EXHIBIT
10.3
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of September
16, 2009 (the “ Agreement ”) is by and among
Medis Technologies Ltd., a Delaware corporation (“
Medis ”), Medis El Ltd., a corporation formed under
the laws of the State of Israel (“ Medis El ”),
More Energy Ltd., a corporation formed under the laws of the State
of Israel (“ More ”), and Iroquois Master Fund
Ltd. (“ Purchaser ”).
Medis and Purchaser are parties to a
Subscription Agreement dated as of September 16, 2009 (as modified
and supplemented and in effect from time to time, the “
Subscription Agreement ”), that provides, subject to
the terms and conditions thereof, for the issuance and sale by
Medis to Purchaser of Notes and Warrants as more fully described in
the Subscription Agreement.
To induce Purchaser to enter into the
Subscription Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor has agreed to pledge and grant a security
interest in the Collateral (as hereinafter defined) as security for
the Secured Obligations (as hereinafter
defined). Accordingly, the parties hereto agree as
follows:
Section 1. Definitions
. Each capitalized term used herein and not otherwise
defined shall have the meaning assigned to such term in the
Subscription Agreement. In addition, as used
herein:
“ Accounts ” shall have the
meaning ascribed thereto in Section 3(d) hereof.
“ Business ” shall mean the
businesses from time to time, now or hereafter, conducted by Debtor
and its Subsidiaries.
“ Collateral ” shall have the
meaning ascribed thereto in Section 3 hereof.
“ Copyright Collateral ”
shall mean all Copyrights, whether now owned or hereafter acquired
by Debtor, that are associated with the Business.
“ Copyrights ” shall mean all
copyrights, copyright registrations and applications for copyright
registrations, including those shown on Annex 3
hereto, and, without limitation, all renewals and extensions
thereof, the right to recover for all past, present and future
infringements thereof, and all other rights whatsoever accruing
thereunder or pertaining thereto.
“ Debtor ” shall mean each of
Medis, Medis El and More.
“ Documents ” shall have the
meaning ascribed thereto in Section 3(j) hereof.
“ Equipment ” shall have the
meaning ascribed thereto in Section 3(h) hereof.
“ Event of Default ” shall
have the meaning ascribed thereto in Article IV of the
Notes.
“ Excluded Collateral ” shall
mean the assets of Debtor which secure the Permitted Indebtedness
and the assets listed on Annex 2 hereto.
“ Guaranty ” shall mean the
Guaranty provided by each of Medis El and More as described in
Section 3 of the Subscription Agreement.
“ Instruments ” shall have
the meaning ascribed thereto in Section 3(e) hereof.
“ Intellectual Property ”
shall mean, collectively, all Copyright Collateral, all Patent
Collateral and all Trademark Collateral, together with (a) all
inventions, processes, production methods, proprietary information,
know-how and trade secrets used or useful in the Business; (b) all
licenses or user or other agreements granted to Debtor with respect
to any of the foregoing, in each case whether now or hereafter
owned or used including, without limitation, the licenses or other
agreements with respect to the Copyright Collateral, the Patent
Collateral or the Trademark Collateral; (c) all customer lists,
identification of suppliers, data, plans, blueprints,
specifications, designs, drawings, recorded knowledge, surveys,
manuals, materials standards, processing standards, catalogs,
computer and automatic machinery software and programs, and the
like pertaining to the operation by Debtor of the Business; (d) all
sales data and other information relating to sales now or hereafter
collected and/or maintained by Debtor that pertain to the Business;
(e) all accounting information which pertains to the Business and
all media in which or on which any of the information or knowledge
or data or records which pertain to the Business may be recorded or
stored and all computer programs used for the compilation or
printout of such information, knowledge, records or data; (f) all
licenses, consents, permits, variances, certifications and
approvals of governmental agencies now or hereafter held by Debtor
pertaining to the operation by Debtor and its Subsidiaries of the
Business; and (g) all causes of action, claims and warranties now
or hereafter owned or acquired by Debtor in respect of any of the
items listed above.
“ Inventory ” shall have the
meaning ascribed thereto in Section 3(f) hereof.
“ Issuers ” shall mean,
collectively, the respective entities identified on Annex
1 hereto, and all other entities formed by Debtor or
entities in which Debtor owns or acquires any capital stock or
similar interest.
“ Motor Vehicles ” shall mean
motor vehicles, tractors, trailers and other like property, whether
or not the title thereto is governed by a certificate of title or
ownership.
“ Patent Collateral ” shall
mean all Patents, whether now owned or hereafter acquired by Debtor
that are associated with the Business.
