EXHIBIT 4.3(E)
ANNEX IV
TO
NOTE PURCHASE
AGREEMENT
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of the 1st day of March, 1999, made
by Cephalon, Inc., a Delaware corporation ("Grantor"), to Delta Opportunity
Fund, Ltd., as collateral agent (in such capacity, the "Collateral Agent") on
behalf of the Holders.
W I T N E S S E T H:
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WHEREAS, Grantor and the Buyers are parties to certain Note Purchase
Agreements, dated as of February 24, 1999 (as from time to time amended or
supplemented, the "Note Purchase Agreements"), pursuant to which, among other
things, the Buyers have agreed to purchase $30,000,000 aggregate principal
amount of 11% Revenue Sharing Senior Secured Notes due 2002 (the "Notes");
WHEREAS, Grantor has agreed to grant to Collateral Agent a security
interest in certain of its property and assets relating to the Pharmaceutical
Compositions to secure the performance of the obligations of Grantor under the
Notes and the Note Purchase Agreements;
WHEREAS, it is a condition precedent to the several obligations of the
Buyers to purchase their respective Notes that the Grantor shall have executed
and delivered this Security Agreement to the Collateral Agent for the ratable
benefit of the Holders; and
WHEREAS, the Grantor is contemporaneously entering into a Patent and
Trademark Security Agreement with the Collateral Agent for the ratable benefit
of the Holders;
NOW, THEREFORE, in consideration of the premises and to induce the
Buyers to purchase their respective Notes, the Grantor hereby agrees with the
Collateral Agent, for the ratable benefit of the Holders, as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms
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used herein which are defined in the Notes are so used as so defined, and the
meanings assigned to terms defined herein or in the Notes shall be equally
applicable to both the singular and plural forms of such terms. In addition, the
terms set forth below have the following meanings:
"Accounts" means all rights to payment for goods sold or leased or for
services
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rendered, whether or not such rights have been earned by performance.
"Buyer" means any of the several buyers party to a Note Purchase
Agreement.
"Chattel Paper" shall have the meaning assigned to such term under the
Code.
"Code" means the Uniform Commercial Code as from time to time in
effect in the Commonwealth of Pennsylvania.
"Compound" shall mean modafinil and/or any other similar compound,
isomer or salt thereof.
"Contracts" shall have the meaning assigned to such term under the
Code.
"Documents" shall have the meaning assigned to such term under the
Code.
"Event of Default" means:
(1) the failure by the Grantor to perform in any material respect any
obligation of the Grantor under this Security Agreement as and when
required by this Security Agreement; or
(2) any representation or warranty made by the Grantor pursuant to
this Security Agreement shall have been untrue in any material respect when
made;
(3) the failure by the Grantor to perform in any material respect any
obligation of the Grantor under the Patent and Trademark Security Agreement
as and when required by the required by the Patent and Trademark Security
Agreement;
(4) any representation or warranty made by the Grantor pursuant to
the Patent and Trademark Security Agreement shall have been untrue in any
material respect when made; or
(5) any Event of Default, as that term is defined in any of the
Notes.
"General Intangibles" shall have the meaning assigned to such term
under the Code.
"Holder" means any Buyer or any holder from time to time of any Note.
"Inventory" shall have the meaning assigned to such term under the
Code, and in any event, including all inventory, merchandise, goods and
other personal property that
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are held by or on behalf of a Person for sale or lease or to be furnished
under a contract of service or which give rise to any Account, including
returned goods.
"Investment Property" shall have the meaning assigned to such term
under the Code.
"Xxxxx" shall mean Laboratoire X. Xxxxx.
"Xxxxx Agreements" shall mean collectively, the License Agreement, the
Supply Agreement and the Trademark Agreement.
"License Agreement" shall mean the License Agreement entered into by
Grantor and Xxxxx on January 20, 1993, as amended.
"Lien" shall mean any lien, mortgage, security interest, chattel
mortgage, pledge or other encumbrance (statutory or otherwise) of any kind
securing satisfaction or performance of an obligation, including any
agreement to give any of the foregoing, any conditional sales or other
title retention agreement, any lease in the nature thereof, and the filing
of or the agreement to give any financing statement under the Code of any
jurisdiction or similar evidence of any encumbrance, whether within or
outside the United States.
"New Drug Application Rights" shall mean all rights of Grantor
presently existing or hereafter arising with respect to all new drug
applications (as they may be amended) filed with the U.S. Food and Drug
Administration relating to the marketing, distribution, promotion and sale
of the Pharmaceutical Compositions in the Territory.
"Obligations" shall mean:
(1) the full and prompt payment when due of all obligations and
liabilities to the Holders, whether now existing or hereafter arising,
under the Notes, this Agreement or the other Transaction Documents and the
due performance and compliance with the terms of the Notes and the other
Transaction Documents;
(2) any and all sums advanced by the Collateral Agent or any Holder
in order to preserve the Collateral or to preserve the Collateral Agent's
security interest in the Collateral; and
(3) in the event of any proceeding for the collection or enforcement
of any obligations or liabilities of the Grantor referred to in the
immediately preceding clauses (1) through (2) in accordance with the terms
of the Notes and this Agreement, the reasonable expenses of re-taking,
holding, preparing for sale, selling or otherwise
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disposing of or realizing on the Collateral, or of any other exercise by
the Collateral Agent of its rights hereunder, together with reasonable
attorneys' fees and court costs.
