SECURITY AGREEMENT
Exhibit
10.12
SECURITY
AGREEMENT (this “Security
Agreement”)
dated
as of 14th day of November, 2007, by and among Interpharm Holdings Inc. (the
“Company”)
and
Interpharm, Inc. (the “Subsidiary”
and
together with the Company, the “Debtors”),
and
Xxxxxx-Xxxxxxxxx Capital Focus III, L.P., in its capacity as the collateral
agent (together with any successors thereto in such capacity, the “Collateral
Agent”)
for
the benefit of the holders (the “Holders”)
of the
Notes (as defined below) (the Collateral Agent and the Holders are hereinafter
referred to as the “Secured
Parties”).
Recitals
A. Pursuant
to the Securities Purchase Agreement, dated as of the date hereof (including
all
annexes, exhibits and schedules thereto, as from time to time amended, restated,
supplemented or otherwise modified, the “Purchase
Agreement”),
among
the Debtors and the Purchasers named therein (the “Purchasers”),
the
Debtors have agreed to issue, and subject to the terms thereof, and the
Purchasers have agreed to purchase, the Debtors’
Secured
12% Notes
due
2009 in the aggregate principal amount of $5,000,000 (together with all
renewals, extensions and modifications thereof and any note or notes issued
in
substitution or exchange therefor, the “Notes”);
and
B. As
a
condition to each of the Purchasers’ obligation to purchase the Notes, the
Purchasers have required, and the Debtors have agreed, to execute and deliver
this Security Agreement to provide collateral security for the obligations
of
(i) the Debtors under the Purchase Agreement, the Notes, this Security Agreement
and any other agreements entered into, now or in the future by the Debtors
in
connection with the Purchase Agreement (hereinafter collectively referred to
as
the “Note
Documents”).
Agreement
NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Defined
Terms.
Terms
not
otherwise defined in this Security Agreement (including Annex
A
hereto),
unless the context indicates otherwise, have the meanings set forth in the
Purchase Agreement, or if not defined in the Purchase Agreement, then as
provided for by the Code to the extent the same are used or defined
therein.
2. Grant
Of Lien.
(a) To
secure
the prompt and complete payment, performance and observance when due (whether
at
stated maturity, by acceleration or otherwise) of all of the Secured
Obligations, the Debtors hereby grant, assign, convey, mortgage, pledge,
hypothecate and transfer to the Collateral Agent, for itself and the benefit
of
the Secured Parties, security interests in all of their right, title and
interest in, to and under all personal property and other assets described
below, whether now owned by or owing to, or hereafter acquired by or arising
in
favor of the Debtors, and whether owned or consigned by or to, or leased from
or
to, the Debtors, and regardless of where located (all of which being hereinafter
collectively referred to as the “Collateral”):
(i)
all Accounts; (ii) all General Intangibles; (iii) all goods, including, without
limitation, Inventory and Equipment; (iv) all real property and fixtures; (v)
all Chattel Paper; (vi) all Instruments (including all promissory notes); (vii)
all documents; (viii) all Deposit Accounts, including all deposits therein;
(ix)
all money, cash or cash equivalents of the Debtor; (x) all books and records
pertaining to the Collateral; (xi) all investment property (including
securities, whether certificated or uncertificated, securities accounts,
security entitlements, commodity contracts or commodity accounts); (xii) to
the
extent not otherwise included, all Proceeds, tort claims, insurance claims
and
other rights to payments not otherwise included in the foregoing and products
of
the foregoing and all accessions to, substitutions and replacements for, and
rents and profits of, each of the foregoing.
(b) In
addition, to secure the prompt and complete payment, performance and observance
of the Secured Obligations and in order to induce the Secured Parties as
aforesaid, the Debtors hereby grant to the Collateral Agent, for the benefit
of
the Secured Parties, a right of setoff against the property of the Debtor held
by the Secured Parties, consisting of property described above in Section
2(a)
now or
hereafter in the possession or custody of or in transit to the Secured Parties,
for any purpose, including safekeeping, collection or pledge, for the account
of
the Debtors, or as to which the Debtors may have any right or
power.
