EXHIBIT 99.6
------------
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT ("Agreement"), dated as of February __, 2001,
is made by and between ABLE LABORATORIES, INC. ("Grantor"), a Delaware
corporation, and FINOVA MEZZANINE CAPITAL INC., ("FINOVA") a Tennessee
corporation with its principal office and place of business in Nashville,
Tennessee, in its capacity as collateral agent for itself and for Argosy
Investment Partners, L.P. ("Argosy"), a Pennsylvania limited partnership
("FINOVA and Argosy are collectively referred to as "Lender"; FINOVA is referred
to in its agency capacity as "Agent").
RECITALS:
---------
WHEREAS, as described in that Credit Agreement of this date among
DynaGen, Inc. ("Borrower"), a Delaware corporation, Argosy and FINOVA, in its
individual capacity and as Collateral Agent (as now existing and as may
hereafter be amended, the "Credit Agreement"), Lender has various obligations
outstanding to Grantor, which obligations have been guaranteed by Grantor
pursuant to its Unconditional Guaranty dated as of the date hereof (the
"Guaranty"); and
WHEREAS, it is a condition of Lender's agreements described in the
Credit Agreement that Grantor execute and deliver this Agreement to Lender.
AGREEMENT:
----------
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Security Interest. Grantor hereby grants to Lender a
security interest in the following described property (collectively, the
"Collateral"; equipment is expressly excluded from the Collateral):
(a) presently existing and hereafter arising accounts,
contract rights, and all other forms of obligations owing to Grantor
arising out of the sale or lease of goods or the rendition of services
by Grantor, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Grantor and Grantor's Books
relating to any of the foregoing (collectively, "Accounts");
(b) present and future general intangibles and other personal
property (including choses or things in action, goodwill, patents,
trade names, trademarks, servicemarks, copyrights, blueprints,
drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, monies due under any royalty or
licensing agreements, infringement claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs deposit accounts,
insurance premium rebates, tax refunds, and tax refund claims) other
than goods and Accounts, and Grantor's Books relating to any of the
foregoing (collectively, "General Intangibles");
(c) present and future letters of credit, notes, drafts,
instruments, certificated and uncertificated securities, documents,
leases, and chattel paper, and Grantor's Books relating to any of the
foregoing (collectively, "Negotiable Collateral");
(d) present and future inventory in which Grantor has any
interest, including goods held for sale or lease or to be furnished
under a contract of service and all of Grantor's present and future raw
materials, work in process, finished goods, and packing and shipping
materials, wherever located, and any documents of title representing
any of the above, and Grantor's Books relating to any of the foregoing
(collectively, "Inventory");
(e) books and records including: ledgers; records indicating,
summarizing, or evidencing Grantor's assets or liabilities, or the
collateral; all information relating to Grantor's business operations
or financial condition; and all computer programs, disc or tape files,
printouts, funds or other computer prepared information, and the
equipment containing such information (collectively, "Grantor's
Books");
(f) substitutions, replacements, additions, accessions,
proceeds, products to or of any of the foregoing, including, but not
limited to, proceeds of insurance covering any of the foregoing, or any
portion thereof, and any and all Accounts, General Intangibles,
Negotiables, Collateral, Inventory, money, deposits, accounts, or other
tangible or intangible property resulting from the sale or other
disposition of the accounts, General Intangibles, Negotiable
Collateral, Inventory or any portion thereof or interest therein and
the proceeds thereof.
2. Secured Indebtedness. The security interest granted hereby shall
secure the prompt payment and performance of the "Guaranteed Obligations" (as
defined in the Guaranty) and the prompt performance of each of the covenants and
duties under the "Loan Documents" (as defined in the Credit Agreement).
3. Representations and Warranties of Grantor. Grantor represents,
warrants and agrees as follows:
(a) Except as set forth on Schedule 3(a) hereto (the
"Permitted Encumbrances"), Grantor is the owner of the Collateral free
and clear of any liens and security interests. Grantor will defend the
Collateral against the claims and demands of all persons other than the
holders of the Permitted Encumbrances.