"Orphan Drug Act Rights" shall mean all rights of Grantor presently
existing or hereafter arising under the Orphan Drug Act relating to the
marketing exclusivity of the Pharmaceutical Compositions in the Territory.
"Patent and Trademark Security Agreement" shall mean that certain
Patent and Trademark Security Agreement dated March 1, 1999 between the
Grantor and the Collateral Agent.
"Pharmaceutical Compositions" shall mean all pharmaceutical
compositions containing the Compound.
"Proceeds" shall have the meaning assigned to such term under the Code.
"Proprietary Information" means information generally unavailable to
the public that has been created, discovered, developed or otherwise become
known to Grantor or in which property rights have been assigned or
otherwise conveyed to Grantor, which information has economic value or
potential economic value to the marketing, sale and distribution of the
Pharmaceutical Compositions in the United States, its territories and
possessions. Proprietary Information shall include, but not be limited to,
trade secrets, processes, formulas, writings data, know-how, negative know-
how, improvements, discoveries, developments, designs, inventions,
techniques, technical data, customer and supplier lists, financial
information, business plans or projections and modifications or
enhancements to any of the above. Proprietary Information shall include all
information existing on the date hereof and all information developed or
acquired hereafter.
"Security Agreement" means this Security Agreement, as amended,
supplemented or otherwise modified from time to time.
"Supply Agreement" shall mean the Supply Agreement entered into
between Grantor and Xxxxx on January 20, 1993, as amended.
"Territory" shall mean the United States of America, its territories
and possessions.
"Trademark Agreement" shall mean the Trademark Agreement entered into
between Grantor and Genelco S.A. on January 20, 1993, as amended.
2. Grant of Security Interest. As collateral security for the prompt
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and complete payment and performance when due of the Obligations, the Grantor
hereby grants to the
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Collateral Agent, for the ratable benefit of the Holders, a continuing first
priority security interest in all of the following property now owned or at any
time hereafter acquired by the Grantor or in which the Grantor now has or at any
time in the future may acquire right, title or interest (collectively, the
"Collateral"):
(i) the License Agreement, and the right to use and rely upon
the inventions and other intellectual property conveyed thereunder, to
the extent and only to the extent that the License Agreement
authorizes the use and sale of the Compound to make, have made, use
and sell the Pharmaceutical Compositions in the Territory;
(ii) the Supply Agreement to the extent and only to the extent
necessary to provide suitable quantities of the Compound to make, have
made, use or sell the Pharmaceutical Compositions in the Territory;
(iii) the rights of Grantor under the Trademark Agreement, in
and to the use of the trademark "Provigil" as a trademark for the
Pharmaceutical Compositions in the Territory; together with any good
will of the business associated with the use of such trademark in the
Territory;
(iv) all Proprietary Information possessed by Cephalon, whether
existing on the date hereof or developed or acquired hereafter, to the
extent and only to the extent necessary to practice the technology
subject to the security interest granted hereby;
(v) the Orphan Drug Act Rights;
(vi) the New Drug Application Rights;
(vii) Contracts, Documents and General Intangibles developed or
acquired by Cephalon, whether now existing or hereafter arising, to
the extent and only to the extent necessary to use or sell Compound
for the purpose of manufacturing, marketing, selling or distributing
the Pharmaceutical Compositions in the Territory;
(viii) all insurance policies to the extent and only to the
extent they relate to items (i) through (viii) above;
(ix) all books, ledgers, books of account, records, writings,
databases, information and other property relating to, used or useful
in connection with, evidencing, embodying, incorporating, or referring
to any of the foregoing; and
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(x) to the extent not otherwise included, all Proceeds,
products, rents, issues, profits and returns of and from any and all
of the foregoing, which Proceeds may be in the form of Accounts,
Chattel Paper, Inventory or otherwise.
3. Rights of Collateral Agent; Limitations on Collateral Agent's
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Obligations.
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(a) Grantor Remains Liable under Accounts and Contracts.
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Anything herein to the contrary notwithstanding, the Grantor shall remain liable
under each of the Accounts and Contracts that constitute part of the Collateral
to observe and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any agreement
giving rise to each such Account and in accordance with and pursuant to the
terms and provisions of each such Contract. The Collateral Agent shall not have
any obligation or liability under any Account that constitutes part of the
Collateral (or any agreement giving rise thereto) or under any Contract that
constitutes part of the Collateral by reason of or arising out of this Security
Agreement or the receipt by the Collateral Agent of any payment relating to such
Account or Contract pursuant hereto, nor shall the Collateral Agent be obligated
in any manner to perform any of the obligations of the Grantor under or pursuant
to any such Account (or any agreement giving rise thereto) or under or pursuant
to any such Contract, to make any payment, to make any inquiry as to the nature
or the sufficiency of any payment received by it or as to the sufficiency of any
performance by any party under any such Account (or any agreement giving rise
thereto) or under any such Contract, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
(b) Notice to Account Debtors and Contracting Parties. Upon the
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request of the Collateral Agent at any time that an Event of Default has
occurred and is continuing, but in the case of Events of Default that are solely
ones covered by the final clause (2) of Section 4.01 of any Note, only after the
expiration of the 365-day period specified in such clause (2), the Grantor shall
notify account debtors on the Accounts that constitutes part of the Collateral
and parties to the Contracts that constitutes part of the Collateral that such
Accounts and such Contracts have been assigned to the Collateral Agent for the
ratable benefit of the Holders and that payments in respect thereof shall be
made directly to the Collateral Agent or as the Collateral Agent shall direct.
