SECURITY AGREEMENT
SECURITY AGREEMENT (this “
Agreement ”), dated as of May 15, 2009, by and among
Wellstar International Inc., a Nevada corporation (“
Parent ”), Trillennium Medical Imaging, Inc., an Ohio
corporation (collectively the “ Subsidiary ”)
(hereinafter the Parent and the Subsidiary shall collectively be
referred to as the “ Company ”) and the secured
parties signatory hereto and their respective endorsees,
transferees and assigns (collectively, the “ Secured
Party ”).
WITNESSETH:
WHEREAS, pursuant to a Securities Purchase
Agreement, dated the date hereof, between Parent and the Secured
Party (the “ Purchase Agreement ”), Parent has
agreed to issue to the Secured Party and the Secured Party has
agreed to purchase from Parent certain of Parent’s 13%
Callable Secured Convertible Notes, due three years from the date
of issue (the “ Notes ”), which are convertible
into shares of Company’s Common Stock, par value $.001 per
share (the “ Common Stock ”); and
WHEREAS, the Parent and the Subsidiary have
been, and are now, engaged in developing and licensing the use of
advanced thermal imaging technology in the consumer health care and
veterinary markets throughout the U.S. In the past, as
now, the Parent has provided financing for the Subsidiary, and the
Subsidiary has relied upon the Parent to provide such
financing. In addition, it is anticipated that, if the
Subsidiary executes and delivers this , the Parent will continue to
provide such financing to the Subsidiary, and that the proceeds of
the Purchase Agreement and Notes will be used, in
part, for the general working capital purposes of the Subsidiary;
and
WHEREAS, the Subsidiary constitutes all of the
subsidiaries of the Parent and it is in the best interest of the
Subsidiary as subsidiaries of the Parent and the indirect
beneficiaries of the Purchase Agreement and Notes, that the Secured
Party enter into the Purchase Agreement and purchase the Notes to
the Company; and
WHEREAS, in order to induce the Secured Party to
purchase the Notes, Company has agreed to execute and deliver to
the Secured Party this Agreement for the benefit of the Secured
Party and to grant to it a first priority security interest in
certain property of Company to secure the prompt payment,
performance and discharge in full of all of Company’s
obligations under the Notes and exercise and discharge in full of
Company’s obligations; and
WHEREAS, in light of the foregoing, the Company
expects to derive substantial benefit from the Purchase Agreement
and sale of the Notes and the transactions contemplated thereby
and, in furtherance thereof, has agreed to execute and deliver
this.
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 “
general intangibles ” and “ proceeds
”) shall have the respective meanings given such terms in
Article 9 of the UCC.
(a) “
Collateral ” means the collateral in which the Secured
Party is granted a security interest by this Agreement and which
shall include the following, whether presently owned or existing or
hereafter acquired or coming into existence, 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:
(i) All
Goods of the Company, including, without limitations, 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 the Company’s
businesses and all improvements thereto (collectively, the “
Equipment ”); and
(ii) All
Inventory of the Company; and
(iii) All
of the Company’s contract rights and general intangibles,
including, without limitation, all partnership interests, stock or
other securities, licenses, distribution and other agreements,
computer software development rights, leases, franchises, customer
lists, quality control procedures, grants and rights, goodwill,
trademarks, service marks, trade styles, trade names, patents,
patent applications, copyrights, deposit accounts, and income tax
refunds (collectively, the “ General Intangibles
”); and
(iv) All
Receivables of the Company including all insurance proceeds, and
rights to refunds or indemnification whatsoever owing, 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
Receivable, including any right of stoppage in transit;
and
(v) All
of the Company’s documents, instruments and chattel paper,
files, records, books of account, business papers, computer
programs and the products and proceeds of all of the foregoing
Collateral set forth in clauses (i)-(iv) above.
(b) “
Company ” shall mean, collectively, Company and all of
the subsidiaries of Company, a list of which is contained in
Schedule A , attached hereto.
(c) “
Obligations ” means all of the Company’s
obligations under this Agreement and the Notes, 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 decreased, 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 the
Secured Party as a preference, fraudulent transfer or otherwise as
such obligations may be amended, supplemented, converted, extended
or modified from time to time.
(d) “
UCC ” means the Uniform Commercial Code, as currently
in effect in the State of New York.
2.
Grant of Security Interest . As an inducement for
the Secured Party to purchase the Notes and to secure the complete
and timely payment, performance and discharge in full, as the case
may be, of all of the Obligations, the Company hereby,
unconditionally and irrevocably, pledges, grants and hypothecates
to the Secured Party, a continuing security interest in, a
continuing first lien upon, an unqualified right to possession and
disposition of and a right of set-off against, in each case to the
fullest extent permitted by law, all of the Company’s right,
title and interest of whatsoever kind and nature in and to the
Collateral (the “ Security Interest
”).
3.
Representations, Warranties, Covenants and Agreements of the
Company . The Company represents and warrants to,
and covenants and agrees with, the Secured Party as
follows:
(a) The
Company has the requisite corporate power and authority to enter
into this Agreement and otherwise to carry out its obligations
thereunder. The execution, delivery and performance by
the Company of this Agreement and the filings contemplated therein
have been duly authorized by all necessary action on the part of
the Company and no further action is required by the
Company. This Agreement constitutes a legal, valid and
binding obligation of the Company enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditor’s rights generally.
