11     $ 421,000     $ 1,000    
Product Liability
  CNA Healthpro     2097437066       6/1/10 – 6/1/11     $ 5,000,000     $
50,000    
Directors & Officers Employment Practices
  Carolina Casualty     6972644       6/1/10 – 6/1/11     $ 2,000,000     $
10,000    
Cargo
  Falvey / Lloyds   MC-2452       6/1/10 – 6/1/11     $ 50,000     $ 1,000  
 
          WC-2452                            
Mechanical Breakdown
  Travelers     BM214317B962       6/1/10 – 6/1/11     $ 2,281,021     $ 5,000  

 

 

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SCHEDULE 4
EFFECTIVE FINANCING STATEMENTS
1. Grantor has granted a first priority security interest in all of its assets
to Agent (as defined below) pursuant to (i) that certain Loan and Security
Agreement dated April 21, 2008, as amended to date, by and among Oxford Finance
Corporation, a Delaware corporation (“Oxford”), as collateral agent (“Agent”),
and the Lenders listed on Schedule 1.1 thereof and otherwise party hereto,
including without limitation, Oxford and ATEL Ventures, Inc. (the “Loan
Agreement”) and (ii) that certain Intellectual Property Security Agreement dated
January 7, 2010 by and among Oxford, as Agent for the Lenders listed on
Schedule 1.1 to the Loan Agreement, and Grantor.
2. Grantor has granted a third lien security interest in all of its assets
pursuant to the Secured Parties (as defined below) that certain Security
Agreement (the “Agreement”) dated June 11, 2010, as amended to date, by and
among Grantor and each of the signatories thereto (each a “Secured Party” and
collectively the “Secured Parties”).