SECURITY AGREEMENT
(Execution Version)
dated as of
March 9, 2023
by
LUMOS ANALYTICS INC., a Delaware corporation, as Grantor,
in favor of
RIDGELINE NATIONAL BANK, NATIONAL ASSOCIATION, as Collateral Agent
SECURITY AGREEMENT
This SECURITY AGREEMENT (as amended, restated, supplemented, or otherwise modified from time to time, this "Agreement" or this "Security Agreement"), dated as of March 9, 2023, is made by LUMOS ANALYTICS INC., a corporation organized and existing under the laws of the State of Delaware (the "Grantor"), in favor of RIDGELINE NATIONAL BANK, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, in its capacity as Collateral Agent (in such capacity, together with its successors and assigns in such capacity, the "Collateral Agent") under the Credit Agreement (as defined below), for the benefit of the Secured Parties (as defined below).
RECITALS
WHEREAS, reference is made to that certain Revolving Credit Agreement, dated as of March 9, 2023 (as amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement"), among Lumos Analytics Inc., as Borrower, the financial institutions from time to time party thereto, as Lenders, Ridgeline National Bank, National Association, as Administrative Agent, and Ridgeline National Bank, National Association, as Collateral Agent and sole initial Lender;
WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to extend revolving credit facilities to the Grantor upon the terms and subject to the conditions set forth therein;
WHEREAS, it is a condition precedent to the closing of the Credit Agreement and the extension of credit thereunder that the Grantor execute and deliver this Security Agreement to the Collateral Agent, for the benefit of the Secured Parties;
WHEREAS, the Grantor is entering into this Security Agreement in order to secure all Obligations (as defined in the Credit Agreement) by granting a first-priority perfected security interest in and lien upon substantially all of the assets and property of the Grantor, as more particularly described herein; and
WHEREAS, the Grantor has determined that its execution, delivery, and performance of this Security Agreement is in the best interests of the Grantor and directly benefits the Grantor.
NOW, THEREFORE, in consideration of the premises and the agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantor hereby agrees with the Collateral Agent, for the benefit of the Secured Parties, as follows:
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ARTICLE I — DEFINITIONS AND INTERPRETATION
Section 1.1 — Defined Terms.
Capitalized terms used in this Security Agreement and not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement. As used in this Security Agreement, the following terms shall have the following meanings:
"Account" shall have the meaning ascribed to such term in Division 9 of the California Uniform Commercial Code, as in effect from time to time, and shall include, without limitation, all accounts receivable, health-care-insurance receivables, and any right to payment of a monetary obligation, whether or not earned by performance, for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, for services rendered or to be rendered, for a policy of insurance issued or to be issued, for a secondary obligation incurred or to be incurred, or arising out of the use of a credit or charge card or information contained on or for use with the card.
"Chattel Paper" shall have the meaning ascribed to such term in Division 9 of the California Uniform Commercial Code, as in effect from time to time, and shall include both electronic chattel paper and tangible chattel paper.
"Collateral" shall mean all assets and property of the Grantor, of every type and description, whether now owned or hereafter acquired, and wherever located, including, without limitation, all Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Equipment, Fixtures, General Intangibles, Goods, Instruments, intellectual Property Collateral, Inventory, Investment Property, Letter-of-Credit Rights, Money, Software, Supporting Obligations, and all Proceeds and products of any and all of the foregoing; provided, however, that the term "Collateral" shall not include any Excluded Assets.
"Commercial Tort Claims" shall have the meaning ascribed to such term in Division 9 of the California Uniform Commercial Code, as in effect from time to time, and shall include those Commercial Tort Claims, if any, listed on Schedule 4 hereto.
"Deposit Accounts" shall have the meaning ascribed to such term in Division 9 of the California Uniform Commercial Code, as in effect from time to time, and shall mean all deposit accounts maintained by the Grantor at any bank or other financial institution, including, without limitation, those maintained at Pacific Horizon Bank, 101 Park Center Plaza, San Jose, California 95113, but excluding any Excluded Accounts.
"Documents" shall have the meaning ascribed to such term in Division 9 of the California Uniform Commercial Code, as in effect from time to time.
"Equipment" shall mean all "equipment" as defined in Division 9 of the California Uniform Commercial Code, as in effect from time to time, and shall include, without limitation, all machinery, furniture, fixtures, vehicles, tools, computer hardware, servers, networking equipment, and other tangible personal property of every kind and nature, together with all accessions thereto, substitutions and replacements therefor, and all parts, components, and accessories installed thereon or affixed thereto.
"Excluded Accounts" shall mean any deposit account of the Grantor that, at any time, holds deposits in an aggregate amount not exceeding Two Hundred Fifty Thousand Dollars ($250,000) individually.
"Excluded Assets" shall mean (a) intent-to-use trademark applications filed with the United States Patent and Trademark Office (the "USPTO") to the extent that the grant of a security interest therein would impair the validity or enforceability of such applications under applicable law (including the Lanham Act, 15 U.S.C. § 1060), in each case only until such time as a statement of use or amendment to allege use has been filed with and accepted by the USPTO with respect to such application; (b) certain immaterial foreign intellectual property not registered in the United States or with any United States governmental authority; (c) Excluded Accounts; (d) any lease, license, contract, or agreement to the extent that the grant of a security interest therein is expressly prohibited by the terms thereof or would give rise to a valid termination right in favor of any third party thereunder (provided that this clause (d) shall not apply to the extent that any such prohibition is rendered ineffective or unenforceable pursuant to Division 9 of the California Uniform Commercial Code, the Delaware Uniform Commercial Code, or any other applicable law); and (e) any contract or agreement with the United States government or any agency or instrumentality thereof to the extent that applicable law or regulation prohibits the creation, grant, or perfection of a security interest therein.
"Excluded IP" shall mean the intellectual property described in clauses (a) and (b) of the definition of "Excluded Assets."