(b) The address set forth on Schedule 3(b) hereto is Grantor's
principal place(s) of business and the location of all tangible
Collateral and the place where the records concerning all intangible
Collateral are kept and/or maintained.
(c) Grantor will pay all costs of filing of financing,
continuation and termination statements with respect to the security
interests created hereby, and Lender is authorized to do all things
that it deems necessary to perfect and continue perfection of the
security interests created hereby and to protect the Collateral.
-2-
4. Agreements With Respect to the Collateral. Grantor covenants and
agrees with Lender as follows:
(a) Grantor will not permit any of the Collateral to be
removed from the location specified herein, except for temporary
periods in the normal and customary use thereof, without the prior
written consent of Lender.
(b) Grantor shall notify Lender in writing of any change in
the location of Grantor's principal place of business (or residence) or
the location of any tangible Collateral or the place(s) where the
records concerning all intangible Collateral are kept or maintained.
(c) Grantor will keep the Collateral in good condition and
repair and will pay and discharge all taxes, levies and other
impositions levied thereon as well as the cost of repairs to or
maintenance of same, and will not permit anything to be done that may
impair the value of any of the Collateral. If Grantor fails to pay such
sums, Lender may do so for Grantor's account and add the amount thereof
to the Obligations.
(d) Until the occurrence of an Event of Default, Grantor shall
be entitled to possession of the Collateral and to use the same in any
lawful manner, provided that such use does not cause excessive wear and
tear to the Collateral, cause it to decline in value at an excessive
rate, or violate the terms of any policy of insurance thereon.
(e) Grantor will not sell, exchange, lease or otherwise
dispose of any of the Collateral or any interest therein without the
prior written consent of Lender. Notwithstanding the foregoing, so long
as an Event of Default is not continuing, Grantor shall have the right
to process and sell Grantor's inventory in the regular course of
business and to sell or otherwise dispose of obsolete assets in the
ordinary course of business. Lender's security interest hereunder shall
attach to all proceeds of all sales or other dispositions of the
Collateral. If at any time any such proceeds shall be represented by
any instruments, chattel paper or documents of title, then such
instruments, chattel paper or documents of title shall be promptly
delivered to Lender and subject to the security interest granted
hereby. If at any time any of Grantor's inventory is represented by any
document of title, such document of title will be delivered promptly to
Lender and subject to the security interest granted hereby.
(f) Grantor will not allow the Collateral to be attached to
real estate in such manner as to become a fixture or a part of any real
estate.
(g) Grantor will at all times keep the Collateral insured
against all insurable hazards in amounts equal to the full cash value
of the Collateral. Such insurance shall be in such companies as may be
acceptable to Lender, with provisions satisfactory to Lender for
payment of all losses thereunder to Lender as its interests may appear.
If required by Lender, Grantor shall deposit the policies with Lender.
Any money received by Lender under said policies may be applied to the
payment of the Obligations, whether or not due and payable, or at
Lender's option may be delivered by Lender to Grantor for the purpose
of repairing or restoring the Collateral. Grantor assigns to Lender all
right to receive
-3-
proceeds of insurance not exceeding the amounts secured hereby, directs
any insurer to pay all proceeds directly to Lender, and appoints Lender
Grantor's attorney-in-fact to endorse any draft or check made payable
to Grantor in order to collect the benefits of such insurance. If
Grantor fails to keep the Collateral insured as required by Lender,
Lender shall have the right to obtain such insurance at Grantor's
expense and add the cost thereof to the Obligations.
(h) Grantor will not permit any liens or security interests
other than those created by this Agreement and the Permitted
Encumbrances to attach to any of the Collateral, nor permit any of the
Collateral to be levied upon under any legal process, nor permit
anything to be done that may impair the security intended to be
afforded by this Agreement, nor permit any tangible Collateral to
become attached to or commingled with other goods without the prior
written consent of Lender.
