EXHIBIT 10.9
================================================================================
SECURITY AGREEMENT
By
WOMEN FIRST HEALTHCARE, INC.,
as Company
and
CIBC WMC INC.,
as Collateral Agent
----------------------
Dated as of June 25, 2002
================================================================================
TABLE OF CONTENTS
Page
----
PREAMBLE ................................................................................. 1
RECITALS ................................................................................. 1
AGREEMENT ................................................................................ 2
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions ............................................................... 2
SECTION 1.2 Interpretation ............................................................ 10
SECTION 1.3 Resolution of Drafting Ambiguities ........................................ 10
ARTICLE II
GRANT OF SECURITY AND SECURED OBLIGATIONS
SECTION 2.1 Pledge-First Priority ..................................................... 10
SECTION 2.2 Pledge-Second Priority .................................................... 11
SECTION 2.3 Secured Obligations ....................................................... 12
SECTION 2.4 Security Interests ........................................................ 12
SECTION 2.5 No Release ................................................................ 12
ARTICLE III
PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES;
USE OF PLEDGED COLLATERAL
SECTION 3.1 Financing Statements and Other Filings; Maintenance of Perfected
Security Interest ...................................................... 12
SECTION 3.2 Other Actions ............................................................. 13
SECTION 3.3 Use and Pledge of Pledged Collateral ...................................... 14
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 4.1 Title, Authority and Validity; Preservation of Corporate Existence ........ 14
SECTION 4.2 Validity of Security Interests ............................................ 14
SECTION 4.3 Limitation on Liens ....................................................... 15
SECTION 4.4 Other Financing Statements ................................................ 15
-i-
Page
----
SECTION 4.5 Chief Executive Office; Change of Name; Jurisdiction of Organization ...... 15
SECTION 4.6 Location of Inventory and Equipment ....................................... 16
SECTION 4.7 Condition and Maintenance of Equipment .................................... 16
SECTION 4.8 Corporate Names; Prior Transactions ....................................... 16
SECTION 4.9 No Claims ................................................................. 16
SECTION 4.10 No Conflicts, Consents, etc. .............................................. 17
SECTION 4.11 Pledged Collateral ........................................................ 17
SECTION 4.12 Insurance ................................................................. 17
SECTION 4.13 Payment of Taxes; Compliance with Laws; Contesting Liens; Claims .......... 18
SECTION 4.14 Access to Pledged Collateral, Books and Records; Other Information ........ 18
ARTICLE V
CERTAIN PROVISIONS CONCERNING INTELLECTUAL
PROPERTY COLLATERAL
SECTION 5.1 Grant of License .......................................................... 18
SECTION 5.2 Registrations ............................................................. 19
SECTION 5.3 No Violations or Proceedings .............................................. 19
SECTION 5.4 Protection of Collateral Agent's Security ................................. 19
SECTION 5.5 After-Acquired Property ................................................... 20
SECTION 5.6 Modifications ............................................................. 20
SECTION 5.7 Litigation ................................................................ 20
ARTICLE VI
CERTAIN PROVISIONS CONCERNING ACCOUNTS
SECTION 6.1 Special Representations and Warranties .................................... 21
SECTION 6.2 Maintenance of Records .................................................... 21
SECTION 6.3 Legend .................................................................... 21
SECTION 6.4 Modification of Terms, etc ................................................ 21
SECTION 6.5 Collection ................................................................ 22
ARTICLE VII
TRANSFERS AND OTHER LIENS
SECTION 7.1 Transfers of and other Liens on Pledged Collateral ........................ 22
ARTICLE VIII
REMEDIES
SECTION 8.1 Remedies .................................................................. 22
SECTION 8.2 Notice of Sale ............................................................ 24
-ii-
Page
----
SECTION 8.3 Waiver of Notice and Claims ............................................... 24
SECTION 8.4 Certain Sales of Pledged Collateral ....................................... 24
SECTION 8.5 No Waiver; Cumulative Remedies ............................................ 26
SECTION 8.6 Certain Additional Actions Regarding Intellectual Property ................ 26
ARTICLE IX
APPLICATION OF PROCEEDS
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Concerning the Collateral Agent ........................................... 27
SECTION 10.2 Collateral Agent May Perform; Collateral Agent Appointed
Attorney-in-Fact ....................................................... 27
SECTION 10.3 Expenses .................................................................. 28
SECTION 10.4 Indemnity ................................................................. 28
SECTION 10.5 Continuing Security Interests; Assignment ................................. 29
SECTION 10.6 Termination; Release ...................................................... 29
SECTION 10.7 Modification in Writing ................................................... 29
SECTION 10.8 Notices ................................................................... 30
SECTION 10.9 Governing Law ............................................................. 30
SECTION 10.10 Consent to Jurisdiction and Service of Process; Waiver of Jury Trial ...... 30
SECTION 10.11 Severability of Provisions ................................................ 30
SECTION 10.12 Execution in Counterparts ................................................. 30
SECTION 10.13 Business Days ............................................................. 30
SECTION 10.14 No Credit for Payment of Taxes or Imposition .............................. 31
SECTION 10.15 No Claims Against Collateral Agent ........................................ 31
SECTION 10.16 Obligations Absolute ...................................................... 31
SIGNATURES
SCHEDULE 1.1 Prior Liens
SCHEDULE 4.10 Required Consents
SCHEDULE 5.3 Violations or Proceedings
EXHIBIT 1 Form of Company Acknowledgment
ANNEX A Patents and Trademarks
ANNEX B Copyrights
-iii-
SECURITY AGREEMENT
SECURITY AGREEMENT (the "Agreement"), dated as of June 25, 2002, made
by Women First HealthCare, Inc., a Delaware corporation having an office at
00000 Xx Xxxxxx Xxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx 00000 (the "Company"), in
favor of CIBC WMC INC., a [ ] having an office at C/O CIBC Capital
Partners, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, in its capacity as
Collateral Agent pursuant to the Securities Purchase Agreement and Preferred
Stock Purchase Agreement (each as hereinafter defined), as pledgee, assignee and
secured party (in such capacities and together with any successors in such
capacities, the "Collateral Agent").
R E C I T A L S :
A. The Company and the Purchasers (as defined in the Securities
Purchase Agreement) have, in connection with the execution and delivery of this
Agreement, entered into the Note and Warrant Purchase Agreement, dated as of
June 25, 2002 (as amended, amended and restated, supplemented or otherwise
modified from time to time, the "Securities Purchase Agreement"), pursuant to
which the Company has issued its senior secured notes due 2005 (the "Notes") in
the aggregate principal amount of $28.0 million, together with warrants to
purchase common stock. It is contemplated that the Company may, after the date
hereof, issue Additional Notes (as defined in the Securities Purchase Agreement;
the Additional Notes, together with the Notes, the "Securities") pursuant to the
provisions of the Securities Purchase Agreement.
B. The Company and the Purchasers (as defined in the Preferred Stock
Purchase Agreement) have, in connection with the execution and delivery of this
Agreement, entered into the Preferred Stock Purchase Agreement, dated as of June
25, 2002 (as amended, amended and restated, supplemented or otherwise modified
from time to time, the "Preferred Stock Purchase Agreement" and, together with
the Securities Purchase Agreement, the "Purchase Agreements"), pursuant to which
the Company has issued convertible redeemable preferred stock (the "Convertible
Preferred Stock") in the aggregate liquidation preference of $13.0 million. It
is contemplated that the Company may, after the date hereof, issue Additional
Preferred Stock (as defined in the Preferred Stock Purchase Agreement; the
Additional Preferred Stock, together with the Convertible Preferred Stock, the
"Preferred Stock") pursuant to the provisions of the Certificate of Designation
relating to the Preferred Stock (the "Certificate of Designation").
C. The Company will receive substantial benefits from the execution,
delivery and performance of the obligations under the Purchase Agreements and
is, therefore, willing to enter into this Agreement.
D. The Company is or, as to Pledged Collateral (as hereinafter
defined) acquired by such Company after the date hereof will be, the legal
and/or beneficial owner of the Pledged Collateral pledged by it hereunder.
E. This Agreement is given by the Company in favor of the Collateral
Agent for the benefit of the Secured Parties (as hereinafter defined) to secure
the payment and performance of all of the Secured Obligations (as hereinafter
defined).
A G R E E M E N T :
NOW THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Collateral Agent hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions.
(a) Unless otherwise defined herein, terms used herein that are
defined in the UCC shall have the meanings assigned to them in the UCC,
including the following terms which are capitalized herein:
"Accounts"; "Bank"; "Chattel Paper"; "Commercial Tort Claim"; "Deposit
Accounts"; "Documents"; "Electronic Chattel Paper"; "Equipment"; "Fixtures";
"Instruments" (as defined in Article 9 rather than Article 3); "Inventory";
"Proceeds"; "Security Entitlement"; and "Tangible Chattel Paper".
(b) Capitalized terms used but not otherwise defined herein that are
defined in the Purchase Agreements shall have the meanings given to them in the
Purchase Agreements, including the following terms:
"Affiliate"; "Business Day"; "Capitalized Lease Obligations"; "Cash
Equivalents"; "Date of Closing"; "Debt"; "Event of Default"; "GAAP";
"Indebtedness"; "Lien"; "Person"; and "Purchase Money Indebtedness".
(c) The following terms shall have the following meanings:
"Acquisition Document Rights" shall mean, with respect to the Company,
collectively, all of the Company's rights, title and interest in, to and under
the Acquisition Documents including, without limitation, (i) all rights and
remedies relating to monetary damages, including indemnification rights and
remedies, and claims for damages or other relief pursuant to or in respect of
the Acquisition Documents, (ii) all rights and remedies relating to monetary
damages, including indemnification rights and remedies, and claims for monetary
damages under or in respect of the agreements, documents and instruments
referred to in the Acquisition Documents or related thereto and (iii) all
proceeds, collections, recoveries and rights of subrogation with respect to the
foregoing.
"Acquisition Documents" shall mean, collectively, (i) that certain
Asset Purchase Agreement dated June 25, 2002, among the Company, Westwood-Squibb
Colton Holdings Partnership, xxx Xxxxxxxx Xxxxxxx and Xxxxxxx-Xxxxx Squibb
Company (the "Asset Purchase Agreement"); (ii) that certain Supply Agreement
dated June 25, 2002, among the Company, Westwood-Squibb Colton Holdings
Partnership, xxx Xxxxxxxx Xxxxxxx and Xxxxxxx-Xxxxx Squibb Company; and (iii)
that certain License Agreement dated June 25, 2002, among the Company,
Westwood-Squibb Colton Holdings Partnership, xxx Xxxxxxxx Xxxxxxx and
Xxxxxxx-Xxxxx Squibb Company; in each case, together with any and all documents,
agreements and other instruments then or at any time thereafter executed and/or
delivered in connection therewith or related thereto in each case as amended,
amended and restated, supplemented, extended, renewed, replaced or otherwise
modified from time to time.
-2-
"Agreement" shall mean this Agreement, as amended, amended and
restated, supplemented or otherwise modified from time to time in accordance
with the provisions hereof.
"Asset Purchase Agreement" shall have the meaning assigned to such
term in the definition of Acquisition Documents hereof.
"Business" shall mean the treatment of unwanted facial hair in women
through the sale of the Product.
"Certificate of Designation" shall have the meaning assigned to such
term in Recital B hereof.
"Charges" shall mean any and all property and other taxes, assessments
and special assessments, levies, fees and all governmental charges imposed upon
or assessed against, and all claims (including, without limitation, landlords',
carriers', mechanics', workmen's, repairmen's, laborers', materialmen's,
suppliers' and warehousemen's Liens and other claims arising by operation of
law) against, all or any portion of the Pledged Collateral.
