SECURITY AGREEMENT
(Execution Version)
Dated as of March 6, 2026
by and between
GENOME DX THERAPEUTICS INC.
as Grantor
and
PACIFIC FIDUCIARY SERVICES INC.
as Collateral Agent
for the benefit of the Secured Parties
Reference is made to that certain Bridge Loan Agreement dated as of March 6, 2026 (as amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement"), among Genome Dx Therapeutics Inc. (as Borrower), Pinnacle Venture Lending Corp. (as Administrative Agent and a Lender), Cobalt Life Sciences Fund III, L.P. (as a Lender), and Pacific Fiduciary Services Inc. (as Collateral Agent).
Right-click to update Table of Contents
RECITALS
A. The Grantor is a party to that certain Bridge Loan Agreement dated as of March 6, 2026 (the "Credit Agreement"), among Genome Dx Therapeutics Inc. (as Borrower), Pinnacle Venture Lending Corp. (as Administrative Agent and a Lender), Cobalt Life Sciences Fund III, L.P. (as a Lender), and Pacific Fiduciary Services Inc. (as Collateral Agent), pursuant to which the Lenders have agreed to extend a senior secured bridge loan facility in the aggregate principal amount of Fifteen Million Dollars ($15,000,000) to the Grantor, subject to the terms and conditions set forth therein.
B. It is a condition precedent to the obligation of the Lenders to make advances under the Credit Agreement that the Grantor execute and deliver this Security Agreement to the Collateral Agent for the ratable benefit of the Secured Parties.
C. The Grantor will derive substantial direct and indirect benefit from the extensions of credit made available under the Credit Agreement, and the Grantor has determined that the execution and delivery of this Security Agreement is in the best interests of the Grantor.
D. Reference is made to that certain Intercreditor Agreement dated as of March 6, 2026 (the "Intercreditor Agreement"), among Pinnacle Venture Lending Corp. (in its capacity as Administrative Agent under the Credit Agreement), Ridgeline Capital Partners LLC, and the Grantor, with the acknowledgment of Pacific Fiduciary Services Inc. (in its capacity as Collateral Agent hereunder), which governs the relative priority of liens on certain equipment collateral as between the Secured Parties, on the one hand, and Ridgeline Capital Partners LLC, on the other hand.
E. The Grantor desires to grant a security interest in substantially all of its assets (subject to certain exclusions set forth herein) to the Collateral Agent, for the ratable benefit of the Secured Parties, to secure the prompt and complete payment, performance, and observance of all Secured Obligations.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Security Agreement, the following terms shall have the meanings set forth below:
"Administrative Agent" means Pinnacle Venture Lending Corp., a Delaware corporation, in its capacity as administrative agent under the Credit Agreement, and its successors and assigns in such capacity.
"Bridge Priority Collateral" means all Collateral other than the Ridgeline Priority Collateral. For the avoidance of doubt, Bridge Priority Collateral includes, without limitation, all Accounts, intellectual Property, Deposit Accounts, General Intangibles, Investment Property, and all other Collateral in which the Collateral Agent holds a first-priority security interest hereunder.
"Collateral" has the meaning set forth in Section 2.1 of this Security Agreement.
"Collateral Agent" means Pacific Fiduciary Services Inc., a California corporation, in its capacity as collateral agent hereunder for the benefit of the Secured Parties, and its successors and assigns in such capacity. The principal office of the Collateral Agent is located at 350 Mission Street, Suite 1200, San Francisco, California 94105. The key contact for the Collateral Agent in connection with this Security Agreement and the other Transaction Documents is David Nakamura, Vice President, Corporate Trust.
"Credit Agreement" means the Bridge Loan Agreement dated as of March 6, 2026, among Genome Dx Therapeutics Inc. (as Borrower), Pinnacle Venture Lending Corp. (as Administrative Agent and a Lender), Cobalt Life Sciences Fund III, L.P. (as a Lender), and Pacific Fiduciary Services Inc. (as Collateral Agent), as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Deposit Accounts" means all deposit accounts (as defined in the UCC) of the Grantor, including, without limitation, (a) the operating account (Acct **7834) maintained at First Basin National Bank, South San Francisco branch, and (b) the payroll account (Acct **2091) maintained at First Basin National Bank, South San Francisco branch, and all funds held therein or credited thereto from time to time.
"Equipment" means all equipment (as defined in the UCC) now owned or hereafter acquired by the Grantor, including, without limitation, all machinery, furniture, fixtures, vehicles, tools, parts, supplies, and all additions, attachments, accessions, replacements, and substitutions thereto and therefor, together with all manuals, drawings, instructions, warranties, and rights with respect thereto.
"Excluded Property" means (a) assets subject to Ridgeline Capital Partners LLC's first-priority lien as described in the Intercreditor Agreement (constituting the Ridgeline Priority Collateral), solely to the extent the security interest of the Collateral Agent therein is subordinated pursuant to the terms of the Intercreditor Agreement; provided, however, that the Collateral Agent shall hold a junior lien on such Ridgeline Priority Collateral subject to and in accordance with the terms of the Intercreditor Agreement, and (b) any other property excluded from the Collateral pursuant to Section 2.2 hereof. For the avoidance of doubt, the term "Excluded Property" is used solely with reference to the first-priority interest; the Collateral Agent shall at all times hold a second-priority lien on the Ridgeline Priority Collateral, subject to the Intercreditor Agreement.
"General Intangibles" means all general intangibles (as defined in the UCC) of the Grantor, including, without limitation, all payment intangibles, software (including both operational and embedded software), customer lists, supplier lists, goodwill, tax refunds, tax refund claims, rights and claims under insurance policies, rights under contracts and agreements, and all other intangible personal property of every kind and nature.
