COMPANY GENERAL SECURITY AGREEMENT
This
Company General Security Agreement (the “Agreement”)
is
dated as of June 22, 2005 by and among Acura Pharmaceuticals, Inc., a New York
corporation with its principal place of business at 000 X. Xxxxx Xxxxx,
Xxxxxxxx, Xxxxxxxx, 00000 (“Debtor”),
and
Xxxxx Partners III, L.P., a Delaware limited partnership with its principal
place of business at 000 Xxxxx Xxxxxx, Xxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000,
acting in its capacity as agent for the Lenders, as defined below (the
“Agent”),
for
the benefit of the Lenders.
PRELIMINARY
STATEMENTS
Debtor
has entered into a Loan Agreement of even date herewith (as the same may be
amended, modified, supplemented or restated from time to time, the “Loan
Agreement;”
terms
which are capitalized in this Agreement and not otherwise defined shall have
the
meanings ascribed to them in the Loan Agreement) with the Lenders party thereto
(the “Lenders”).
The
Lenders have required, as a condition precedent to the effectiveness of the
Loan
Agreement, that the Debtor (a) grant to the Agent, for the ratable benefit
of
the Lenders, a security interest in and to the Collateral (as defined in Section
2.1 below) and (b) execute and deliver this Agreement in order to secure the
payment and performance by the Debtor of the obligations owing by the Debtor
to
the Lenders under the Loan Agreement, the Notes, the other Transaction Documents
and each of the agreements, documents and instruments delivered by the Debtor
pursuant thereto or in connection therewith (collectively, the “Obligations”).
AGREEMENT
In
consideration of the premises and in order to induce the Lenders to enter into
and perform the Loan Agreement, the Debtor hereby agrees as
follows:
ARTICLE
1
CREATION
OF SECURITY INTEREST
1.1 SECURITY
INTEREST
The
Debtor hereby pledges, assigns and grants to the Agent a continuing perfected
lien and security interest having priority over any and all other security
interests in all of the Debtor’s right, title and interest in and to the
Collateral (as defined in Section 2.1 below) in order to secure the payment
and
performance of all Obligations owing by the Debtor.
1.2 DEBTOR
REMAINS LIABLE
Anything
herein to the contrary notwithstanding, (a) the Debtor shall remain liable
under
the contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Agent
of any of the rights hereunder shall not release the Debtor from any of its
duties or obligations under the contracts and agreements included in the
Collateral and (c) neither the Agent nor any Lender shall have any obligation
or
liability under the contracts and agreements included in the Collateral by
reason of this Agreement, the Loan Agreement or any other Transaction Document,
nor shall the Agent or any Lender be obligated to perform any of the obligations
or duties of the Debtor thereunder or to take any action to collect or enforce
any claim for payment assigned hereunder.
ARTICLE
2
COLLATERAL
2.1 COLLATERAL
For
purposes of this Agreement, the term “Collateral”
shall
mean all of the assets of the Debtor including all of the kinds and types of
property described in clauses (a) through (h) of this Section 2.1, whether
now
owned or hereafter at any time arising, acquired or created by the Debtor and
wherever located, and includes all replacements, additions, accessions,
substitutions, repairs, proceeds and products relating thereto or therefrom,
and
all documents, ledger sheets and files of the Debtor relating thereto and all
Proceeds (as defined in Section 2.2 below) of Collateral:
(a) all
of
the Debtor’s accounts, whether now existing or existing in the future, including
without limitation (i) all accounts receivable (whether or not specifically
listed on schedules furnished to the Agent), including, without limitation,
all
accounts created by or arising from all of the Debtor’s sales of goods or
rendition of services made under any of the Debtor’s trade names, or through any
of its divisions, (ii) all unpaid seller’s rights (including rescission,
replevin, reclamation and stoppage in transit) relating to the foregoing or
arising therefrom, (iii) all rights to any goods represented by any of the
foregoing, including returned or repossessed goods, (iv) all reserves and credit
balances held by the Debtor with respect to any such accounts receivable or
account debtors, (v) all health-care-insurance receivables, and (vi) all
guarantees or collateral for any of the foregoing (all of the foregoing property
and similar property being hereinafter referred to as “Accounts”);
(b) all
of
the Debtor’s inventory, including without limitation (i) all raw materials, work
in process, parts, components, assemblies, supplies and materials used or
consumed in the Debtor’s businesses, wherever located and whether in the
possession of the Debtor or any other Person; (ii) all goods, wares and
merchandise, finished or unfinished, held for sale or lease or leased or
furnished or to be furnished under contracts of service, wherever located and
whether in the possession of the Debtor or any other person or entity; and
(iii)
all goods returned to or repossessed by the Debtor (all of the foregoing
property being hereinafter referred to as “Inventory”);
(c) all
of
the equipment owned or leased by the Debtor, including, without limitation,
machinery, equipment, office equipment and supplies, computers and related
equipment, furniture, furnishings, tools, tooling, jigs, dies, fixtures,
manufacturing implements, fork lifts, trucks, trailers, motor vehicles, and
other equipment (all of the foregoing property being hereinafter referred to
as
“Equipment”);
(d) all
of
the Debtor’s general intangibles (including, without limitation, payment
intangibles), instruments, securities (including, without limitation, United
States of America Treasury Bills), credits, claims, demands, documents, letters
of credit and letter of credit proceeds, documents of title, certificates of
title, certificates of deposit, warehouse receipts, bills of lading, leases
which are permitted to be assigned or pledged, deposit accounts, money, tax
refund claims, and contract rights which are permitted to be assigned or pledged
(all of the foregoing property being hereinafter referred to as “Intangibles”);
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(e) all
of
the Debtor’s intellectual property, including, without limitation, New Drug