"Fixtures" shall have the meaning ascribed to such term in Division 9 of the California Uniform Commercial Code, as in effect from time to time.
"General Intangibles" shall have the meaning ascribed to such term in Division 9 of the California Uniform Commercial Code, as in effect from time to time, and shall include, without limitation, all payment intangibles, software, customer lists, subscriber lists, subscription agreements, SaaS agreements, contract rights, goodwill, literary rights, rights to performance, rights under license agreements, and all other intangible personal property of every kind and nature (other than Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Goods, Instruments, Investment Property, Letter-of-Credit Rights, Money, and Oil, Gas, and Other Minerals Before Extraction).
"Goods" shall have the meaning ascribed to such term in Division 9 of the California Uniform Commercial Code, as in effect from time to time.
"Instruments" shall have the meaning ascribed to such term in Division 9 of the California Uniform Commercial Code, as in effect from time to time, and shall include, without limitation, all promissory notes, drafts, bills of exchange, and similar instruments.
"intellectual Property Collateral" shall mean all intellectual property rights of the Grantor, whether now owned or hereafter acquired, including, without limitation, all Patents, Trademarks, Copyrights, Trade Secrets, domain names, internet addresses, social media accounts, and all licenses and sublicenses granted or obtained with respect to any of the foregoing, together with all income, royalties, damages, and payments now or hereafter due or payable with respect thereto; provided, however, that "Intellectual Property Collateral" shall not include Excluded IP.
"Inventory" shall have the meaning ascribed to such term in Division 9 of the California Uniform Commercial Code, as in effect from time to time.
"Investment Property" shall have the meaning ascribed to such term in Division 9 of the California Uniform Commercial Code, as in effect from time to time, and shall include, without limitation, all certificated and uncertificated securities, security entitlements, securities accounts, commodity contracts, commodity accounts, and all equity interests in any direct or indirect subsidiary of the Grantor now existing or hereafter formed or acquired.
"Letter-of-Credit Rights" shall have the meaning ascribed to such term in Division 9 of the California Uniform Commercial Code, as in effect from time to time.
"Money" shall have the meaning ascribed to such term in Division 9 of the California Uniform Commercial Code, as in effect from time to time.
"Patents" shall mean all patents and patent applications (including provisional applications) issued by or filed with the USPTO or any foreign patent office, all reissues, divisions, continuations, continuations-in-part, renewals, and extensions thereof, and all rights to obtain any reissues, renewals, or extensions of the foregoing.
"Pledged Accounts" shall mean all Deposit Accounts of the Grantor other than Excluded Accounts. For the avoidance of doubt, Deposit Account Control Agreements ("DACAs") in form and substance reasonably satisfactory to the Collateral Agent are required for all Pledged Accounts holding more than Two Hundred Fifty Thousand Dollars ($250,000), to be delivered within thirty (30) days following the date hereof (i.e., by April 8, 2023), as a post-closing obligation pursuant to the Credit Agreement.
"Proceeds" shall have the meaning ascribed to such term in Division 9 of the California Uniform Commercial Code, as in effect from time to time, and shall include, without limitation, all proceeds of every kind and description arising from or in connection with the Collateral, including (a) all insurance proceeds, (b) all rental or license payments, royalties, and other income, (c) all dividends, distributions, cash, instruments, and other property received, receivable, or otherwise distributed in respect of or in exchange for any or all of the Collateral, (d) all claims of the Grantor against third parties for loss of, damage to, or destruction of any or all of the Collateral, and (e) all collections on, and other proceeds of, the collection or other disposition of any or all of the Collateral.
"Secured Obligations" shall mean all Obligations (as defined in the Credit Agreement), including, without limitation, all principal, interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership, or other similar proceeding, regardless of whether allowed or allowable in such proceeding), fees, expenses, indemnification obligations, reimbursement obligations, and all other amounts payable by the Grantor under the Credit Agreement and the other Loan Documents, in each case whether now existing or hereafter arising, whether direct or indirect, absolute or contingent, joint or several, due or to become due, primary or secondary, liquidated or unliquidated, or secured or unsecured.
"Secured Parties" shall have the meaning ascribed to such term in the Credit Agreement, and as of the date hereof includes Ridgeline National Bank, National Association, in its capacities as Administrative Agent, Collateral Agent, and sole initial Lender under the Credit Agreement.
"Software" shall have the meaning ascribed to such term in Division 9 of the California Uniform Commercial Code, as in effect from time to time, and shall include all computer programs, source code, object code, algorithms, data, databases, and related documentation.
"Supporting Obligations" shall have the meaning ascribed to such term in Division 9 of the California Uniform Commercial Code, as in effect from time to time, and shall include all letters of credit, letter-of-credit rights, guaranties, suretyships, and other secondary obligations supporting or securing the payment or performance of any Account, Chattel Paper, Document, General Intangible, Instrument, or Investment Property constituting Collateral.
"Trade Secrets" shall mean all trade secrets, proprietary information, know-how, technology, formulae, processes, procedures, methods, algorithms, machine-learning models, data sets, research and development information, technical data, financial and business information, customer and supplier lists, and other confidential or proprietary information of the Grantor, in each case that derives independent economic value from not being generally known to the public.
"Trademarks" shall mean all trademarks, service marks, trade names, trade dress, logos, brand names, corporate names, fictitious business names, and other source identifiers, whether registered or unregistered, and all registrations and applications for registration thereof (including intent-to-use applications, to the extent not constituting Excluded Assets), together with all renewals and extensions thereof, all goodwill associated therewith, and all rights to obtain any reissues, renewals, or extensions of the foregoing.
"UCC" shall mean the Uniform Commercial Code as in effect from time to time in the State of California (including Division 9 thereof), or, where applicable by its terms, the Uniform Commercial Code as in effect from time to time in any other relevant jurisdiction, including the State of Delaware.