5. Remedies Upon Default. Upon and during the continuance of an Event
of Default under and as defined in the Credit Agreement, Lender may pursue any
or all of the following remedies, without any notice to Grantor except as
required below:
(a) Lender may give written notice of default to Grantor,
following which Grantor shall not dispose of, conceal, transfer, sell
or encumber any of the Collateral (including, but not limited to, cash
proceeds) without Lender's prior written consent, even if such
disposition is otherwise permitted hereunder in the ordinary course of
business. Any such disposition, concealment, transfer or sale after the
giving of such notice shall constitute a wrongful conversion of the
Collateral. Lender may obtain a temporary restraining order or other
equitable relief to enforce Grantor's obligation to refrain from so
impairing Lender's Collateral.
(b) Lender may take possession of any or all of the
Collateral. Grantor hereby consents to Lender's entry into any of
Grantor's premises to repossess Collateral, and specifically consents
to Lender's forcible entry thereto as long as Lender causes no
significant damage to the premises in the process of entry (xxxxxxxx of
locks, cutting of chains and the like do not in themselves cause
"significant" damage for the purposes hereof) and provided that Lender
accomplishes such entry without a breach of the peace.
(c) Lender may dispose of the Collateral at private or public
sale. Any required notice of sale shall be deemed commercially
reasonable if given at least ten (10) days prior to sale. Lender may
adjourn any public or private sale to a different time or place without
notice or publication of such adjournment, and may adjourn any sale
either before or after offers are received. The Collateral may be sold
in such lots as Lender may elect, in its sole discretion. Lender may
take such action as it may deem necessary to repair, protect, or
maintain the Collateral pending its disposition.
(d) Lender may recover any or all proceeds of accounts from
any bank or other custodian who may have possession thereof. Grantor
hereby authorizes and directs all custodians of Grantor's assets to
comply with any demand for payment made by Lender pursuant to this
Agreement, without the need of confirmation from Grantor and without
making any inquiry as to the existence of an Event of Default or any
other
-4-
matter. Lender may engage a collection agent to collect accounts for a
reasonable percentage commission or for any other reasonable
compensation arrangement.
(e) Lender may notify any or all account debtors that
subsequent payments must be made directly to Lender or its designated
agent. Such notice may be made over Lender's signature or over
Grantor's name with no signature or both, in Lender's discretion.
Grantor hereby authorizes and directs all existing or future account
debtors to comply with any such notice given by Lender, without the
need of confirmation from Grantor and without making any inquiry as to
the existence of an Event of Default or as to any other matter.
(f) Lender may, but shall not be obligated to, take such
measures as Lender may deem necessary in order to collect any or all of
the accounts. Without limiting the foregoing, Lender may institute any
administrative or judicial action that it may deem necessary in the
course of collecting and enforcing any or all of the accounts. Any
administrative or judicial action or other action taken by Lender in
the course of collecting the accounts may be taken by Lender in its own
name or in Grantor's name. Lender may compromise any disputed claims
and may otherwise enter into settlements with account debtors or
obligors under the accounts, which compromises or settlements shall be
binding upon Grantor. Lender shall have no duty to pursue collection of
any account, and may abandon efforts to collect any account after such
efforts are initiated.
(g) Lender may, with respect to any account involving
uncompleted performance by Grantor, and with respect to any general
intangible or other Collateral whose value may be preserved by
additional performance on Grantor's part, take such action as Lender
may deem appropriate including, but not limited, to performing or
causing the performance of any obligation of Grantor thereunder, the
making of payments to prevent defaults thereunder, and the granting of
adequate assurances to other parties thereto with respect to future
performance. Lender's action with respect to any such accounts or
general intangibles shall not render Lender liable for further
performance thereunder unless Lender so agrees in writing.
(h) Lender may exercise its lien upon and right of setoff
against any monies, items, credits, deposits or instruments that Lender
may have in its possession and that belong to Grantor or to any other
person or entity liable for the payment of any or all of the
Obligations.
(i) Lender may exercise any right that it may have under any
other document evidencing or securing the Obligations or otherwise
available to Lender at law or equity.
6. Audits and Examinations. Lender shall have the right, at any
reasonable time and, in the absence of an Event of Default, upon reasonable
advance notice, by its own auditors, accountants or other agents, to examine or
audit any of the books and records of Grantor, or the Collateral, all of which
will be made available upon request. Such accountants or other representatives
of Lender will be permitted to make any verification of the existence of the
Collateral or accuracy of the records that Lender deems necessary or proper. Any
reasonable
-5-
expenses incurred by Lender in making such examination, inspection, verification
or audit shall be paid by Grantor promptly on demand and shall constitute part
of the Obligations.