(c) Verification and Analysis of Accounts. If an Event of
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Default has occurred and is continuing, but in the case of Events of Default
that are solely ones covered by the final clause (2) of Section 4.01 of any
Note, only after the expiration of the 365-day period specified in such clause
(2), the Collateral Agent shall have the right in its own name or in the name of
others to communicate with account debtors on the Accounts that constitute part
of the Collateral and parties to the Contracts that constitute part of the
Collateral to verify with them to its satisfaction the existence, amount and
terms of any such Accounts or Contracts and to make test verifications of such
Accounts in any manner and through any medium that it reasonably
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considers advisable, and the Grantor shall furnish all such assistance and
information as the Collateral Agent may require in connection therewith. At any
time and from time to time, upon the Collateral Agent's reasonable request and
at the expense of the Grantor, the Grantor shall cause independent public
accountants or others satisfactory to the Collateral Agent to furnish to the
Collateral Agent reports showing reconciliations, aging and test verifications
of, and trial balances for, such Accounts.
4. Representations and Warranties. The Grantor hereby represents and
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warrants that:
(a) Title; No Other Liens. Except for the Lien granted to the
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Collateral Agent for the ratable benefit of the Holders pursuant to this
Security Agreement and the Lien granted to the Collateral Agent for the ratable
benefit of the Holders pursuant to the terms of the Patent and Trademark
Security Agreement, the Grantor owns each item of the Collateral free and clear
of any and all Liens or claims of others except as permitted by Section 3.9 of
the Notes. No security agreement, financing statement or other public notice
with respect to all or any part of the Collateral is on file or of record in any
public office, except such as may have been filed in favor of the Collateral
Agent, for the ratable benefit of the Holders, pursuant to this Security
Agreement.
(b) Perfected First Priority Liens. The Liens granted pursuant
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to this Security Agreement will constitute upon the completion of all the
filings or notices listed in Schedule I hereto, perfected Liens on all
Collateral, which are prior to all other Liens on such Collateral and which are
enforceable as such against all creditors of the Grantor.
(c) Accounts. No amount payable to the Grantor under or in
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connection with any Account that constitutes part of the Collateral is evidenced
by any Instrument (other than checks in the ordinary course of business) or
Chattel Paper which has not been delivered to the Collateral Agent. The place
where the Grantor keeps its records concerning the Accounts that constitute part
of the Collateral is set forth on Schedule II hereto.
(d) Consents. No consent (other than consents that have been
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obtained) of any party (other than the Grantor) to any Contract that constitutes
part of the Collateral is required, or purports to be required, in connection
with the execution, delivery and performance of this Security Agreement.
(e) Inventory. The Inventory that constitute part of the
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Collateral are, as of the Closing Date, kept at the locations listed on Schedule
III hereto and have not been kept at any other location within the five-month
period ending on the Closing Date.
(f) Chief Executive Office. The Grantor's chief executive office
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and chief place of business is located at 000 Xxxxxxxxxx Xxxxxxx, Xxxx Xxxxxxx,
Xxxxxxxxxxxx 00000.
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(g) Power and Authority. The Grantor has full power, authority
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and legal right to enter into this Security Agreement and to grant the
Collateral Agent the Lien on the Collateral pursuant to this Security Agreement.
(h) Binding Obligation. This Agreement has been duly executed
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and delivered by the Grantor and constitutes a legal, valid and binding
obligation of the Grantor enforceable in accordance with its terms.
(i) Non-Contravention. The execution, delivery and performance
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of this Security Agreement will not violate any provision of any applicable law
or regulation or of any order, judgment, writ, award or decree of any court,
arbitrator or governmental authority, domestic or foreign, or of any securities
issued by the Grantor, or of any mortgage, indenture, lease, contract or other
agreement, instrument or undertaking to which the Grantor is a party or which
purports to be binding upon the Grantor or upon any of its assets and will not
result in the creation or imposition of any Lien on any of the assets of the
Grantor except as contemplated by this Security Agreement.
(j) Consents. No consent, filing, approval, registration,
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recording, registration or other action is required (x) for the grant by the
Grantor of the Lien on the Collateral pursuant to this Security Agreement or for
the execution, delivery or performance of this Security Agreement by the
Grantor, or (y) to perfect the Lien purported to be created by this Agreement,
in each case except as contemplated by Section 4(b) above, except with respect
to Sections 2(v) and (vi) above.
5. Covenants. The Grantor covenants and agrees with the Collateral
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Agent that from and after the date of this Security Agreement until the payment
or performance in full by the Grantor of all of its obligations under this
Security Agreement, the Guaranty and the Patent and Trademark Security
Agreement:
(a) Further Documentation; Pledge of Instruments and Chattel
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Paper. At any time and from time to time, upon the written request of the
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Collateral Agent, and at the sole expense of the Grantor, the Grantor will
promptly and duly execute and deliver 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 Security Agreement
and of the rights and powers herein granted, including, without limitation, (i)
the filing of any financing or continuation statements under the Code in effect
in any such jurisdiction with respect to the Liens created hereby and (ii)
providing to the Grantor such documents or instruments as shall be necessary or
desirable for the transfer of New Drug Application Rights to the Collateral
Agent or its designee, subject, in the case of documents or instruments provided
under this clause (ii), to the limitations upon the use or exercise thereof
contained in Section 5(j) below. The Grantor also hereby authorizes the
Collateral Agent to file any such financing or continuation
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statement without the signature of the Grantor to the extent permitted by
applicable law. A carbon, photographic or other reproduction of this Security
Agreement shall be sufficient as a financing statement for filing in any
jurisdiction. If any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any Instrument or Chattel Paper, such
Instrument or Chattel Paper shall be immediately delivered to the Collateral
Agent, duly endorsed in a manner satisfactory to the Collateral Agent, to be
held as Collateral pursuant to this Security Agreement.