"Collateral" shall mean all the rights and interests related to the
Product acquired by the Company in connection with the acquisition by the
Company of the Product and related assets pursuant to the Asset Purchase
Agreement and the financing thereof.
"Collateral Account Funds" shall mean, collectively, the following
from time to time on deposit in a collateral account: all funds (including,
without limitation, all Trust Monies), investments (including, without
limitation, all Cash Equivalents) and all certificates and instruments from time
to time representing or evidencing such investments; all notes, certificates of
deposit, checks and other instruments from time to time hereafter delivered to
or otherwise possessed by the Collateral Agent for or on behalf of the Company
in substitution for, or in addition to, any or all of the Pledged Collateral;
and all interest, dividends, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the items constituting Pledged Collateral.
"Collateral Agent" shall have the meaning assigned to such term in the
Preamble of this Agreement.
"Collateral Material Adverse Effect" shall mean, as of any date of
determination and whether individually or in the aggregate (a) any event,
circumstance, occurrence or condition which has caused or resulted in (or would
reasonably be expected to cause or result in) a material adverse effect on the
business or operations as presently conducted in connection with the Pledged
Collateral; (b) any event, circumstance, occurrence or condition which has
caused or resulted in (or would reasonably be expected to cause or result in) a
material adverse effect on the value or utility of the Pledged Collateral; or
(c) subject to Section 2.2 of this Agreement, any event, circumstance,
occurrence or condition which has caused or resulted in (or would reasonably
expect to cause or result in) a material adverse effect on the legality,
priority or enforceability of the Lien created by this Agreement or the rights
and remedies of the Collateral Agent hereunder.
"Company" shall have the meaning assigned to such term in the Preamble
hereof.
"Contested Liens" shall mean, collectively, any Liens incurred in
respect of any Charges to the extent that the amounts owing in respect thereof
are not yet delinquent or are being contested and
-3-
otherwise comply with the provisions of Section 4.13 hereof; provided, however,
that such Liens shall in all respects be subject and subordinate in priority to
the Liens and security interests created and evidenced by this Agreement, except
if and to the extent that the law or regulation creating, permitting or
authorizing such Lien provides that such Lien must be superior to the Liens and
security interests created and evidenced hereby.
"Contracts" shall mean, collectively, with respect to the Company, all
sale, service, performance, equipment or property lease contracts, agreements
and grants and all other contracts, agreements or grants (in each case, whether
written or oral, or third party or intercompany), between the Company and third
parties, and all assignments, amendments, restatements, supplements, extensions,
renewals, replacements or modifications thereof relating to the Pledged
Collateral.
"Control" shall mean (i) in the case of each Deposit Account,
"control," as such term is defined in Section 9-104 of the UCC.
"Control Agreement" shall mean an agreement in form and substance
acceptable to the Collateral Agent.
"Convertible Preferred Stock" shall have the meaning assigned to such
term in Recital B hereof.
"Copyrights" shall mean, collectively, with respect to the Company,
all copyrights (whether statutory or common law, whether established or
registered in the United States or any other country or any political
subdivision thereof whether registered or unregistered and whether published or
unpublished) relating to the Pledged Collateral and all copyright registrations
and applications made by the Company, in each case, whether now owned or
hereafter created or acquired by or assigned to the Company, including, without
limitation, the copyrights, registrations and applications listed in Annex B
attached hereto, together with any and all (i) rights and privileges arising
under applicable law with respect to the Company's use of such copyrights, (ii)
reissues, renewals, continuations and extensions thereof, (iii) income, fees,
royalties, damages, claims and payments now or hereafter due and/or payable with
respect thereto, including, without limitation, damages and payments for past,
present or future infringements thereof, (iv) rights corresponding thereto
throughout the world and (v) rights to xxx for past, present or future
infringements thereof.
"Deposit Accounts" shall mean, collectively, with respect to the
Company, (i) all "deposit accounts" as such term is defined in the UCC in
connection with the Pledged Collateral and (ii) all cash, funds, checks, notes
and instruments from time to time on deposit in any of the accounts described in
clause (i) of this definition.
"Destruction" shall mean any and all damage to, or loss or destruction
of, all or any portion of the Pledged Collateral.
"Excluded Property" shall mean Special Property other than the
following:
(a) the right to receive any payment of money (including, without
limitation, Accounts, General Intangibles and Payment Intangibles) or any
other rights referred to in Sections 9-406(f), 9-407(a) or 9-408(a) of the
UCC; and
(b) any Proceeds, substitutions or replacements of any Special
Property (unless such Proceeds, substitutions or replacements would
constitute Special Property).
-4-
"FDA" shall mean the United States Food and Drug Administration, or
any successor entity.
"General Intangibles" shall mean, collectively, with respect to the
Company, all "general intangibles," as such term is defined in the UCC, of the
Company relating to the Pledged Collateral and, in any event, shall include,
without limitation, (i) all of the Company's rights, title and interest in, to
and under all Insurance Policies and Contracts, (ii) all know-how and warranties
relating to any of the Pledged Collateral, (iii) any and all other rights,
claims, choses-in-action and causes of action of the Company against any other
Person and the benefits of any and all collateral or other security given by any
other Person in connection therewith, (iv) all guarantees, endorsements and
indemnifications on, or of, any of the Pledged Collateral, (v) all lists, books,
records, correspondence, ledgers, print-outs, files (whether in printed form or
stored electronically), tapes and other papers or materials containing
information relating to any of the Pledged Collateral, including, without
limitation, all customer or tenant lists, identification of suppliers, data,
plans, blueprints, specifications, designs, drawings, appraisals, recorded
knowledge, surveys, studies, engineering reports, test reports, manuals,
standards, processing standards, performance standards, catalogs, research data,
computer and automatic machinery software and programs and the like, field
repair data, accounting information pertaining to the Company's operations or
any of the Pledged Collateral and all media in which or on which any of the
information or knowledge or data or records may be recorded or stored and all
computer programs used for the compilation or printout of such information,
knowledge, records or data, (vi) all licenses, consents, permits, variances,
certifications, authorizations and approvals, however characterized, of any
Governmental Authority (or any Person acting on behalf of a Governmental
Authority) now or hereafter acquired or held by the Company pertaining to
operations now or hereafter conducted by the Company or any of the Pledged
Collateral including, without limitation, building permits, certificates of
occupancy, environmental certificates, industrial permits or licenses and
certificates of operation and (vii) all rights to reserves, deferred payments,
deposits, refunds, indemnification of claims to the extent the foregoing relate
to any Pledged Collateral and claims for tax or other refunds against any
Governmental Authority relating to any Pledged Collateral.
"Goodwill" shall mean, collectively, with respect to the Company, the
goodwill connected with the Pledged Collateral including, without limitation,
(i) all goodwill connected with the use of and symbolized by any of the
Intellectual Property Collateral in which the Company has any interest and (ii)
all know-how, trade secrets, customer and supplier lists, proprietary
information, inventions, methods, procedures, formulae, descriptions,
compositions, technical data, drawings, specifications, name plates, catalogs,
confidential information and the right to limit the use or disclosure thereof by
any Person, pricing and cost information, business and marketing plans and
proposals, consulting agreements, engineering contracts and such other assets
which relate to such goodwill.
"Governmental Authority" shall mean any Federal, state, local, foreign
or other governmental, quasi-governmental or administrative (including
self-regulatory) body, instrumentality, department, agency, authority, board,
bureau, commission, office of any nature whatsoever or other subdivision
thereof, or any court, tribunal, administrative hearing body, arbitration panel
or other similar dispute-resolving body, whether now or hereafter in existence,
or any officer or official thereof, having jurisdiction over the Company or the
Pledged Collateral or any portion thereof.
"Indemnified Liabilities" shall have the meaning assigned to such term
in Section 10.4(i) hereof.
"Indemnitees" shall have the meaning assigned to such term in Section
10.4(i) hereof.
-5-
"Insurance Policies" shall mean the insurance policies and coverages
required to be maintained by the Company with respect to the Pledged Collateral
pursuant to Paragraph 5H of the Securities Purchase Agreement and all renewals
and extensions thereof.
"Insurance Requirements" means, collectively, with respect to the
Company, all provisions of the Insurance Policies, all requirements of the
Company of any of the Insurance Policies and all orders, rules, regulations and
any other requirements of the National Board of Fire Underwriters (or any other
body exercising similar functions) binding upon the Company and applicable to
the Pledged Collateral or any use or condition thereof.
"Intellectual Property Collateral" shall mean, collectively, the
Patents, Trademarks, Copyrights, Licenses, Know-How, Internet Names, Trade Dress
and Goodwill relating to the Pledged Collateral.
"Intercreditor Agreement" means that certain Intercreditor Agreement,
dated as of the date hereof, among the Purchaser and the Collateral Agent and
acknowledged by the Company.
"Internet Names" shall mean all web addresses, domain names and phone
numbers held in the Company's name and the applications and registrations
therefor.
"Know-How" shall mean any and all Manufacturing Know-How, product
specifications, processes, product designs, plans, trade secrets, ideas,
concepts, inventions, manufacturing, engineering and other manuals and drawings,
standard operating procedures, formulae, flow diagrams, chemical,
pharmacological, toxicological, pharmaceutical, physical, analytical, safety,
quality assurance, quality control and clinical data, technical information,
research records, and all other confidential or proprietary technical and
business information that is currently owned by the Company or is in the future
developed by or for the Company and used exclusively in the Business. For the
sake of clarity, none of the foregoing information shall be included in Know-How
to the extent that such information is covered by any claim of any Patent.
"Licenses" shall mean, collectively, with respect to the Company, all
license and distribution agreements with, and covenants not to xxx, any other
party with respect to any Patent, Trademark or Copyright, whether the Company is
a licensor or licensee, distributor or distributee under any such license or
distribution agreement, including, without limitation, the license and
distribution agreements listed in Annexes A and B attached hereto, together with
any and all (i) renewals, extensions, supplements and continuations thereof,
(ii) income, fees, royalties, damages, claims and payments now and hereafter due
and/or payable thereunder and with respect thereto including, without
limitation, damages and payments for past, present or future infringements or
violations thereof, (iii) rights to xxx for past, present and future
infringements or violations thereof and (iv) other rights to use, exploit or
practice any or all of the Patents, Trademarks or Copyrights.
"Manufacturing Know-How" shall mean the percentages and specifications
of ingredients, the manufacturing processes, specifications, technology,
inventions, assays, quality control and testing procedures, know-how and trade
secrets owned by the Company and used exclusively to manufacture, formulate,
test and package the Product for sale, marketing and distribution. For the sake
of clarity, none of the foregoing information shall be included in Know-How to
the extent that such information is covered by any claim of any Patent.
"Marketing Materials" shall mean all marketing materials, marketing
research data, customer and sales information, product literature, promotional
materials and data, advertising and display
-6-
materials and all training materials in whatever medium (e.g., audio, visual or
print) held in the Company's name and exclusively related to the Business.
"Material Intellectual Property" means Intellectual Property
Collateral owned by or in which the Company has any interest which is material
to its business.
"NDA" shall mean any new drug application filed pursuant to the
requirements of the FDA, as more fully defined in 21 C.F.R.ss.314.5 et seq., and
any equivalent application filed with any Governmental Authority.
"Notes" shall have the meaning assigned to such term in Recital A
hereof.
"Operative Agreement" shall mean (i) in the case of any limited
liability company or partnership or other non-corporate entity, any membership
or partnership agreement or other organizational agreement or document thereof
and (ii) in the case of any corporation, any charter or certificate of
incorporation and by-laws thereof.