"Grantor" means Genome Dx Therapeutics Inc., a corporation duly organized and existing under the laws of the State of Delaware, qualified to do business in the State of California, with its headquarters and principal place of business located at 450 Genome Way, Suite 300, South San Francisco, California 94080; EIN: 82-4917263; Delaware file number: 7481263.
"Instruments" means all instruments (as defined in the UCC), promissory notes, and chattel paper (whether electronic or tangible) of the Grantor.
"intellectual Property" or "IP Collateral" means all intellectual property of the Grantor, including, without limitation, (a) all patents (including the fourteen (14) issued United States patents and seven (7) pending Patent Cooperation Treaty ("PCT") applications owned by the Grantor as of the date hereof, as set forth on Schedule 5 attached hereto), together with all reissues, continuations, continuations-in-part, divisions, extensions, renewals, and reexaminations thereof, (b) all trademarks, service marks, trade names, trade dress, logos, and all registrations and applications therefor, together with all goodwill associated therewith, (c) all copyrights and all registrations and applications therefor, (d) all trade secrets, know-how, confidential information, proprietary data, inventions, processes, formulae, and technical information, and (e) all licenses, agreements, and permissions relating to any of the foregoing, together with all rights to sue for past, present, and future infringement, misappropriation, dilution, or other violation of any of the foregoing, and all proceeds thereof. Reference is made to the IP Security Agreement (short-form patent and trademark security agreement for recording with the United States Patent and Trademark Office) dated as of March 6, 2026.
"Intercreditor Agreement" means the Intercreditor Agreement dated as of March 6, 2026, among Pinnacle Venture Lending Corp. (in its capacity as Administrative Agent under the Credit Agreement), Ridgeline Capital Partners LLC, and the Grantor, with the acknowledgment of Pacific Fiduciary Services Inc. (in its capacity as Collateral Agent hereunder), as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms.
"IP Security Agreement" means the short-form patent and trademark security agreement dated as of March 6, 2026, between the Grantor and the Collateral Agent, for recording with the United States Patent and Trademark Office, as the same may be amended, supplemented, or otherwise modified from time to time.
"Lenders" means (a) Pinnacle Venture Lending Corp. (with a commitment of Ten Million Dollars ($10,000,000)) and (b) Cobalt Life Sciences Fund III, L.P. (with a commitment of Five Million Dollars ($5,000,000)), together with their respective successors and assigns.
"Permitted Liens" has the meaning ascribed to such term in the Credit Agreement. Without limiting the generality of the foregoing, Permitted Liens include (a) liens securing the existing equipment financing facility with Ridgeline Capital Partners LLC (with Three Million Two Hundred Thousand Dollars ($3,200,000) outstanding as of the date hereof, maturing December 2027) on the Ridgeline Priority Collateral, (b) statutory liens for taxes not yet delinquent or being contested in good faith by appropriate proceedings, (c) purchase money security interests in equipment acquired in the ordinary course of business not to exceed the limits set forth in the Credit Agreement, and (d) other liens expressly permitted under the terms of the Credit Agreement.
"Proceeds" means all proceeds as defined in Section 9-102(a)(64) of the UCC, including, without limitation, all insurance proceeds (whether payable by reason of loss or damage to or otherwise with respect to any of the Collateral), cash proceeds, non-cash proceeds, and all proceeds of proceeds.
"Required Lenders" means, at any time, Lenders holding more than fifty percent (50%) of the aggregate commitments under the Credit Agreement at such time, or, if the commitments have been terminated, Lenders holding more than fifty percent (50%) of the aggregate outstanding principal amount of the loans under the Credit Agreement.
"Ridgeline Priority Collateral" means the specifically identified equipment and related proceeds that are subject to Ridgeline Capital Partners LLC's first-priority lien under its existing equipment financing facility with the Grantor, as more particularly described in the Intercreditor Agreement and in Schedule 3 hereto.
"Secured Obligations" means all obligations of the Grantor under the Credit Agreement, this Security Agreement, the IP Security Agreement, the Warrant Agreements (as defined in the Credit Agreement), and any other Transaction Document, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, including, without limitation, (a) the principal amount of all loans outstanding under the Credit Agreement (up to an aggregate principal amount of Fifteen Million Dollars ($15,000,000)), (b) all interest accrued thereon (at a rate of six percent (6.00%) per annum, or at the Default Rate of eight percent (8.00%) per annum upon the occurrence and during the continuance of an Event of Default), (c) the commitment fee of One Hundred Fifty Thousand Dollars ($150,000), (d) the administrative agent fee of Twenty-Five Thousand Dollars ($25,000) per annum, (e) all Lenders' counsel fees and expenses, (f) all costs, expenses, and indemnification obligations, and (g) all renewals, extensions, modifications, refinancings, and rearrangements of any of the foregoing.
"Secured Parties" means, collectively, the Administrative Agent, the Collateral Agent, the Lenders, and any other holder of Secured Obligations from time to time.
"Security Agreement" means this Security Agreement, as may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms.
"Termination Date" has the meaning set forth in Section 9.1.
"Transaction Documents" has the meaning ascribed to such term in the Credit Agreement.
"UCC" means the Uniform Commercial Code as in effect from time to time in the State of California or, where applicable with respect to the perfection or priority of the security interest granted hereunder, the Uniform Commercial Code as in effect from time to time in the State of Delaware or in any other relevant jurisdiction.
Section 1.2 — UCC Terms
Terms used in this Security Agreement that are defined in the UCC and that are not otherwise defined herein shall have the meanings ascribed to them in the UCC as in effect from time to time. Without limiting the generality of the foregoing, the following UCC-defined terms shall have the meanings set forth in the applicable provisions of the UCC: "account," "chattel paper," "commercial tort claim," "deposit account," "document," "equipment," "general intangible," "goods," "instrument," "inventory," "investment property," "letter-of-credit right," "proceeds," and "supporting obligation." To the extent that the definition of any UCC term is revised after the date hereof, the revised definition shall control for purposes of this Security Agreement.