Section 1.2 — UCC Definitions.
All terms defined in Division 9 of the California Uniform Commercial Code that are used but not otherwise defined in this Security Agreement shall have the respective meanings ascribed to such terms therein. To the extent that a term used herein is defined in both this Security Agreement and Division 9 of the California Uniform Commercial Code, the definition set forth in this Security Agreement shall control.
Section 1.3 — Interpretation.
(a) Unless the context otherwise requires, (i) references herein to the "Credit Agreement" shall mean the Revolving Credit Agreement dated as of March 9, 2023, as defined in the recitals hereto, as the same may be amended, restated, supplemented, or otherwise modified from time to time; (ii) words in the singular include the plural, and words in the plural include the singular; (iii) references to any Person include such Person's successors and permitted assigns; (iv) the words "include," "includes," and "including" shall be deemed to be followed by the words "without limitation"; (v) references to "Sections," "Articles," "Schedules," and "Exhibits" are, unless otherwise specified, references to sections and articles of, and schedules and exhibits to, this Security Agreement; and (vi) the words "hereof," "herein," "hereunder," and words of similar import refer to this Security Agreement as a whole and not to any particular provision hereof.
(b) The headings and captions in this Security Agreement are for convenience of reference only and shall not define, limit, or otherwise affect any of the terms or provisions hereof.
(c) This Security Agreement shall be governed by and construed in accordance with the laws of the State of California, as more particularly set forth in Section 7.2 hereof.
ARTICLE II — GRANT OF SECURITY INTEREST
Section 2.1 — Security Interest.
As security for the prompt and complete payment, performance, and observance of all Secured Obligations, the Grantor hereby grants to the Collateral Agent, for the ratable benefit of the Secured Parties, a continuing first-priority security interest in and lien upon all of the Grantor's right, title, and interest in, to, and under all of the following property and assets of the Grantor, whether now owned or existing or hereafter acquired or arising, and wherever located (collectively, together with all other Collateral described in this Section 2.1, the "Collateral"):
(a) all Accounts and accounts receivable, together with all interest, late charges, penalties, collection fees, and other amounts due or to become due in connection therewith;
(b) all Chattel Paper, including all electronic chattel paper and tangible chattel paper;
(c) all Commercial Tort Claims now existing or hereafter arising, including those listed on Schedule 4 hereto (which, as of the date hereof, reflects no Commercial Tort Claims);
(d) all Deposit Accounts (other than Excluded Accounts), including all funds and amounts therein and all certificates and instruments, if any, from time to time representing or evidencing such Deposit Accounts;
(e) all Documents, including all bills of lading, warehouse receipts, and other documents of title;
(f) all Equipment, including all machinery, furniture, fixtures, vehicles, tools, computer hardware, servers, networking equipment, and other tangible personal property, together with all accessions thereto and all substitutions and replacements therefor;
(g) all Fixtures;
(h) all General Intangibles, including all payment intangibles, software, customer lists, subscriber lists, subscription agreements, SaaS agreements, contract rights, goodwill, literary rights, rights to performance, and all other intangible personal property;
(i) all Goods, including all raw materials, work-in-process, finished goods, and other tangible personal property;
(j) all Instruments, including all promissory notes, drafts, and bills of exchange;
(k) all intellectual Property Collateral, including all Patents, Trademarks, Copyrights, Trade Secrets, domain names, and licenses with respect thereto, but specifically excluding the Excluded Assets described in Section 2.3 hereof;
(l) all Inventory, including all raw materials, work-in-process, finished goods, and other inventory;
(m) all Investment Property, including all certificated and uncertificated securities, security entitlements, securities accounts, commodity contracts, commodity accounts, and all equity interests in any direct or indirect subsidiary of the Grantor, whether now existing or hereafter formed or acquired;
(n) all Letter-of-Credit Rights;
(o) all Money, whether in United States dollars or any foreign currency;
(p) all Software, including all computer programs, source code, object code, algorithms, databases, and related documentation;
(q) all Supporting Obligations, including all letters of credit, guaranties, and other supporting obligations;
(r) all books, records, ledger cards, files, correspondence, computer programs, tapes, disks, and other data and information relating to any and all of the foregoing Collateral, including all rights of access to such books, records, and data and all rights to retrieve the same from any Person or entity in possession thereof; and
(s) to the extent not otherwise included above, all Proceeds and products of any and all of the foregoing Collateral, of every kind and description, whether in cash or in kind, including all insurance proceeds, rental or license payments, royalties, dividends, distributions, and other income.
Section 2.2 — Security for Obligations.
The security interest granted pursuant to Section 2.1 secures the prompt and complete payment when due (whether at stated maturity, by acceleration, or otherwise), performance, and observance of all Secured Obligations under the Credit Agreement and the other Loan Documents, including, without limitation, (a) all amounts outstanding under the Thirty Million Dollar ($30,000,000) revolving credit facility provided for in the Credit Agreement, (b) any amounts drawn under the Five Million Dollar ($5,000,000) letter of credit sub-facility, (c) any obligations arising under or in connection with any incremental revolving commitments established pursuant to the Fifteen Million Dollar ($15,000,000) accordion feature set forth in the Credit Agreement, (d) all interest thereon (including post-petition interest in any bankruptcy or insolvency proceeding), (e) all fees, expenses, indemnities, and other amounts payable by the Grantor under the Credit Agreement and the other Loan Documents, and (f) all costs of collection and enforcement, including reasonable attorneys' fees and expenses. The security interest granted herein shall remain in full force and effect until the termination of this Security Agreement in accordance with Section 7.8 hereof.
Section 2.3 — Excluded Assets.