(b) Indemnification. The Grantor agrees to pay, and to save the
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Collateral Agent and each Holder harmless from, any and all liabilities, costs
and expenses (including, without limitation, legal fees and expenses) (i) with
respect to, or resulting from, any delay in paying, any and all excise, sales or
other taxes which may be payable or determined to be payable with respect to any
of the Collateral, (ii) with respect to, or resulting from, any delay by Grantor
in complying with any law or regulation applicable to any of the Collateral or
(iii) in connection with this Security Agreement or any action taken by the
Collateral Agent or any Holder in exercising its rights hereunder. In any suit,
proceeding or action brought by the Collateral Agent or any Holder under any
Account or Contract that constitutes part of the Collateral for any sum owing
thereunder, or to enforce any provisions of any such Account or Contract, the
Grantor will save, indemnify and keep the Collateral Agent and each Holder
harmless from and against all expense, loss or damage suffered by reason of any
defense, setoff, counterclaim, recoupment or reduction or liability whatsoever
of the account debtor or obligor thereunder, arising out of a breach by the
Grantor of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such account
debtor or obligor or its successors from the Grantor.
(c) Maintenance of Records. The Grantor will keep and maintain
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at its own cost and expense satisfactory and complete records of the Collateral,
including, without limitation, a record of all payments received and all credits
granted with respect to the Accounts that constitute part of the Collateral. For
the further security of the Holders, the Grantor hereby grants to the Collateral
Agent, for the ratable benefit of the Holders, a security interest in all of the
Grantor's books and records pertaining to the Collateral, and the Grantor shall
turn over any such books and records for inspection at the office of the Grantor
to the Collateral Agent or to its representatives during normal business hours
at the request of the Collateral Agent.
(d) Limitation on Liens on Collateral. The Grantor (x) will not
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create, incur or permit to exist, will defend the Collateral against, and will
take such other action as is necessary to remove, any Lien or claim on or to the
Collateral, other than the Liens created hereby and as permitted by Section 3.9
of the Note, and (y) will defend the right, title and interest of the Collateral
Agent in and to any of the Collateral against the claims and demands of all
persons whomsoever.
(e) Limitations on Dispositions of Collateral. The Grantor will
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not sell,
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transfer, lease or otherwise dispose of any of the Collateral, or attempt, offer
or contract to do so except for sales of Inventory and the collection and use of
cash proceeds in the ordinary course of its business.
(f) Limitations on Performance of Contracts and Agreements
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Giving Rise to Accounts. The Grantor will not (i) fail to exercise promptly and
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diligently each and every material right or fail to perform each material
obligation which it may have under each Contract that constitutes part of the
Collateral and each agreement giving rise to an Account that constitutes part of
the Collateral (other than any right of termination) except where the Grantor
determines in its reasonable business judgment that the failure to exercise such
right or perform such obligation is in the best interest of the Grantor and
consistent with the protection and preservation of the rights and interests of
the Collateral Agent in the Collateral or (ii) fail to deliver to the Collateral
Agent, upon request, a copy of each material demand, notice or document received
by it relating in any way to any Contract that constitutes part of the
Collateral or any agreement giving rise to an Account that constitutes part of
the Collateral. The Grantor will not amend or modify the terms of, or waive any
rights under, any Contracts, including the Xxxxx Agreements, in a manner having
a material adverse effect on the value of such Contracts to the manufacturing,
marketing, sale or distribution of the Pharmaceutical Compositions in the
Territory.
(g) Further Identification of Collateral. The Grantor will
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furnish to the Collateral Agent from time to time, upon the request of the
Collateral Agent, statements and schedules further identifying and describing
the Collateral and such other reports in connection with the Collateral as the
Collateral Agent may reasonably request, all in reasonable detail.
(h) Notices. The Grantor will advise the Collateral Agent
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promptly, in reasonable detail, at its address in accordance with Section 16,
(i) of any Lien (other than Liens permitted hereunder) on, or claim asserted
against, any of the Collateral and (ii) of the occurrence of any other event
which could reasonably be expected to have a material adverse effect on the
value of any material portion of the Collateral or on the Liens created
hereunder.
(i) Changes in Locations, Name, Etc. The Grantor will not (i)
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change the location of its chief executive office/chief place of business from
that specified in Section 4(f) or remove its books and records from the location
specified in Section 4(c) or (ii) change its name, identity or corporate
structure to such an extent that any financing statement filed by the Collateral
Agent in connection with this Security Agreement would become misleading, unless
it shall have given the Collateral Agent at least 30 days prior written notice
thereof and, prior to such action or event, shall have taken appropriate action
to preserve and protect the Collateral Agent's security interest under this
Security Agreement.
(j) Transfer of New Drug Application Rights. The Grantor has
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provided to the Collateral Agent a letter, addressed to the U.S. Food and Drug
Administration (the "FDA"), in the form of Exhibit A hereto, executed by the
Grantor but undated, providing the
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FDA notice of the transfer of the new drug application of the Grantor with
respect to modafinil (the "NDA Transfer Letter"). During any period in which an
Event of Default is continuing, but in the case of Events of Default that are
solely ones covered by the final clause (2) of Section 4.01 of any Note, only
after the expiration of the 365-day period specified in such clause (2), the
Collateral Agent may complete the NDA Transfer Letter by indicating the name of
the transferee and dating the NDA Transfer Letter and may forward the NDA
Transfer Letter to the FDA.