Section 1.3 — Rules of Construction
Unless the context otherwise requires: (a) references herein to the Credit Agreement, the Intercreditor Agreement, and any other agreement or instrument shall be deemed to include all amendments, restatements, supplements, and other modifications thereto; (b) capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement; (c) the words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation"; (d) references to any law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing, or interpreting such law; (e) references to "Sections," "Articles," and "Schedules" are to the Sections, Articles, and Schedules of this Security Agreement unless otherwise specified; (f) the singular shall include the plural and vice versa; and (g) the words "hereof," "herein," "hereunder," and words of similar import shall refer to this Security Agreement as a whole and not to any particular provision hereof.
ARTICLE II — GRANT OF SECURITY INTEREST
Section 2.1 — Grant
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 right, title, and interest of the Grantor in and to the following property, whether now owned or existing or hereafter acquired or arising and wherever located (collectively, the "Collateral"):
(a) all Accounts, including, without limitation, all accounts receivable, health care insurance receivables, credit card receivables, and all rights to payment for goods sold, leased, licensed, or otherwise disposed of, or for services rendered;
(b) all Chattel Paper, including both electronic chattel paper and tangible chattel paper;
(c) all Deposit Accounts, specifically including, without limitation, (i) the operating account (Acct **7834) maintained at First Basin National Bank, South San Francisco branch, and (ii) the payroll account (Acct **2091) maintained at First Basin National Bank, South San Francisco branch, and all funds on deposit therein or credited thereto from time to time;
(d) all Documents, including, without limitation, all documents of title, warehouse receipts, and bills of lading;
(e) all Equipment, including, without limitation, all machinery, furniture, fixtures, vehicles, tools, parts, and supplies; provided, however, that the security interest in Equipment constituting Ridgeline Priority Collateral shall be subject to the terms and conditions of the Intercreditor Agreement;
(f) all General Intangibles, including, without limitation, all payment intangibles, software (including both operational and embedded software), customer lists, supplier lists, goodwill, tax refunds, and other intangible personal property;
(g) all Goods, including, without limitation, all inventory (if any), raw materials, work-in-process, finished goods, and supplies;
(h) all Instruments, including, without limitation, all promissory notes, drafts, and other negotiable and non-negotiable instruments;
(i) all intellectual Property, including, without limitation, (i) all patents (including the fourteen (14) issued United States patents and the seven (7) pending PCT applications owned by the Grantor as of the date hereof), (ii) all trademarks, service marks, trade names, and trade dress, together with all goodwill associated therewith, (iii) all copyrights, (iv) all trade secrets, know-how, proprietary data, and confidential information, (v) all licenses and agreements relating to any of the foregoing, and (vi) all rights to sue for past, present, and future infringement, misappropriation, or other violation thereof;
(j) all Investment Property, including, without limitation, all securities (whether certificated or uncertificated), securities accounts, securities entitlements, commodity contracts, and commodity accounts;
(k) all Letter-of-Credit Rights, including, without limitation, all rights to payment or performance under any letter of credit;
(l) all Supporting Obligations, including, without limitation, all letters of credit, guaranties, and other secondary obligations supporting or securing payment of any of the foregoing;
(m) all books and records (whether in written, electronic, or other form) pertaining to any of the foregoing Collateral, including, without limitation, all computer programs, tapes, discs, and related electronic data processing records;
(n) all Proceeds and products of any and all of the foregoing Collateral, including, without limitation, all insurance proceeds (whether payable by reason of loss or damage to or otherwise with respect to any of the foregoing), cash proceeds, non-cash proceeds, and all proceeds of proceeds; and
(o) to the extent not otherwise included in clauses (a) through (n) above, all other personal property of the Grantor of whatever kind or nature, whether tangible or intangible, and whether now owned or hereafter acquired.
Section 2.2 — Excluded Property
Notwithstanding the provisions of Section 2.1, the Collateral shall not include the following (collectively, "Excluded Property"):
(a) any property to the extent that the granting of a security interest therein would violate any applicable law, rule, or regulation, or the terms of any contract, lease, license, or other agreement to which the Grantor is a party, in each case, after giving effect to the applicable provisions of the UCC (including, without limitation, Sections 9-406, 9-407, 9-408, and 9-409 of the UCC), and only to the extent that such prohibition is enforceable under applicable law; provided, however, that the Collateral shall include the foregoing property immediately upon the time at which such prohibition ceases to be effective or enforceable;
(b) any United States intent-to-use trademark applications filed pursuant to Section 1(b) of the Lanham Act (15 U.S.C. § 1051(b)), to the extent (and solely to the extent) that the grant of a security interest therein prior to the filing of a "Statement of Use" or an "Amendment to Allege Use" would impair the validity or enforceability of such applications under applicable law; provided, however, that upon the filing 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 become part of the Collateral without any further action by the Grantor; and
(c) the Ridgeline Priority Collateral, solely as to the first-priority security interest therein (but the Collateral Agent shall at all times hold a second-priority lien on the Ridgeline Priority Collateral, subject to and in accordance with the terms of the Intercreditor Agreement).
For the avoidance of doubt, upon the indefeasible payment in full of all obligations under the Ridgeline equipment financing facility and the release of all liens held by Ridgeline Capital Partners LLC on the Ridgeline Priority Collateral, the Ridgeline Priority Collateral shall automatically become part of the Bridge Priority Collateral and shall thereupon be subject to the first-priority lien of the Collateral Agent hereunder, without any further action by the Grantor or any other party.
Section 2.3 — Security for Secured Obligations
The Collateral secures the prompt and complete payment, performance, and observance of all Secured Obligations, including, without limitation, all principal, interest, fees, costs, expenses, and indemnification obligations arising under the Credit Agreement, this Security Agreement, the IP Security Agreement, the Warrant Agreements, and each other Transaction Document.