“ Patents ” shall mean all
patents and patent applications, including those shown on
Annex 3 hereto, and without limitation, the
inventions and improvements described and claimed therein together
with the reissues, divisions, continuations, renewals, extensions
and continuations-in-part thereof, all income, royalties, damages
and payments now or hereafter due and/or payable under and with
respect thereto, including, without limitation, damages and
payments for past or future infringements thereof, the right to sue
for past, present and future infringements thereof, and all rights
corresponding thereto throughout the world.
“ Payment in Full ” shall
mean the indefeasible payment in full in cash or any other form of
consideration that is expressly acceptable to Purchaser (provided
that the acceptance in any one instance by a Purchaser of such
other form of consideration shall not be deemed to be a waiver or
relinquishment of such Purchaser’s right to decline such
other form of consideration at any other time) of the Secured
Obligations. If after receipt of any payment of, or
Proceeds applied to the payment of the Secured Obligations,
Purchaser is required to surrender or return such payment or
Proceeds for any reason, then the Secured Obligations intended to
be satisfied by such payment or Proceeds shall be reinstated and
continue and this Agreement shall continue in full force and effect
as if such payment or Proceeds had not been received by Purchaser
or any Purchaser, as the case may be, and no Payment in Full shall
be deemed to have occurred.
“ Permitted Indebtedness ”
shall mean Debtor’s existing indebtedness, liabilities and
obligations as disclosed on Annex 5 hereto and any
future capitalized leases, purchase money indebtedness and the
Notes.
“ Permitted Liens ” shall
have the meaning ascribed thereto in Section 9(p) of the
Subscription Agreement.
“ Pledged Stock ” shall have
the meaning ascribed thereto in Section 3(a) hereof.
“ Real Estate ” shall have
the meaning ascribed thereto in Section 3(l) hereof.
“ Secured Obligations ” shall
mean, collectively, the principal of and interest on the Notes
issued or issuable (as applicable) by Debtor and held by the
Purchaser and all other amounts from time to time owing to
Purchaser by Debtor under the Subscription Agreement, each Guaranty
and the Note.
“ Stock Collateral ” shall
mean, collectively, the Collateral described in clauses (a) through
(c) of Section 3 hereof and the proceeds of and to any such
property and, to the extent related to any such property or such
proceeds, all books, correspondence, credit files, records,
invoices and other papers.
“ Trademark Collateral ”
shall mean all Trademarks, whether now owned or hereafter acquired
by Debtor, that are associated with the
Business. Notwithstanding the foregoing, the Trademark
Collateral does not and shall not include any Trademark which would
be rendered invalid, abandoned, void or unenforceable by reason of
its being included as part of the Trademark Collateral
.
“ Trademarks ” shall mean all
trade names, trademarks and service marks, logos, trademark and
service mark registrations, and applications for trademark and
service mark registrations, including those shown on Annex
3 hereto and without limitation, all renewals of trademark
and service mark registrations, all rights corresponding thereto
throughout the world, the right to recover for all past, present
and future infringements thereof, all other rights of any kind
whatsoever accruing thereunder or pertaining thereto, together, in
each case, with the product lines and goodwill of the business
connected with the use of, and symbolized by, each such trade name,
trademark and service mark.
“ Uniform Commercial Code ”
shall mean the Uniform Commercial Code as in effect in the State of
New York from time to time.
Section 2. Representations
and Warranties . Each Debtor represents and warrants
to Purchaser that:
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Debtor is the
sole beneficial owner of the Collateral and no Lien exists or will
exist upon any Collateral at any time (and, with respect to the
Stock Collateral, no right or option to acquire the same exists in
favor of any other Person), except for Permitted Liens and the
pledge and security interest in favor of the Purchaser created or
provided for herein which pledge and security interest will
constitute a first priority perfected pledge and security interest
in and to all of the Collateral (other than Intellectual Property
registered outside of the United States of America) upon the filing
of the applicable financing statements or delivery of stock
certificates required hereunder;
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the Pledged
Stock directly or indirectly owned by Debtor in the entities
identified in Annex 1 hereto is, and all other
Pledged Stock, whether issued now or in the future, will be, duly
authorized, validly issued, fully paid and nonassessable, free and
clear of all Liens other than Permitted Liens and none of such
Pledged Stock is or will be subject to any contractual restriction,
preemptive and similar rights, or any restriction under the charter
or by-laws of the respective Issuers of such Pledged Stock, upon
the transfer of such Pledged Stock (except for any such restriction
contained herein);
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the Pledged
Stock directly or indirectly owned by Debtor in the entities
identified in Annex 1 hereto constitutes all of the
issued and outstanding shares of capital stock of any class of such
Issuers beneficially owned by Debtor on the date hereof (whether or
not registered in the name of Debtor) and said Annex
1 correctly identifies, as at the date hereof, the
respective Issuers of such Pledged Stock;
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except as may
be set forth in said Annex 3 , Debtor owns and
possesses the right to use, and has done nothing to authorize or
enable any other Person to use, all of its Copyrights, Patents and
Trademarks necessary for the operation of the Business, and all
registrations of its material Copyrights, Patents and Trademarks
are valid and in full force and effect;
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to
Debtor’s knowledge, (i) except as set forth in Annex
3 hereto, there is no violation by others of any right of
Debtor with respect to any material Copyrights, Patents or
Trademarks, respectively, and (ii) Debtor is not, in connection
with the Business, infringing in any respect upon any Copyrights,
Patents or Trademarks of any other Person; and no proceedings have
been instituted or are pending against Debtor or, to Debtor’s
knowledge, threatened, and no claim against Debtor has been
received by Debtor, alleging any such violation, except as may be
set forth in said Annex 3 ;
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Debtor does not
own any material Trademarks registered in the United States of
America to which the last sentence of the definition of Trademark
Collateral applies.