(k) Subsidiaries. This Agreement is entered into on behalf of
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and for the benefit of the Grantor and its subsidiaries and other entities
controlled by the Grantor which have rights in the Collateral. The security
interest granted by the Grantor hereunder is intended to include all rights of
the Grantor in and to the Collateral, including any rights of its subsidiaries
and such other entities in and to such Collateral, and the Grantor will not
permit such subsidiaries and entities to exercise any of their rights with
respect to the Collateral.
6. Collateral Agent's Appointment as Attorney-in-Fact.
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(a) Powers. The Grantor hereby irrevocably constitutes and
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appoints the Collateral Agent and any officer or agent thereof, with full power
of substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Grantor and in the name of the
Grantor or in its own name, from time to time in the Collateral Agent's
discretion, during any period in which an Event of Default is continuing, but in
the case of Events of Default that are solely ones covered by the final clause
(2) of Section 4.01 of any Note, only after the expiration of the 365-day period
specified in such clause (2), for the purpose of carrying out the terms of this
Security Agreement, to take any and all appropriate action and to execute any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Security Agreement, and, without limiting the
generality of the foregoing, the Grantor hereby gives the Collateral Agent the
power and right, on behalf of the Grantor, without notice to or assent by the
Grantor, except any notice required by law, to do the following:
(i) to take possession of and endorse and collect any
checks, drafts, notes, acceptances or other instruments for the payment of
moneys due under or with respect to any Collateral and to file any claim or
to take any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by the Collateral Agent for the purpose of
collecting any and all such moneys due under or with respect to any such
Collateral whenever payable, in each case in the name of the Grantor or its
own name, or otherwise;
(ii) to pay or discharge taxes and liens levied or placed on
or threatened against the Collateral and to pay all or any part of the
premiums therefor and the costs thereof; and
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(iii) (A) to direct any party liable for any payment under
any of the Collateral to make payment of any and all moneys due or to
become due thereunder directly to the Collateral Agent or as the Collateral
Agent shall direct; (B) to ask or demand for, collect, receive payment of
and receipt for, any and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of any Collateral; (C)
to sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (D) to commence and prosecute any suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect the
Collateral or any thereof and to enforce any other right in respect of any
Collateral; (E) to defend any suit, action or proceeding brought against
the Grantor with respect to any Collateral; (F) to settle, compromise or
adjust any suit, action or proceeding described in clause (E) above and, in
connection therewith, to give such discharges or releases as the Collateral
Agent may deem appropriate; and (G) generally, to sell, transfer, pledge
and make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Collateral Agent were the
absolute owner thereof for all purposes, and to do, at the Collateral
Agent's option and the Grantor's expense, at any time, or from time to
time, all acts and things which the Collateral Agent deems necessary to
protect, preserve or realize upon the Collateral and the Collateral Agent's
Liens thereon and to effect the intent of this Security Agreement, all as
fully and effectively as the Grantor might do.
The Grantor hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable until the Grantor shall have paid and
performed in full all of its obligations under this Security Agreement, the
Notes and the Patent and Trademark Security Agreement.
(b) Other Powers. The Grantor also authorizes the Collateral
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Agent, from time to time during any period in which an Event of Default is
continuing, but in the case of Events of Default that are solely ones covered by
the final clause (2) of Section 4.01 of any Note, only after the expiration of
the 365-day period specified in such clause (2), to execute, in connection with
the sale provided for herein, any endorsements, assignments or other instruments
of conveyance or transfer with respect to the Collateral.
(c) No Duty on Collateral Agent's Part. The powers conferred on
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the Collateral Agent hereunder are solely to protect the Collateral Agent's
interests in the Collateral and shall not impose any duty upon the Collateral
Agent to exercise any such powers. The Collateral Agent shall be accountable
only for amounts that it actually receives as a result of the exercise of such
powers, and neither it nor any of its officers, directors, employees or agents
shall be responsible to the Grantor for any act or failure to act hereunder,
except for their own gross negligence or willful misconduct.
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7. Performance by Collateral Agent of Grantor's Obligations. If the
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Grantor fails to perform or comply with any of its agreements contained herein
and the Collateral Agent, as provided for by the terms of this Security
Agreement and following reasonable notice to the Grantor, shall itself perform
or comply, or otherwise cause performance or compliance, with such agreement,
the expenses of the Collateral Agent incurred in connection with such
performance or compliance shall be payable by the Grantor to the Collateral
Agent on demand and shall constitute Obligations secured hereby.
8. Remedies. If an Event of Default has occurred and is continuing,
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but in the case of Events of Default that are solely ones covered by the final
clause (2) of Section 4.01 of any Note, only after the expiration of the 365-day
period specified in such clause (2), the Collateral Agent may exercise, in
addition to all other rights and remedies granted to it in this Security
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the Code. Without limiting the generality of the foregoing, if an Event of
Default has occurred and is continuing, but in the case of Events of Default
that are solely ones covered by the final clause (2) of Section 4.01 of any
Note, only after the expiration of the 365-day period specified in such clause
(2), the Collateral Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below or expressly provided for) to or upon the
Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are, to the extent permitted by applicable law,
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, license, assign, give option or options to purchase, or
otherwise dispose of and deliver the Collateral or any part thereof (or contract
to do any of the foregoing), at public or private sale or sales, at any
exchange, broker's board or office of the Collateral Agent or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk. The Collateral Agent shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Grantor, which right or equity is
hereby waived, to the extent permitted by applicable law, or released.