Applications, Investigatory New Drug Applications, Abbreviated New Drug
Applications, Alternative New Drug Applications, registrations and quotas as
issued by the DEA or the Attorney General of the United States pursuant to
the
CSA, certifications, permits and approvals of federal and state governmental
agencies, patents, patent applications, trademarks, trademark applications,
service marks, service xxxx applications, trade names, domain names, technical
knowledge and processes, formal or informal licensing arrangements which are
permitted to be assigned or pledged, blueprints, technical specifications,
computer software, programs, databases, copyrights, copyright applications
and
all confidential and proprietary information, including, without limitation,
know-how, trade secrets, manufacturing and production processes and techniques,
inventions, research and development information, databases and data, including,
without limitation, technical data, financial and marketing and business data,
customer lists, supplier lists, pricing and cost information and business and
marketing plans, and all embodiments thereof, and rights thereto, including,
without limitation, all of the Debtor’s rights to use the patents, trademarks,
copyrights, service marks, or other property of the aforesaid nature of other
Persons now or hereafter licensed to the Debtor, together with the goodwill
of
the business symbolized by or connected with the Debtor’s trademarks,
copyrights, service marks, licenses and the other rights included in this
Section 2.1(e) (all of the foregoing property being hereinafter referred to
as
“Intellectual
Property”);
(f) all
interest, dividends, distributions, 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 then existing Collateral;
(g) all
deposit accounts, letter-of-credit rights, instruments (including, without
limitation, promissory notes), investment property and chattel paper;
and
(h) all
of
the shares of stock or other securities of Acura Pharmaceutical Technologies,
Inc. and Axiom Pharmaceutical Corporation, and the certificates, if any,
representing such shares or other securities, and all dividends, distributions,
return of capital, 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 such shares or securities and all subscription warrants, rights
or
options issued thereon or with respect thereto, and all investment property,
all, to the extent applicable, as further set forth in the Stock Pledge
Agreement.
2.2 PROCEEDS
For
purposes of this Agreement, the term “Proceeds”
shall
include (a) whatever is now or hereafter received by the Debtor upon the sale,
exchange, collection or other disposition of any item of Collateral, whether
such proceeds constitute Inventory, Accounts, Intangibles, royalties, payment
under insurance (whether or not the Agent is the loss payee thereof), or any
indemnities, warranties or guaranties, payable by reason of loss or damage
to or
otherwise with respect to any or the foregoing Collateral, and (b) any such
items which are now or hereafter acquired by the Debtor with any proceeds of
Collateral hereunder.
3
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES
The
Debtor represents and warrants as follows:
3.1 ORGANIZATION
AND EXISTENCE
The
Debtor is a corporation duly organized, validly existing and in good standing
under the laws of the State of New York and is qualified to do business in
such
other jurisdictions as the nature or conduct of its operations or the ownership
of its properties require such qualification. The Debtor does not own or lease
any property or engage in any activity in any jurisdiction that might require
qualification to do business as a foreign corporation in such jurisdiction
and
where the failure to so qualify could reasonably be expected to have a Material
Adverse Effect or subject the Debtor to a material liability.
3.2 AUTHORIZATION
(a) The
Debtor has all requisite corporate power and authority (i) to execute and
deliver, and to perform and observe its obligations under, the Transaction
Documents to which it is a party, and (ii) to consummate the transactions
contemplated hereby and thereby, including, without limitation, the grant of
any
security interest, mortgage, payment trust, guaranty or other security
arrangement by the Debtor in, on or in respect of the Collateral.
(b) All
corporate action on the part of the Debtor and its directors and stockholders
necessary for the authorization, execution,
delivery and performance by the Debtor of this Agreement and the transactions
contemplated herein or in any other Transaction Document to which it is a party,
has been taken.
3.3 PLACES
OF BUSINESS
The
Debtor has no places of business, or warehouses in which it leases space, other
than those set forth on Section
3.3 of Schedule A,
a copy
of which is attached hereto and made a part hereof (“Schedule
A”).
3.4 LOCATION
OF COLLATERAL
Except
for the movement of Collateral from time to time from one place of business
or
warehouse listed on Section
3.3 of Schedule A
to
another place of business or warehouse listed on Section
3.3 of Schedule A,
the
Collateral is located at the Debtor’s chief executive office or other places of
business or warehouses listed on Section
3.3 of Schedule A,
and not
at any other location.
3.5 RESTRICTIONS
ON COLLATERAL DISPOSITION
Except
for any restrictions imposed under the Xxxxxx Security Agreement (as hereinafter
defined),none of the Collateral is subject to contractual obligations that
may
restrict or inhibit the Agent’s rights or ability to sell or dispose of the
Collateral or any part thereof after the occurrence of an Event of
Default.
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3.6 STATUS
OF ACCOUNTS
Each
Account is based on an actual and bona fide rendition of services or sale of
goods or products to customers, made by the Debtor in the ordinary course of
its
business. The Accounts created are the Debtor’s exclusive property and are not
and shall not be subject to any lien, consignment arrangement, encumbrance,
security interest or financing statement whatsoever, except the lien in favor
of
the holders of the Senior Note under the Xxxxxx Term Loan and the documents
executed in connection therewith, including, without limitation, the Xxxxxx
Security Agreement dated as of March 29, 2000 (the “Xxxxxx
Security Agreement”).