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Section 3. Collateral
. As collateral security for the prompt Payment in Full
when due (whether at stated maturity, by acceleration or otherwise)
of the Secured Obligations, Debtor hereby pledges, grants, assigns,
hypothecates and transfers to the Purchaser as hereinafter
provided, a security interest in and Lien upon all of
Debtor’s right, title and interest in, to and under all
personal property and other assets of Debtor, whether now owned or
hereafter acquired by or arising in favor of Debtor, whether now
existing or hereafter coming into existence, whether owned or
consigned by or to, or leased from or to Debtor and regardless of
where located, except for the Excluded Collateral, (all being
collectively referred to herein as “ Collateral
”) including:
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Debtor’s
direct or indirect ownership interest in the respective shares of
capital stock of the Issuers and all other shares of capital stock
of whatever class of the Issuers, now or hereafter owned by Debtor,
together with in each case the certificates evidencing the same
(collectively, the “ Pledged Stock
”);
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all shares,
securities, moneys or property representing a dividend on any of
the Pledged Stock, or representing a distribution or return of
capital upon or in respect of the Pledged Stock, or resulting from
a split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of,
or otherwise in respect of, the Pledged Stock;
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without
affecting the obligations of Debtor under any provision prohibiting
such action hereunder or under the Subscription Agreement or the
Notes, in the event of any consolidation or merger in which any
Issuer is not the surviving corporation, all shares of each class
of the capital stock of the successor corporation (unless such
successor corporation is Debtor itself) formed by or resulting from
such consolidation or merger (the Pledged Stock, together with all
other certificates, shares, securities, properties or moneys as may
from time to time be pledged hereunder pursuant to clause (a) or
(b) above and this clause (c) being herein collectively called the
“ Stock Collateral ”);
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all accounts
and general intangibles (each as defined in the Uniform Commercial
Code) of Debtor constituting any right to the payment of money,
including (but not limited to) all moneys due and to become due to
Debtor in respect of any loans or advances for the purchase price
of Inventory or Equipment or other goods sold or leased or for
services rendered, all moneys due and to become due to Debtor under
any guarantee (including a letter of credit) of the purchase price
of Inventory or Equipment sold by Debtor and all tax refunds (such
accounts, general intangibles and moneys due and to become due
being herein called collectively “ Accounts
”);
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all
instruments, chattel paper or letters of credit (each as defined in
the Uniform Commercial Code) of Debtor evidencing, representing,
arising from or existing in respect of, relating to, securing or
otherwise supporting the payment of, any of the Accounts, including
(but not limited to) promissory notes, drafts, bills of exchange
and trade acceptances (herein collectively called “
Instruments ”);
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all inventory
(as defined in the Uniform Commercial Code) of Debtor and all goods
obtained by Debtor in exchange for such inventory (herein
collectively called “ Inventory ”);
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all
Intellectual Property and all other accounts or general intangibles
of Debtor not constituting Intellectual Property or
Accounts;
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all equipment
(as defined in the Uniform Commercial Code) of Debtor (herein
collectively called “ Equipment ”);
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each contract
and other agreement of Debtor relating to the sale or other
disposition of Inventory or Equipment;
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all documents
of title (as defined in the Uniform Commercial Code) or other
receipts of Debtor covering, evidencing or representing Inventory
or Equipment (herein collectively called “ Documents
”);
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all rights,
claims and benefits of Debtor against any Person arising out of,
relating to or in connection with Inventory or Equipment purchased
by Debtor, including, without limitation, any such rights, claims
or benefits against any Person storing or transporting such
Inventory or Equipment;
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all estates in
land together with all improvements and other structures now or
hereafter situated thereon, together with all rights, privileges,
tenements, hereditaments, appurtenances, easements, including, but
not limited to, rights and easements for access and egress and
utility connections, and other rights now or hereafter appurtenant
thereto (" Real Estate ");
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all other
tangible or intangible property of Debtor, including, without
limitation, all proceeds, products and accessions of and to any of
the property of Debtor described in clauses (a) through (l) above
in this Section 3 (including, without limitation, any proceeds of
insurance thereon), and, to the extent related to any property
described in said clauses or such proceeds, products and
accessions, all books, correspondence, credit files, records,
invoices and other papers, including without limitation all tapes,
cards, computer runs and other papers and documents in the
possession or under the control of Debtor or any computer bureau or
service company from time to time acting for Debtor.