"Patents" shall mean, collectively, with respect to the Company, all
patents issued or assigned to and all patent applications and registrations made
by the Company relating to the Pledged Collateral (whether established or
registered or recorded in the United States or any other country or any
political subdivision thereof), including, without limitation, those listed in
Annex A attached hereto, together with any and all (i) rights and privileges
arising under applicable law with respect to the Company's use of any such
patents, (ii) inventions and improvements described and claimed therein, (iii)
reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof, (iv) income, fees, royalties, damages, claims and
payments now or hereafter due and/or payable thereunder and with respect thereto
including, without limitation, damages and payments for past, present or future
infringements thereof, (v) rights corresponding thereto throughout the world and
(vi) rights to xxx for past, present or future infringements thereof.
"Perfection Certificate" shall mean that certain Perfection
Certificate dated June 25, 2002, executed and delivered by the Company in favor
of the Collateral Agent for the benefit of the Secured Parties, as the same may
be amended, amended and restated, supplemented or otherwise modified from time
to time upon the request of the Collateral Agent.
"Permitted Collateral Liens" shall have the meaning assigned to such
term in Section 4.3 hereof.
"Pledged Collateral" shall have the meaning assigned to such term in
Sections 2.1 hereof.
"Preferred Stock" shall have the meaning assigned to such term in
Recital B hereof.
"Preferred Stock Purchase Agreement" shall have the meaning assigned
to such term in Recital B hereof.
"Prior Liens" shall mean, collectively, the Liens identified in
Schedule 1.1 attached hereto relating to the items of Pledged Collateral
identified in such Schedule.
"Product" shall mean VANIQA(R) (eflornithine hydrochloride) Cream, in
all current and future presentations and formulations.
-7-
"Product Registrations" shall mean the NDAs (including any Marketing
Authorization Approvals) and comparable regulatory filings and approvals for the
Product held in the Company's name.
"Prudent Operator" shall mean the standard of care taken by a prudent
operator of property and assets similar in use and configuration to the Pledged
Collateral, as the case may be, and located in the locality where the Pledged
Collateral, as the case may be, is located.
"Purchase Agreements" shall have the meaning assigned to such term in
Recital B hereof.
"Regulatory Documentation" shall mean all (a) regulatory filings and
supporting documents, chemistry, manufacturing and controls data and
documentation, preclinical and clinical studies and tests, (b) records
maintained under record keeping or reporting requirements of the FDA, or any
other Governmental Authority including without limitation the drug master file
and Investigational New Drug application, and (c) the complete complaint,
adverse event and medical inquiry filings with respect to the Product; in each
case held in the Company's name and in each case exclusively related to the
Business, including the Product Registrations.
"Requirements of Law" shall mean, collectively, any and all
requirements of any Governmental Authority including, without limitation, any
and all laws, ordinances, rules, regulations or similar statutes or case law.
"Secured Obligations" shall mean all obligations (whether or not
constituting future advances, obligatory or otherwise) of the Company from time
to time arising under or in respect of this Agreement, the Purchase Agreements,
the Securities, the Preferred Stock, the Certificate of Designation and the
other Security Documents (including, without limitation, the obligations to pay
principal, interest and all other charges, fees, expenses, commissions,
reimbursements, premiums, indemnities and other payments related to or in
respect of the obligations contained in this Agreement, the Purchase Agreements,
the Securities, the Preferred Stock, the Certificate of Designation and the
other Security Documents), in each case whether (i) such obligations are direct
or indirect, secured or unsecured, joint or several, absolute or contingent, due
or to become due whether at stated maturity, by acceleration or otherwise, (ii)
arising in the regular course of business or otherwise, (iii) for payment or
performance and/or (iv) now existing or hereafter arising (including, without
limitation, interest and other obligations arising or accruing after the
commencement of any bankruptcy, insolvency, reorganization or similar proceeding
with respect to the Company or any other Person, or which would have arisen or
accrued but for the commencement of such proceeding, even if such obligation or
the claim therefor is not enforceable or allowable in such proceeding).
"Secured Parties" shall mean, collectively, the Collateral Agent and
the holders of the Securities and the Preferred Stock.
"Securities" shall have the meaning assigned to such term in Recital A
hereof.
"Securities Purchase Agreement" shall have the meaning assigned to
such term in Recital A hereof.
"Security Documents" means this Agreement, the Perfection Certificate,
and each other security document or pledge agreement required by applicable law
to grant a valid, perfected Lien on and security interest in the Collateral, and
all UCC or other financing statements or instruments of perfection required by
this Agreement and the Acquisition Documents and any other document or
instrument utilized to pledge any Property of whatever kind or nature as
collateral for the Debt.
-8-
"Special Property" shall mean:
(a) any permit, lease or license held by the Company that validly
prohibits the creation by the Company of a security interest therein;
(b) any permit, lease or license held by the Company to the extent
that any Requirement of Law applicable thereto prohibits the creation of a
security interest therein; and
(c) Equipment owned by the Company on the date hereof or hereafter
acquired that is subject to a Lien securing a Purchase Money Indebtedness
or Capitalized Lease Obligations permitted to be incurred pursuant to the
provisions of the Purchase Agreements if the contract or other agreement in
which such Lien is granted (or the documentation providing for such
Purchase Money Indebtedness or Capitalized Lease Obligation) validly
prohibits the creation of any other Lien on such Equipment;
provided, however, that in each case described in clauses (a), (b) and (c) of
this definition, such property shall constitute "Special Property" only to the
extent and for so long as such permit, lease, license, contract or other
agreement or Requirement of Law applicable thereto, validly prohibits the
creation of a Lien on such property in favor of the Collateral Agent and, upon
the termination of such prohibition (howsoever occurring), such property shall
cease to constitute "Special Property".
"Subordinated Liens" shall have the meaning assigned to such term in
Sections 4.3 hereof.
"Successor Interests" shall mean, collectively, with respect to the
Company, all shares of each class of the capital stock of the successor
corporation or interests or certificates of the successor limited liability
company, partnership or other entity owned by the Company (unless such successor
is the Company itself) formed by or resulting from any consolidation or merger
in which any Person listed in Schedule 1(a) annexed to the Perfection
Certificate is not the surviving entity; provided, however, that the pledge of
the Successor Interests affected hereby shall in no event affect the obligations
of the Company under any provision prohibiting such action hereunder or under
the Purchase Agreements.
"Taking" shall mean any taking of the Pledged Collateral or any
portion thereof, in or by condemnation or other eminent domain proceedings
pursuant to any law, general or special, or by reason of the temporary
requisition of the use of the Pledged Collateral or any portion thereof, by any
Governmental Authority, civil or military.
"Tax Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"Trade Dress" shall mean the trade dress and packaging, including
without limitation the registered trade dress held in the Company's name and in
exclusively used in the Business.
"Trademarks" shall mean, collectively, with respect to the Company,
all trademarks (including service marks), logos, slogans, logos, certification
marks, trade dress, uniform resource locations (URL's), domain names, corporate
names and trade names, whether registered or unregistered, owned by or assigned
to the Company relating to the Pledged Collateral and all registrations and
applications for the foregoing (whether statutory or common law and whether
established or registered in the United States or any other Country or any
political subdivision thereof), including, without limitation, the registrations
and applications listed in Annex A attached hereto, together with any and all
(i) rights and privileges arising
-9-
under applicable law with respect to the Company's use of any such trademarks,
(ii) reissues, continuations, extensions and renewals thereof, (iii) income,
fees, royalties, damages and payments now and hereafter due and/or payable
thereunder and with respect thereto, including, without limitation, damages,
claims and payments for past, present or future infringements thereof, (iv)
rights corresponding thereto throughout the world and (v) rights to xxx for
past, present and future infringements thereof.
"UCC" shall mean the Uniform Commercial Code as in effect on the date
hereof in the State of New York; provided, however, that if by reason of
mandatory provisions of law, any or all of the attachment, perfection or
priority of the Collateral Agent's and the Secured Parties' security interest in
any item or portion of the Pledged Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of New York,
the term "UCC" shall mean the Uniform Commercial Code as in effect on the date
hereof in such other jurisdiction for purposes of the provisions hereof relating
to such attachment, perfection or priority and for purposes of definitions
relating to such provisions.
SECTION 1.2 Interpretation. The rules of construction set forth in
Paragraph 10 of the Securities Purchase Agreements shall be applicable to this
Agreement.
SECTION 1.3 Resolution of Drafting Ambiguities. The Company
acknowledges and agrees that it was represented by counsel in connection with
the execution and delivery hereof, that it and its counsel reviewed and
participated in the preparation and negotiation hereof and that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party (i.e., the Collateral Agent) shall not be employed in the
interpretation hereof.
ARTICLE II
GRANT OF SECURITY AND SECURED OBLIGATIONS
SECTION 2.1 Pledge-First Priority. As collateral security for the
payment and performance in full of all the Secured Obligations, the Company
hereby pledges and grants to the Collateral Agent for its benefit and for the
benefit of the holders of the Securities, a first priority lien on and security
interest in and to all of the right, title and interest of the Company in, to
and under the following property, wherever located, whether now existing or
hereafter arising or acquired from time to time (collectively, the "Pledged
Collateral"):
(i) all Accounts relating exclusively to the Collateral;
(ii) all Equipment, Goods, Inventory and Fixtures relating
exclusively to the Collateral;
(iii) all Documents, Instruments and Chattel Paper relating
exclusively to the Collateral;
(iv) all Intellectual Property Collateral relating exclusively to the
Collateral;
(v) the Commercial Tort Claims described on Schedule 16 to the
Perfection Certificate relating exclusively to the Collateral;
-10-
(vi) all General Intangibles relating exclusively to the Collateral
(including, without limitation, rights arising under common
law, statutes, or regulations, new drug applications and
modifications thereof);
(vii) the Acquisition Documents and Acquisition Document Rights;
(viii) all books and records relating exclusively to the Collateral;
(ix) all Marketing Materials relating exclusively to the Collateral;
(x) all Regulatory Documentation relating exclusively to the
Collateral; and
(xi) to the extent not covered by clauses (i) through (vii) of this
sentence, all other Proceeds and products of each of the
foregoing and all accessions to, substitutions and replacements
for, and profits and products of, each of the foregoing, any
and all proceeds of any insurance, indemnity, warranty or
guaranty payable to the Company from time to time with respect
to any of the foregoing.
Notwithstanding anything to the contrary contained in clauses (i)
through (viii) above, the security interests created by this Agreement shall not
extend to, and the term "Pledged Collateral" shall not include, any Excluded
Property and (i) the Company shall from time to time at the request of the
Collateral Agent give written notice to the Collateral Agent identifying in
reasonable detail the Special Property (and stating in such notice that such
Special Property constitutes "Excluded Property") and shall provide to the
Collateral Agent such other information regarding the Special Property as the
Collateral Agent may reasonably request and (ii) from and after the Date of
Closing, the Company shall not permit to become effective in any document
creating, governing or providing for any permit, lease or license, a provision
that would prohibit the creation of a Lien on such permit, lease or license in
favor of the Collateral Agent unless the Company believes, in its reasonable
judgment, that such prohibition is usual and customary in transactions of such
type.
SECTION 2.2 Pledge-Second Priority. As collateral security for the
payment and performance in full of all the Secured Obligations, the Company
hereby pledges and grants to the Collateral Agent for its benefit and for the
benefit of the holders of Preferred Stock, a second priority lien on and
security interest in and to all of the right, title and interest of the Company
in, to and under the Pledged Collateral, wherever located, whether now existing
or hereafter arising or acquired from time to time; provided that
notwithstanding the foregoing, (i) no representation or warranty is made by the
Company in this Agreement, with respect to the validity or enforceability of
this Section 2.2 with respect to the rights, if any, of the Secured Parties
under this Section 2.2, including with respect the creation or perfection of a
security interest, and the relative priority of any such security interest, or
the effect of the federal Bankruptcy Code and comparable provisions of state
law, and other applicable antifraud laws, securities laws, usury laws or public
policy considerations on the rights, if any, of the Secured Parties under this
Section 2.2; and (ii) the Company shall not be held accountable for any failure
to create, perfect or maintain a security interest pursuant to this Section 2.2
by reason of the foregoing; however, provided further, the Company shall not,
and shall not permit any of its subsidiaries to, directly or indirectly,
challenge the enforceability, validity or perfection of the security interest
created pursuant to this Section 2.2 for the benefit of the Collateral Agent for
the benefit of the Secured Parties, or their transferees or assigns, on the
Collateral, except in the context of (i) any derivative actions brought on
behalf of the Company and (ii) proceedings under the Federal Bankruptcy Code or
similar state proceedings, to the extent required by law.