To
the best knowledge of the Debtor, the Debtor’s customers have accepted the
goods, products and services and owe and are obligated to pay the full amounts
stated in the invoices according to their terms, without any dispute, offset,
defense or counterclaim.
3.7 COPYRIGHTS,
TRADEMARKS AND PATENTS
(a) The
Debtor owns outright all of the Intellectual Property Rights listed on
[Section
4.12
of the
Schedule of Exceptions]
attached
to the Loan Agreement free and clear of all liens and encumbrances except for
the Permitted Liens and pays no royalty to anyone under or with respect to
any
of them.
(b) The
Debtor has not licensed to anyone the use of any of such Intellectual Property
Rights and has no knowledge of the infringing use by the Debtor or any Guarantor
of any Intellectual Property Rights of third parties.
(c) Other
than as disclosed to the Debtor’s Board of Directors, the Debtor has no
knowledge, nor has it received any notice (i) of any conflict with the asserted
rights of others with respect to any Intellectual Property Rights used in,
or
useful to, the operation of the business conducted by the Debtor and the
Guarantors or with respect to any license under which the Debtor or a Guarantor
is licensor or licensee; or (ii) that the Intellectual Property Rights infringe
upon the rights of any third party.
(d) The
Debtor has made or performed all filings, recordings and other acts and has
paid
all required fees and taxes to maintain and protect its interest in each and
every item of Intellectual Property in full force and effect throughout the
world, and to protect and maintain its interest therein including, without
limitation, recordations of any of its interests in patents and trademarks
with
the U.S. Patent and Trademark Office and in corresponding national and
international patent offices, and recordation of any of its interests in any
copyrights with the U.S. Copyright Office and in corresponding national and
international copyright offices. The Debtor has used proper statutory notice
in
connection with its use of each patent, trademark and copyright.
3.8 INVENTORY
All
Inventory of the Debtor consists of a quality and quantity usable and salable
in
the ordinary course of business, except for obsolete items and items of
below-standard quality, all of which have been or will be written off or written
down to net realizable value on the consolidated balance sheet of the Debtor
and
its Subsidiaries as of March 31, 2005. The quantities of each type of Inventory
(whether raw materials, work-in-process, or finished goods) are not excessive,
but are reasonable and warranted in the present circumstances of the
Debtor.
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3.9 OWNERSHIP
The
Debtor is the legal and beneficial owner of its Collateral free and clear of
any
lien, claim, option or right of others, except for the security interest created
under this Agreement and the Xxxxxx Security Agreement. No effective financing
statement or other instrument similar in effect covering all or any part of
such
Collateral or listing the Debtor or any trade name of the Debtor is on file
in
any recording office, except such as may have been filed relating to the Xxxxxx
Term Loan. The Agent has, for the benefit of the Lenders, a valid and perfected
security interest in the Collateral which security interest has priority over
any and all other security interests in such Collateral.
ARTICLE
4
COVENANTS
The
Debtor agrees as follows:
4.1 DEFEND
AGAINST CLAIMS
The
Debtor will defend the Collateral against all claims and demands of all Persons
at any time claiming the same or any interest therein unless both the Agent
and
the Debtor determine that the claim or demand is not material and that,
consequently, such defense would not be consistent with good business judgment.
The Debtor will not permit any lien notices with respect to the Collateral
or
any portion thereof to exist or be on file in any public office except for
those
in favor of the Agent and those permitted under the terms of the Loan
Agreement.
4.2 CHANGE
IN COLLATERAL LOCATION
The
Debtor will not (a) change its corporate name, (b) change the location of its
chief executive office or establish any place of business other than those
specified in Section
3.3 of Schedule A,
or (c)
move or permit movement of the Collateral from the locations specified therein
except from one such location to another such location, unless in each case
the
Debtor shall have given the Agent at least thirty (30) days prior written notice
thereof, and shall have, in advance, executed and caused to be filed or
delivered to the Agent any financing statements or other documents required
by
the Agent to perfect the security interest of the Agent in the Collateral in
accordance with Section 4.3 of this Agreement, all in form and substance
satisfactory to the Agent.
4.3 ADDITIONAL
FINANCING STATEMENTS
Promptly
upon the reasonable request of the Agent, the Debtor will execute and deliver
or
use its best efforts to procure any document, give any notices, execute and
file
any financing statements, mortgages or other documents, all in form and
substance satisfactory to the Agent, xxxx any chattel paper, deliver any chattel
paper or instruments to the Agent and take any other actions that are necessary
or, in the opinion of the Agent, desirable to perfect or continue the perfection
and the first priority of the Agent’s security interest in the Collateral, to
protect the Collateral against the rights, claims, or interests of third
persons, or to effect the purposes of this Agreement. The Debtor will pay the
costs incurred in connection with any of the foregoing.