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Section 4. Further
Assurances; Remedies . In furtherance of the grant
of the pledge and security interest pursuant to Section 3 hereof,
Debtor hereby agrees with the Purchaser as follows:
4.01 Delivery and
Other Perfection . Debtor shall:
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if any of the
above-described shares, securities, monies or property required to
be pledged by Debtor under clauses (a), (b) and (c) of Section 3
hereof are received by Debtor, forthwith either (x) transfer and
deliver to the Purchaser such shares or securities so received by
Debtor (together with the certificates for any such shares and
securities duly endorsed in blank or accompanied by undated stock
powers duly executed in blank) all of which thereafter shall be
held by the Purchaser, pursuant to the terms of this Agreement, as
part of the Collateral or (y) take such other action as the
Purchaser shall reasonably deem necessary or appropriate to duly
record the Lien created hereunder in such shares, securities,
monies or property referred to in said clauses (a), (b) and (c) of
Section 3;
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deliver the
certificates representing ownership of the capital stock of Medis
El and More together with undated stock powers duly executed in
blank to the Purchaser within three business days of the execution
of this Agreement. Failure to deliver the certificates
within three business days following the Closing Date, shall be a
material default under this Agreement and the Note.
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deliver and
pledge to the Purchaser, at the Purchaser's request, any and all
Instruments, endorsed and/or accompanied by such instruments of
assignment and transfer in such form and substance as the Purchaser
may request; provided, that so long as no Event of Default shall
have occurred and be continuing, Debtor may retain for collection
in the ordinary course any Instruments received by it in the
ordinary course of business and the Purchaser shall, promptly upon
request of Debtor, make appropriate arrangements for making any
other Instrument pledged by Debtor available to it for purposes of
presentation, collection or renewal (any such arrangement to be
effected, to the extent deemed appropriate by the Purchaser,
against trust receipt or like document);
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give, execute,
deliver, file and/or record any financing statement, notice,
instrument, document, agreement or other papers that may be
necessary (in the reasonable judgment of the Purchaser) to create,
preserve, perfect or validate any security interest granted
pursuant hereto or to enable the Purchaser to exercise and enforce
their rights hereunder with respect to such security interest,
including, without limitation, causing any or all of the Stock
Collateral to be transferred of record into the name of the
Purchaser or its nominee (and the Purchaser agrees that if any
Stock Collateral is transferred into its name or the name of its
nominee, the Purchaser will thereafter promptly give to Debtor
copies of any notices and communications received by it with
respect to the Stock Collateral);
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upon the
acquisition after the date hereof by Debtor of any Equipment
covered by a certificate of title or ownership cause the Purchaser
to be listed as the lienholder on such certificate of title and
within 120 days of the acquisition thereof deliver evidence of the
same to the Purchaser;
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keep accurate
books and records relating to the Collateral, and stamp or
otherwise mark such books and records in such manner as the
Purchaser may reasonably require in order to reflect the security
interests granted by this Agreement;
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furnish to the
Purchaser from time to time (but, unless an Event of Default shall
have occurred and be continuing, no more frequently than quarterly)
statements and schedules further identifying and describing the
Copyright Collateral, the Patent Collateral and the Trademark
Collateral, respectively, and such other reports in connection with
the Copyright Collateral, the Patent Collateral and the Trademark
Collateral, as the Purchaser may reasonably request, all in
reasonable detail;
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permit
representatives of the Purchaser, upon reasonable notice, at any
time during normal business hours to inspect and make abstracts
from its books and records pertaining to the Collateral, and permit
representatives of the Purchaser to be present at Debtor’s
place of business to receive copies of all communications and
remittances relating to the Collateral, and forward copies of any
notices or communications by Debtor with respect to the Collateral,
all in such manner as the Purchaser may reasonably require;
and
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upon the
occurrence and during the continuance of any Event of Default, upon
request of the Purchaser, promptly notify each account debtor in
respect of any Accounts or Instruments that such Collateral has
been assigned to the Purchaser hereunder, and that any payments due
or to become due in respect of such Collateral are to be made
directly to the Purchaser.