3. Representations
and Warranties.
The
Debtors represent and warrant that:
(a) The
Debtors are corporations duly organized and in good standing under the laws
of
the jurisdiction of its incorporation. The execution and delivery, and
performance of this Security Agreement, the other Note Documents to which it
is
a party and the transactions contemplated hereunder and thereunder (i) are
all
within the Debtors’ corporate powers, (ii) have been duly authorized, (iii) are
not in contravention of law or the terms of the Debtors’ certificates of
incorporation or by-laws, or other organizational documentation, or any
indenture, agreement or undertaking to which the Debtors are a party or by
which
their property is bound and (iv) will not result in the creation or imposition
of, or require or give rise to any obligation to grant, any lien, security
interest, charge or other encumbrance upon any property of the Debtors other
than in favor of the Secured Parties. This Security Agreement and the other
Note
Documents to which the Debtors are a party constitute legal, valid and binding
obligations of the Debtors enforceable in accordance with their respective
terms.
(b) As
of the
date hereof and after the creation of the Secured Obligations and the security
interest of the Secured Parties, the Debtors (i) own assets and property
whose fair saleable value is greater than the amount that is likely to be
required to pay all of their liabilities (including contingent liabilities
as
and when they become due); (ii) are able to pay all of its liabilities as
such liabilities mature; (iii) have capital sufficient to carry on its
business and transactions and all business and transactions in which it is
about
to engage; and (iv) are not “insolvent” within the meaning of Section
101(32) of the Bankruptcy Code.
2
(c) The
Debtors have rights in and the power to transfer, and are the sole beneficial
owners of, each item of the Collateral upon which it purport to xxxxx x Xxxx
hereunder free and clear of any and all Liens.
(d) No
effective security agreement, financing statement, equivalent security or Lien
instrument or continuation statement covering all or any part of the Collateral
is on file or of record in any public office, except such as may have been
filed
by the Debtors in favor of the Collateral Agent pursuant to this Security
Agreement or the other Note Documents and except pursuant to the Senior Credit
Agreement.
(e) This
Security Agreement is effective to create a valid and continuing Lien on and,
upon the filing of appropriate financing statements with the governmental
offices listed on Schedule
I
hereto,
a perfected Lien in favor of the Collateral Agent, for the benefit of the
Secured Parties, on the Collateral with respect to which a Lien may be perfected
by filing pursuant to Article 9 of the Code. As of the Closing, such Lien will
be prior to all other Liens (other than Liens in favor of the lender under
the
Senior Credit Agreement), and is enforceable as such as against any and all
creditors of and purchasers from the Debtors.
(f) The
Debtors’ names as they appears in official filings in the jurisdiction of its
incorporation or other organization, the type of entity of each Debtor
(including corporation, partnership, limited partnership or limited liability
company), organizational identification number issued by the Debtors’
jurisdictions of incorporation or organization or a statement that no such
number has been issued, the Debtors’ jurisdictions of organization or
incorporation, the location of the Debtors’ chief executive offices, principal
places of business, offices and premises where Collateral is stored or located,
and the locations of their books and records concerning the Collateral are
set
forth on Schedule
II
hereto.
Each of the Debtors has only one state of incorporation or organization. The
Debtors have not, during the five years prior to the date of this Security
Agreement, been known by or used any other corporate or fictitious name or
been
party to any merger or consolidation, or acquired all or substantially all
of
the assets of any Person, or acquired any of its property or assets out of
the
ordinary course of business, except as set forth on Schedule
II
hereto.
The Debtors have not (i) within the period of four months prior to the date
hereof, changed their locations (as defined in Section 9-307 of the Code),
(ii) except as specified on Schedule
II
hereto,
heretofore changed their names, or (iii) except as specified on
Schedule
II
hereto,
heretofore became “new debtor” (as defined in Section 9-102(a)(56) of the Code)
with respect to a currently effective security agreement previously entered
into
by any other Person.
(g) The
Debtors do not own or license any Trademarks, Patents or Copyrights or other
Intellectual Property, except as set forth on Schedule
III
hereto.