6
Without
the prior written consent of the Agent, the Debtor will not, in any way,
hypothecate or create or permit to exist any lien, security interest, charge
or
encumbrance on or other interest in the Collateral, other than those permitted
under the terms of the Loan Agreement and the liens in favor of the holders
of
the Senior Note pursuant to the Xxxxxx Term Loan and documents relative thereto,
and the Debtor will not sell, transfer, assign, pledge, collaterally assign,
exchange or otherwise dispose of the Collateral, other than the sale of
Inventory in the ordinary course of business and the sale of obsolete or worn
out Equipment. Notwithstanding the foregoing, if the proceeds of any such sale
consist of notes, instruments, documents of title, letters of credit or chattel
paper, such proceeds shall be promptly delivered to the Agent to be held as
Collateral hereunder. If the Collateral, or any part thereof, is sold,
transferred, assigned, exchanged, or otherwise disposed of in violation of
these
provisions, the security interest of the Agent shall continue in such Collateral
or part thereof notwithstanding such sale, transfer, assignment, exchange or
other disposition, and the Debtor will hold the proceeds thereof for the benefit
of the Agent, and promptly transfer such proceeds to the Agent in
kind.
4.5 CONTRACTUAL
OBLIGATIONS
The
Debtor will not enter into any contractual obligations which may restrict or
inhibit the Agent’s rights or ability to sell or otherwise dispose of the
Collateral or any part thereof after the occurrence or during the continuance
of
an Event of Default.
4.6 AGENT’S
RIGHT TO PROTECT COLLATERAL
Upon
the
occurrence or continuance of an Event of Default, the Agent shall have the
right
at any time to make any payments and do any other acts the Agent may deem
necessary to protect the security interests of the Lenders in the Collateral,
including, without limitation, the rights to pay, purchase, contest or
compromise any encumbrance, charge or lien which, in the reasonable judgment
of
the Agent, appears to be prior to or superior to the security interests granted
hereunder, and appear in and defend any action or proceeding purporting to
affect its security interests in, or the value of, the Collateral. The Debtor
hereby agrees to reimburse the Agent for all payments made and expenses incurred
under this Agreement including reasonable fees, expenses and disbursements
of
attorneys and paralegals acting for the Agent, including any of the foregoing
payments under, or acts taken to protect its security interests in, the
Collateral, which amounts shall be secured under this Agreement, and agrees
it
shall be bound by any payment made or act taken by the Agent hereunder absent
the Agent’s gross negligence or willful misconduct. The Agent shall have no
obligation to make any of the foregoing payments or perform any of the foregoing
acts.
4.7 FURTHER
OBLIGATIONS WITH RESPECT TO ACCOUNTS
In
furtherance of the continuing assignment and security interest in the Accounts
of the Debtor granted pursuant to this Agreement, upon the creation of Accounts,
upon the Agent’s request, the Debtor will execute and deliver to the Agent in
such form and manner as the Agent may require, solely for its convenience in
maintaining records of Collateral, such confirmatory schedules of Accounts,
and
other appropriate reports designating, identifying and describing the Accounts
as the Agent may reasonably require. In addition, upon the Agent’s request, the
Debtor shall provide the Agent with copies of agreements with, or purchase
orders from, the customers of the Debtor and copies of invoices to customers,
proof of shipment or delivery and such other documentation and information
relating to such Accounts and other Collateral as the Agent may reasonably
require. Furthermore, upon the Agent’s request, the Debtor shall deliver to the
Agent any documents or certificates of title issued with respect to any property
included in the Collateral, and any promissory notes, letters of credit or
instruments related to or otherwise in connection with any property included
in
the Collateral, which in any such case came into the possession of the Debtor,
or shall cause the issuer thereof to deliver any of the same directly to the
Agent, in each case with any necessary endorsements in favor of the Agent.
Failure to provide the Agent with any of the foregoing shall in no way affect,
diminish, modify or otherwise limit the security interests granted herein.
The
Debtor hereby authorizes the Agent to regard the Debtor’s printed name or rubber
stamp signature on assignment schedules or invoices as the equivalent of a
manual signature by the Debtor’s authorized officers or agents.
7
4.8 INSURANCE
The
Debtor agrees to maintain public liability insurance, third party property
damage insurance and replacement value insurance on the Collateral under such
policies of insurance, with such insurance companies, in such amounts and
covering such risks as are at all times satisfactory to the Agent in its
commercially reasonable judgment. All policies covering the Collateral are
to
name the Agent as an additional insured and the loss payee in case of loss,
and
are to contain such other provisions as the Agent may reasonably require to
fully protect the Agent’s interest in the Collateral and to any payments to be
made under such policies. Without limiting the generality of the foregoing,
all
such policies shall contain standard lender’s loss payable clauses in favor of
the Agent and shall provide that the same may not be cancelled, terminated
or
revised without giving the Agent at least 30 days prior written notice of such
cancellation, termination or revision. Proceeds of such insurance policy or
policies will be applied to the Obligations unless written consent to the
contrary is obtained from the Agent. The Debtor will furnish the Agent with
certificates of insurance or such other evidence satisfactory to the Agent
so as
to evidence compliance with the provisions of this Section.
4.9 TAXES
The
Debtor agrees to pay, when due, all taxes lawfully levied or assessed against
the Debtor or any of the Collateral before any penalty or interest accrues
thereon; provided,
however,
that,
unless such taxes have become a federal tax or ERISA lien on any of the assets
of the Debtor, no such tax need be paid if the same is being contested, in
good
faith, by appropriate proceedings promptly instituted and diligently conducted
and if an adequate reserve or other appropriate provision shall have been made
therefor as required in order to be in conformity with GAAP.