The Grantor further agrees that, if an Event of Default has occurred and is
continuing, but in the case of Events of Default that are solely ones covered by
the final clause (2) of Section 4.01 of any Note, only after the expiration of
the 365-day period specified in such clause (2), at the Collateral Agent's
request Collateral, to assemble the Collateral and make it available to the
Collateral Agent at places which the Collateral Agent shall reasonably select,
whether at the Grantor's premises or elsewhere. The Collateral Agent shall apply
the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the
Collateral Agent hereunder, including, without limitation, reasonable attorneys'
fees and disbursements, to the payment in
-13-
whole or in part of the Obligations, in such order as the Collateral Agent may
elect, and only after such application and after the payment by the Collateral
Agent of any other amount required by any provision of law, need the Collateral
Agent account for the surplus, if any, to the Grantor. To the extent permitted
by applicable law, the Grantor waives all claims, damages and demands it may
acquire against the Collateral Agent arising out of the exercise by it of any
rights hereunder, provided, that nothing contained in this Section shall relieve
--------
the Collateral Agent from liability arising solely from its gross negligence or
willful misconduct. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable and
proper if given at least ten (10) days before such sale or other disposition.
The Grantor shall remain liable for any deficiency if the proceeds of any sale
or other disposition of the Collateral are insufficient to pay the Obligations
and the fees and disbursements of any attorneys employed by the Collateral Agent
to collect such deficiency.
9. Limitation on Duties Regarding Preservation of Collateral. The
---------------------------------------------------------
Collateral Agent's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Code or otherwise, shall be to deal with it in the same manner as the
Collateral Agent deals with similar property for its own account. Neither the
Collateral Agent nor any of its directors, officers, employees or agents shall
be liable for failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Grantor or
otherwise.
10. Powers Coupled with an Interest. All authorizations and agencies
-------------------------------
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest until Grantor has paid and performed in full all of its
obligations under this Security Agreement, the Guaranty and the Patent and
Trademark Security Agreement.
11. Severability. Any provision of this Security Agreement 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, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12. Paragraph Headings. The paragraph headings used in this Security
------------------
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
13. No Waiver; Cumulative Remedies. The Collateral Agent shall not by
------------------------------
any act, delay, indulgence, omission or otherwise be deemed to have waived any
right or remedy hereunder or to have acquiesced in any Event of Default or in
any breach of any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Collateral Agent, any right,
power or privilege hereunder shall operate as a waiver thereof. No
-14-
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Collateral Agent of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Collateral Agent would otherwise have on any future
occasion. The rights and remedies herein and in the Guaranty and the Notes
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law or in equity or by statute.
14. Waivers and Amendments; Successors and Assigns. None of
----------------------------------------------
the terms or provisions of this Security Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the party to be charged with enforcement; provided, however, that any provision
-------- -------
of this Security Agreement may be waived, amended, supplemented or otherwise
modified by the Collateral Agent only with the prior written approval of the
Majority Holders. This Security Agreement shall be binding upon the successors
and permitted assigns of the Grantor and shall inure to the benefit of the
Collateral Agent and its successors and assigns. The Grantor may not assign its
rights or obligations under this Agreement without the prior written consent of
the Collateral Agent.
15. Termination of Security Interest; Release of Collateral.
-------------------------------------------------------
(a) Upon the payment and performance in full by the
Grantor of its obligations under the Notes, this Agreement and the Patent and
Trademark Security Agreement, the security interest granted in the Collateral
pursuant to this Agreement (the "Security Interest") shall terminate and all
rights to the Collateral shall revert to the Grantor. At any time and from time
to time prior to such termination of the Security Interest, the Collateral Agent
shall release any of the Collateral only with the prior written consent of the
Majority Holders.
(b) Upon any such termination of the Security Interest,
the Collateral Agent will, at the expense of the Grantor, execute and deliver to
the Grantor such documents and take such other actions as the Grantor shall
reasonably request to evidence the termination of the Security Interest and
deliver to the Grantor all Collateral so released then in its possession.
16. Notices. Any notices required or permitted to be given
-------
under the terms of this Agreement shall be in writing and shall be sent by mail,
personal delivery, telephone line facsimile transmission or courier and shall be
effective five days after being placed in the mail, if mailed, or upon receipt,
if delivered personally, by telephone line facsimile transmission or by courier,
in each case addressed to a party at such party's address (or telephone line
facsimile transmission number) shown below or such other address (or telephone
line facsimile transmission number) as a party shall have provided by notice to
the other party in accordance with this provision. In the case of any notice to
the Grantor, such notice shall be addressed to the Grantor at 000 Xxxxxxxxxx
Xxxxxxx, Xxxx Xxxxxxx, Xxxxxxxxxxxx 00000, Attention: Chief Financial Officer
(telephone line facsimile transmission number (000) 000-0000), and a copy shall
also be
-15-
given to: Xxxxxx, Xxxxx & Xxxxxxx, LLP, 0000 Xxx Xxxxx Xxxxxx, Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000, Attention: Xxxxx X. Xxxx, Esq. (telephone line facsimile
transmission number (000) 000-0000), and in the case of any notice to the
Collateral Agent, such notice shall be addressed to the Collateral Agent c/o
International Fund Administration, Inc., 48 Par la Xxxxx Xxxx, Xxxxx 000,
Xxxxxxxx XX00, Xxxxxxx, Xxxxxxxxx: Xx. Xxxxx Xxxx (telephone line facsimile
number (000) 000-0000), and a copy shall also be given to: Xxxx & Altshcul
Advisors, LLC, 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 (telephone
line facsimile number (000) 000-0000), and Law Offices of Xxxxx X Xxxxx,
Penthouse Suite, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (telephone line
facsimile transmission number (000) 000-0000).