Section 2.4 — Continuing Security Interest
The security interest granted hereunder is a continuing security interest and shall remain in full force and effect until the Termination Date (as defined in Section 9.1). The security interest shall not be affected by the repayment and re-borrowing of any portion of the Secured Obligations, and shall continue to secure all Secured Obligations until the Termination Date regardless of any intermediate payment or discharge thereof.
ARTICLE III — REPRESENTATIONS AND WARRANTIES OF THE GRANTOR
The Grantor hereby represents and warrants to the Collateral Agent and each of the Secured Parties as follows:
Section 3.1 — Organization and Existence
The Grantor is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. The Grantor is duly qualified to do business and is in good standing in the State of California and in each other jurisdiction where the nature of its business or the ownership of its properties requires such qualification, except where the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect (as defined in the Credit Agreement). The Grantor's registered agent in the State of Delaware is National Registered Agents of Delaware Inc., located at 1209 Orange Street, Wilmington, Delaware 19801. The Grantor's principal place of business and chief executive office are located at 450 Genome Way, Suite 300, South San Francisco, California 94080. The Grantor is organized under the laws of the State of Delaware and has been assigned Delaware file number 7481263.
Section 3.2 — Authorization; No Conflict
The execution, delivery, and performance of this Security Agreement have been duly authorized by all necessary corporate action of the Grantor, including, without limitation, by resolutions duly adopted by the board of directors of the Grantor, as certified in the Officer's Certificate delivered to the Collateral Agent and the Administrative Agent on the date hereof. This Security Agreement constitutes the legal, valid, and binding obligation of the Grantor, enforceable against the Grantor in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). The grant of the security interest pursuant to this Security Agreement does not (a) violate or conflict with the Grantor's certificate of incorporation or bylaws, (b) violate or conflict with any law, rule, regulation, order, judgment, or decree applicable to the Grantor, or (c) breach, conflict with, result in a default under, or require consent under any material agreement, contract, or instrument to which the Grantor is a party or by which the Grantor or any of its properties is bound, including, without limitation, the existing equipment financing facility with Ridgeline Capital Partners LLC (as modified and supplemented by the Intercreditor Agreement).
Section 3.3 — Ownership of Collateral
The Grantor is the sole legal and beneficial owner of the Collateral, free and clear of all liens, security interests, claims, and encumbrances, except for Permitted Liens. As of the date hereof, the following existing lien exists on the Collateral: Ridgeline Capital Partners LLC holds a first-priority lien on the Ridgeline Priority Collateral, securing Three Million Two Hundred Thousand Dollars ($3,200,000) in outstanding obligations under the existing equipment financing facility maturing in December 2027. A negative pledge on intellectual property exists under the Ridgeline equipment financing facility; the Grantor represents and warrants that such negative pledge expressly permits the grant of a first-priority security interest to the Collateral Agent on all IP assets, and that none of the Grantor's intellectual property constitutes Ridgeline Priority Collateral. No other person or entity has any right, title, or interest in or to the Collateral, except as set forth on Schedule 3 hereto or as otherwise permitted under the Credit Agreement.
Section 3.4 — Perfection
Upon (a) the filing of UCC-1 financing statements with the Delaware Secretary of State (as the jurisdiction of the Grantor's incorporation) and the California Secretary of State (as a protective filing), (b) the delivery of fully executed deposit account control agreements ("DACAs") for the operating account (Acct **7834) and the payroll account (Acct **2091) at First Basin National Bank, (c) the recording of the IP Security Agreement with the United States Patent and Trademark Office, and (d) the delivery of possession of any certificated securities, instruments (other than instruments arising in the ordinary course of business having a face amount of less than Twenty-Five Thousand Dollars ($25,000) individually), or tangible chattel paper, the Collateral Agent will have a perfected first-priority security interest in the Collateral (subject to Permitted Liens and the Intercreditor Agreement with respect to the Ridgeline Priority Collateral). No further filing, recording, registration, or other action is necessary to create, perfect, or protect the security interest granted hereunder, except as set forth in this Section 3.4 and except for the filing of continuation statements as required under the UCC.
Section 3.5 — Deposit Accounts
Set forth on Schedule 2 hereto is a complete and accurate list of all deposit accounts maintained by the Grantor as of the date hereof, including the name of each depository institution, the account number, the type of account, and the branch location. As of the date hereof, the Grantor maintains the following deposit accounts:
(a) First Basin National Bank, operating account, Acct **7834, South San Francisco branch; and
(b) First Basin National Bank, payroll account, Acct **2091, South San Francisco branch.
The Grantor does not maintain any other deposit accounts or securities accounts as of the date hereof and has not maintained any deposit accounts at any other financial institution during the twelve (12) month period preceding the date hereof.
Section 3.6 — Intellectual Property
The Grantor owns fourteen (14) issued United States patents and has seven (7) pending PCT applications, all of which are listed on Schedule 5 hereto and on Exhibit A to the IP Security Agreement. All such intellectual property is duly and validly assigned to the Grantor and is free and clear of all liens, security interests, claims, and encumbrances other than Permitted Liens. The Grantor's intellectual property is subject to a negative pledge under the Ridgeline equipment financing facility; however, such negative pledge expressly permits the grant of the security interest granted hereunder in favor of the Collateral Agent, and none of the Grantor's intellectual property constitutes Ridgeline Priority Collateral. To the Grantor's knowledge, as of the date hereof, (i) none of the Grantor's patents or patent applications are subject to any pending or threatened opposition, interference, cancellation, or reexamination proceeding, and (ii) the Grantor's ownership and use of the intellectual Property does not infringe, misappropriate, or otherwise violate the intellectual property rights of any third party.