4.10 COMPLIANCE
WITH LAWS
The
Debtor agrees to comply in all material respects with all Legal Requirements
applicable to the Collateral or any part thereof, or to the operation of its
business or its assets generally, unless the Debtor contests in good faith,
by
appropriate legal, administrative or other proceedings promptly instituted
and
diligently conducted, any such Legal Requirements in a reasonable manner and
in
good faith. The Debtor agrees to maintain in full force and effect, its
respective licenses and permits granted by any governmental authority as may
be
necessary or advisable for the Debtor to conduct its business in all material
respects.
8
4.11 MAINTENANCE
OF PROPERTY
The
Debtor agrees to keep all property useful and necessary to its business in
good
working order and condition (ordinary wear and tear excepted) and not to commit
or suffer any waste with respect to any of its properties.
4.12 ENVIRONMENTAL
AND OTHER MATTERS
The
Debtor will conduct its business so as to comply in all respects with all
environmental, land use, occupational, safety or health Legal Requirements
in
all jurisdictions in which it is or may at any time be doing business, except
to
the extent that the Debtor is contesting, in good faith by appropriate legal,
administrative or other proceedings, promptly instituted and diligently
conducted, any such Legal Requirement; provided,
further,
that
the Debtor shall comply with the order of any court or other governmental
authority relating to such Legal Requirements unless the Debtor shall currently
be prosecuting an appeal, proceedings for review or administrative proceedings
and shall have secured a stay of enforcement or execution or other arrangement
postponing enforcement or execution pending such appeal, proceedings for review
or administrative proceedings.
4.13 INTELLECTUAL
PROPERTY
With
respect to each item of its Intellectual Property, the Debtor agrees to take,
at
its expense, all necessary steps, including, without limitation, in the U.S.
Patent and Trademark Office, the U.S. Copyright Office and any other
governmental authority, to (a) maintain the validity and enforceability of
such
Intellectual Property and maintain such Intellectual Property in full force
and
effect, and (b) pursue the registration and maintenance of each patent,
trademark, or copyright registration or application, now or hereafter included
in such Intellectual Property of the Debtor, including, without limitation,
the
payment of required fees and taxes, the filing of responses to office actions
issued by the U.S. Patent and Trademark Office, the U.S. Copyright Office or
other governmental authorities, the filing of applications for renewal or
extension, the filing of affidavits under Sections 8 and 15 of the U.S.
Trademark Act, the filing of divisional, continuation, continuation-in-part,
reissue and renewal applications or extensions, the payment of maintenance
fees
and the participation in interference, reexamination, opposition, cancellation,
infringement and misappropriation proceedings. The Debtor shall not, without
the
prior written consent of the Agent, discontinue use of or otherwise abandon
any
Intellectual Property, or abandon any right to file an application for any
patent, trademark or copyright, unless the Debtor shall have previously
determined that such use or the pursuit or maintenance of such Intellectual
Property is no longer desirable in the conduct of the Debtor’s business and that
the loss thereof would not be reasonably likely to have a Material Adverse
Effect, in which case, the Debtor will give prompt notice of any such
abandonment to the Agent.
4.14 FURTHER
ASSURANCES
The
Debtor shall take all such further actions and execute all such further
documents and instruments (including, but not limited to, collateral assignments
of Intellectual Property and Intangibles or any portion thereof) as the Agent
may at any time reasonably determine in its sole discretion to be necessary
or
desirable to further carry out and consummate the transactions contemplated
by
the Loan Agreement and the documentation relating thereto, including this
Agreement, and to perfect or protect the liens (and the priority status thereof)
of the Agent in the Collateral.
9
ARTICLE
5
REMEDIES
5.1 OBTAINING
COLLATERAL UPON DEFAULT
If
any
Event of Default shall have occurred and be continuing, then and in every such
case, subject to the terms of the Loan Agreement regarding the exercise of
remedies and any mandatory requirements of applicable law then in effect, the
Agent, in addition to any rights now or hereafter existing under applicable
law,
shall have all rights as a secured creditor under the Uniform Commercial Code
in
all relevant jurisdictions and may:
(a) personally,
or by agents or attorneys, immediately retake possession of the Collateral
or
any part thereof, from the Debtor 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 Debtor’s premises where any of the Collateral is located and
remove the same and use in connection with such removal any and all services,
supplies, aids and other facilities of the Debtor;
(b) instruct
the obligor or obligors on any agreement, instrument or other obligation
(including, without limitation, the Accounts) constituting the Collateral to
make any payment required by the terms of such instrument or agreement directly
to the Agent;
(c) withdraw
all monies, securities and instruments held pursuant to any pledge arrangement
for application to the Obligations;
(d) sell,
assign or otherwise liquidate, or direct the Debtor to sell, assign or otherwise
liquidate, any or all of the Collateral or any part thereof, and take possession
of the proceeds of any such sale or liquidation;
(e) take
possession of the Collateral or any part thereof, by directing the Debtor in
writing to deliver the same to the Agent at any place or places designated
by
the Agent, in which event the Debtor shall at its own expense:
(1) forthwith
cause the same to be moved to the place or places so designated by the Agent
and
there delivered to the Agent,
(2) store
and
keep any Collateral so delivered to the Agent at such place or places pending
further action by the Agent as provided in Section 5.2, and
(3) while
the
Collateral shall be so stored and kept, provide such guards and maintenance
services as shall be necessary to protect the same and to preserve and maintain
the Collateral in good condition;
it
being
understood that the Debtor’s obligation to so deliver the Collateral is of the
essence of this Agreement and that, accordingly, upon application to a court
of
equity having jurisdiction, the Agent shall be entitled to a decree requiring
specific performance by the Debtor of said obligation.