17. Concerning Collateral Agent. The Grantor acknowledges that
---------------------------
the rights and responsibilities of the Collateral Agent under this Security
Agreement with respect to any action taken by the Collateral Agent or the
exercise or nonexercise by the Collateral Agent of any option, right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Security Agreement shall, as between the Collateral Agent and the
Holders, be governed by Schedule IV hereto and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Collateral Agent and the Grantor, except as expressly provided in Sections 14
and 15, the Collateral Agent shall be conclusively presumed to be acting as
agent for the Holders with full and valid authority so to act or refrain from
acting, and the Grantor shall not be under any obligation to make any inquiry
respecting such authority. The Collateral Agent hereby waives for the benefit of
the Holders any claim, right or lien of the Collateral Agent against the
Collateral arising under applicable law or arising from any business or
transaction between the Collateral Agent and the Grantor other than pursuant to
this Security Agreement or any of the other Transaction Documents.
18. Integration. This Security Agreement represents the
-----------
agreement of the Grantor and the Collateral Agent with respect to the subject
matter hereof, and there are no promises, undertakings, representations or
warranties by the Collateral Agent relative to subject matter hereof not
expressly set forth or referred to herein.
19. Governing Law. This Security Agreement and the rights and
-------------
obligations of the Grantor under this Security Agreement shall be governed by,
and construed and interpreted in accordance with, the law of the State of New
York, except to the extent that under the New York Uniform Commercial Code the
laws of another jurisdiction govern matters of perfection and the effect of
perfection or non-perfection of any security interest granted hereunder.
-16-
IN WITNESS WHEREOF, the Grantor has caused this Security
Agreement to be duly executed and delivered as of the date first above written.
CEPHALON, INC.
By:
Name:
Title:
ACKNOWLEDGED AND AGREED:
DELTA OPPORTUNITY FUND, LTD.
By:
Name:
Title:
-17-
SCHEDULE I
Filings Required to Perfect Security Interest
---------------------------------------------
I-18
SCHEDULE II
Location of Records Concerning Accounts
---------------------------------------
II-19
SCHEDULE III
Inventory
---------
III-20
SCHEDULE IV
The Collateral Agent
--------------------
1. Appointment. The Holders (all capitalized terms used in
this Schedule IV and not otherwise defined shall have the respective meanings
provided in the Security Agreement to which this Schedule IV is attached (the
"Security Agreement")), by their acceptance of the benefits of the Security
Agreement, hereby irrevocably designate Delta Opportunity Fund, Ltd., as
Collateral Agent to act as specified herein and in the Security Agreement. Each
Buyer hereby irrevocably authorizes, and each other Holder of any Note by the
acceptance of such Note shall be deemed irrevocably to authorize, the Collateral
Agent to take such action on its behalf under the provisions of the Security
Agreement and any other instruments and agreements referred to herein or therein
and to exercise such powers and to perform such duties hereunder and thereunder
as are specifically delegated to or required of the Collateral Agent by the
terms hereof and thereof and such other powers as are reasonably incidental
thereto. The Collateral Agent may perform any of its duties hereunder by or
through its agents or employees.
2. Nature of Duties. The Collateral Agent shall have no
duties or responsibilities except those expressly set forth in the Security
Agreement. Neither the Collateral Agent nor any of its officers, directors,
employees or agents shall be liable for any action taken or omitted by it as
such under the Security Agreement or hereunder or in connection herewith or
therewith, unless caused by its or their gross negligence or willful misconduct.
The duties of the Collateral Agent shall be mechanical and administrative in
nature; the Collateral Agent shall not have by reason of the Security Agreement
or any other Transaction Document a fiduciary relationship in respect of any
Holder; and nothing in the Security Agreement, expressed or implied, is intended
to or shall be so construed as to impose upon the Collateral Agent any
obligations in respect of the Security Agreement except as expressly set forth
herein.
The Collateral Agent shall not be liable for any act it may do
or omit to do while acting in good faith and in the exercise of its own best
judgment. Any act done or omitted by the Collateral Agent on the advice of its
own attorneys shall be deemed conclusively to have been done or omitted in good
faith. The Collateral Agent shall have the right at any time to consult with
counsel on any question arising under this Security Agreement. The Collateral
Agent shall incur no liability for any delay reasonably required to obtain the
advice of counsel.
3. Lack of Reliance on the Collateral Agent. Independently
and without reliance upon the Collateral Agent, each Holder, to the extent it
deems appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of the Grantor and its
subsidiaries in connection with the making and the continuance of the
Obligations and the taking or not taking of any action in connection therewith,
and (ii) its own appraisal of the creditworthiness of the Grantor and its
subsidiaries, and the Collateral Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Holder with any credit
or other information with respect thereto, whether coming into its possession
before
IV-21
any Obligation arises or the purchase of any Note, or at any time or times
thereafter. The Collateral Agent shall not be responsible to any Holder for any
recitals, statements, information, representations or warranties herein or in
any document, certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability,
perfection, collectibility, priority or sufficiency of the Security Agreement or
the financial condition of the Grantor or be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of the Security Agreement, or the financial condition of the
Grantor, or the existence or possible existence of any Event of Default.