Notwithstanding anything to the contrary in Section 2.1 or elsewhere in this Security Agreement, the Collateral shall not include any of the following (collectively, "Excluded Assets"):
(a) any intent-to-use trademark application filed with the USPTO to the extent that the grant of a security interest therein would impair the validity or enforceability of such application, or would result in the cancellation of such application, under the provisions of 15 U.S.C. § 1060 or any other applicable provision of the Lanham Act; provided that upon the filing and acceptance by the USPTO of a statement of use or an amendment to allege use with respect to any such intent-to-use trademark application, such application shall automatically, and without further action by any party, cease to constitute an Excluded Asset and shall be deemed to be Collateral hereunder;
(b) any immaterial foreign intellectual property that is not registered with, or the subject of a pending application before, any United States governmental authority, including the USPTO or the United States Copyright Office;
(c) all Excluded Accounts (i.e., deposit accounts holding deposits in an aggregate amount not exceeding Two Hundred Fifty Thousand Dollars ($250,000) individually at any time);
(d) any lease, license, contract, instrument, or other agreement to which the Grantor is a party or under which the Grantor has rights, to the extent (and only to the extent) that (i) the grant of a security interest therein is expressly prohibited by, or would constitute a breach or default under or would give rise to a valid termination right in favor of any third party under, the terms of such lease, license, contract, instrument, or other agreement, and (ii) such prohibition, breach, default, or termination right is not rendered ineffective or unenforceable by Section 9406, Section 9407, Section 9408, or Section 9409 of the California Uniform Commercial Code (or any equivalent provision of the Uniform Commercial Code of any other applicable jurisdiction) or any other applicable law; provided, however, that the Collateral shall include, and the security interest granted hereunder shall attach to, (A) all Proceeds of any such lease, license, contract, instrument, or other agreement to the extent that the grant of a security interest in such Proceeds is not so prohibited, and (B) all rights in respect of such lease, license, contract, instrument, or other agreement upon the termination or lapse of any such prohibition; and
(e) any contract or agreement with the United States government or any agency, department, or instrumentality thereof to the extent that applicable federal law, rule, regulation, or executive order expressly prohibits the creation, grant, or perfection of a security interest therein; provided that the Collateral shall include all Accounts and payment rights arising under or in connection with any such government contract to the extent that the grant of a security interest in such Accounts and payment rights is permitted under applicable law, including the Federal Assignment of Claims Act (31 U.S.C. § 3727).
For the avoidance of doubt, to the extent that any asset or property described in clauses (a) through (e) above ceases to satisfy the applicable criteria for exclusion (including, without limitation, upon the filing and acceptance of a statement of use with respect to an intent-to-use trademark application), such asset or property shall automatically, and without any further action or the execution of any additional documentation, constitute Collateral hereunder and shall be subject to the security interest granted in Section 2.1.
ARTICLE III — PERFECTION OF SECURITY INTEREST
Section 3.1 — UCC Financing Statements.
(a) The Grantor hereby authorizes the Collateral Agent, at any time and from time to time, to file or cause to be filed UCC-1 financing statements (and any continuation statements and amendments thereto) in each of the following jurisdictions:
(i) the office of the Secretary of State of the State of Delaware (the Grantor's jurisdiction of organization; Delaware File No. 6284501); and
(ii) the office of the Secretary of State of the State of California (the state in which the Grantor's principal place of business is located: 2180 Gateway Boulevard, Suite 400, San Jose, California 95110).
(b) The Grantor authorizes the filing of such financing statements and amendments thereto naming Lumos Analytics Inc. as debtor and Ridgeline National Bank, National Association, as Collateral Agent, as secured party, describing the Collateral as "all assets of the Debtor" or "all personal property of the Debtor" or with such greater specificity or such other description as the Collateral Agent may determine in its reasonable discretion. The Grantor acknowledges and agrees that the Collateral Agent may file such financing statements without the signature of the Grantor to the extent permitted by applicable law, including Division 9 of the California Uniform Commercial Code and Article 9 of the Delaware Uniform Commercial Code.
(c) The Grantor acknowledges that all UCC searches and filings contemplated by this Security Agreement will be coordinated by Pinnacle Filing Services, Inc., 1209 Orange Street, Wilmington, Delaware 19801, or such other filing agent as the Collateral Agent may designate from time to time. The Grantor shall cooperate with the Collateral Agent and Pinnacle Filing Services, Inc. in connection with any such searches and filings, including by providing any information or documentation reasonably requested.
(d) The Grantor agrees to pay, or reimburse the Collateral Agent for, all filing fees and related expenses incurred in connection with the filing of any financing statements, continuation statements, amendments, or termination statements contemplated by this Security Agreement.
Section 3.2 — Deposit Account Control Agreements.
(a) Within thirty (30) days after the date hereof (i.e., on or before April 8, 2023), the Grantor shall deliver, or cause to be delivered, to the Collateral Agent duly executed Deposit Account Control Agreements, in form and substance reasonably satisfactory to the Collateral Agent, with respect to each Pledged Account maintained by the Grantor at Pacific Horizon Bank, 101 Park Center Plaza, San Jose, California 95113, including, without limitation, each of the following accounts:
(i) the Grantor's operating account;
(ii) the Grantor's payroll account; and
(iii) the Grantor's reserve account.
(b) Each Deposit Account Control Agreement shall provide, among other things, that Pacific Horizon Bank (or such other depository bank, as applicable) shall comply with instructions originated by the Collateral Agent directing disposition of the funds in such Pledged Account, without further consent of the Grantor, upon receipt of notice from the Collateral Agent that an Event of Default has occurred and is continuing under the Credit Agreement.
(c) Pending the delivery of such Deposit Account Control Agreements, the Collateral Agent's security interest in the Pledged Accounts shall be perfected to the extent possible by the filing of UCC financing statements as contemplated by Section 3.1 hereof. The Grantor acknowledges that the filing of UCC financing statements alone may not be sufficient to perfect the Collateral Agent's security interest in Deposit Accounts under Division 9 of the California Uniform Commercial Code, and accordingly the Grantor agrees to use commercially reasonable efforts to deliver the required Deposit Account Control Agreements as promptly as practicable and in no event later than the date specified in clause (a) above.