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5.2 DISPOSITION
OF COLLATERAL
Any
Collateral repossessed by the Agent under or pursuant to Section 5.1 and any
other Collateral whether or not so repossessed by the Agent may be sold,
assigned, leased or otherwise disposed of under one or more contracts or as
an
entirety, and without the necessity of gathering at the place of sale the
property to be sold, and in general in such manner, at such time or times,
at
such place or places and on such terms as the Agent may, in compliance with
any
mandatory requirements of applicable law, determine to be commercially
reasonable. Any of the Collateral may be sold, leased or otherwise disposed
of,
in the condition in which the same existed when taken by the Agent or after
any
overhaul or repair which the Agent shall determine to be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceedings permitted by such requirements shall be made upon not less than
ten
(10) days’ written notice to the Debtor specifying the time at which such
disposition is to be made and the intended sale price or other consideration
therefor, and shall be subject, for the ten (10) days after the giving of such
notice, to the right of the Debtor or any nominee of the Debtor to acquire
the
Collateral involved at a price or for such other consideration at least equal
to
the intended sale price or other consideration so specified. Any such
disposition which shall be a public sale permitted by such requirements shall
be
made upon not less than ten (10) days’ written notice to the Debtor specifying
the time and place of such sale and, in the absence of applicable requirements
of law, shall be by public auction (which may, at the option of the Agent,
be
subject to reserve), after publication at least once in The
New York Times
not less
than ten (10) days prior to the date of sale. If The
New York Times
is not
then being published, publication may be made in lieu thereof in any newspaper
then being circulated in the City of New York, New York, as the Agent may elect.
All requirements of reasonable notice under this Section 5.2 shall be met if
such notice is mailed, postage prepaid at least ten (10) days before the time
of
such sale or disposition, to the Debtor at its address set forth herein or
such
other address as the Debtor may have, in writing, provided to the Agent. The
Agent may, if it deems it reasonable, postpone or adjourn any sale of any
Collateral from time to time by an announcement at the time and place of the
sale to be so postponed or adjourned without being required to give a new notice
of sale. The proceeds realized from the sale of any Collateral shall be applied
as follows: first, to the reasonable costs, expenses and attorneys’ fees and
expenses incurred by Agent for collection and for acquisition, completion,
protection, removal, storage, sale and delivery of the Collateral; second,
to
interest due on any of the Obligations and any fees payable under this
Agreement; and third, to the principal of the Obligations. If any deficiency
shall arise, the Debtor shall remain liable to Agent and Lenders
therefor.
5.3 POWER
OF ATTORNEY
The
Debtor hereby irrevocably authorizes and appoints the Agent, or any Person
or
agent the Agent may designate, as the Debtor’s attorney-in-fact, at the Debtor’s
cost and expense, subject to the terms of the Loan Agreement regarding the
exercise of remedies, to exercise all of the following powers upon and at any
time after the occurrence and during the continuance of an Event of Default,
which powers, being coupled with an interest, shall be irrevocable until all
of
the Obligations owing by the Debtor shall have been paid and satisfied in
full:
(a) accelerate
or extend the time of payment, compromise, issue credits, bring suit or
administer and otherwise collect Accounts or proceeds of any
Collateral;
(b) receive,
open and dispose of all mail addressed to the Debtor and notify postal
authorities to change the address for delivery thereof to such address as the
Agent may designate;
11
(c) give
customers indebted on Accounts notice of the Agent’s interest therein, or to
instruct such customers to make payment directly to the Agent for the Debtor’s
account;
(d) convey
any item of Collateral to any purchaser thereof;
(e) give
any
notices or record any liens under Section 4.3 hereof; and
(f) make
any
payments or take any acts under Section 4.6 hereof.
The
Agent’s authority under this 5.3 shall include, without limitation, the
authority to execute and give receipt for any certificate of ownership or any
document, transfer title to any item of Collateral, sign the Debtor’s name on
all financing statements or any other documents deemed necessary or appropriate
to preserve, protect or perfect the security interest in the Collateral and
to
file the same, prepare, file and sign the Debtor’s name on any notice of lien,
assignment or satisfaction of lien or similar document in connection with any
Account and prepare, file and sign the Debtor’s name on a proof of claim in
bankruptcy or similar document against any customer of the Debtor, and to take
any other actions arising from or incident to the rights, powers and remedies
granted to the Agent in this Agreement. This power of attorney is coupled with
an interest and is irrevocable by the Debtor.
5.4 WAIVER
OF CLAIMS
Except
as
otherwise provided in this Agreement, THE DEBTOR HEREBY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH
THE
AGENT’S OR ANY LENDER’S TAKING POSSESSION OF OR DISPOSING OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH THE DEBTOR
WOULD
OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR
OF
ANY STATE, and the Debtor hereby further waives, to the extent permitted by
law:
(a) all
damages occasioned by such taking of possession except any damages which are
the
direct result of the Agent’s or Lender’s gross negligence or willful
misconduct;
(b) all
other
requirements as to the time, place and terms of sale or other requirements
with
respect to the enforcement of the Agent’s or Lender’s rights hereunder, except
as expressly provided herein; and
(c) all
rights of redemption, appraisement, valuation, stay, extension or moratorium
now
or hereafter in force under any applicable law in order to prevent or delay
the
enforcement of this Agreement or the absolute sale of the Collateral or any
portion thereof, and the Debtor, for itself and all who may claim under it,
insofar as it or they now or hereafter lawfully may, hereby waives the benefit
of all such laws.