4. Covenants.
The
Debtors covenant and agree with the Collateral Agent, for the benefit of the
Secured Parties, that from and after the date of this Security Agreement and
until the Termination Date:
(a) Further
Assurances.
(i) At
any
time and from time to time (including upon any written request of the Collateral
Agent), at the sole expense of the Debtors, the Debtors shall promptly and
duly
execute and deliver any and all such further instruments and documents and
take
such further actions as may be necessary or desirable or reasonably requested
by
the Collateral Agent to obtain the full benefits of this Security Agreement
and
of the rights and powers herein granted, including (A) using all reasonable
efforts to secure all consents and approvals necessary or appropriate to enforce
the security interests granted hereunder; and (B) filing any financing
statements, mortgages, continuation statements, assignments and amendments
with
respect to the Liens granted hereunder as to those jurisdictions that are not
Uniform Commercial Code jurisdictions.
3
(ii) The
Debtors hereby irrevocably and unconditionally authorize the Collateral Agent
at
any time and from time to time to file in any filing office in any Uniform
Commercial Code jurisdiction any initial financing statements, continuation
statements, assignments and amendments thereto that (a) indicate the Collateral,
and (b) contain any other information required by Article 9 of the Code for
the
sufficiency or filing office acceptance of any financing statement or amendment.
The Debtors agree to furnish any such information to the Collateral Agent
promptly upon request. The Debtors also ratify their authorization for the
Collateral Agent to have filed in any Uniform Commercial Code jurisdiction
any
initial financing statements or amendments thereto if filed prior to the date
hereof and ratifies and confirms the authorization of the Collateral Agent
to
file such financing statements (and amendments, if any). The Debtors hereby
authorize the Collateral Agent to adopt on behalf of the Debtors any symbol
required for authenticating any electronic filing. In the event that the
description of the collateral in any financing statement naming the Collateral
Agent or its designee as the secured party and the Debtors as debtors includes
assets and properties of the Debtors that do not at any time constitute
Collateral, whether hereunder, under any of the other Documents or otherwise,
the filing of such financing statement shall nonetheless be deemed authorized
by
the Debtors to the extent of the Collateral included in such description and
it
shall not render the financing statement ineffective as to any of the Collateral
or otherwise affect the financing statement as it applies to any of the
Collateral. In no event shall the Debtors at any time file, or permit or cause
to be filed, any correction statement or termination statement with respect
to
any financing statement (or amendment or continuation with respect thereto)
naming the Collateral Agent or its designee as secured party and the Debtors
as
debtors.
(iii) The
Debtors shall take all steps necessary to grant the Collateral Agent control
of
and a perfected Lien on all Chattel Paper, Instruments, Deposit Accounts,
Investment Property, investment accounts, security accounts, commodity accounts,
letters of credit or banker’s acceptance constituting Collateral (including,
without limitation, the delivery to the Collateral Agent of all such Collateral,
accompanied by such instruments of transfer or assignment duly executed in
black, the delivery of a deposit or investment property control agreement
executed by the Debtors and any applicable financial institution).
(iv) The
Debtors shall, upon the occurrence and during the continuance of any Event
of
Default, upon request of the Collateral Agent, promptly notify (and the Debtors
hereby authorize the Collateral Agent so to notify) each Account Debtor in
respect of any Accounts of the Debtors that such Collateral has been assigned
to
the Collateral Agent hereunder, and that any payments due or to become due
in
respect thereof are to be made directly to the Collateral Agent.
4
(b) Maintenance
of Records.
The
Debtors shall keep and maintain, at its own cost and expense, satisfactory
and
complete records of the Collateral, including a record of any and all payments
received and any and all credits granted with respect to the Collateral in
the
same manner such records are presently kept and maintained.
(c) Limitation
on Liens on Collateral.
The
Debtors will not create, permit or suffer to exist, and the Debtors will defend
the Collateral against, and take such other action as is necessary to remove,
any Lien on the Collateral, and will defend the right, title and interest of
the
Secured Parties in and to any of the Debtors’ rights under the Collateral
against the claims and demands of all Persons whomsoever, other than Liens
pursuant to the Senior Credit Agreement.