Section 3.3 — Intellectual Property Filings.
(a) With respect to all registered intellectual Property Collateral, the Grantor shall execute and deliver (or shall authorize the Collateral Agent to file or record) such documents, instruments, and agreements as may be necessary or reasonably requested by the Collateral Agent to record the security interest granted herein with:
(i) the United States Patent and Trademark Office, with respect to all registered Patents and Trademarks (and all pending applications therefor) included in the Collateral; and
(ii) the United States Copyright Office, with respect to all registered Copyrights included in the Collateral.
(b) Without limiting the generality of the foregoing, the Grantor and the Collateral Agent have entered into that certain intellectual Property Security Agreement, dated as of March 9, 2023 (the "IP Security Agreement"), which IP Security Agreement serves as the primary instrument for the recordation of the security interest in the Grantor's intellectual Property Collateral with the USPTO and the United States Copyright Office. The Grantor shall cooperate with the Collateral Agent in the preparation and filing of all documents necessary to effect such recordation, including short-form security agreements, assignments, and other instruments required by the USPTO and the United States Copyright Office.
Section 3.4 — Other Perfection Actions.
In addition to the actions described in Sections 3.1 through 3.3, the Grantor shall take such other actions as the Collateral Agent may from time to time reasonably request to perfect, protect, or more fully evidence the security interest of the Collateral Agent in the Collateral, including, without limitation:
(a) with respect to any certificated securities or Instruments constituting Collateral, delivering the originals thereof to the Collateral Agent (or its designated custodian), together with undated stock powers or instruments of transfer or assignment duly executed in blank by the Grantor and with all necessary transfer tax stamps affixed thereto;
(b) marking its books and records, including its computerized records and databases, to reflect the security interest of the Collateral Agent in the Collateral;
(c) with respect to any Letter-of-Credit Rights constituting Collateral, obtaining the written consent of the issuer of the applicable letter of credit to the assignment of the proceeds thereof to the Collateral Agent, in form and substance reasonably satisfactory to the Collateral Agent;
(d) with respect to any Commercial Tort Claims arising after the date hereof, providing prompt written notice to the Collateral Agent (in accordance with Section 5.10 hereof) and executing and delivering such amendments, supplements, or modifications to this Security Agreement and Schedule 4 hereto as may be necessary to grant a first-priority perfected security interest in favor of the Collateral Agent in such Commercial Tort Claims; and
(e) taking such other actions as the Collateral Agent may reasonably request from time to time, including the execution and delivery of security agreements, pledges, assignments, and other documents in form and substance reasonably satisfactory to the Collateral Agent.
ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF GRANTOR
The Grantor hereby represents and warrants to the Collateral Agent and the Secured Parties as of the date hereof as follows:
Section 4.1 — Title and Ownership.
The Grantor is the sole legal and beneficial owner of all Collateral (or, with respect to after-acquired Collateral, will be the sole legal and beneficial owner thereof at the time of acquisition), free and clear of all liens, security interests, claims, charges, encumbrances, and rights of others of every kind and description, other than (a) the security interest created by this Security Agreement and the other Loan Documents in favor of the Collateral Agent for the benefit of the Secured Parties, and (b) Permitted Liens (as defined in the Credit Agreement). The Grantor has full right, power, and authority to grant the security interest in the Collateral as provided herein. No Person other than the Collateral Agent has "control" (within the meaning of Division 9 of the California Uniform Commercial Code) over any Deposit Account or Investment Property constituting Collateral, subject to the post-closing delivery of Deposit Account Control Agreements as required by Section 3.2 hereof and the Credit Agreement.
Section 4.2 — Legal Name and Organizational Information.
(a) The exact legal name of the Grantor, as set forth in its Certificate of Incorporation filed with the Secretary of State of the State of Delaware, is: Lumos Analytics Inc.
(b) The Grantor is a corporation organized, validly existing, and in good standing under the laws of the State of Delaware.
(c) The Grantor's Delaware File Number is 6284501.
(d) The Grantor's federal Employer Identification Number (EIN) is 82-4917356.
(e) The Grantor has not, within the five (5) years preceding the date hereof, changed its legal name, its identity (whether by merger, consolidation, or otherwise), its jurisdiction of organization, its organizational structure, or its type of organization.
(f) Except for the trade name "Lumos AI," the Grantor does not use, and has not at any time during the five (5) years preceding the date hereof used, any prior name, trade name, fictitious business name, assumed name, or other name.
Section 4.3 — Location of Grantor and Collateral.
(a) The chief executive office and principal place of business of the Grantor is located at: 2180 Gateway Boulevard, Suite 400, San Jose, California 95110.
(b) The Collateral (other than Collateral consisting of Deposit Accounts, Investment Property held in securities accounts, and intangible Collateral) is kept or located at the following locations: (i) 2180 Gateway Boulevard, Suite 400, San Jose, California 95110 (principal place of business and headquarters), and (ii) 7600 North Lamar Boulevard, Suite 220, Austin, Texas 78752 (satellite office).
(c) The Grantor's registered agent for service of process in the State of Delaware is: Capitol Registered Agents LLC, 850 New Burton Road, Suite 201, Dover, Delaware 19904.
(d) All of the Grantor's books and records relating to the Collateral are maintained at its principal place of business in San Jose, California.
Section 4.4 — Deposit Accounts.
Schedule 2 hereto sets forth a true, complete, and correct list of all Deposit Accounts maintained by the Grantor as of the date hereof, including the name of each bank or depository institution, the address of the branch where each account is maintained, and the type of each account. All Deposit Accounts of the Grantor are maintained at Pacific Horizon Bank, 101 Park Center Plaza, San Jose, California 95113. The Deposit Accounts of the Grantor consist of an operating account, a payroll account, and a reserve account, as more particularly described on Schedule 2. The Grantor does not maintain any Deposit Accounts other than those listed on Schedule 2 and Excluded Accounts, and has not at any time during the one (1) year preceding the date hereof maintained any other Deposit Accounts.