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4.02 Other Financing
Statements and Liens . Except with respect to
Permitted Indebtedness, without the prior written consent of the
Purchaser, Debtor shall not file or suffer to be on file, or
authorize or permit to be filed or to be on file, in any
jurisdiction, any financing statement or like instrument with
respect to the Collateral in which the Purchaser is not named as
the sole secured party.
4.03 Preservation of
Rights . The Purchaser shall not be required to take
steps necessary to preserve any rights against prior parties to any
of the Collateral.
4.04 Special
Provisions Relating to Certain Collateral .
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Debtor will
cause the Stock Collateral to constitute at all times 100% of the
total number of shares of each class of capital stock of each
Issuer then outstanding that is owned directly or indirectly by
Debtor.
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So long as no
Event of Default shall have occurred and be continuing, Debtor
shall have the right to exercise all voting, consensual and other
powers of ownership pertaining to the Stock Collateral for all
purposes not inconsistent with the terms of this Agreement, the
Subscription Agreement, the Notes or any other instrument or
agreement referred to herein or therein, provided that Debtor
agrees that it will not vote the Stock Collateral in any manner
that is inconsistent with the terms of this Agreement, the
Subscription Agreement, the Notes or any such other instrument or
agreement; and the Purchaser shall execute and deliver to Debtor or
cause to be executed and delivered to Debtor all such proxies,
powers of attorney, dividend and other orders, and all such
instruments, without recourse, as Debtor may reasonably request for
the purpose of enabling Debtor to exercise the rights and powers
which it is entitled to exercise pursuant to this Section
4.04(a)(2).
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Unless and
until an Event of Default has occurred and is continuing, Debtor
shall be entitled to receive and retain any dividends on the Stock
Collateral paid in cash out of earned surplus.
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If any Event of
Default shall have occurred, then so long as such Event of Default
shall continue, and whether or not the Purchaser exercises any
available right to declare any Secured Obligations due and payable
or seeks or pursues any other relief or remedy available to it
under applicable law or under this Agreement, the Subscription
Agreement, the Notes or any other agreement relating to such
Secured Obligations, all dividends and other distributions on the
Stock Collateral shall be paid directly to the Purchaser and
retained by it as part of the Stock Collateral, subject to the
terms of this Agreement, and, if the Purchaser shall so request in
writing, Debtor agrees to execute and deliver to the Purchaser
appropriate additional dividend, distribution and other orders and
documents to that end, provided that if such Event of Default is
cured, any such dividend or distribution theretofore paid to the
Purchaser shall, upon request of Debtor (except to the extent
theretofore applied to the Secured Obligations) be returned by the
Purchaser to Debtor.
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4.05 Events of
Default, etc. During the period during which an
Event of Default shall have occurred and be continuing:
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Debtor shall,
at the request of the Purchaser, assemble the Collateral owned by
it at such place or places, reasonably convenient to both the
Purchaser and Debtor, designated in its request;
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the Purchaser
may make any reasonable compromise or settlement deemed desirable
with respect to any of the Collateral and may extend the time of
payment, arrange for payment in installments, or otherwise modify
the terms of, any of the Collateral;
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the Purchaser
shall have all of the rights and remedies with respect to the
Collateral of a secured party under the Uniform Commercial Code
(whether or not said Code is in effect in the jurisdiction where
the rights and remedies are asserted) and such additional rights
and remedies to which a secured party is entitled under the laws in
effect in any jurisdiction where any rights and remedies hereunder
may be asserted, including, without limitation, the right, to the
maximum extent permitted by law, to exercise all voting, consensual
and other powers of ownership pertaining to the Collateral as if
the Purchaser were the sole and absolute owner thereof (and Debtor
agrees to take all such action as may be appropriate to give effect
to such right);
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the Purchaser
in its discretion may, in its name or in the name of Debtor or
otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in
exchange for any of the Collateral, but shall be under no
obligation to do so; and
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the Purchaser
may, upon 10 Business Days, prior written notice to Debtor of the
time and place, with respect to the Collateral or any part thereof
which shall then be or shall
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thereafter come
into the possession, custody or control of the Purchaser, or any of
its respective agents, sell, lease, assign or otherwise dispose of
all or any of such Collateral, at such place or places as the
Purchaser deems best, and for cash or on credit or for future
delivery (without thereby assuming any credit risk), at public or
private sale, without demand of performance or notice of intention
to effect any such disposition or of time or place thereof (except
such notice as is required above or by applicable statute and
cannot be waived) and the Purchaser or anyone else may be the
purchaser, lessee, assignee or recipient of any or all of the
Collateral so disposed of at any public sale (or, to the extent
permitted by law, at any private sale), and thereafter hold the
same absolutely, free from any claim or right of whatsoever kind,
including any right or equity of redemption (statutory or
otherwise), of Debtor, any such demand, notice or right and equity
being hereby expressly waived and released. In the event
of any sale, assignment, or other disposition of any of the
Trademark Collateral, the goodwill of the Business connected with
and symbolized by the Trademark Collateral subject to such
disposition shall be included, and Debtor shall supply to the
Purchaser or its designee, for inclusion in such sale, assignment
or other disposition, all Intellectual Property relating to such
Trademark Collateral. The Purchaser may, without notice
or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time
and place fixed for the sale, and such sale may be made at any time
or place to which the same may be so adjourned.