-11-
SECTION 2.3 Secured Obligations. This Agreement secures, and the
Pledged Collateral is collateral security for, the payment and performance in
full when due of the Secured Obligations.
SECTION 2.4 Security Interests. (a) The Company hereby irrevocably
authorizes the Collateral Agent at any time and from time to time to file in any
relevant jurisdiction any initial financing statements (including fixture
filings) and amendments thereto that contain the information required by Article
9 of the Uniform Commercial Code of each applicable jurisdiction for the filing
of any financing statement or amendment relating to the Pledged Collateral,
including, without limitation, whether the Company is an organization, the type
of organization and any organizational identification number issued to the
Company. The Company agrees to provide all information described in the
immediately preceding sentence to the Collateral Agent promptly upon request.
(b) The Company hereby ratifies its authorization for the Collateral
Agent to file in any relevant jurisdiction any initial financing statements or
amendments thereto relating to the Pledged Collateral if filed prior to the date
hereof.
(c) The Company hereby further authorizes the Collateral Agent to
file filings with the United States Patent and Trademark Office or United States
Copyright Office (or any successor office or any similar office in any other
country) or other documents for the purpose of perfecting, confirming,
continuing, enforcing or protecting the security interests granted by the
Company hereunder, without the signature of the Company, and naming the Company,
as debtor, and the Collateral Agent, as secured party.
SECTION 2.5 No Release. Nothing set forth in this Agreement shall
relieve the Company from the performance of any term, covenant, condition or
agreement on the Company's part to be performed or observed under or in respect
of any of the Pledged Collateral or from any liability to any Person under or in
respect of any of the Pledged Collateral or shall impose any obligation on the
Collateral Agent or any other Secured Party to perform or observe any such term,
covenant, condition or agreement on the Company's part to be so performed or
observed or shall impose any liability on the Collateral Agent or any other
Secured Party for any act or omission on the part of the Company relating
thereto or for any breach of any representation or warranty on the part of the
Company contained in this Agreement, the Purchase Agreements, the Securities,
the Preferred Stock or the other Security Documents, or under or in respect of
the Pledged Collateral or made in connection herewith or therewith. The
obligations of the Company contained in this Section 2.5 shall survive the
termination hereof and the discharge of the Company's other obligations under
this Agreement and the Purchase Agreements, the Securities, the Preferred Stock,
the Certificate of Designation and the other Security Documents.
ARTICLE III
PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES;
USE OF PLEDGED COLLATERAL
SECTION 3.1 Financing Statements and Other Filings; Maintenance of
Perfected Security Interest. The only filings, registrations and recordings
necessary and appropriate to create, preserve, protect, publish notice of and
perfect the security interests granted by the Company to the Collateral Agent
(for the benefit of the Secured Parties) pursuant to this Agreement in respect
of the Pledged Collateral are listed in Schedule 7 of the Perfection
Certificate. All such filings, registrations and recordings have been delivered
to the Collateral Agent in completed and, to the extent necessary or
appropriate, duly executed form for filing in each governmental, municipal or
other office specified in Schedule 7 of the
-12-
Perfection Certificate and shall be filed, registered and recorded immediately
after the date thereof. The Company agrees that at the sole cost and expense of
the Company, (i) the Company will maintain the security interests created by
this Agreement in the Pledged Collateral as perfected security interests having
at least the priority required hereunder and shall defend such security
interests against the claims and demands of all Persons, (ii) the Company will
furnish to the Collateral Agent from time to time statements and schedules
further identifying and describing the Pledged Collateral and such other reports
in connection with the Pledged Collateral as the Collateral Agent may reasonably
request, all in reasonable detail and (iii) at any time and from time to time,
upon the written request of the Collateral Agent, the Company will promptly and
duly execute and deliver, and have recorded, such further instruments and
documents and take such further action as the Collateral Agent may reasonably
request for the purpose of obtaining or preserving the full benefits of this
Agreement and of the rights and powers herein granted, including the filing of
any financing or continuation statement under the UCC (or other similar laws) in
effect in any jurisdiction with respect to the security interests created hereby
and the execution and delivery of Control Agreements.
SECTION 3.2 Other Actions. In order to further insure the attachment,
perfection and priority of, and the ability of the Collateral Agent to enforce,
the Collateral Agent's security interests in the Pledged Collateral, the Company
agrees, in each case at the Company's own expense, to take the following actions
with respect to the following Pledged Collateral:
(a) Instruments and Tangible Chattel Paper. As of the date hereof,
the Company hereby represents and warrants that no amount individually or
in the aggregate in excess of $100,000 payable under or in connection with
any of the Collateral is evidenced by any Instrument or Tangible Chattel
Paper other than such Instruments and Tangible Chattel Paper listed in
Schedule 13 of the Perfection Certificate. If any amount individually or in
the aggregate in excess of $100,000 payable under or in connection with any
of the Collateral shall be evidenced by any Instrument or Tangible Chattel
Paper, the Company shall forthwith endorse, assign and deliver the same to
the Collateral Agent, accompanied by such instruments of transfer or
assignment duly executed in blank as the Collateral Agent may from time to
time specify; provided, however, that so long as no Event of Default shall
have occurred and be continuing, the Collateral Agent shall return such
Instrument or Tangible Chattel Paper to the Company from time to time, to
the extent necessary for collection in the ordinary course of the Company's
business.
(b) Deposit Accounts. The Company hereby represents and warrants that
it has neither opened nor maintains any Deposit Accounts related to the
Collateral other than the accounts listed in Schedule 17 of the Perfection
Certificate. The Company shall not hereafter establish and maintain any
Deposit Account related to the Collateral unless (1) the Company shall have
given the Collateral Agent 30 days' prior written notice of its intention
to establish such new Deposit Account with a Bank, (2) such Bank shall be
reasonably acceptable to the Collateral Agent and (3) such Bank and the
Company shall have duly executed and delivered to the Collateral Agent a
Control Agreement with respect to such Deposit Account. The Collateral
Agent agrees with the Company that the Collateral Agent shall not give any
instructions directing the disposition of funds from time to time credited
to any Deposit Account related to the Collateral or withhold any withdrawal
rights from the Company with respect to funds from time to time credited to
any Deposit Account related to the Collateral unless an Event of Default
has occurred and is continuing, or, after giving effect to any withdrawal
that would occur. The provisions of this Section 3.2(b) shall not apply to
such Deposit Accounts related to the Collateral for which the Collateral
Agent is the Bank. The Company shall not grant Control of any Deposit
Account related to the Collateral to any Person other than the Collateral
Agent.
-13-
(c) Commercial Tort Claims. As of the date hereof the Company hereby
represents and warrants that it holds no Commercial Tort Claims related to
the Collateral other than those listed in Schedule 16 of the Perfection
Certificate. If the Company shall at any time hold or acquire a Commercial
Tort Claim related to the Collateral having a value individually or in the
aggregate in excess of $100,000, the Company shall immediately notify the
Collateral Agent in writing signed by the Company of the brief details
thereof and grant to the Collateral Agent in such writing a security
interest therein and in the Proceeds thereof, all upon the terms of this
Agreement, with such writing to be in form and substance satisfactory to
the Collateral Agent.
SECTION 3.3 Use and Pledge of Pledged Collateral. Unless an Event of
Default shall have occurred and be continuing, the Collateral Agent shall from
time to time execute and deliver, upon written request of the Company and at the
sole cost and expense of the Company, any and all instruments, certificates or
other documents, in a form reasonably requested by the Company, necessary or
appropriate in the reasonable judgment of the Company to enable the Company to
continue to exploit, license, use, enjoy and protect the Pledged Collateral in
accordance with the terms hereof and of the Purchase Agreements and the
Acquisition Documents. The Company and the Collateral Agent acknowledge that
this Agreement is intended to grant to the Collateral Agent for the benefit of
the Secured Parties security interests in and Liens upon the Pledged Collateral
and shall not constitute or create a present assignment of any of the Pledged
Collateral.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
The Company represents, warrants and covenants as follows:
SECTION 4.1 Title, Authority and Validity; Preservation of Corporate
Existence. (i) The Company (A) has good and valid rights in and title to the
Pledged Collateral with respect to which it has purported to grant security
interests and Liens hereunder, (B) has full power and authority to grant to the
Collateral Agent the security interests in and Liens on such Pledged Collateral
pursuant hereto and to execute, deliver and perform its obligations in
accordance with the terms of this Agreement, without the consent or approval of
any other Person other than any consent or approval that has been obtained, (C)
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (D) it is duly qualified to transact business
and is in good standing in each state in which the Pledged Collateral is located
and (E) this Agreement is a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
(ii) The Company shall (A) preserve and maintain in full force and
effect its existence and good standing under the laws of the jurisdiction of its
organization, (B) preserve and maintain in full force and effect its
qualification to transact business and good standing in the state in which the
Pledged Collateral is located and (C) preserve and maintain in full force and
effect all consents, authorizations and approvals necessary or required of any
Governmental Authority or any other Person relating to the execution, delivery
and performance hereof.
SECTION 4.2 Validity of Security Interests. The security interests in
and Liens on the Pledged Collateral granted to the Collateral Agent for the
benefit of the Secured Parties hereunder constitutes (a) legal and valid
security interests in all the Pledged Collateral securing the payment and
performance of the Secured Obligations, and (b) subject to the filings described
in Schedule 7 of the Perfection Certificate, perfected security interests in all
the Pledged Collateral. Subject to Section 2.2 of this
-14-
Agreement, the security interests and Liens granted to the Collateral Agent for
the benefit of the Secured Parties pursuant to this Agreement in and on the
Pledged Collateral will at all times constitute perfected, continuing first and
second priority security interests therein, superior and prior to the rights of
all other Persons therein other than in the case of any Pledged Collateral with
respect to the holders of Permitted Collateral Liens.
SECTION 4.3 Limitation on Liens. The Company is as of the date hereof,
and, as to Pledged Collateral acquired by it from time to time after the date
hereof, the Company will be, the sole direct and beneficial owner or licensee of
all Pledged Collateral pledged by it hereunder free from any Lien or other
right, title or interest of any Person other than (i) Prior Liens, (ii) the Lien
and security interests created by this Agreement, (iii) Contested Liens and (iv)
the Liens described in Paragraph 6G of the Securities Purchase Agreement (the
Liens described in clauses (i) through (iv) of this sentence, collectively,
"Permitted Collateral Liens"). The Company shall, at its own cost and expense,
defend title to the Pledged Collateral pledged by it hereunder and the security
interests therein and Liens thereon granted to the Collateral Agent and the
priority thereof against all claims and demands of all Persons, at its own cost
and expense, at any time claiming any interest therein adverse to the Collateral
Agent or any other Secured Party. There is no agreement, and no Company shall
enter into any agreement or take any other action, that would result in the
imposition of any other Lien, restrict the transferability of any of the Pledged
Collateral or otherwise impair or conflict with the Company's obligations or the
rights of the Collateral Agent hereunder; provided, that if the obligations
under the Securities shall no longer be outstanding (whether by maturity,
redemption or otherwise), the Company may, upon notice to the Collateral Agent,
xxxxx x Xxxx in the Pledged Collateral to a third-party that is subordinated to
the Liens granted under this Agreement ("Subordinated Liens").