Section 4.5 — Intellectual Property.
(a) The Grantor owns, or has valid licenses to use, all intellectual Property Collateral that is material to the conduct of its business as currently conducted and as currently proposed to be conducted.
(b) Schedule 3 hereto sets forth a true, complete, and correct list of all registered Patents, Trademarks, and Copyrights of the Grantor (including registration numbers, application numbers, dates of registration or application, and the applicable registering authority) and a description of all material unregistered intellectual property of the Grantor, in each case as of the date hereof. The IP Security Agreement, dated as of March 9, 2023, and the schedules thereto, contain a complete and detailed listing of all such registered and material unregistered intellectual property as filed or to be filed with the USPTO and the United States Copyright Office.
(c) To the Grantor's knowledge, there are no material claims, disputes, actions, suits, proceedings, or investigations pending or threatened against the Grantor relating to any infringement, misappropriation, dilution, or other violation of the Grantor's intellectual property rights by any third party, or alleging that the Grantor infringes, misappropriates, dilutes, or otherwise violates the intellectual property rights of any third party.
(d) The Grantor has taken commercially reasonable steps to protect and maintain its intellectual property rights, including by requiring employees, contractors, and consultants with access to proprietary information to execute appropriate confidentiality, invention assignment, and work-for-hire agreements.
Section 4.6 — Commercial Tort Claims.
As of the date hereof, the Grantor has no Commercial Tort Claims. Schedule 4 hereto, which lists all Commercial Tort Claims of the Grantor, reflects "None" as of the date hereof.
Section 4.7 — Authority and Enforceability.
(a) The Grantor has full corporate power and authority to execute, deliver, and perform its obligations under this Security Agreement, to grant the security interest in the Collateral as contemplated hereby, and to consummate the transactions contemplated hereby.
(b) The execution, delivery, and performance of this Security Agreement by the Grantor, and the grant of the security interest in the Collateral as contemplated hereby, have been duly authorized by all necessary corporate action on the part of the Grantor, including approval by its Board of Directors. Reference is made to the Officer's Certificate, dated as of March 9, 2023, executed by Marcus Delaney, General Counsel and Secretary of the Grantor, certifying the resolutions of the Board of Directors of the Grantor authorizing the execution, delivery, and performance of this Security Agreement and the other Loan Documents.
(c) This Security Agreement has been duly executed and delivered by the Grantor and constitutes a legal, valid, and binding obligation of the Grantor, enforceable against the Grantor in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and other similar laws relating to or affecting the enforcement of creditors' rights generally, and (ii) general equitable principles (whether considered in a proceeding in equity or at law), including concepts of materiality, reasonableness, good faith, and fair dealing.
Section 4.8 — No Conflicts.
The execution, delivery, and performance by the Grantor of this Security Agreement, and the grant of the security interest in the Collateral pursuant hereto, do not and will not (a) violate, contravene, or conflict with the Certificate of Incorporation (as amended) or the Bylaws (as amended) of the Grantor, (b) violate, contravene, or conflict with any applicable law, statute, rule, regulation, order, judgment, injunction, decree, or permit binding upon or applicable to the Grantor, (c) result in a breach of, or constitute a default (or an event that, with the giving of notice or lapse of time or both, would constitute a default) under, or give rise to a right of termination, cancellation, or acceleration of any obligation under, any material agreement, contract, instrument, license, lease, or other arrangement to which the Grantor is a party or by which the Grantor or any of its assets or properties is bound, or (d) result in the creation or imposition of any lien, security interest, charge, or encumbrance on any of the Collateral, other than (i) the security interest granted hereunder in favor of the Collateral Agent for the benefit of the Secured Parties, and (ii) Permitted Liens.
Section 4.9 — Governmental Consents.
No governmental authorization, approval, consent, registration, qualification, order, or filing with, or notice to, any governmental authority or regulatory body is required for (a) the grant of the security interest in the Collateral as contemplated by this Security Agreement, (b) the perfection or maintenance of perfection of the security interest created hereby, or (c) the exercise by the Collateral Agent of its rights and remedies under this Security Agreement, except for:
(i) UCC financing statement filings with the Secretary of State of the State of Delaware and the Secretary of State of the State of California;
(ii) filings with the United States Patent and Trademark Office and the United States Copyright Office with respect to the intellectual Property Collateral, as contemplated by Section 3.3 hereof and the IP Security Agreement; and
(iii) the execution and delivery of Deposit Account Control Agreements with respect to the Pledged Accounts, as contemplated by Section 3.2 hereof.
Section 4.10 — No Prior Security Interests.
(a) As of the date hereof, no effective UCC financing statement (or similar filing) naming the Grantor as debtor or seller covers any of the Collateral, other than (i) UCC financing statements filed in connection with Permitted Liens (as defined in the Credit Agreement), if any, and (ii) UCC financing statements to be filed in connection with this Security Agreement and the other Loan Documents.
(b) The Grantor has not at any time prior to the date hereof granted any security interest in any of the Collateral that remains in effect as of the date hereof, and no Person other than the Collateral Agent holds any security interest in the Collateral (other than Permitted Liens).
(c) As of December 31, 2022, the Grantor had zero dollars ($0) of total funded indebtedness and was wholly unlevered. The revolving credit facility under the Credit Agreement represents the first credit facility entered into by the Grantor.
ARTICLE V — COVENANTS OF GRANTOR
The Grantor hereby covenants and agrees with the Collateral Agent, for the benefit of the Secured Parties, as follows:
Section 5.1 — Maintenance of Collateral.