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The proceeds of
each collection, sale or other disposition under this Section 4.05
shall be applied in accordance with Section 4.09 hereof.
Debtor recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933, as amended,
and applicable state securities laws, the Purchaser may be
compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among
other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale
thereof. Debtor acknowledges that any such private sales
to an unrelated third party in an arm’s length transaction
may be at prices and on terms less favorable to the Purchaser than
those obtainable through a public sale without such restrictions,
and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially
reasonable manner and that the Purchaser shall have no obligation
to engage in public sales and no obligation to delay the sale of
any Collateral for the period of time necessary to permit the
respective Issuer thereof to register it for public
sale.
4.06 Deficiency
. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 4.05
hereof are insufficient to cover the costs and expenses of such
realization and the Payment in Full of the Secured Obligations,
Debtor shall remain liable for any deficiency.
4.07 Removals,
etc . Without at least 30 days’ prior written
notice to the Purchaser or unless otherwise required by law, Debtor
shall not (i) maintain any of its books or records with respect to
the Collateral at any office or maintain its chief executive office
or its principal place of business at any place, or permit any
Inventory or Equipment to be located anywhere other than at the
address indicated for Debtor in Section 5.03 hereof or at one of
the locations identified in Annex 4 hereto or in
transit from one of such locations to another or (ii) change its
corporate name, or the name under which it does business, from the
name shown on the signature page hereto.
4.08 Private
Sale . The Purchaser shall incur no liability as a
result of the sale of the Collateral, or any part thereof, at any
private sale to an unrelated third party in an arm’s length
transaction pursuant to Section 4.05 hereof conducted in a
commercially reasonable manner. Debtor hereby waives
any
claims against
the Purchaser arising by reason of the fact that the price at which
the Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale or
was less than the aggregate amount of the Secured Obligations, even
if the Purchaser accepts the first offer received and does not
offer the Collateral to more than one offeree.
4.09 Application of
Proceeds . Except as otherwise herein expressly
provided, the proceeds of any collection, sale or other realization
of all or any part of the Collateral pursuant hereto, and any other
cash at the time held by the Purchaser under this Section 4, shall
be applied by the Purchaser:
First , to the payment of the costs and expenses of
such collection, sale or other realization, including reasonable
out-of-pocket costs and expenses of the Purchaser and the fees and
expenses of its agents and counsel, and all expenses, and advances
made or incurred by the Purchaser in connection
therewith;
Next ,
to the Payment in Full of the Secured Obligations then due and
owing to Purchaser; and
Finally , to the payment to Debtor, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining.
As used in this
Section 4, “ proceeds ” of Collateral shall mean
cash, securities and other property realized in respect of, and
distributions in kind of, Collateral, including any thereof
received under any reorganization, liquidation or adjustment of
debt of Debtor or any issuer of or obligor on any of the
Collateral.
4.10
Attorney-in-Fact . Without limiting any rights or
powers granted by this Agreement to the Purchaser while no Event of
Default has occurred and is continuing, upon the occurrence and
during the continuance of any Event of Default, the Purchaser is
hereby appointed the attorney-in-fact of Debtor for the purpose of
carrying out the provisions of this Section 4 and taking any action
and executing any instruments which the Purchaser may deem
necessary or advisable to accomplish the purposes hereof, which
appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the
foregoing, so long as the Purchaser shall be entitled under this
Section 4 to make collections in respect of the Collateral, the
Purchaser shall have the right and power to receive, endorse and
collect all checks made payable to the order of Debtor representing
any dividend, payment, or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the
same.
4.11 Perfection
. (i) Prior to or concurrently with the execution and
delivery of this Agreement, Debtor shall, and the Purchaser may,
file such financing statements and other documents in such offices
as the Purchaser may request or elect, to perfect the security
interests granted by Section 3 of this Agreement, and (ii) at any
time requested by the Purchaser, Debtor shall deliver to the
Purchaser all share certificates of capital stock directly or
indirectly owned by Debtor in the entities identified in
Annex 1 hereto, accompanied by undated stock powers
duly executed in blank.