SECTION 4.4 Other Financing Statements. There is no (nor will there be
any) valid or effective financing statement (or similar statement or instrument
of registration under the law of any jurisdiction) covering or purporting to
cover any interest of any kind in the Pledged Collateral other than in the case
of Pledged Collateral financing statements relating to Permitted Collateral
Liens. So long as any of the Secured Obligations remain unpaid, the Company
shall not execute, authorize or permit to be filed in any public office any
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) or statements relating to any Pledged Collateral,
except, in the case of any Pledged Collateral, financing statements filed or to
be filed in respect of and covering the security interests granted by the
Company to the holders of the Permitted Collateral Liens and Subordinated Liens.
SECTION 4.5 Chief Executive Office; Change of Name; Jurisdiction of
Organization. (a) The exact legal name, type of organization, jurisdiction of
organization, Federal Taxpayer Identification Number, organizational
identification number and chief executive office of the Company is indicated
next to its name in Schedules 1(a) and 2(a) of the Perfection Certificate. The
Company shall not change (i) its corporate name, (ii) the location of its chief
executive office, its principal place of business, any office in which it
maintains books or records relating to Pledged Collateral owned by it or any
office or facility at which Pledged Collateral owned by it is located (including
the establishment of any such new office or facility), (iii) its identity or
type of organization or corporate structure, (iv) its Federal Taxpayer
Identification Number or organizational identification number or (v) its
jurisdiction of organization (in each case, including, without limitation, by
merging with or into any other entity, reorganizing, dissolving, liquidating,
reincorporating or incorporating in any other jurisdiction) until (A) it shall
have given the Collateral Agent not less than 30 days' prior written notice (in
the form of an Officers' Certificate) of its intention so to do, clearly
describing such change and providing such other information in connection
therewith as the Collateral Agent may reasonably request and (B) with respect to
such change, the Company shall have taken all action reasonably satisfactory to
the Collateral Agent to maintain the perfection
-15-
and priority of the security interests of the Collateral Agent for the benefit
of the Secured Parties in the Pledged Collateral intended to be granted
hereunder, including, without limitation, using commercially reasonable efforts
to obtain waivers of landlord's or warehousemen's liens with respect to such new
location, if applicable. The Company agrees to promptly provide the Collateral
Agent with certified organizational documents reflecting any of the changes
described in the preceding sentence.
(b) The Collateral Agent may rely on opinions of counsel as to
whether any or all UCC financing statements of the Company need to be amended as
a result of any of the changes described in Section 4.5(a). If the Company fails
to provide information to the Collateral Agent about such changes on a timely
basis, the Collateral Agent shall not be liable or responsible to any party for
any failure to maintain perfected security interests in the Company's property
constituting Pledged Collateral, for which the Collateral Agent needed to have
information relating to such changes. The Collateral Agent shall have no duty to
inquire about such changes if the Company does not inform the Collateral Agent
of such changes, the parties acknowledging and agreeing that it would not be
feasible or practical for the Collateral Agent to search for information on such
changes if such information is not provided by the Company.
SECTION 4.6 Location of Inventory and Equipment. All Equipment and
Inventory constituting Pledged Collateral of the Company is located at the chief
executive office or such other location listed in Schedules 2(a), 2(b), 2(c),
2(d) or 2(e) of the Perfection Certificate. The Company shall not move any
Equipment or Inventory exclusively related to the Collateral to any location
other than one within the Continental United States that is listed in such
Schedules of the Perfection Certificate with respect to the Company until (i) it
shall have given the Collateral Agent not less than 30 days' prior written
notice (in the form of an Officers' Certificate) of its intention so to do,
clearly describing such new location within the Continental United States and
providing such other information in connection therewith as the Collateral Agent
may request and (ii) with respect to such new location, the Company shall have
taken all action reasonably satisfactory to the Collateral Agent to maintain the
perfection and priority of the security interests of the Collateral Agent for
the benefit of the Secured Parties in the Pledged Collateral intended to be
granted hereby, including, without limitation, using commercially reasonable
efforts to obtain waivers of landlord's or warehouseman's liens with respect to
such new location, if applicable.
SECTION 4.7 Condition and Maintenance of Equipment. The Equipment
constituting Pledged Collateral of the Company is in good repair, working order
and condition, reasonable wear and tear excepted. The Company shall cause any
Equipment acquired exclusively in connection with the Collateral to be
maintained and preserved in good repair, working order and condition, reasonable
wear and tear excepted, and shall as quickly as commercially practicable make or
cause to be made all repairs, replacements and other improvements which are
necessary or appropriate in the conduct of the Company's business.
SECTION 4.8 Corporate Names; Prior Transactions. The Company has not,
during the past five years, been known by or used any other corporate or
fictitious name or been a party to any merger or consolidation, or acquired all
or substantially all of the assets of any Person, or acquired any of its
property or assets out of the ordinary course of business, except as set forth
in Schedules 1(b), 1(c) and 4 of the Perfection Certificate.
SECTION 4.9 No Claims. The Company owns or has rights to use all of
the Pledged Collateral pledged by it hereunder and all rights with respect to
any of the foregoing used in, necessary for or material to the Company's
business as currently conducted. The use by the Company of such Pledged
Collateral and all such rights with respect to the foregoing do not infringe on
the rights of any Person
-16-
other than such infringement which would not, individually or in the aggregate,
result in a Collateral Material Adverse Effect. No claim has been made and
remains outstanding that the Company's use of any Pledged Collateral does or may
violate the rights of any third Person that would individually, or in the
aggregate, have a Collateral Material Adverse Effect.
SECTION 4.10 No Conflicts, Consents, etc. Neither the execution and
delivery hereof by the Company nor the consummation of the transactions herein
contemplated nor the fulfillment of the terms hereof (i) violates any Operative
Agreement of the Company, (ii) violates the terms of any agreement, indenture,
mortgage, deed of trust, equipment lease, instrument or other document to which
the Company is a party, or by which it may be bound or to which any of its
properties or assets may be subject, which violation would, individually or in
the aggregate, have a Collateral Material Adverse Effect, (iii) conflicts with
any Requirement of Law applicable to any the Company or its property, which
conflict would, individually or in the aggregate, have a Collateral Material
Adverse Effect, or (iv) results in or requires the creation or imposition of any
Lien (other than the Liens contemplated hereby) upon or with respect to any of
the property now owned or hereafter acquired by the Company. No consent of any
party (including, without limitation, equityholders or creditors of the Company)
and no consent, authorization, approval, license or other action by, and no
notice to or filing with, any Governmental Authority or regulatory body or other
Person is required (A) for the pledge by the Company of the Pledged Collateral
pledged by it pursuant to this Agreement or for the execution, delivery or
performance hereof by the Company, except as set forth in Schedule 4.10 attached
hereto, (B) for the exercise by the Collateral Agent of the rights provided for
in this Agreement or (C) for the exercise by the Collateral Agent of the
remedies in respect of the Pledged Collateral pursuant to this Agreement. In the
event that the Collateral Agent desires to exercise any remedies, rights and
powers set forth in this Agreement and determines it necessary to obtain any
approvals or consents of any Governmental Authority or any other Person
therefor, then, upon the reasonable request of the Collateral Agent, the Company
agrees to use its best efforts to assist and aid the Collateral Agent to obtain
as soon as practicable any necessary approvals or consents for the exercise of
any such remedies, rights and powers.
SECTION 4.11 Pledged Collateral. All information set forth herein,
including the schedules attached hereto, and all information contained in any
documents, schedules and lists heretofore delivered to any Secured Party in
connection with this Agreement, in each case, relating to the Pledged
Collateral, is accurate and complete in all material respects. The Pledged
Collateral described on the schedules attached hereto constitutes all of the
property of such type of Pledged Collateral owned or held by the Company.
SECTION 4.12 Insurance. (a) The Company, at its own expense, shall
maintain or cause to be maintained the insurance policies and coverages required
under Paragraph 5H of the Purchase Agreements with respect to the Pledged
Collateral.
(b) If there shall occur any Destruction, individually or in the
aggregate, in excess of $100,000, the Company shall promptly send to the
Collateral Agent a written notice setting forth the nature and extent of such
Destruction. If there shall occur any Taking, the applicable Company shall
immediately notify the Collateral Agent upon receiving notice of such Taking or
commencement of proceedings therefor. The Net Insurance Proceeds are hereby
assigned and shall be paid to the Collateral Agent. The Company shall take all
steps necessary to notify the condemning authority of such assignment. All Net
Insurance Proceeds shall be applied in accordance with the provisions of
Paragraph 5H of the Securities Purchase Agreement.
-17-
(c) In the event that the proceeds of any insurance claim are paid
after the Collateral Agent has exercised its right to foreclose after an Event
of Default such proceeds shall be paid to the Collateral Agent to satisfy any
deficiency remaining after such foreclosure. The Collateral Agent shall retain
its interest in the Insurance Policies required to be maintained pursuant to
this Agreement during any redemption period.
SECTION 4.13 Payment of Taxes; Compliance with Laws; Contesting Liens;
Claims. The Company represents and warrants that all Charges imposed upon or
assessed against the Pledged Collateral have been paid and discharged except to
the extent such Charges constitute a Lien not yet due and payable or a Permitted
Collateral Lien. The Company shall comply with all Requirements of Law
applicable to the Pledged Collateral the failure to comply with which would,
individually or in the aggregate, have a Collateral Material Adverse Effect. The
Company may at its own expense contest the validity, amount or applicability of
any Charges so long as the contest thereof shall be conducted in accordance
with, and permitted pursuant to the provisions of, the Purchase Agreements.
Notwithstanding the foregoing provisions of this Section 4.13, (i) no contest of
any such obligation may be pursued by the Company if such contest would expose
the Collateral Agent or any other Secured Party to (A) any possible criminal
liability or (B) any additional civil liability for failure to comply with such
obligations unless the Company shall have furnished a bond or other security
therefor satisfactory to the Collateral Agent, or such Secured Party, as the
case may be, and (ii) if at any time payment or performance of any obligation
contested by the Company pursuant to this Section 4.13 shall become necessary to
prevent the imposition of remedies because of non-payment, the Company shall pay
or perform the same, in sufficient time to prevent the imposition of remedies in
respect of such default or prospective default.
SECTION 4.14 Access to Pledged Collateral, Books and Records; Other
Information. Upon reasonable request and prior notice to the Company, the
Collateral Agent, its agents, accountants and attorneys shall have full and free
access to visit and inspect, as applicable, during normal business hours and
such other reasonable times as may be requested by the Collateral Agent all of
the Pledged Collateral including, without limitation, all of the books,
correspondence and records of the Company relating thereto. The Collateral Agent
and its representatives may examine the same, take extracts therefrom and make
photocopies thereof, and the Company agrees to render to the Collateral Agent,
at the Company's cost and expense, such clerical and other assistance as may be
reasonably requested by the Collateral Agent with regard thereto. The Company
shall, at any and all times, within a reasonable time after written request by
the Collateral Agent, furnish or cause to be furnished to the Collateral Agent,
in such manner and in such detail as may be reasonably requested by the
Collateral Agent, additional information with respect to the Pledged Collateral.
ARTICLE V
CERTAIN PROVISIONS CONCERNING INTELLECTUAL
PROPERTY COLLATERAL
SECTION 5.1 Grant of License. For the purpose of enabling the
Collateral Agent, during the continuance of an Event of Default, to exercise
rights and remedies under Article VIII hereof at such time as the Collateral
Agent shall be lawfully entitled to exercise such rights and remedies, and for
no other purpose, the Company hereby grants to the Collateral Agent, to the
extent assignable, an irrevocable, non-exclusive license (exercisable without
payment of royalty or other compensation to the Company) to use, assign, license
or sublicense any of the Intellectual Property Collateral now owned or hereafter
acquired by the Company, wherever the same may be located, including in such
license access to all
-18-
media in which any of the licensed items may be recorded or stored and to all
computer programs used for the compilation or printout hereof.