(d) Limitations
on Disposition.
The
Debtors will not sell, license, lease, transfer or otherwise dispose of any
of
the Collateral (other than Inventory in the ordinary course of business), or
attempt or contract to do so.
(e) Further
Identification of Collateral.
The
Debtors will, if so requested by the Collateral Agent, furnish to the Collateral
Agent, as often as the Collateral Agent reasonably requests, 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 such detail as the Collateral Agent may reasonably
specify.
(f) Notices.
The
Debtors will advise the Collateral Agent promptly, in reasonable detail, (i)
of
any Lien or written claim made or asserted against any of the Collateral, and
(ii) of the occurrence of any other event which could have a material adverse
effect on the value of the Collateral or on the Liens created
hereunder.
(g) No
Reincorporation; No Name Change.
The
Debtors shall not reincorporate or reorganize itself under the laws of any
jurisdiction other than the jurisdictions in which they are incorporated or
organized as of the date hereof without the prior written consent of the
Collateral Agent. The Debtors shall not change their legal names without first
giving 30 days prior written notice of its intent to do so to the Collateral
Agent.
5. Collateral
Agent’s Appointment As Attorney-in-fact.
On
the
Closing Date, the Debtors shall execute and deliver to the Collateral Agent
a
power of attorney (the “Power
of Attorney”)
substantially in the form attached hereto as Exhibit
A.
The
power of attorney granted pursuant to the Power of Attorney is a power coupled
with an interest and shall be irrevocable until the Termination Date. The powers
conferred on the Collateral Agent, for the benefit of the Secured Parties,
under
the Power of Attorney are solely to protect the Collateral Agent’s interests
(for the benefit of the Secured Parties) in the Collateral and shall not impose
any duty upon the Secured Parties to exercise any such powers. The Collateral
Agent agrees with the Secured Parties and the Borrowers that (a) except for
the
powers granted in clause (h) of the Power of Attorney, it shall not exercise
any
power or authority granted under the Power of Attorney unless an Event of
Default has occurred and is continuing, (b) it shall not exercise any power
or
authority under the Power of Attorney unless such action has been approved
in
writing by the holders of a majority in principal amount of the Notes
outstanding held by Xxxxxx-Xxxxxxxxx Capital Focus III, L.P., Aisling Capital
II, L.P. and Xxxxxxx Xxxx or any of their successors in interest or transferees
(the “Required
Holders”),
and
(c) the Collateral Agent shall account for any moneys received by the Collateral
Agent in respect of any foreclosure on or disposition of Collateral pursuant
to
the Power of Attorney provided that the Secured Parties shall not have any
duty
as to any Collateral, and the Secured Parties shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers.
NONE OF THE SECURED PARTIES OR THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO THE DEBTORS FOR
ANY
ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN
RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT
JURISDICTION.
5
6. Remedies:
Rights Upon Default.
(a) In
addition to all other rights and remedies granted to it under this Security
Agreement, the other Note Documents and under any other instrument or agreement
securing, evidencing or relating to any of the Secured Obligations, if any
Event
of Default shall have occurred and be continuing, the Collateral Agent may
exercise all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Debtors expressly agree that
in
any such event the Collateral Agent, on behalf of the Secured Parties, without
demand of performance or other demand, advertisement or notice of any kind
(except the notice specified below of time and place of public or private sale)
to or upon the Debtors or any other Person (all and each of which demands,
advertisements and notices are hereby expressly waived to the maximum extent
permitted by the Code and other applicable law), may forthwith enter upon the
premises of the Debtors where any Collateral is located through self-help,
without judicial process, without first obtaining a final judgment or giving
the
Debtors or any other Person notice and opportunity for a hearing on the Secured
Parties’ claim or action and may collect, receive, assemble, process,
appropriate and realize upon the Collateral, or any part thereof, and may
forthwith sell, lease, license, assign, give an option or options to purchase,
or sell or otherwise dispose of and deliver said Collateral (or contract to
do
so), or any part thereof, in one or more parcels at a public or private sale
or
sales, at any exchange at such prices as it may deem acceptable, 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
for the benefit of the Secured Parties, the whole or any part of said Collateral
so sold, free of any right or equity of redemption, which equity of redemption
the Debtors hereby release. Such sales may be adjourned and continued from
time
to time with or without notice. The Collateral Agent shall have the right to
conduct such sales on the Debtors’ premises or elsewhere and shall have the
right to use the Debtors’ premises without charge for such time or times as the
Collateral Agent deems necessary or advisable.