Any
sale
of, or the grant of options to purchase, or any other realization upon any
Collateral shall operate to divest all right, title, interest, claim and demand,
either at law or in equity, of the Debtor therein and thereto, and shall be
a
perpetual bar both at law and in equity against the Debtor and against any
and
all persons claiming or attempting to claim the Collateral so sold, optioned
or
realized upon, or any part thereof, from, through and under the
Debtor.
12
5.5 REMEDIES
CUMULATIVE
Each
and
every right, power and remedy hereby specifically given to the Agent shall
be in
addition to every other right, power and remedy specifically given under this
Agreement, under the Loan Agreement or under other documentation relating
thereto or now or hereafter existing at law or in equity, or by statute, and
each and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time or simultaneously and
as
often and in such order as may be deemed expedient by the Agent. All such
rights, powers and remedies shall be cumulative and the exercise or the
beginning of exercise of one shall not be deemed a waiver of the right to
exercise of any other or others. No delay or omission of the Agent in the
exercise of any such right, power or remedy and no renewal or extension of
any
of the Obligations shall impair any such right, power or remedy or shall be
construed to be a waiver of any default or Event of Default or any acquiescence
therein.
ARTICLE
6
MISCELLANEOUS
PROVISIONS
6.1 NOTICES
All
notices, approvals, consents or other communications required or desired to
be
given hereunder shall be delivered in person, by facsimile transmission followed
promptly by first class mail, by a nationally recognized courier service marked
for next business day delivery or by overnight mail, and delivered if to the
Agent, then to the attention of Xxxxx X. Xxxxxx, c/o Xxxxx Partners III, L.P.,
000 Xxxxx Xxxxxx, Xxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000, fax no. (000)
000-0000, with a copy to Xxxxxx X. Xxxxxxxx, Esq., c/o Blank Rome, LLP, Chrysler
Building, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, fax no. (000)
000-0000, and if to the Debtor, then to the attention of Xx. Xxxxxx X. Xxxxxxx,
000 X. Xxxxxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxx, 00000, with a copy to Xxxx X.
Xxxxxx, Esq., St. Xxxx & Xxxxx, L.L.C., 0 Xxxx Xxxxx Xxxx, Xxxxxx, Xxx
Xxxxxx, 00000, fax no. (000) 000-0000.
6.2 HEADINGS
The
headings in this Agreement are for purposes of reference only and shall not
affect the meaning or construction of any provision of this
Agreement.
6.3 SEVERABILITY
The
provisions of this Agreement are severable, and if any clause or provision
shall
be held invalid or unenforceable in whole or in part in any jurisdiction, then
such invalidity or unenforceability shall affect, in that jurisdiction only,
such clause or provision, or part thereof, and shall not in any manner affect
such clause or provision in any other jurisdiction or any other clause or
provision of this Agreement in any jurisdiction.
6.4 AMENDMENTS,
WAIVERS AND CONSENTS
Any
amendment or waiver of any provision of this Agreement and any consent to any
departure by the Debtor from any provision of this Agreement shall be effective
only if made or given in writing signed by the Agent.
13
6.5 INTERPRETATION
OF AGREEMENT
All
terms
not defined herein or in the Loan Agreement shall have the meaning set forth
in
the applicable Uniform Commercial Code. Acceptance of or acquiescence in a
course of performance rendered under this Agreement shall not be relevant in
determining the meaning of this Agreement even though the accepting or
acquiescing party had knowledge of the nature of the performance and opportunity
for objection.
6.6 CONTINUING
SECURITY INTEREST
This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect, (b) be binding upon the Debtor,
and
its successors and assigns and (b) inure to the benefit of the Agent and its
successors and assigns.
6.7 REINSTATEMENT
To
the
extent permitted by law, this Agreement shall continue to be effective or be
reinstated if at any time any amount received by the Agent in respect of the
Obligations owing by the Debtor is rescinded or must otherwise be restored
or
returned by the Agent upon the occurrence or during the pendency of any Event
of
Default, all as though such payments had not been made.
6.8 SURVIVAL
OF PROVISIONS
All
representations, warranties and covenants of the Debtor contained herein shall
survive the execution and delivery of this Agreement, and shall terminate only
upon the full and final indefeasible payment and performance by the Debtor
of
the Obligations secured hereby.
6.9 SETOFF
The
Agent
shall have all rights of setoff available at law or in equity.
6.10 POWER
OF ATTORNEY
In
addition to the powers granted to the Agent under Section 5.3, the Debtor hereby
irrevocably authorizes and appoints the Agent, or any Person or agent the Agent
may designate, as the Debtor’s attorney-in-fact, at the Debtor’s cost and
expense, to exercise all of the following powers, which being coupled with
an
interest, shall be irrevocable until all of the Obligations shall have been
indefeasibly paid and satisfied in full:
(a) after
the
occurrence of an Event of Default, to receive, take, endorse, sign, assign
and
deliver, all in the name of the Agent or the Debtor, any and all checks, notes,
drafts, and other documents or instruments relating to the Collateral;
and
(b) to
request, at any time from customers indebted on Accounts, verification of
information concerning the Accounts and the amounts owing thereon.