SECTION 5.2 Registrations. Except pursuant to licenses and other user
agreements entered into by the Company in the ordinary course of business that
are listed in Annexes A and B attached hereto, on and as of the date hereof (i)
the Company owns and possesses the right to use, and has done nothing to
authorize or enable any other Person to use, any Copyright, Patent or Trademark
listed in Annexes A and B attached hereto, and (ii) to the Company's knowledge,
all registrations listed in Annexes A and B attached hereto are valid and in
full force and effect.
SECTION 5.3 No Violations or Proceedings. To the Company's knowledge,
on and as of the date hereof, (i) except as set forth in Schedule 5.3 attached
hereto, there is no material violation by others of any right of the Company
with respect to any Copyright, Patent or Trademark listed in Annexes A and B
attached hereto, respectively, pledged by it under the name of the Company, (ii)
the Company is not infringing upon any Copyright, Patent or Trademark of any
other Person other than such infringement that, individually or in the
aggregate, would not (or would not reasonably be expected to) result in a
material adverse effect on the value or utility of the Intellectual Property
Collateral or any portion thereof material to the use and operation of the
Pledged Collateral and (iii) no proceedings have been instituted or are pending
against the Company or, to the Company's knowledge, threatened, and no claim
against the Company has been received by the Company, alleging any such
violation, except as may be set forth in Schedule 5.3.
SECTION 5.4 Protection of Collateral Agent's Security. On a continuing
basis, the Company shall, at its sole cost and expense, (i) promptly following
its becoming aware thereof, notify the Collateral Agent of (A) any materially
adverse determination in any proceeding in the United States Patent and
Trademark Office or the United States Copyright Office with respect to any
material Patent, Trademark or Copyright in relation to the Collateral or (B) the
institution of any proceeding or any adverse determination in any Federal, state
or local court or administrative body regarding the Company's claim of ownership
in or right to use any of the Intellectual Property Collateral material to the
use and operation of the Pledged Collateral, its right to register such
Intellectual Property Collateral or its right to keep and maintain such
registration in full force and effect, (ii) to the extent permitted under the
Acquisition Documents, maintain and protect the Intellectual Property Collateral
material to the use and operation of the Pledged Collateral as presently used
and operated and as contemplated by the Purchase Agreements, (iii) to the extent
permitted under the Acquisition Documents, not permit to lapse or become
abandoned any Intellectual Property Collateral material to the use and operation
of the Pledged Collateral as presently used and operated and as contemplated by
the Purchase Agreements, and not settle or compromise any pending or future
litigation or administrative proceeding with respect to such Intellectual
Property Collateral, in each case except as shall be consistent with
commercially reasonable business judgment, (iv) upon the Company obtaining
knowledge thereof, promptly notify the Collateral Agent in writing of any event
which may be reasonably expected to materially and adversely affect the value or
utility of the Intellectual Property Collateral or any portion thereof material
to the use and operation of the Pledged Collateral, the ability of the Company
or the Collateral Agent to dispose of the Intellectual Property Collateral or
any portion thereof or the rights and remedies of the Collateral Agent in
relation thereto including, without limitation, a levy or threat of levy or any
legal process against the Intellectual Property Collateral or any portion
thereof, (v) not license the Intellectual Property Collateral other than
licenses entered into by the Company in, or incidental to, the ordinary course
of business, or amend or permit the amendment of any of the licenses in a manner
that materially and adversely affects the right to receive payments thereunder,
or in any manner that would materially impair the value of the Intellectual
Property Collateral or the Liens on and security interests in the Intellectual
Property Collateral intended to be
-19-
granted to the Collateral Agent for the benefit of the Secured Parties, without
the consent of the Collateral Agent, (vi) until the Collateral Agent exercises
its rights to make collection, diligently keep adequate records respecting the
Intellectual Property Collateral and (vii) furnish to the Collateral Agent from
time to time upon the Collateral Agent's reasonable request therefor detailed
statements and amended schedules further identifying and describing the
Intellectual Property Collateral and such other materials evidencing or reports
pertaining to the Intellectual Property Collateral as the Collateral Agent may
from time to time request.
SECTION 5.5 After-Acquired Property. If the Company shall, at any time
before the Secured Obligations have been paid in full (other than contingent
indemnification obligations which, pursuant to the provisions of the Purchase
Agreements or the collateral documents, survive the termination thereof), (i)
obtain any rights to any additional Intellectual Property Collateral or (ii)
become entitled to the benefit of any additional Intellectual Property
Collateral or any renewal or extension thereof, including any reissue, division,
continuation, or continuation-in-part of any Intellectual Property Collateral,
or any improvement on any Intellectual Property Collateral, the provisions
hereof shall automatically apply thereto and any such item enumerated in clause
(i) or (ii) of this Section 5.5 with respect to the Company shall automatically
constitute Intellectual Property Collateral if such would have constituted
Intellectual Property Collateral at the time of execution hereof and be subject
to the Liens and security interests created by this Agreement without further
action by any party. The Company shall promptly (x) provide to the Collateral
Agent written notice of any of the foregoing and (y) confirm the attachment of
the Liens and security interests created by this Agreement to any rights
described in clauses (x) and (y) of the immediately preceding sentence of this
Section 5.5 by execution of an instrument in form reasonably acceptable to the
Collateral Agent.
SECTION 5.6 Modifications. The Company authorizes the Collateral Agent
to modify this Agreement by amending Annexes A and B attached hereto to include
any Intellectual Property Collateral acquired or arising after the date hereof
of the Company including, without limitation, any of the items listed in Section
5.5 hereof.
SECTION 5.7 Litigation. Unless there shall occur and be continuing any
Event of Default, the Company shall have the right to commence and prosecute in
its own name, as the party in interest, for its own benefit and at the sole cost
and expense of the Company, such applications for protection of the Intellectual
Property Collateral and suits, proceedings or other actions to prevent the
infringement, counterfeiting, unfair competition, dilution, diminution in value
or other damage as are necessary to protect the Intellectual Property
Collateral. Upon the occurrence and during the continuance of any Event of
Default, the Collateral Agent shall have the right but shall in no way be
obligated to file applications for protection of the Intellectual Property
Collateral and/or bring suit in the name of the Company, the Collateral Agent or
the Secured Parties to enforce the Intellectual Property Collateral and any
license thereunder. In the event of such suit, the Company shall, at the
reasonable request of the Collateral Agent, do any and all lawful acts and
execute any and all documents requested by the Collateral Agent in aid of such
enforcement and the Company shall promptly reimburse and indemnify the
Collateral Agent, as the case may be, for all costs and expenses incurred by the
Collateral Agent in the exercise of its rights under this Section 5.7 in
accordance with Section 10.3 hereof. In the event that the Collateral Agent
shall elect not to bring suit to enforce the Intellectual Property Collateral,
the Company agrees, at the reasonable request of the Collateral Agent, to take
all commercially reasonable actions necessary, whether by suit, proceeding or
other action, to prevent the infringement, counterfeiting, unfair competition,
dilution, diminution in value of or other damage to any of the Intellectual
Property Collateral by others and for that purpose agrees to diligently maintain
any suit, proceeding or other action against any Person so infringing necessary
to prevent such infringement.
-20-
ARTICLE VI
CERTAIN PROVISIONS CONCERNING ACCOUNTS
SECTION 6.1 Special Representations and Warranties. As of the time
when each of its Accounts in relation to the Collateral arises, the Company
shall be deemed to have represented and warranted that such Account and all
records, papers and documents relating thereto (i) are genuine and correct and
in all material respects what they purport to be, (ii) represent the legal,
valid and binding obligation of the account debtor, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability, evidencing indebtedness
unpaid and owed by such account debtor, arising out of the performance of labor
or services or the sale, lease, license, assignment or other disposition and
delivery of the goods or other property listed therein or out of an advance or a
loan, (iii) will, in the case of an Account relating to the Collateral, except
for the original or duplicate original invoice sent to a purchaser evidencing
such purchaser's account, be the only original writings evidencing and embodying
such obligation of the account debtor named therein and (iv) are in all material
respects in compliance and conform with all applicable Federal, state and local
laws and applicable laws of any relevant foreign jurisdiction.
SECTION 6.2 Maintenance of Records. The Company shall keep and
maintain at its own cost and expense complete records of each Account in
relation to the Collateral, in a manner consistent with prudent business
practice, including, without limitation, records of all payments received, all
credits granted thereon, all merchandise returned and all other documentation
relating thereto. The Company shall, at the Company's sole cost and expense,
upon the Collateral Agent's demand made at any time after the occurrence and
during the continuance of any Event of Default, deliver all tangible evidence of
Accounts related to the Collateral, including, without limitation, all documents
evidencing Accounts related to the Collateral and any books and records relating
thereto to the Collateral Agent or to its representatives (copies of which
evidence and books and records may be retained by the Company). Upon the
occurrence and during the continuance of any Event of Default, the Collateral
Agent may transfer a full and complete copy of the Company's books, records,
credit information, reports, memoranda and all other writings relating to the
Accounts related to the Collateral to and for the use by any Person that has
acquired or is contemplating acquisition of an interest in the Accounts related
to the Collateral or the Collateral Agent's security interests therein without
the consent of the Company.
SECTION 6.3 Legend. The Company shall legend, at the request of the
Collateral Agent made at any time after the occurrence of any Event of Default
and in form and manner satisfactory to the Collateral Agent, the Accounts
related to the Collateral and the other books, records and documents of the
Company evidencing or pertaining to the Accounts related to the Collateral with
an appropriate reference to the fact that the Accounts related to the Collateral
have been assigned to the Collateral Agent for the benefit of the Secured
Parties and that the Collateral Agent has security interests therein.
SECTION 6.4 Modification of Terms, etc. The Company shall not rescind
or cancel any indebtedness evidenced by any Account related to the Collateral or
modify any term thereof or make any adjustment with respect thereto except in
the ordinary course of business consistent with prudent business practice, or
extend or renew any such indebtedness except in the ordinary course of business
consistent with prudent business practice or compromise or settle any dispute,
claim, suit or legal proceeding relating thereto or sell any Account related to
the Collateral or interest therein except in the ordinary course of business
consistent with prudent business practice without the prior written consent of
the Collateral
-21-
Agent. The Company shall timely fulfill all obligations on its part to be
fulfilled under or in connection with the Accounts related to the Collateral.
SECTION 6.5 Collection. The Company shall cause to be collected from
the account debtor of each of the Accounts related to the Collateral, as and
when due in the ordinary course of business consistent with prudent business
practice (including, without limitation, Accounts related to the Collateral that
are delinquent, such Accounts to be collected in accordance with generally
accepted commercial collection procedures), any and all amounts owing under or
on account of such Account, and apply forthwith upon receipt thereof all such
amounts as are so collected to the outstanding balance of such Account, except
that the Company may, with respect to an Account related to the Collateral,
allow in the ordinary course of business (i) a refund or credit due as a result
of returned or damaged or defective merchandise and (ii) such extensions of time
to pay amounts due in respect of Accounts related to the Collateral and such
other modifications of payment terms or settlements in respect of Accounts
related to the Collateral as shall be commercially reasonable in the
circumstances, all in accordance with the Company's ordinary course of business
consistent with its collection practices as in effect from time to time. The
costs and expenses (including, without limitation, reasonable attorneys' fees)
of collection, in any case, whether incurred by the Company, the Collateral
Agent or any Secured Party, shall be paid by the Company.