If
any
Event of Default shall have occurred and be continuing, the Debtors further
agree, at the Collateral Agent’s request, to assemble the Collateral and make it
available to the Collateral Agent at a place or places designated by the
Collateral Agent which are reasonably convenient to the Collateral Agent and
the
Debtors, whether at the Debtors’ premises or elsewhere. Until the Collateral
Agent is able to affect a sale, lease, or other disposition of Collateral,
the
Collateral Agent shall have the right to hold or use Collateral, or any part
thereof, to the extent that it deems appropriate for the purpose of preserving
Collateral or its value or for any other purpose deemed appropriate by the
Collateral Agent. The Collateral Agent shall have no obligation to the Debtors
to maintain or preserve the rights of the Debtors as against third parties
with
respect to Collateral while Collateral is in the possession of the Collateral
Agent. The Collateral Agent may, if they so elect, seek the appointment of
a
receiver or keeper to take possession of Collateral and to enforce any of the
Secured Parties’ or Collateral Agent’s remedies, with respect to such
appointment without prior notice or hearing as to such appointment. The
Collateral Agent shall apply the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale to the Secured Obligations as
provided in the Note Documents, and only after so paying over such net proceeds,
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 Debtors. To the maximum extent permitted by applicable law, the Debtors
hereby waive all claims, damages, and demands against the Secured Parties and
the Collateral Agent arising out of the repossession, retention or sale of
the
Collateral except such as arise solely out of the gross negligence or willful
misconduct of such Secured Party or Collateral Agent as finally determined
by a
court of competent jurisdiction. The Debtors agree that ten (10) days prior
notice by the Collateral Agent of the time and place of any public sale or
of
the time after which a private sale may take place is reasonable notification
of
such matters. The Debtors shall remain liable for any deficiency if the proceeds
of any sale or disposition of the Collateral are insufficient to pay all Secured
Obligations, including any attorneys’ fees and other expenses incurred by the
Collateral Agent to collect such deficiency.
6
(b) Except
as
otherwise specifically provided herein, the Debtors hereby waive presentment,
demand, protest or any notice (to the maximum extent permitted by applicable
law) of any kind in connection with this Security Agreement or any
Collateral.
(c) To
the
extent that applicable law imposes duties on Secured Parties or the Collateral
Agent to exercise remedies in a commercially reasonable manner, the Debtors
acknowledge and agree that it is not commercially unreasonable for the Secured
Parties or Collateral Agent (i) to fail to incur expenses reasonably deemed
significant by the Secured Parties or Collateral Agent to prepare Collateral
for
disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (ii) to fail to
obtain third party consents for access to Collateral to be disposed of, or
to
obtain or, if not required by other law, to fail to obtain governmental or
third
party consents for the collection or disposition of Collateral to be collected
or disposed of, (iii) to fail to exercise collection remedies against Account
Debtors or other Persons obligated on Collateral or to remove Liens on or any
adverse claims against Collateral, (iv) to exercise collection remedies against
Account Debtors and other Persons obligated on Collateral directly or through
the use of collection agencies and other collection specialists, (v) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi)
to
contact other Persons, whether or not in the same business as the Debtors,
for
expressions of interest in acquiring all or any portion of such Collateral,
(vii) to hire one or more professional auctioneers to assist in the disposition
of Collateral, whether or not the Collateral is of a specialized nature, (viii)
to dispose of Collateral by utilizing internet sites that provide for the
auction of assets of the types included in the Collateral or that have the
reasonable capacity of doing so, or that match buyers and sellers of assets,
(ix) to dispose of assets in wholesale rather than retail markets, (x) to
disclaim disposition warranties, such as title, possession or quiet enjoyment,
(xi) to purchase insurance or credit enhancements to insure the Secured Parties
and/or the Collateral Agent against risks of loss, collection or disposition
of
Collateral or to provide to the Secured Parties a guaranteed return from the
collection or disposition of Collateral, or (xii) to the extent deemed
appropriate by the Collateral Agent, to obtain the services of other brokers,
investment bankers, consultants and other professionals to assist the Collateral
Agent in the collection or disposition of any of the Collateral. The Debtors
acknowledge that the purpose of this Section
6(c)
is to
provide non-exhaustive indications of what actions or omissions by the Secured
Parties or Collateral Agent would not be commercially unreasonable in the
Secured Parties’ or Collateral Agent’s exercise of remedies against the
Collateral and that other actions or omissions by the Secured Parties or
Collateral Agent shall not be deemed commercially unreasonable solely on account
of not being indicated in this Section
6(c).