Section 3.7 — Exact Legal Name; Jurisdiction; Identification Numbers
The full and 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 "Genome Dx Therapeutics Inc." The Grantor's jurisdiction of organization is the State of Delaware. The Grantor's Employer Identification Number (EIN) is 82-4917263. The Grantor's Delaware file number is 7481263. The Grantor has not changed its legal name, its jurisdiction of organization, or its organizational identification number at any time during the five (5) year period preceding the date hereof. The Grantor has no trade names, fictitious business names, or other names under which it conducts business other than "GenomeDx" and "GDT."
Section 3.8 — Location of Equipment and Tangible Collateral
All tangible Collateral, including all Equipment, is located at the Grantor's chief executive office and headquarters at 450 Genome Way, Suite 300, South San Francisco, California 94080, as more particularly described on Schedule 4 hereto. As of the date hereof, no material tangible Collateral is located at any other location. The Grantor does not maintain any other offices, facilities, or locations where material tangible Collateral is kept or stored.
Section 3.9 — Existing Indebtedness and Liens
As of the date hereof, the following indebtedness and liens exist with respect to the Collateral: Three Million Two Hundred Thousand Dollars ($3,200,000) is outstanding under the equipment financing facility with Ridgeline Capital Partners LLC, secured by a first-priority lien on the Ridgeline Priority Collateral only, with a maturity date of December 2027. No other liens, security interests, or encumbrances exist on or with respect to any of the Collateral, except for Permitted Liens as disclosed in the Credit Agreement and listed on Schedule 3 hereto. No other indebtedness of the Grantor is secured by any of the Collateral other than the Secured Obligations and the Ridgeline equipment financing obligations as described herein.
Section 3.10 — No Financing Statements
No effective UCC financing statement, fixture filing, or other public filing or recording is on file in any jurisdiction covering any of the Collateral, or naming the Grantor as debtor, other than (a) UCC financing statements filed by or on behalf of Ridgeline Capital Partners LLC with respect to the Ridgeline Priority Collateral, and (b) the UCC financing statements being filed by or on behalf of the Collateral Agent in connection with this Security Agreement on or about the date hereof. The Grantor has not authorized the filing of any other financing statement covering any of the Collateral.
ARTICLE IV — COVENANTS OF THE GRANTOR
The Grantor hereby covenants and agrees with the Collateral Agent and each of the Secured Parties as follows:
Section 4.1 — Defense of Collateral
The Grantor shall defend the Collateral against all claims and demands of all persons at any time claiming any interest in the Collateral adverse to the Collateral Agent or any Secured Party. The Grantor shall promptly notify the Collateral Agent and the Administrative Agent in writing of any claim, action, or proceeding affecting or relating to the Collateral that could reasonably be expected to have a material adverse effect on the value of the Collateral or the rights of the Collateral Agent or any Secured Party therein.
Section 4.2 — Further Assurances; Perfection
The Grantor shall, at its own cost and expense, promptly execute and deliver all further instruments, documents, and agreements, and take all further action, that the Collateral Agent may from time to time reasonably request in order to:
(a) perfect and protect the security interest created or intended to be created hereby, and the first-priority status thereof (subject to Permitted Liens and the Intercreditor Agreement);
(b) enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to the Collateral; and
(c) otherwise effectuate the provisions and purposes of this Security Agreement.
Without limiting the generality of the foregoing, the Grantor shall:
(i) file and maintain UCC-1 financing statements with the Delaware Secretary of State (as the Grantor's jurisdiction of incorporation) and the California Secretary of State (as a protective filing), and file continuation statements at least six (6) months prior to the expiration of the effectiveness of any such financing statement, all in form and substance satisfactory to the Collateral Agent;
(ii) deliver to the Collateral Agent fully executed DACAs for each deposit account maintained by the Grantor at First Basin National Bank, including the operating account (Acct **7834) and the payroll account (Acct **2091), in form and substance reasonably satisfactory to the Collateral Agent and the Administrative Agent;
(iii) execute and deliver the IP Security Agreement for recording with the United States Patent and Trademark Office, and execute and deliver any amendments, supplements, or updates thereto as may be necessary to reflect new registrations or applications for patents or trademarks;
(iv) deliver possession of any certificated securities, instruments (having a face amount in excess of Twenty-Five Thousand Dollars ($25,000) individually), or tangible chattel paper to the Collateral Agent, duly endorsed or accompanied by instruments of transfer or assignment in blank, all in form and substance satisfactory to the Collateral Agent; and
(v) execute any amendments to UCC financing statements as may be necessary or advisable upon any change in the Grantor's legal name, jurisdiction of organization, or organizational structure, in each case, in order to maintain the perfection and priority of the security interest granted hereunder.
Section 4.3 — Changes in Name, Jurisdiction, or Structure
The Grantor shall provide at least thirty (30) days' prior written notice to the Collateral Agent and the Administrative Agent before:
(a) changing its legal name;
(b) changing its jurisdiction of organization or incorporation;
(c) changing its organizational identification number or Employer Identification Number;
(d) changing the location of its chief executive office or principal place of business; or
(e) merging with or into, consolidating with, or otherwise changing its corporate structure or identity, except as otherwise expressly permitted under the Credit Agreement.
The Grantor shall, prior to the effectiveness of any such change, take all action necessary or reasonably requested by the Collateral Agent to maintain the perfection and priority of the security interest granted hereunder, including, without limitation, the filing of amended UCC financing statements and the delivery of any additional documentation reasonably requested by the Collateral Agent.
Section 4.4 — Maintenance of Collateral
The Grantor shall maintain and preserve all tangible Collateral in good working order and condition (ordinary wear and tear excepted) and shall make all necessary repairs, renewals, and replacements thereof. The Grantor shall not permit any tangible Collateral to be wasted, destroyed, or materially impaired, except in the ordinary course of business and except for dispositions permitted under Section 4.9 hereof. The Grantor shall operate all Equipment in compliance with all applicable laws, regulations, and manufacturer specifications.