ARTICLE VII
TRANSFERS AND OTHER LIENS
SECTION 7.1 Transfers of and other Liens on Pledged Collateral. The
Company shall not (i) sell, convey, assign or otherwise dispose of, or grant any
option with respect to, any of the Pledged Collateral pledged by it hereunder
except as permitted by the Purchase Agreements or (ii) create or permit to exist
any Lien upon or with respect to any of the Pledged Collateral pledged by it
hereunder other than in the case of Pledged Collateral, Permitted Collateral
Liens and Subordinated Liens.
ARTICLE VIII
REMEDIES
SECTION 8.1 Remedies. (a) Upon the occurrence and during the
continuance of any Event of Default the Collateral Agent may from time to time
exercise in respect of the Pledged Collateral, in addition to the other rights
and remedies provided for herein or otherwise available to it:
(i) Personally, or by agents or attorneys, immediately take
possession of the Pledged Collateral or any part thereof, from the Company
or any other Person who then has possession of any part thereof with or
without notice or process of law, and for that purpose may enter upon the
Company's premises where any of the Pledged Collateral is located, remove
such Pledged Collateral, remain present at such premises to receive copies
of all communications and remittances relating to the Pledged Collateral
and use in connection with such removal and possession any and all
services, supplies, aids and other facilities of the Company;
(ii) Demand, xxx for, collect or receive any money or property at any
time payable or receivable in respect of the Pledged Collateral including,
without limitation, instructing the obligor or obligors on any agreement,
instrument or other obligation constituting part of the Pledged
-22-
Collateral to make any payment required by the terms of such agreement,
instrument or other obligation directly to the Collateral Agent, and in
connection with any of the foregoing, compromise, settle, extend the time
for payment and make other modifications with respect thereto; provided,
however, that in the event that any such payments are made directly to the
Company, prior to receipt by any such obligor of such instruction, the
Company shall segregate all amounts received pursuant thereto in trust for
the benefit of the Collateral Agent and shall promptly (but in no event
later than two Business Days after receipt thereof) pay such amounts to the
Collateral Agent;
(iii) Sell, assign, grant a license to use or otherwise liquidate, or
direct the Company to sell, assign, grant a license to use or otherwise
liquidate, any and all investments made in whole or in part with the
Pledged Collateral or any part thereof, and take possession of the proceeds
of any such sale, assignment, license or liquidation;
(iv) Take possession of the Pledged Collateral or any part thereof,
by directing the Company in writing to deliver the same to the Collateral
Agent at any place or places so designated by the Collateral Agent, in
which event the Company shall at its own expense: (A) forthwith cause the
same to be moved to the place or places designated by the Collateral Agent
and there delivered to the Collateral Agent, (B) store and keep any Pledged
Collateral so delivered to the Collateral Agent at such place or places
pending further action by the Collateral Agent and (C) while the Pledged
Collateral shall be so stored and kept, provide such security and
maintenance services as shall be necessary to protect the same and to
preserve and maintain them in good condition. The Company's obligation to
deliver the Pledged Collateral as contemplated in this Section 8.1(iv) is
of the essence hereof. Upon application to a court of equity having
jurisdiction, the Collateral Agent shall be entitled to a decree requiring
specific performance by the Company of such obligation;
(v) Withdraw all moneys, instruments, securities and other property
in any bank, financial securities, deposit or other account of the Company
constituting Pledged Collateral for application to the Secured Obligations
as provided in Article IX hereof;
(vi) Require the Company to execute and deliver to the Secured
Parties an assignment of the Intellectual Property Collateral (the "IP
Assignment"). The Company hereby authorizes the Secured Parties to complete
as Assignee and record with the United States Patent and Trademark Office
and the United States Copyright Office each IP Assignment;
(vii) Exercise any and all rights as beneficial and legal owner of
the Pledged Collateral, including, without limitation, perfecting
assignment of and exercising any and all consensual and other rights and
powers with respect to any Pledged Collateral; and
(viii) All the rights and remedies of a secured party on default under
the UCC, and the Collateral Agent may also in its sole discretion, without
notice except as specified in Section 8.2 hereof, sell, assign or grant a
license to use the Pledged Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange, broker's board or at
any of the Collateral Agent's offices or elsewhere, for cash, on credit or
for future delivery, and at such price or prices and upon such other terms
as the Collateral Agent may deem commercially reasonable. The Collateral
Agent or any other Secured Party or any of their respective Affiliates may
be the purchaser, licensee, assignee or recipient of any or all of the
Pledged Collateral at any such sale and shall be entitled, for the purpose
of bidding and making settlement or payment of the purchase price for all
or any portion of the Pledged Collateral sold, assigned or licensed at such
sale, to use
-23-
and apply any of the Secured Obligations owed to such Person as a credit on
account of the purchase price of any Pledged Collateral payable by such
Person at such sale. Each purchaser, assignee, licensee or recipient at any
such sale shall acquire the property sold, assigned or licensed absolutely
free from any claim or right on the part of the Company, and the Company
hereby waives, to the fullest extent permitted by law, all rights of
redemption, stay and/or appraisal which it now has or may at any time in
the future have under any rule of law or statute now existing or hereafter
enacted. The Collateral Agent shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given. The
Collateral Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. The Company hereby waives, to the fullest extent permitted by
law, any claims against the Collateral Agent arising by reason of the fact
that the price at which any Pledged Collateral may have been sold, assigned
or licensed at such a private sale was less than the price which might have
been obtained at a public sale, even if the Collateral Agent accepts the
first offer received and does not offer such Pledged Collateral to more
than one offeree.
SECTION 8.2 Notice of Sale. The Company acknowledges and agrees that,
to the extent notice of sale or other disposition of Pledged Collateral shall be
required by law, 10 days' prior notice to the Company of the time and place of
any public sale or of the time after which any private sale or other intended
disposition is to take place shall be commercially reasonable notification of
such matters. No notification need be given to the Company if it has signed,
after the occurrence of an Event of Default, a statement renouncing or modifying
any right to notification of sale or other intended disposition.
SECTION 8.3 Waiver of Notice and Claims. The Company hereby waives, to
the fullest extent permitted by applicable law, notice or judicial hearing in
connection with the Collateral Agent's taking possession or the Collateral
Agent's disposition of any of the Pledged Collateral, including, without
limitation, any and all prior notice and hearing for any prejudgment remedy or
remedies and any such right which the Company would otherwise have under law,
and the Company hereby further waives, to the fullest extent permitted by
applicable law: (i) all damages occasioned by such taking of possession, (ii)
all other requirements as to the time, place and terms of sale or other
requirements with respect to the enforcement of the Collateral Agent's rights
hereunder and (iii) all rights of redemption, appraisal, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law. The
Collateral Agent shall not be liable for any incorrect or improper payment made
pursuant to this Article VIII in the absence of gross negligence or willful
misconduct. Any sale of, or the grant of options to purchase, or any other
realization upon, any Pledged Collateral shall operate to divest all right,
title, interest, claim and demand, either at law or in equity, of the Company
therein and thereto, and shall be a perpetual bar both at law and in equity
against the Company and against any and all Persons claiming or attempting to
claim the Pledged Collateral so sold, optioned or realized upon, or any part
thereof, from, through or under the Company.
SECTION 8.4 Certain Sales of Pledged Collateral.
(i) The Company recognizes that, by reason of certain prohibitions
contained in law, rules, regulations or orders of any Governmental Authority,
the Collateral Agent may be compelled, with respect to any sale of all or any
part of the Pledged Collateral, to limit purchasers to those who meet the
requirements of such Governmental Authority. The Company acknowledges that any
such sales may be at prices and on terms less favorable to the Collateral Agent
than those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agrees that any such restricted sale
-24-
shall be deemed to have been made in a commercially reasonable manner and that,
except as may be required by applicable law, the Collateral Agent shall have no
obligation to engage in public sales.
(ii) The Company further agrees that a breach of any of the
covenants contained in this Section 8.4 will cause irreparable injury to the
Collateral Agent and other Secured Parties, that the Collateral Agent and the
other Secured Parties have no adequate remedy at law in respect of such breach
and, as a consequence, that each and every covenant contained in this Section
8.4 shall be specifically enforceable against the Company, and the Company
hereby waives and agrees not to assert any defenses against an action for
specific performance of such covenants except for a defense that no Event of
Default has occurred and is continuing.
-25-
SECTION 8.5 No Waiver; Cumulative Remedies.
(i) No failure on the part of the Collateral Agent to exercise, no
course of dealing with respect to, and no delay on the part of the Collateral
Agent in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy; nor shall the Collateral Agent be
required to look first to, enforce or exhaust any other security, collateral or
guaranties. The remedies herein provided are cumulative and are not exclusive of
any remedies provided by law.
(ii) In the event that the Collateral Agent shall have instituted
any proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to the Collateral Agent, then and in every such case, the Company, the
Collateral Agent and each other Secured Party shall be restored to their
respective former positions and rights hereunder with respect to the Pledged
Collateral, and all rights, remedies and powers of the Collateral Agent and the
other Secured Parties shall continue as if no such proceeding had been
instituted.
SECTION 8.6 Certain Additional Actions Regarding Intellectual
Property. If any Event of Default shall have occurred and be continuing, upon
the written demand of Collateral Agent, the Company shall execute and deliver to
Collateral Agent an assignment or assignments of the registered Patents,
Trademarks and/or Copyrights related to the Collateral and such other documents
as are necessary or appropriate to carry out the intent and purposes hereof.
Within five Business Days of written notice thereafter from Collateral Agent,
the Company shall make available to Collateral Agent, to the extent within the
Company's power and authority, such personnel in the Company's employ on the
date of the Event of Default as Collateral Agent may reasonably designate to
permit the Company to continue, directly or indirectly, to produce, advertise
and sell the products and services sold by the Company under the registered
Patents, Trademarks and/or Copyrights related to the Collateral, and such
persons shall be available to perform their prior functions on Collateral
Agent's behalf.
ARTICLE IX
APPLICATION OF PROCEEDS
The proceeds received by the Collateral Agent in respect of any sale
of, collection from or other realization upon all or any part of the Pledged
Collateral pursuant to the exercise by the Collateral Agent of its remedies as a
secured creditor as provided in Article VIII hereof shall be applied, together
with any other sums then held by the Collateral Agent in the manner set forth in
the Intercreditor Agreement.
-26-
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Concerning the Collateral Agent.
(i) The Collateral Agent has been appointed as collateral agent
pursuant to the Intercreditor Agreement. The actions of the Collateral Agent
hereunder are subject to the provisions of the Intercreditor Agreement. The
Collateral Agent shall have the right hereunder to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking action (including, without limitation, the release or
substitution of the Pledged Collateral), in accordance with this Agreement and
the Intercreditor Agreement. The Collateral Agent may employ agents and
attorneys-in-fact in connection herewith and shall not be liable for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith. The Collateral Agent may resign and a successor Collateral Agent
may be appointed in the manner provided in the Intercreditor Agreement. Upon the
acceptance of any appointment as the Collateral Agent by a successor Collateral
Agent, that successor Collateral Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Collateral Agent under this Agreement, and the retiring Collateral Agent shall
thereupon be discharged from its duties and obligations under this Agreement.
After any retiring Collateral Agent's resignation, the provisions hereof shall
inure to its benefit as to any actions taken or omitted to be taken by it under
this Agreement while it was the Collateral Agent.
(ii) The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if such Pledged Collateral is accorded treatment substantially
equivalent to that which the Collateral Agent, in its individual capacity,
accords its own property consisting of similar instruments or interests, it
being understood that neither the Collateral Agent nor any of the Secured
Parties shall have responsibility for taking any necessary steps to preserve
rights against any Person with respect to any Pledged Collateral.
(iii) The Collateral Agent shall be entitled to rely upon any written
notice, statement, certificate, order or other document believed by it to be
genuine and correct and to have been signed, sent or made by the proper person,
and, with respect to all matters pertaining to this Agreement and its duties
hereunder, upon advice of counsel selected by it.