4.12 Termination
. When Payment in Full of all Secured Obligations shall
have been made under the Subscription Agreement, this Agreement
shall terminate, and the Purchaser shall forthwith cause to be
assigned, transferred and delivered, against receipt but without
any recourse, warranty or representation whatsoever, any remaining
Collateral and money received in respect thereof, to or on the
order of Debtor. The Purchaser shall also execute and
deliver to Debtor upon such termination such Uniform Commercial
Code termination statements, certificates for terminating the Liens
on the Motor Vehicles and such other documentation as shall be
reasonably requested by Debtor to effect the termination and
release of the Liens on the Collateral.
4.13 Expenses
. Debtor agrees to pay to the Purchaser all
out-of-pocket expenses (including reasonable expenses for legal
services of every kind) of, or incident to, the enforcement of any
of the provisions
of this Section
4, or performance by the Purchaser of any obligations of Debtor in
respect of the Collateral which Debtor has failed or refused to
perform upon reasonable notice, or any actual or attempted sale, or
any exchange, enforcement, collection, compromise or settlement in
respect of any of the Collateral, and for the care of the
Collateral and defending or asserting rights and claims of the
Purchaser in respect thereof, by litigation or otherwise, including
expenses of insurance, and all such expenses shall be Secured
Obligations to the Purchaser secured under Section 3
hereof.
4.14 Further
Assurances . Debtor agrees that, from time to time
upon the written request of the Purchaser, Debtor will execute and
deliver such further documents and do such other acts and things as
the Purchaser may reasonably request in order fully to effect the
purposes of this Agreement.
4.15 Rights of
Purchaser to Appoint Receiver . Without
limiting, and in addition to, any other rights, options and
remedies Purchaser has under this Agreement, the Note, the UCC, at
law or in equity, or otherwise, upon the occurrence and
continuation of an Event of Default, Purchaser shall have the right
to apply for and have a receiver appointed with respect to
Debtor by a court of competent jurisdiction, its business or
properties. Debtor expressly agrees that such a receiver
will be able to manage, protect and preserve the Collateral and
continue the operation of the Business of Debtor to the extent
necessary to collect all revenues and profits thereof and to apply
the same to the payment of all expenses and other charges of such
receivership, including the compensation of the receiver, until a
sale or other disposition of such Collateral shall be finally made
and consummated. Debtor waives any right to require a
bond to be posted by or on behalf of any such receiver.
Section 5.
Miscellaneous .
5.01 No Waiver
. No failure on the part of the Purchaser or any of its
agents to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial
exercise by the Purchaser or any of its agents of any right, power
or remedy hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The
remedies herein are cumulative and are not exclusive of any
remedies provided by law.
5.02 Governing Law;
Venue; Severability . This Agreement shall be
governed by and construed in accordance with the laws of the State
of New York without regard to conflicts of laws principles that
would result in the application of the substantive laws of another
jurisdiction, except to the extent that the perfection of the
security interest granted hereby in respect of any item of
Collateral may be governed by the law of another
jurisdiction. Any legal action or proceeding against
Debtor with respect to this Agreement may be brought in the courts
in the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this
Agreement, Debtor hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The parties
executing this Agreement and other agreements referred to herein or
delivered in connection herewith agree to submit to the exclusive
jurisdiction of such courts and hereby irrevocably waive trial by
jury. Debtor hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in
connection with this Agreement brought in the aforesaid courts and
hereby further irrevocably waives and agrees not to plead or claim
in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum. If
any provision of this Agreement, or the application thereof to any
person or circumstance, is held invalid, such invalidity shall not
affect any other provisions which can be given effect without the
invalid provision or application, and to this end the provisions
hereof shall be severable and the remaining, valid provisions shall
remain of full force and effect. Each party hereby
irrevocably waives personal service of process and consents to
process being served in any suit, action or proceeding in
connection with this Agreement 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 other manner permitted by law.
5.03 Notices
. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be
in writing and, unless otherwise specified herein, shall be (a)
personally served, (b) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (c) delivered
by a reputable overnight courier service with charges prepaid, or
(d) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall
have specified most recently by written notice. Any
notice or other communication required or permitted to be given
hereunder shall be deemed effective upon hand delivery or delivery
by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated
below (if delivered on a business day during normal business hours,
or the first business day following such delivery (if delivered
other than on a business day during normal business hours), (ii) on
the first business day following the date deposited with an
overnight courier service with charges prepaid, or (iii) on the
fifth business day following the date of mailing pursuant to
subpart (b) above, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such
communications shall be:
To
Debtor:
c/o Medis Technologies Ltd.
805 Third
Avenue
New York, NY
10022
Attn: Jose A.
Mejia, CEO and President
Fax: (212)
935-9216
With a copy by
facsimile
only
to:
Sonnenschein
Nath & Rosenthal LLP
1221 Avenue of
the Americas
New York, NY
10020
Attn: Ira I.