Section 4.5 — Insurance
The Grantor shall maintain insurance policies covering the Collateral as required by Section [applicable section] of the Credit Agreement, including, without limitation:
(a) directors and officers liability insurance maintained with Sentinel Specialty Insurance Co. (or another insurer reasonably acceptable to the Administrative Agent), with a policy limit of not less than Ten Million Dollars ($10,000,000); and
(b) general commercial liability insurance maintained with Commonwealth Mutual Insurance Group (or another insurer reasonably acceptable to the Administrative Agent), with a policy limit of not less than Five Million Dollars ($5,000,000).
The Collateral Agent shall be named as lender's loss payee with respect to all property and casualty insurance policies covering any tangible Collateral, and as additional insured with respect to all liability insurance policies, in each case, pursuant to endorsements in form and substance reasonably satisfactory to the Collateral Agent. All such insurance policies shall provide that they may not be cancelled or materially modified without at least thirty (30) days' prior written notice to the Collateral Agent. The Grantor shall deliver to the Collateral Agent, upon request, certificates of insurance and copies of all endorsements evidencing the insurance required hereunder.
Section 4.6 — Deposit Accounts
The Grantor shall not establish, maintain, or open any new deposit account or securities account without the prior written consent of the Collateral Agent (such consent not to be unreasonably withheld or delayed), and promptly upon the opening of any such account (and in any event within ten (10) business days thereof), the Grantor shall deliver to the Collateral Agent a fully executed DACA in favor of the Collateral Agent with respect to such new account, in form and substance reasonably satisfactory to the Collateral Agent and the Administrative Agent. All operating deposits and payroll deposits shall continue to be maintained at First Basin National Bank unless otherwise consented to in writing by the Collateral Agent and the Administrative Agent. The Grantor shall not close any existing deposit account without the prior written consent of the Collateral Agent.
Section 4.7 — Intellectual Property
The Grantor shall:
(a) maintain and preserve all of its intellectual Property in full force and effect and take all commercially reasonable actions necessary to protect, defend, and maintain the validity and enforceability thereof;
(b) not abandon, assign, sell, transfer, license (except non-exclusive licenses in the ordinary course of business), or permit to lapse any intellectual Property, other than in the ordinary course of business and consistent with reasonable business judgment, and then only to the extent such action would not reasonably be expected to have a material adverse effect on the value of the Collateral or the rights of the Collateral Agent or any Secured Party therein;
(c) promptly notify the Collateral Agent and the Administrative Agent of any new patent or trademark registrations or applications made by the Grantor, and execute and deliver supplements or amendments to the IP Security Agreement as may be necessary or reasonably requested by the Collateral Agent to ensure that all intellectual Property of the Grantor is at all times subject to the security interest granted hereunder;
(d) diligently prosecute all pending patent and trademark applications, respond to all office actions, and take all commercially reasonable steps to obtain the issuance or registration thereof; and
(e) promptly notify the Collateral Agent and the Administrative Agent of any infringement, misappropriation, or dilution of the Grantor's intellectual Property by any third party of which the Grantor becomes aware, and take commercially reasonable steps to enforce and protect the Grantor's rights therein.
Section 4.8 — No Liens
The Grantor shall not create, incur, assume, or permit to exist any lien, security interest, claim, or encumbrance on or with respect to any of the Collateral, other than (a) the security interest granted hereunder in favor of the Collateral Agent for the benefit of the Secured Parties, (b) Permitted Liens, and (c) the liens of Ridgeline Capital Partners LLC on the Ridgeline Priority Collateral as described in the Intercreditor Agreement. The Grantor shall not file or authorize or permit to be filed any financing statement or other public filing or recording with respect to the Collateral, except financing statements naming the Collateral Agent as secured party and financing statements naming Ridgeline Capital Partners LLC as secured party with respect to the Ridgeline Priority Collateral.
Section 4.9 — No Disposition of Collateral
The Grantor shall not sell, lease, license, transfer, assign, or otherwise dispose of, or grant any option or other right with respect to, any Collateral, except:
(a) dispositions of inventory in the ordinary course of business (to the extent the Grantor holds any inventory from time to time);
(b) dispositions of worn-out, surplus, or obsolete Equipment, so long as the aggregate fair market value of all Equipment disposed of in any fiscal year does not exceed the amount permitted under the Credit Agreement;
(c) non-exclusive licenses of intellectual Property in the ordinary course of business on arm's-length terms; and
(d) as otherwise expressly permitted under the Credit Agreement.
Section 4.10 — Compliance with Intercreditor Agreement
The Grantor shall comply in all material respects with all of its obligations under the Intercreditor Agreement, including, without limitation, all covenants, agreements, and restrictions applicable to the Grantor thereunder. The Grantor acknowledges and agrees that, as between the Secured Parties and Ridgeline Capital Partners LLC, the relative priority of their respective liens on the Collateral is as follows: (a) Ridgeline Capital Partners LLC holds a first-priority lien on the Ridgeline Priority Collateral, and the Collateral Agent holds a second-priority lien thereon, and (b) the Collateral Agent holds a first-priority lien on the Bridge Priority Collateral (being all Collateral other than the Ridgeline Priority Collateral). The Grantor shall not take any action, or fail to take any action, that would result in a breach of the Intercreditor Agreement or that would adversely affect the relative priority of the liens as set forth therein and herein.
Section 4.11 — Books and Records
The Grantor shall maintain complete and accurate books and records relating to the Collateral and the financial condition and operations of the Grantor, in accordance with generally accepted accounting principles consistently applied. The Grantor shall permit representatives of the Collateral Agent and the Administrative Agent (including, without limitation, independent accountants, consultants, and counsel retained by the Collateral Agent or the Administrative Agent) to inspect, examine, audit, and make copies of such books and records at the Grantor's offices during normal business hours upon reasonable prior notice (which notice shall not be required during the continuance of an Event of Default), and shall provide to the Collateral Agent and the Administrative Agent such financial and other information regarding the Collateral as the Collateral Agent or the Administrative Agent may from time to time reasonably request.