(iv) If any item of Pledged Collateral also constitutes collateral
granted to Collateral Agent under any other deed of trust, mortgage, security
agreement, pledge or instrument of any type, in the event of any conflict
between the provisions hereof and the provisions of such other deed of trust,
mortgage, security agreement, pledge or instrument of any type in respect of
such collateral, the Collateral Agent, in its sole discretion, shall select
which provision or provisions shall control.
SECTION 10.2 Collateral Agent May Perform; Collateral Agent Appointed
Attorney-in-Fact. If the Company shall fail to perform any covenants contained
in this Agreement (including, without limitation, the Company's covenants to (i)
pay the premiums in respect of all required insurance policies hereunder, (ii)
pay Charges, (iii) make repairs, (iv) discharge Liens or (v) pay or perform any
obligations of the Company under any Pledged Collateral) or if any warranty on
the part of the Company contained herein shall be breached, the Collateral Agent
may (but shall not be obligated to) do the same or cause it to be done or remedy
any such breach, and may expend funds for such purpose; provided, however, that
Collateral Agent shall in no event be bound to inquire into the validity of any
tax, lien, imposition or other obligation which the Company fails to pay or
perform as and when required hereby and which the
-27-
Company does not contest in accordance in accordance with the provision of
Section 4.13 hereof. Any and all amounts so expended by the Collateral Agent
shall be paid by the Company in accordance with the provisions of Section 10.3
hereof. Neither the provisions of this Section 10.2 nor any action taken by
Collateral Agent pursuant to the provisions of this Section 10.2 shall prevent
any such failure to observe any covenant contained in this Agreement nor any
breach of warranty form constituting an Event of Default. The Company hereby
appoints the Collateral Agent its attorney-in-fact, with full authority in the
place and stead of the Company and in the name of the Company, or otherwise,
from time to time in the Collateral Agent's discretion to take any action and to
execute any instrument consistent with the terms of the Intercreditor Agreement
and the other collateral documents which the Collateral Agent may deem necessary
or advisable to accomplish the purposes hereof. The foregoing grant of authority
is a power of attorney coupled with an interest and such appointment shall be
irrevocable for the term hereof. The Company hereby ratifies all that such
attorney shall lawfully do or cause to be done by virtue hereof.
SECTION 10.3 Expenses. The Company will upon demand pay to the
Collateral Agent the amount of any and all costs and expenses, including the
fees and expenses of its counsel and the fees and expenses of any experts and
agents which the Collateral Agent may incur in connection with (i) any action,
suit or other proceeding affecting the Pledged Collateral or any part thereof
commenced, in which action, suit or proceeding the Collateral Agent is made a
party or participates or in which the right to use the Pledged Collateral or any
part thereof is threatened, or in which it becomes necessary in the judgment of
the Collateral Agent to defend or uphold the Liens hereof (including, without
limitation, any action, suit or proceeding to establish or uphold the compliance
of the Pledged Collateral with any requirements of any Governmental Authority or
law), (ii) the collection of the Secured Obligations, (iii) the enforcement and
administration hereof, (iv) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Pledged Collateral, (v)
the exercise or enforcement of any of the rights of the Collateral Agent or any
Secured Party hereunder or (vi) the failure by the Company to perform or observe
any of the provisions hereof. All amounts expended by the Collateral Agent and
payable by the Company under this Section 10.3 shall be due upon demand therefor
(together with interest thereon accruing at the highest rate then in effect
under the Purchase Agreements during the period from and including the date on
which such funds were so expended to the date of repayment) and shall be part of
the Secured Obligations. The Company's obligations under this Section 10.3 shall
survive the termination hereof and the discharge of the Company's other
obligations under this Agreement, the Purchase Agreements and the other
collateral documents.
SECTION 10.4 Indemnity.
(i) Indemnity. The Company agrees to indemnify, pay and hold
harmless the Collateral Agent and each of the other Secured Parties and the
officers, directors, employees, agents and Affiliates of the Collateral Agent
and each of the other Secured Parties (collectively, the "Indemnitees") from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs (including, without limitation,
settlement costs), expenses or disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of counsel
for such Indemnitees in connection with any investigative, administrative or
judicial proceeding, commenced or threatened, whether or not such Indemnitee
shall be designated a party thereto) which may be imposed on, incurred by, or
asserted against that Indemnitee, in any manner relating to or arising out of
this Agreement, the Purchase Agreements, the Securities, the Preferred Stock,
the Certificate of Designation any other collateral document or any other
document evidencing the Secured Obligations (including, without limitation, any
misrepresentation by the Company in this Agreement, the Purchase Agreements, the
Securities, the Preferred Stock, other collateral document or any other document
evidencing the Secured Obligations) (the "Indemnified Liabilities"); provided,
however, that no Company shall have any
-28-
obligation to an Indemnitee hereunder with respect to Indemnified Liabilities if
it has been determined by a final decision (after all appeals and the expiration
of time to appeal) of a court of competent jurisdiction that such Indemnified
Liabilities arose from the gross negligence or willful misconduct of that
Indemnitee. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, the Company shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable law to the
payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them.
(ii) Survival. The obligations of the Company's contained in this
Section 10.4 shall survive the termination hereof and the discharge of the
Company's other obligations under this Agreement, the Purchase Agreements and
under the other collateral documents.
(iii) Reimbursement. Any amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement shall constitute Secured
Obligations secured by the Pledged Collateral.
SECTION 10.5 Continuing Security Interests; Assignment. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(i) be binding upon the Company, their respective successors and assigns and
(ii) inure, together with the rights and remedies of the Collateral Agent
hereunder, to the benefit of the Collateral Agent and the other Secured Parties
and each of their respective successors, transferees and assigns. No other
Persons (including, without limitation, any other creditor of the Company) shall
have any interest herein or any right or benefit with respect hereto. Without
limiting the generality of the foregoing clause (ii), any Secured Party may
assign or otherwise transfer any indebtedness held by it secured by this
Agreement to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to such Secured Party,
herein or otherwise.
SECTION 10.6 Termination; Release. The Pledged Collateral shall be
released from the Liens of this Agreement in accordance with the provisions of
the Purchase Agreements. Upon termination hereof or any release of Pledged
Collateral in accordance with the provisions of the Purchase Agreements, the
Collateral Agent shall, upon the request and at the sole cost and expense of the
Company, assign, transfer and deliver to Company, against receipt and without
recourse to or warranty by the Collateral Agent, such of the Pledged Collateral
to be released (in the case of a release) as may be in possession of the
Collateral Agent and as shall not have been sold or otherwise applied pursuant
to the terms hereof, and, with respect to any other Pledged Collateral, proper
documents and instruments (including UCC-3 termination statements or releases)
acknowledging the termination hereof or the release of such Pledged Collateral,
as the case may be.
SECTION 10.7 Modification in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision hereof, nor consent to
any departure by the Company therefrom, shall be effective unless the same shall
be made in accordance with the terms of the Purchase Agreements and the
Certificate of Designation unless in writing and signed by the Collateral Agent.
Any amendment, modification or supplement of or to any provision hereof, any
waiver of any provision hereof and any consent to any departure by the Company
from the terms of any provision hereof shall be effective only in the specific
instance and for the specific purpose for which made or given. Except where
notice is specifically required by this Agreement or any other document
evidencing the Secured Obligations, no notice to or demand on the Company in any
case shall entitle the Company to any other or further notice or demand in
similar or other circumstances.
-29-
SECTION 10.8 Notices. Unless otherwise provided herein or in the
Purchase Agreements, any notice or other communication herein required or
permitted to be given shall be given in the manner and become effective as set
forth in the Purchase Agreements, as to the Company, addressed to it at the
address of the Company set forth in the Purchase Agreements and as to the
Collateral Agent, addressed to it at the address set forth in the Intercreditor
Agreement, or in each case at such other address as shall be designated by such
party in a written notice to the other party complying as to delivery with the
terms of this Section 10.8.
SECTION 10.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 10.10 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER
OF JURY TRIAL. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE COMPANY WITH RESPECT
TO THIS AGREEMENT MAY BE BROUGHT IN THE SUPREME COURT OF THE STATE OF NEW YORK
SITTING IN NEW YORK COUNTY, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK AND APPELLATE COURTS OF ANY THEREOF, AND BY
EXECUTION AND DELIVERY HEREOF, THE COMPANY ACCEPTS FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. THE COMPANY AGREES
THAT SERVICE OF PROCESS IN ANY PROCEEDING MAY BE EFFECTED BY MAILING A COPY
THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF
MAIL), POSTAGE PREPAID, TO THE COMPANY AT ITS ADDRESS SET FORTH IN THE PURCHASE
AGREEMENTS OR AT SUCH OTHER ADDRESS OF WHICH THE COLLATERAL AGENT SHALL HAVE
BEEN NOTIFIED PURSUANT THERETO. IF ANY AGENT APPOINTED BY THE COMPANY REFUSES TO
ACCEPT SERVICE, THE COMPANY HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL
CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE
COLLATERAL AGENT TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY
OTHER JURISDICTION. THE COMPANY HEREBY IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 10.11 Severability of Provisions. Any provision hereof which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 10.12 Execution in Counterparts. This Agreement and any
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original,
but all such counterparts together shall constitute one and the same agreement.
SECTION 10.13 Business Days. In the event any time period or any date
provided in this Agreement ends or falls on a day other than a Business Day,
then such time period shall be deemed to
-30-
end and such date shall be deemed to fall on the next succeeding Business Day,
and performance herein may be made on such Business Day, with the same force and
effect as if made on such other day.
SECTION 10.14 No Credit for Payment of Taxes or Imposition. The
Company shall not be entitled to any credit against the principal, premium, if
any, or interest payable under the Security Purchase Agreement or the
Securities, or any liquidation preference or dividends under the Preferred Stock
Purchase Agreement or the Preferred Stock, and the Company shall not be entitled
to any credit against any other sums which may become payable under the terms
thereof or hereof, by reason of the payment of any Tax on the Pledged Collateral
or any part thereof.
SECTION 10.15 No Claims Against Collateral Agent. Nothing contained in
this Agreement shall constitute any consent or request by the Collateral Agent,
express or implied, for the performance of any labor or services or the
furnishing of any materials or other property in respect of the Pledged
Collateral or any part thereof, nor as giving the Company any right, power or
authority to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such fashion as would
permit the making of any claim against the Collateral Agent in respect thereof
or any claim that any Lien based on the performance of such labor or services or
the furnishing of any such materials or other property is prior to the Liens
hereof.
SECTION 10.16 Obligations Absolute. All obligations of the Company
hereunder shall be absolute and unconditional irrespective of:
(i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of the Company;
(ii) any lack of validity or enforceability of the Purchase
Agreements, the Securities, the Preferred Stock or any other collateral
document, or any other agreement or instrument relating thereto;
(iii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Purchase
Agreements, the Securities, the Preferred Stock or any other collateral
document, or any other agreement or instrument relating thereto;
(iv) any pledge, exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to any
departure from any guarantee, for all or any of the Secured Obligations;
(v) any exercise, non-exercise or waiver of any right, remedy,
power or privilege under or in respect hereof, the Purchase Agreements, the
Securities, the Preferred Stock or any other collateral document except as
specifically set forth in a waiver granted pursuant to the provisions of
Section 10.7 hereof; or
(vi) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, the Company.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-31-
IN WITNESS WHEREOF, the Company and the Collateral Agent have caused
this Agreement to be duly executed and delivered by their duly authorized
officers as of the date first above written.
WOMEN FIRST HEALTHCARE, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chief Financial Officer
CIBC WMC INC.,
as Collateral Agent
By: /s/ X. Xxxxxxx
-----------------------------------
Name: Xxxx Xxxxxxx
Title: Managing Director