Roxland, Esq.
Fax: (212)
768-6800
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Iroquois Master
Fund Ltd.
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641 Lexington
Ave., 26th Floor
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Attn: Mitch
Kulick, Esq., General Counsel
If to Debtor or Lender,
with a copy by telecopier only to:
551 Fifth Avenue, Suite 1601
5.04 Waivers,
etc . The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed
by Debtor and the Purchaser. Any such amendment or
waiver shall be binding upon Purchaser and Debtor.
5.05 Successors and
Assigns . This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of
Debtor and Purchaser (provided, however, that Debtor shall not
assign or transfer its rights hereunder without the prior written
consent of the Purchaser).
5.06
Counterparts/Execution . This Agreement may be
executed in any number of counterparts and by the different
signatories hereto on separate counterparts, each of which, when so
executed, shall be deemed an original, but all such counterparts
shall constitute but one and the same instrument. This
Agreement may be executed by facsimile signature and delivered by
electronic transmission.
5.07
Severability . If any provision hereof is invalid
and unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, (i) the other provisions hereof shall remain in
full force and effect in such jurisdiction and shall be liberally
construed in favor of the Purchasers in order to carry out the
intentions of the parties hereto as nearly as may be possible and
(ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction.
[THIS SPACE INTENTIONALLY LEFT
BLANK]
IN WITNESS WHEREOF, the parties hereto have
caused this Security Agreement to be duly executed as of the day
and year first above written.
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“DEBTOR”
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“PURCHASER”
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MEDIS
TECHNOLOGIES LTD.
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IR OQUOIS
MASTER FUND LTD.
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a Delaware
corporation
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By: /s/ Jose
Meija
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By: /s/
Joshua
Silverman
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Its:
CEO
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Its:
Authorized
Signatory
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“DEBTOR”
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“DEBTOR”
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MEDIS EL
LTD.
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MORE ENERGY
LTD.
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an Israel
corporation
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an Israel
corporation
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By: /s/
Stephen
Crea
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By: /s/
Stephen
Crea
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Its:
CFO
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Its:
CFO
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DISCLOSURE ANNEXES
Reference is made to the Security Agreement (the
“ Agreement ”), dated as of September 16,
2009, by and among Medis Technologies Ltd., a Delaware corporation
(the “ Company ”), Medis El Ltd., a corporation
formed under the laws of the State of Israel (“
Medis El ”), More Energy Ltd., a corporation
formed under the laws of the State of Israel (“ More
”), and Iroquois Master Fund Ltd. (“ Investor
”). All capitalized terms used herein but not otherwise
defined shall have the meanings given to them in the
Agreement.
The specific disclosures set forth in the
following Disclosure Annexes (the “ Annexes ”)
have been organized to correspond to the Annex references in the
Agreement to which the disclosure may be most likely to relate,
together with appropriate cross references when disclosure is
applicable to other Annexes of the Agreement.
Certain matters set forth in the Annexes are
included solely for informational purposes for the convenience of
the parties to the Agreement. The inclusion of any
information in the Annexes shall not be deemed to be an admission
or acknowledgement, in and of itself, that such information (i) is
required by the terms of the Agreement to be disclosed, (ii) is
material to the Company or (iii) has had or would reasonably be
expected to have a Material Adverse Effect (as such term is defined
in that certain Subscription Agreement, dated as of
September 16, 2009, by and between the Company and the
Investor).
The headings contained in these Annexes are for
convenience of reference only and shall not be deemed to modify or
influence the interpretation of the information contained in these
Annexes or the Agreement.
Annex 1
Issuers
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1.
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Medis, Inc., a
Delaware corporation. 100% owned by the Company (Active
Shell).
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2.
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Medis El Ltd.,
an Israeli corporation. 100% owned by Medis, Inc.
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3.
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More Energy
Ltd., an Israeli corporation. 7% owned by the Company (remaining
93% owned by Medis El Ltd.).
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4.
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Cell Kinetics
Ltd., an Israeli corporation. 82.5% owned by Medis El
Ltd.
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5.
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Toroidal
Products Inc., a Delaware corporation. 100% owned by the Company
(dormant and does not hold any assets).
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Annex 2
Excluded
Collateral
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1.
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The assets of
Debtor which secure the Permitted Indebtedness.
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2.
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The assets of
More listed on Schedule A attached hereto, which assets
are located at More’s production facility at Celestica,
Parkmore Business Park, Ballybrit, Galway, Ireland and which are
comprised primarily of manufacturing equipment.
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3.
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The assets of
More listed on Schedule B attached hereto, which assets
were manufactured by two of More’s vendors, KRAMSKI GmbH
(“ Kramski ”) and A.J Englander Ltd. (“
Englander ”), to whom More has substantial payment
obligations.
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