7. Termination Statement. Upon receipt of proper written demand
following the payment in full of the Obligations and termination of any
commitment of Lender to make any future advances to Grantor, Lender at its
option, shall send a termination statement with respect to any financing
statement filed to perfect Lender's security interests in any of the Collateral
to Grantor or cause such termination statement to be filed with the appropriate
filing officer(s).
8. Power of Attorney. Grantor hereby constitutes Lender or its
designee, as Grantor's attorney-in-fact with power, upon the occurrence and
during the continuance of an Event of Default, to endorse Grantor's name upon
any notes, acceptances, checks, drafts, money orders, or other evidences of
payment or Collateral that may come into either its or Lender's possession; to
sign the name of Grantor on any invoice or xxxx of lading relating to any of the
accounts receivable, drafts against customers, assignments and verifications of
accounts receivable and notices to customers; to send verifications of accounts
receivable; to notify the Post Office authorities to change the address for
delivery of mail addressed to Grantor to such address as Lender may designate;
to execute any of the documents referred to in Section 3(c) hereof in order to
perfect and/or maintain the security interests and liens granted herein by
Grantor to Lender; to do all other acts and things necessary to carry out the
purposes of and remedies provided under this Agreement. All acts of said
attorney or designee are hereby ratified and approved, and said attorney or
designee shall not be liable for any acts of commission or omission (other than
acts of gross negligence or willful misconduct), nor for any error of judgment
or mistake of fact or law. This power being coupled with an interest is
irrevocable until all of the Obligations are paid in full and any and all
promissory notes executed in connection therewith are terminated and satisfied.
9. Binding Effect. This Agreement shall inure to the benefit of
Lender's successors and assigns and shall bind Grantor's heirs, representatives,
successors and assigns.
10. Severability. If any provision of this Agreement is held invalid,
such invalidity shall not affect the validity or enforceability of the remaining
provisions of this Agreement.
11. Governing Law and Amendments. This Agreement shall be construed and
enforced under the laws of the State of Tennessee applicable to contracts to be
wholly performed in such State. No amendment or modification hereof shall be
effective except in a writing executed by each of the parties hereto.
12. Survival of Representations and Warranties. All representations and
warranties contained herein or made by or furnished on behalf of Grantor in
connection herewith shall survive the execution and delivery of this Agreement.
13. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
-6-
14. Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that Grantor, Lender and their respective agents have participated in the
preparation hereof.
15. Consent to Jurisdiction; Exclusive Venue. Grantor hereby
irrevocably consents to the Jurisdiction of the United States District Court for
the Middle District of Tennessee and of all Tennessee state courts sitting in
Davidson County, Tennessee, for the purpose of any litigation to which Lender
may be a party and which concerns this Agreement or the Obligations. It is
further agreed that venue for any such action shall lie exclusively with courts
sitting in Davidson County, Tennessee, unless Lender agrees to the contrary in
writing.
16. Waiver of Trial by Jury. LENDER AND Grantor HEREBY KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COUNSEL WAIVE TRIAL BY JURY IN ANY ACTIONS,
PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT OR TORT OR OTHERWISE,
AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS AGREEMENT OR
THE LOAN DOCUMENTS.
IN WITNESS WHEREOF, Grantor and Lender have executed this Agreement, or
have caused this Agreement to be executed as of the date first above written.
GRANTOR:
--------
ABLE LABORATORIES, INC.,
a Delaware corporation
By:
-----------------------------------------
Title:
--------------------------------------
AGENT:
------
FINOVA MEZZANINE CAPITAL INC.,
a Tennessee corporation, as Agent
By:
----------------------------------------
Title:
-------------------------------------
-7-
SCHEDULE 3(A)
-------------
PERMITTED ENCUMBRANCES
----------------------
-8-
SCHEDULE 3(B)
-------------
PRINCIPAL PLACE(S) OF BUSINESS
------------------------------
AND LOCATION(S) OF COLLATERAL
-----------------------------
-9-