14
6.11 INDEMNIFICATION;
AUTHORITY OF AGENT
Neither
the Agent or any Lender nor any director, officer, employee, attorney or agent
of the Agent or any Lender shall be liable to the Debtor for any action taken
or
omitted to be taken by it or them hereunder, except for its or their own gross
negligence or willful misconduct, nor shall the Agent or any Lender be
responsible for the validity, effectiveness or sufficiency of this Agreement
or
of any document or security furnished pursuant hereto. The Agent, the Lenders
and their respective directors, officers, employees, attorneys and agents shall
be entitled to rely on any communication, instrument or document reasonably
believed by it or them to be genuine and correct and to have been signed or
sent
by the proper person or persons. The Debtor agrees to indemnify and hold
harmless the Agent, the Lenders and any other person from and against any and
all costs, expenses (including reasonable fees, expenses and disbursements
of
attorneys and paralegals (including, without duplication, reasonable charges
of
inside counsel)), claims or liability incurred by the Agent , any Lender or
such
person hereunder, unless such claim or liability shall be due to willful
misconduct or gross negligence on the part of the Agent, the Lender or such
person.
6.12 RELEASE;
TERMINATION OF AGREEMENT
Subject
to the provisions of Section 6.7 of this Agreement, this Agreement shall
terminate upon full and final indefeasible payment and performance of all the
Obligations owing by the Debtor. At such time, the Agent shall, at the request
of the Debtor, reassign and redeliver to the Debtor all of the Collateral
hereunder which has not been sold, disposed of, retained or applied by the
Agent
in accordance with the terms hereof. Such reassignment and redelivery shall
be
without warranty by or recourse to the Agent, except as to the absence of any
prior assignments by the Agent of its interest in the Collateral, and shall
be
at the expense of the Debtor.
6.13 COUNTERPARTS
This
Agreement may be executed in one or more counterparts, including by facsimile
copy, each of which shall be deemed an original but all of which shall together
constitute one and the same agreement.
6.14 GOVERNING
LAW
This
Agreement and the rights of the parties hereunder shall be governed by, and
construed in accordance with, the laws of the State of New York wherein the
terms of this Agreement were negotiated, excluding to the greatest extent
permitted by law any rule of law that would cause the application of the laws
of
any jurisdiction other than the State of New York.
6.15 SUBMISSION
TO JURISDICTION
(a) Each
of
the parties hereto hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any New York State court
or United States Federal court sitting in New York City, and any appellate
court
from any thereof, in any action or proceeding arising our of or relating to
this
Agreement or any of the other Transaction Documents to which it is a party,
or
for recognition or enforcement of any judgment, and each of the parties hereto
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in any such New York State
court or, to the fullest extent permitted by law, in such United States Federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the right that any party may otherwise have to bring
any action or proceeding relating to this Agreement or any of the other
Transaction Documents in the courts of any other jurisdiction.
15
(b) Each
of
the parties hereto irrevocably and unconditionally waives, to the fullest extent
it may legally and effectively do so, any objection that it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of
or
in relation to this Agreement or any other Transaction Document to which it
is a
party in any such New York State or United States Federal court sitting in
New
York City. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
6.16 SERVICE
OF PROCESS
THE
DEBTOR HEREBY IRREVOCABLY AGREES THAT SERVICE OF PROCESS IN ANY LEGAL ACTION
OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE EFFECTED BY MAILING A COPY
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE DEBTOR AT
ITS
ADDRESS SET FORTH IN SECTION 6.1 HEREOF.
6.17 LIMITATION
OF LIABILITY
THE
AGENT
AND THE LENDERS SHALL NOT HAVE ANY LIABILITY TO THE DEBTOR (WHETHER SOUNDING
IN
TORT, CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY THE DEBTOR IN CONNECTION
WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS
CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE
JUDGMENT OR COURT ORDER BINDING ON THE AGENT OR LENDER, AS APPLICABLE, THAT
THE
LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT.
6.18 DELAYS;
PARTIAL EXERCISE OF REMEDIES
No
delay
or omission of the Agent to exercise any right or remedy hereunder, whether
before or after the happening of any Event of Default, shall impair any such
right or shall operate as a waiver thereof or as a waiver of any such Event
of
Default. No single or partial exercise by the Agent of any right or remedy
shall
preclude any other or further exercise thereof, or preclude any other right
or
remedy.
6.19 JURY
TRIAL
THE
DEBTOR AND THE AGENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO ANY TRANSACTION DOCUMENT OR THE ACTIONS
OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
THEREOF.
16
[SIGNATURE
PAGE TO FOLLOW]
17
IN
WITNESS WHEREOF,
the
Debtor has caused this Company General Security Agreement to be duly executed
and delivered as of the date first written above.
By:
/s/
Xxxxxx X. Xxxxxxx
Name:
Xxxxxx X. Xxxxxxx
Title:
President and Chief Executive Office
By
its
acceptance hereof, as of the day and year first above written, the Agent agrees
to be bound by the provisions hereof applicable to it.
XXXXX
PARTNERS III, L.P.
By:
Claudius, L.L.C, General Partner
000
Xxxxx
Xxxxxx, 0xx
Xx.
Xxx
Xxxx,
Xxx Xxxx 00000
By:
/s/
Xxxxx Xxxxxxxxxxx
Name:
Xxxxx Xxxxxxxxxxx, its General Partner
Title:
President and Chief Executive Officer
18
SCHEDULE
A
Section
3.3 Places
of Business
000
X.
Xxxxx Xxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx 00000
19