The Grantor shall maintain, preserve, and protect all Collateral in good condition and working order (ordinary wear and tear excepted), and shall not permit any waste, destruction, or material impairment of the Collateral. Without limiting the generality of the foregoing, the Grantor shall (a) make all repairs, replacements, and improvements to the Collateral as are necessary or desirable to maintain the Collateral in good condition, (b) comply with all applicable laws, rules, regulations, and orders relating to the Collateral, and (c) not permit the value of the Collateral to be materially diminished by any act or omission of the Grantor.
Section 5.2 — Insurance.
(a) The Grantor shall at all times maintain insurance policies that satisfy the requirements set forth in the Credit Agreement, including, without limitation, the following minimum coverage:
(i) commercial general liability insurance with minimum limits of not less than Five Million Dollars ($5,000,000) per occurrence and in the aggregate;
(ii) cyber liability and technology errors and omissions insurance with minimum limits of not less than Ten Million Dollars ($10,000,000) per claim and in the aggregate;
(iii) directors and officers liability insurance with minimum limits of not less than Five Million Dollars ($5,000,000) per claim and in the aggregate; and
(iv) property insurance covering all tangible personal property constituting Collateral (including Equipment and Inventory) in an amount not less than the full replacement cost thereof.
(b) All property and casualty insurance policies maintained by the Grantor shall name Ridgeline National Bank, National Association, as Collateral Agent, as lender loss payee and additional insured, as its interests may appear. The Grantor's current insurance carrier is Broadleaf Mutual Insurance Company (rated A- (Excellent) by AM Best Company, Inc.), 280 Trumbull Street, Hartford, Connecticut 06103. The Grantor shall deliver to the Collateral Agent, on or before March 24, 2023 (as a post-closing obligation under the Credit Agreement), updated insurance certificates evidencing the foregoing coverages and naming Ridgeline National Bank, National Association, as Collateral Agent, as lender loss payee and additional insured.
(c) In the event of any loss, damage, or destruction of any Collateral, the Grantor shall promptly notify the Collateral Agent thereof and shall promptly apply the insurance proceeds received with respect thereto to the repair or replacement of such Collateral, except as otherwise provided in the Credit Agreement. All insurance proceeds in respect of any loss, damage, or destruction of Collateral shall constitute Collateral hereunder and shall be subject to the security interest granted in Section 2.1 hereof.
Section 5.3 — Negative Pledge / Liens.
(a) The Grantor shall not create, incur, assume, suffer, or permit to exist any lien, security interest, charge, encumbrance, or claim of any kind on or with respect to any of the Collateral, except for Permitted Liens (as defined in the Credit Agreement).
(b) For the avoidance of doubt, "Permitted Liens" (as defined in the Credit Agreement) include, without limitation: (i) liens arising under this Security Agreement and the other Loan Documents in favor of the Collateral Agent for the benefit of the Secured Parties; (ii) purchase money security interests and capital lease obligations on Equipment, in each case not exceeding Two Million Dollars ($2,000,000) in the aggregate at any time outstanding; (iii) statutory liens for taxes, assessments, or other governmental charges not yet delinquent or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP; (iv) mechanic's, materialman's, warehouseman's, carrier's, landlord's, and other similar statutory liens arising in the ordinary course of business; and (v) other customary exceptions as set forth in the Credit Agreement.
(c) The Grantor shall defend the Collateral against the claims and demands of all Persons at any time claiming any interest therein adverse to the Collateral Agent or any Secured Party.
Section 5.4 — Further Assurances and After-Acquired Property.
(a) The Grantor shall execute and deliver to the Collateral Agent all further instruments, documents, agreements, and certificates, and shall take all further action, that the Collateral Agent may from time to time reasonably request to (i) perfect, protect, and maintain the first-priority security interest created hereby, (ii) enable the Collateral Agent to exercise and enforce its rights and remedies hereunder, and (iii) otherwise carry out the purposes of this Security Agreement.
(b) With respect to any assets or property that are acquired by the Grantor after the date hereof and that constitute Collateral, the security interest granted in Section 2.1 shall attach automatically to such after-acquired Collateral upon the Grantor's acquisition of rights therein, without any further action by the Grantor or the Collateral Agent and without the execution or delivery of any additional security agreement, financing statement, or other document (except as may be required by Section 3.4 or other provisions of this Security Agreement with respect to specific types of Collateral, including Commercial Tort Claims and intellectual Property Collateral).
(c) If the Grantor shall at any time after the date hereof acquire or form any direct or indirect domestic subsidiary, the Grantor shall cause such subsidiary to become a guarantor under the Credit Agreement and a grantor under this Security Agreement (or a joinder hereto substantially in the form of Exhibit A attached hereto) within thirty (30) days of such formation or acquisition, as required by the Credit Agreement. The joinder shall include updated schedules reflecting the new grantor's assets, locations, intellectual property, deposit accounts, and other information required by this Security Agreement.
Section 5.5 — Use of Collateral.
(a) Subject to the terms and conditions of this Security Agreement and the negative covenants set forth in the Credit Agreement, the Grantor may use, consume, and dispose of Collateral in the ordinary course of its business, including by collecting Accounts, selling Inventory, using Equipment, and licensing intellectual Property Collateral.
(b) The Grantor shall not sell, transfer, assign, lease, license, or otherwise dispose of any material Collateral outside the ordinary course of business without the prior written consent of the Collateral Agent (which consent shall not be unreasonably withheld, conditioned, or delayed), other than Permitted Dispositions (as defined in the Credit Agreement). For purposes of this Section 5.5, a disposition of Collateral having a fair market value in excess of Five Hundred Thousand Dollars ($500,000) individually, or One Million Dollars ($1,000,000) in the aggregate during any fiscal year, shall be deemed a disposition of "material Collateral."
Section 5.6 — Maintenance of Records.