(b) The
Company represents and warrants that it has no place of business or
offices where its 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 A attached
hereto;
(c) The
Company is the sole owner of the Collateral (except for
non-exclusive licenses granted by the Company in the ordinary
course of business), free and clear of any liens, security
interests, encumbrances, rights or claims, and is fully authorized
to grant the Security Interest in and to pledge the
Collateral. 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 have been
filed in favor of the Secured Party pursuant to this Agreement)
covering or affecting any of
the Collateral. So long as this Agreement
shall be in effect, the Company shall not execute and shall not
knowingly permit to be on file in any such office or agency any
such financing statement or other document or instrument (except to
the extent filed or recorded in favor of the Secured Party pursuant
to the terms of this Agreement).
(d) No
part of the Collateral has been judged invalid or
unenforceable. No written claim has been received that
any Collateral or the Company’s use of any Collateral
violates the rights of any third party. There has been no adverse
decision to the Company’s claim of ownership rights in or
exclusive rights to use the Collateral in any jurisdiction or to
the Company’s right to keep and maintain such Collateral in
full force and effect, and there is no proceeding involving said
rights pending or, to the best knowledge of the Company, threatened
before any court, judicial body, administrative or regulatory
agency, arbitrator or other governmental authority.
(e) The
Company 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 A attached hereto and may not relocate such books
of account and records or tangible Collateral unless it delivers to
the Secured Party at least 30 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 and other necessary documents
have been filed and recorded and other steps have been taken to
perfect the Security Interest to create in favor of the Secured
Party valid, perfected and continuing first priority liens in the
Collateral.
(f) This
Agreement creates in favor of the Secured Party a valid security
interest in the Collateral securing the payment and performance of
the Obligations and, upon making the filings described in the
immediately following sentence, a perfected first priority security
interest in such Collateral. Except for the filing of
financing statements on Form-1 under the UCC with the jurisdictions
indicated on Schedule B , attached hereto, no authorization
or approval of or filing with or notice to any governmental
authority or regulatory body is required either for the grant
by the Company of, or the effectiveness of, the Security Interest
granted hereby or for the execution, delivery and performance of
this Agreement by the Company or for the perfection of or
exercise by the Secured Party of its rights and remedies
hereunder.
(g) On
the date of execution of this Agreement, the Company will deliver
to the Secured Party one or more executed UCC financing statements
on Form-1 with respect to the Security Interest for filing
with the jurisdictions indicated on Schedule B ,
attached hereto and in such other jurisdictions as may be requested
by the Secured Party.
(h) The
execution, delivery and performance of this Agreement does not
conflict with or cause a breach or default, or an event that with
or without the passage of time or notice, shall constitute a breach
or default, under any agreement to which the Company is a party or
by which the Company is bound. No consent (including,
without limitation, from stock holders or creditors of the Company)
is required for the Company to enter into and perform its
obligations hereunder.
(i) The
Company shall at all times maintain the liens and Security Interest
provided for hereunder as valid and perfected first priority liens
and security interests in the Collateral in favor of the Secured
Party until this Agreement and the Security Interest hereunder
shall terminate pursuant to Section 11. The Company
hereby agrees to defend the same against any and all
persons. The Company shall safeguard and protect all
Collateral for the account of the Secured Party. At the
request of the Secured Party, the Company will sign and deliver to
the Secured Party at any time or from time to time one or more
financing statements pursuant to the UCC (or any other applicable
statute) in form reasonably satisfactory to the Secured Party and
will pay the cost of filing the same in all public offices wherever
filing is, or is deemed by the Secured Party to be, necessary or
desirable to effect the rights and obligations provided for herein.
Without limiting the generality of the foregoing, the Company shall
pay all fees, taxes and other amounts necessary to maintain the
Collateral and the Security Interest hereunder, and the Company
shall obtain and furnish to the Secured Party from time to time,
upon demand, such releases and/or subordinations of claims and
liens which may be required to maintain the priority of the
Security Interest hereunder.
(j) The
Company will not transfer, pledge, hypothecate, encumber, license
(except for non-exclusive licenses granted by the Company in the
ordinary course of business), sell or otherwise dispose of any of
the Collateral without the prior written consent of the Secured
Party.
(k) The
Company shall keep and preserve its Equipment, Inventory and other
tangible Collateral in good condition, repair and order and shall
not operate or locate any such Collateral (or cause to be operated
or located) in any area excluded from insurance
coverage.
(l) The
Company shall, within ten (10) days of obtaining knowledge thereof,
advise the Secured Party promptly, in sufficient detail, of any
substantial change in the Collateral, and of the occurrence of any
event which would have a material adverse effect on the value of
the Collateral or on the Secured Party’s security interest
therein.
(m) The
Company shall promptly execute and deliver to the Secured Party
such further deeds, mortgages, assignments, security agreements,
financing statements or other instruments, documents, certificates
and assurances and take such further action as the Secured Party
may from time to time request and may in its sole discretion
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