4. Certain Rights of the Collateral Agent. No Holder shall
have the right to cause the Collateral Agent to take any action with respect to
the Collateral, with only the Majority Holders having the right to direct the
Collateral Agent to take any such action. If the Collateral Agent shall request
instructions from the Majority Holders with respect to any act or action
(including failure to act) in connection with the Security Agreement, the
Collateral Agent shall be entitled to refrain from such act or taking such
action unless and until it shall have received instructions from the Majority
Holders, and to the extent requested, appropriate indemnification in respect of
actions to be taken by the Collateral Agent; and the Collateral Agent shall not
incur liability to any person by reason of so refraining. Without limiting the
foregoing, no Holder shall have any right of action whatsoever against the
Collateral Agent as a result of the Collateral Agent acting or refraining from
acting hereunder in accordance with the instructions of the Majority Holders or
as otherwise specifically provided in the Security Agreement.
5. Reliance. The Collateral Agent shall be entitled to rely,
and shall be fully protected in relying, upon any note, writing, resolution,
notice, statement, certificate, telex, teletype or telecopier message,
cablegram, radiogram, order or other document or telephone message signed, sent
or made by the proper person or entity, and, with respect to all legal matters
pertaining to the Security Agreement and its duties thereunder, upon advice of
counsel selected by it.
6. Indemnification. To the extent the Collateral Agent is not
reimbursed and indemnified by the Grantor and/or its subsidiaries, the Holders
will reimburse and indemnify the Collateral Agent, in proportion to their
respective principal amounts of Obligations, for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Collateral Agent in performing
its duties hereunder or under the Security Agreement, or in any way relating to
or arising out of the Security Agreement except for those determined by a final
judgment (not subject to further appeal) of a court of competent jurisdiction to
have resulted solely from the Collateral Agent's own negligence or willful
misconduct.
7. The Collateral Agent in its Individual Capacity. The
Collateral Agent and its affiliates may lend money to, purchase, sell and trade
in securities of and generally engage in
IV-22
any kind of business with the Grantor or any affiliate or subsidiary of the
Grantor as if it were not performing the duties specified herein, and may accept
fees and other consideration from the Grantor for services to the Grantor in
connection with the Transaction Documents and otherwise without having to
account for the same to the Holders; provided, however, that the Collateral
Agent on behalf of itself and such affiliates, hereby waives any claim, right or
lien against the Collateral in any way arising from or relating to any such
loan, securities transaction or business with the Grantor.
8. Holders. The Collateral Agent may deem and treat the
holder of record of any Note as the owner thereof for all purposes hereof unless
and until a written notice of the assignment or transfer thereof, as the case
may be, shall have been filed with the Collateral Agent. Any request, authority
or consent of any person or entity who, at the time of making such request or
giving such authority or consent, is the holder of record of any Note shall be
conclusive and binding on any subsequent holder, transferee or assignee, as the
case may be, of such Note or of any Note(s) issued in exchange therefor.
9. Resignation by the Collateral Agent. (a) The Collateral
Agent may resign from the performance of all its functions and duties under the
Security Agreement at any time by giving 60 Business Days' prior written notice
(as provided in the Security Agreement) to the Grantor and the Holders. Such
resignation shall take effect upon the appointment of a successor Collateral
Agent pursuant to clauses (b) and (c) below.
(b) Upon any such notice of resignation, the Majority Holders
shall appoint a successor Collateral Agent hereunder.
(c) If a successor Collateral Agent shall not have been so
appointed within said 60 Business Day period, the Collateral Agent shall then
appoint a successor Collateral Agent who shall serve as Collateral Agent
hereunder or thereunder until such time, if any, as the Majority Holders appoint
a successor Collateral Agent as provided above. If a successor Collateral Agent
has not been appointed within such 60-day period, the Collateral Agent may
petition any court of competent jurisdiction or may interplead the Grantor and
Holders in a proceeding for the appointment of a successor Collateral Agent, and
all fees, including but not limited to extraordinary fees associated with the
filing of interpleader, and expenses associated therewith shall be payable by
the Grantor.
(d) The fees of any successor Collateral Agent for its
services as such shall be payable by the Grantor.
IV-23
EXHIBIT A
(Cephalon Letterhead)
-------------------
(date)
----
Food and Drug Administration
0000 Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Re: Transfer of Ownership
New Drug Application NDA NDA 20-717
-----------------------------------
To Whom It May Concern:
We are hereby informing you, in accordance with Section 505 of the Federal Food,
Drug and Cosmetic Act (the "Act"), that as of , _________, ___________(the
"Transferee"), is the new official owner and responsible party for the following
New Drug Application (NDA) which, prior to ______________was officially owned
and held by Cephalon, Inc.:
NDA NDA 20-717 (________________) and all supplements and pending
supplements thereto (see attached list).
---
In accordance with 21 C.F.R. 314.81, the Transferee has received from Cephalon,
Inc. a complete copy of the above-referenced NDA and all of its supplements,
pending supplements, amendments, and reports thereto.
Should any questions arise in connection with the above, please do not hesitate
to contact me.
Sincerely,
CEPHALON, INC.
IV-A-24
By: ________________
Title: ________________
IV-A-25
ATTACHMENT TO CEPHALON, INC.
OWNERSHIP TRANSFER OF NDA
As of March 1, 1999, there are currently no supplements or pending supplements
to NDA 20-717.
IV-A-26