The Grantor shall maintain accurate, complete, and current books and records regarding the Collateral, including, without limitation, records of all Accounts, Inventory, Equipment, intellectual Property Collateral, and other items of Collateral. Such books and records shall be maintained at the Grantor's principal place of business (2180 Gateway Boulevard, Suite 400, San Jose, California 95110) or at such other location as the Grantor may designate with the prior written consent of the Collateral Agent. The Grantor shall permit the Collateral Agent and its representatives, upon reasonable advance notice and during normal business hours (and at any time during the continuance of an Event of Default), to inspect, audit, and make copies of such books and records, all in accordance with the terms of the Credit Agreement.
Section 5.7 — Changes in Name, Jurisdiction, or Structure.
(a) The Grantor shall not (i) change its legal name, (ii) change its jurisdiction of organization, (iii) change its organizational structure or type of organization (whether by merger, conversion, reorganization, or otherwise), or (iv) change its federal Employer Identification Number, in each case without providing the Collateral Agent at least thirty (30) days' prior written notice thereof.
(b) In connection with any such change, the Grantor shall, at its own expense, execute and deliver to the Collateral Agent such additional UCC financing statements, amendments, continuation statements, and other documents as may be required to maintain the perfection and priority of the security interest created hereby following such change.
Section 5.8 — Deposit Account Obligations.
(a) The Grantor shall not open, establish, or maintain any new Deposit Account (other than an Excluded Account) without (i) providing the Collateral Agent at least fifteen (15) days' prior written notice, specifying the name of the bank or financial institution, the address of the branch, the type of account, and the anticipated use thereof, and (ii) executing and delivering (or causing to be executed and delivered) a Deposit Account Control Agreement with respect to such new Deposit Account within thirty (30) days of the opening of such account, in form and substance reasonably satisfactory to the Collateral Agent.
(b) The Grantor shall not close, or permit to be closed, any Pledged Account without the prior written consent of the Collateral Agent, unless the funds in such account are transferred to another Pledged Account subject to an existing Deposit Account Control Agreement.
Section 5.9 — Intellectual Property Maintenance.
(a) The Grantor shall maintain, preserve, protect, and renew all material intellectual Property Collateral, including, without limitation, by (i) paying all maintenance fees, annuities, and renewal fees when due, (ii) filing all renewal applications, statements of use, affidavits of use, and other filings required to maintain registrations in force, and (iii) taking all other actions necessary to prevent the abandonment, cancellation, forfeiture, or lapse of any material intellectual property rights.
(b) The Grantor shall promptly notify the Collateral Agent of (i) any new patents, patent applications, trademarks, trademark applications, copyrights, or copyright registrations filed or obtained by the Grantor after the date hereof, and (ii) any material changes in the Grantor's intellectual property portfolio. The Grantor shall, promptly upon request by the Collateral Agent, execute and deliver supplemental intellectual property security agreements and such other documents as may be necessary to grant the Collateral Agent a first-priority perfected security interest in any such new intellectual property.
(c) The Grantor shall take commercially reasonable steps to protect, defend, and enforce its intellectual property rights against infringement, misappropriation, dilution, or other unauthorized use by third parties, including by instituting and maintaining legal proceedings where appropriate. The Grantor shall promptly notify the Collateral Agent of any material infringement, misappropriation, or other violation of its intellectual property rights of which it becomes aware.
Section 5.10 — Notification of Commercial Tort Claims.
The Grantor shall promptly (and in any event within fifteen (15) days after obtaining knowledge thereof) notify the Collateral Agent in writing of any Commercial Tort Claim arising after the date hereof with an amount in controversy reasonably expected to exceed One Hundred Thousand Dollars ($100,000). Such notice shall include a reasonable description of the claim, the parties involved, and the amount in controversy. Concurrently with such notice, or as promptly as practicable thereafter, the Grantor shall execute and deliver to the Collateral Agent such amendments, supplements, or modifications to this Security Agreement and Schedule 4 hereto as may be necessary to grant a first-priority perfected security interest in favor of the Collateral Agent in such Commercial Tort Claim.
ARTICLE VI — COLLATERAL AGENT'S RIGHTS AND REMEDIES
Section 6.1 — Rights Upon Event of Default.
(a) Upon the occurrence and during the continuance of an Event of Default (as defined in the Credit Agreement), the Collateral Agent may exercise, in addition to all other rights and remedies granted to it under this Security Agreement, the Credit Agreement, and the other Loan Documents, all rights and remedies of a secured party under the UCC and under any other applicable law. Without limiting the generality of the foregoing, upon the occurrence and during the continuance of an Event of Default, the Collateral Agent shall have the right to do any or all of the following:
(i) declare all Secured Obligations to be immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, or other notice of any kind, all of which are hereby expressly waived by the Grantor to the fullest extent permitted by applicable law;
(ii) take possession of any or all of the Collateral and, for that purpose, enter, with the aid and assistance of any Person, any premises where the Collateral is located, including the Grantor's headquarters at 2180 Gateway Boulevard, Suite 400, San Jose, California 95110, and the Grantor's satellite office at 7600 North Lamar Boulevard, Suite 220, Austin, Texas 78752;
(iii) require the Grantor to assemble all or any part of the Collateral and make it available to the Collateral Agent at a place to be designated by the Collateral Agent that is reasonably convenient to both parties;
(iv) sell, lease, assign, grant an option or options to purchase, or otherwise dispose of all or any part of the Collateral, at public or private sale, at any office of the Collateral Agent, at any broker's board, or elsewhere, for cash, on credit, or for future delivery, upon at least ten (10) Business Days' notice to the Grantor (which the Grantor agrees is commercially reasonable notice for all purposes), or upon such shorter notice as may be commercially reasonable under the circumstances;
(v) collect, receive, appropriate, and realize upon any or all of the Collateral, including all Accounts, General Intangibles, and other amounts owed to the Grantor, and for that purpose notify any or all account debtors and other Persons obligated on any of the Collateral to make payment directly to the Collateral Agent;