ARTICLE V — DEPOSIT ACCOUNT CONTROL
Section 5.1 — Control Agreements
As a condition to the effectiveness of this Security Agreement and the obligation of the Lenders to make advances under the Credit Agreement, the Grantor shall deliver to the Collateral Agent, on or prior to the date hereof, fully executed deposit account control agreements ("DACAs") for each of the following deposit accounts:
(a) First Basin National Bank, operating account, Acct **7834, South San Francisco branch; and
(b) First Basin National Bank, payroll account, Acct **2091, South San Francisco branch.
Each DACA shall be in form and substance reasonably satisfactory to the Collateral Agent and the Administrative Agent, and shall be duly executed by the Grantor, the Collateral Agent, and First Basin National Bank (as the depository bank). Each DACA shall provide for the Collateral Agent's "control" (within the meaning of Section 9-104 of the UCC) over the applicable deposit account.
Section 5.2 — Rights Under Control Agreements
Until the occurrence of an Activation Event (as defined in the applicable DACA, which shall include, at a minimum, the occurrence and continuance of an Event of Default under the Credit Agreement), the Grantor shall be permitted to use and direct the disposition of funds in its deposit accounts in the ordinary course of business, without the consent of or notice to the Collateral Agent. The Grantor's right to use and direct the disposition of funds in its deposit accounts shall be subject at all times to the terms and conditions of the applicable DACA. Upon the occurrence and during the continuance of an Event of Default under the Credit Agreement, the Collateral Agent may, upon delivery of a notice of exclusive control to First Basin National Bank in accordance with the terms of the applicable DACA, exercise exclusive dominion and control over all deposit accounts of the Grantor, and the Grantor's right to direct the disposition of funds in such accounts shall cease until such Event of Default has been cured or waived in accordance with the terms of the Credit Agreement.
Section 5.3 — Springing Control
Each DACA shall provide for "springing" control, whereby the Collateral Agent's right to assume exclusive dominion and control over the applicable deposit account is activated only upon delivery by the Collateral Agent of a notice of exclusive control (in the form specified in the applicable DACA) to First Basin National Bank, which notice of exclusive control shall be delivered by the Collateral Agent only following the occurrence and during the continuance of an Event of Default under the Credit Agreement. Prior to the delivery of such notice of exclusive control, the Grantor shall have sole authority to direct the disposition of funds in its deposit accounts, subject to the terms and conditions of the applicable DACA and this Security Agreement.
ARTICLE VI — RIGHTS AND REMEDIES
Section 6.1 — Rights Upon Event of Default
Upon the occurrence and during the continuance of an Event of Default (as defined in the Credit Agreement), the Collateral Agent may (and, upon the written direction of the Administrative Agent acting at the direction of the Required Lenders, shall) exercise any and all rights and remedies available to the Collateral Agent under this Security Agreement, the Credit Agreement, the UCC, and applicable law, including, without limitation, the following:
(a) exercise dominion and control over all Deposit Accounts by delivering a notice of exclusive control to First Basin National Bank in accordance with the terms of the applicable DACAs, and direct the disposition of all funds held in such Deposit Accounts;
(b) notify any and all account debtors and other persons obligated on any Collateral of the security interest granted hereunder and direct such account debtors and other persons to make payment directly to the Collateral Agent;
(c) take possession of any and all tangible Collateral, wherever located, and for that purpose enter upon any premises where any such Collateral may be located, without notice to the Grantor (to the extent permitted by law) and without judicial process;
(d) require the Grantor to assemble the Collateral and make it available to the Collateral Agent at a place or places designated by the Collateral Agent that are reasonably convenient to both the Collateral Agent and the Grantor;
(e) sell, lease, assign, or otherwise dispose of the Collateral, or any part thereof, in its then-present condition or following any commercially reasonable preparation or processing, at one or more public or private sales, with or without prior demand upon the Grantor, and upon such terms and conditions as the Collateral Agent may deem commercially reasonable, all in accordance with applicable law;
(f) apply the Proceeds of any sale, collection, or other disposition of the Collateral to the Secured Obligations in the order of priority set forth in Section 6.3 hereof; and
(g) exercise all other rights and remedies of a secured party under the UCC or under any other applicable law, including, without limitation, the right to retain the Collateral in full or partial satisfaction of the Secured Obligations (to the extent permitted by the UCC).
Section 6.2 — Sale of Collateral
The Collateral Agent may sell the Collateral, or any part thereof, at one or more public or private sales, upon not less than ten (10) days' prior written notice to the Grantor (or such shorter period as may be permitted by applicable law), which the Grantor agrees is commercially reasonable notice. The Collateral Agent may purchase all or any portion of the Collateral at any public sale, and at any private sale to the extent permitted by applicable law. The Grantor recognizes that the Collateral Agent may be unable to effect a public sale of all or any part of the intellectual Property or other Collateral by reason of certain restrictions in applicable federal and state securities laws and other applicable laws, and may be compelled to resort to one or more private sales to a restricted group of purchasers. The Grantor agrees that any such private sale shall be deemed to be commercially reasonable. All commercially reasonable costs and expenses incurred by the Collateral Agent in retaking, holding, insuring, preparing for sale, and selling the Collateral (including, without limitation, reasonable attorneys' fees and expenses, appraisal fees, and auctioneer fees) shall be borne by the Grantor and shall constitute part of the Secured Obligations.
Section 6.3 — Application of Proceeds
Proceeds received by the Collateral Agent from any sale, collection, or other disposition of the Collateral shall be applied in the following order of priority:
First, to the payment of all costs and expenses incurred by the Collateral Agent in connection with such sale, collection, or disposition, or otherwise in connection with the exercise of any rights or remedies hereunder, including, without limitation, all reasonable attorneys' fees and expenses, court costs, collection charges, and other expenses of enforcement;
Second, to the payment of the Secured Obligations in such order and in such amounts as the Administrative Agent may direct (in its discretion or at the direction of the Required Lenders), subject in all cases to the terms of the Intercreditor Agreement with respect to Proceeds of the Ridgeline Priority Collateral;
Third, any surplus remaining after the payment in full of all of the foregoing shall be paid to the Grantor, or to such other person or persons as may be entitled thereto under applicable law.
Notwithstanding the foregoing, the application of Proceeds derived from the Ridgeline Priority Collateral shall be governed by and subject to the terms and conditions of the Intercreditor Agreement. In the event of any conflict between this Section 6.3 and the Intercreditor Agreement with respect to the application of Proceeds from the Ridgeline Priority Collateral, the terms of the Intercreditor Agreement shall control.
Section 6.4 — Deficiency
If the Proceeds of any sale, collection, or other disposition of the Collateral are insufficient to pay all of the Secured Obligations in full, the Grantor shall remain liable for any deficiency remaining after the application of such Proceeds, and the Collateral Agent and the Secured Parties shall retain all rights and remedies available at law or in equity to collect such deficiency.
Section 6.5 — Remedies Cumulative
All rights and remedies of the Collateral Agent and the Secured Parties under this Security Agreement, the Credit Agreement, the UCC, and applicable law are cumulative and non-exclusive, and may be exercised singly or concurrently. The exercise of any one right or remedy shall not be deemed to be an election of such right or remedy to the exclusion of any other right or remedy, and shall not preclude the simultaneous or subsequent exercise of any other right or remedy.
Section 6.6 — Waiver of Certain Rights
To the fullest extent permitted by applicable law, the Grantor hereby waives (a) any right to require the Collateral Agent or any Secured Party to proceed against any other person or to exhaust any other security or Collateral before enforcing the security interest granted hereunder, (b) any right to require the Collateral Agent or any Secured Party to pursue any particular remedy before enforcing the security interest granted hereunder, (c) any right to require the marshaling of assets or Collateral, (d) any right of redemption and any right to a hearing prior to the Collateral Agent's taking possession of or disposing of any Collateral (to the extent such waiver is permitted by applicable law), and (e) all rights of appraisement, valuation, stay, extension, or redemption that the Grantor now has or may hereafter acquire, by statute or otherwise, which would prevent or delay the enforcement of this Security Agreement or any sale of the Collateral.
ARTICLE VII — THE COLLATERAL AGENT
Section 7.1 — Appointment and Authority
The Collateral Agent has been appointed by the Secured Parties and acts for the ratable benefit of the Secured Parties in accordance with the terms of this Security Agreement and the Credit Agreement. Pacific Fiduciary Services Inc. hereby accepts its appointment as Collateral Agent hereunder and agrees to act in such capacity subject to the terms and conditions set forth herein and in the Credit Agreement. The Collateral Agent shall hold the security interest granted hereunder for the ratable benefit of the Secured Parties, and shall exercise its rights and perform its duties hereunder in accordance with the instructions of the Administrative Agent (acting at the direction of the Required Lenders), except as otherwise expressly provided herein or in the Credit Agreement.
Section 7.2 — Standard of Care
The Collateral Agent shall exercise the same degree of care in the custody, safekeeping, and preservation of the Collateral in its possession or control as the Collateral Agent exercises with respect to its own property of a similar nature, but in no event less than reasonable care. Except as expressly set forth in this Security Agreement, the Collateral Agent shall have no obligation to take any action with respect to the Collateral beyond the safe custody thereof. The Collateral Agent shall not be liable for any loss or damage to the Collateral arising from causes beyond its reasonable control, nor shall the Collateral Agent be responsible for the existence, genuineness, value, or protection of any Collateral.
Section 7.3 — Reliance
The Collateral Agent shall be entitled to rely upon, and shall be fully protected in relying upon, any notice, certificate, instrument, opinion, request, direction, consent, or other document or communication believed by it in good faith to be genuine and to have been signed, sent, or presented by the proper person or persons, and the Collateral Agent shall have no duty to make any independent investigation or verification of any of the foregoing. The Collateral Agent may consult with legal counsel (including counsel for the Grantor), independent accountants, and other advisors selected by the Collateral Agent, and shall not be liable for any action taken or omitted in good faith in accordance with the advice of such counsel, accountants, or advisors.
Section 7.4 — Delegation
The Collateral Agent may perform any and all of its duties and exercise any and all of its rights hereunder through one or more agents, attorneys-in-fact, sub-agents, or other delegates appointed by the Collateral Agent. Any such delegation shall not relieve the Collateral Agent of its obligations hereunder, except that the Collateral Agent shall not be responsible for the negligence or misconduct of any agent, attorney-in-fact, or delegate selected by it with reasonable care.
Section 7.5 — Resignation and Replacement
The Collateral Agent may resign from its duties hereunder at any time upon not less than thirty (30) days' prior written notice to the Grantor and the Administrative Agent. Upon the effective date of such resignation, the Administrative Agent shall appoint a successor Collateral Agent, which successor shall be reasonably acceptable to the Grantor (so long as no Event of Default has occurred and is continuing at the time of such appointment). If no successor Collateral Agent has been appointed and accepted its appointment within thirty (30) days after the resigning Collateral Agent's notice of resignation, the resigning Collateral Agent may petition a court of competent jurisdiction to appoint a successor Collateral Agent. Upon the acceptance of appointment by a successor Collateral Agent, such successor shall succeed to all of the rights, powers, and duties of the resigning Collateral Agent hereunder, and the resigning Collateral Agent shall be discharged from its duties and obligations hereunder (except with respect to any indemnification obligations owed to the resigning Collateral Agent). The resigning Collateral Agent shall execute and deliver all documents and instruments, and take all further action, as may be reasonably necessary to transfer the security interest and all related rights to the successor Collateral Agent.