Without
limitation upon the foregoing, nothing contained in this Section
6(c)
shall be
construed to grant any rights to the Debtors or to impose any duties on the
Secured Parties or Collateral Agent that would not have been granted or imposed
by this Security Agreement or by applicable law in the absence of this
Section
6(c).
7
(d) The
Secured Parties and Collateral Agent shall not be required to make any demand
upon, or pursue or exhaust any of their rights or remedies against, the Debtors,
any other obligor, guarantor, pledgor or any other Person with respect to the
payment of the Secured Obligations or to pursue or exhaust any of their rights
or remedies with respect to any Collateral therefor or any direct or indirect
guarantee thereof. The Secured Parties and Collateral Agent shall not be
required to marshal the Collateral or any guarantee of the Secured Obligations
or to resort to the Collateral or any such guarantee in any particular order,
and all of its and their rights hereunder or under any other Document shall
be
cumulative. To the extent it may lawfully do so, the Debtors absolutely and
irrevocably waive and relinquish the benefit and advantage of, and covenant
not
to assert against the Secured Parties or the Collateral Agent, any valuation,
stay, appraisement, extension, redemption or similar laws and any and all rights
or defenses it may have as sureties now or hereafter existing which, but for
this provision, might be applicable to the sale of any Collateral made under
the
judgment, order or decree of any court, or privately under the power of sale
conferred by this Security Agreement, or otherwise.
7. Grant
Of Licenses To Use Intellectual Property Collateral.
For
the
purpose of enabling the Collateral Agent to exercise rights and remedies under
Section
6
hereof
(including, without limiting the terms of Section
6
hereof,
in order to take possession of, hold, preserve, process, assemble, prepare
for
sale, market for sale, sell or otherwise dispose of Collateral) at such time
as
the Collateral Agent shall be lawfully entitled to exercise such rights and
remedies, the Debtors hereby grant to the Collateral Agent, irrevocable,
nonexclusive licenses (exercisable without payment of royalty or other
compensation to the Debtors) to use, license or sublicense any Intellectual
Property now owned or hereafter acquired by the Debtors, and wherever the same
may be located, and including in such licenses access to all media in which
any
of the licensed items may be recorded or stored and to all computer software
and
programs used for the compilation or printout thereof.
8
8. Indemnity;
Expenses; Limitation On Secured Parties’ and Collateral Agent’s Duty In Respect
Of Collateral.
(a) Whether
or not the transactions contemplated hereby are consummated, the Debtors shall
indemnify and hold the Secured Parties, the Collateral Agent, their respective
Affiliates, and each of their directors, officers, agents and employees
(collectively, the “Indemnified
Persons”)
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, claims, demands, actions, judgments, suits, costs, charges, expenses
and disbursements (including reasonable attorneys fees and expenses) of any
kind
or nature whatsoever which may at any time (including at any time following
the
termination of the Secured Obligations and the termination, resignation or
replacement of the Collateral Agent or any assignment by a Secured Party) be
imposed on, incurred by or asserted against any such Indemnified Person in
any
way relating to or arising out of or in connection with the execution, delivery,
enforcement, performance or administration of this Security Agreement, the
other
Note Documents or any other agreement, letter or instrument delivered in
connection with the transactions contemplated hereby or the consummation of
the
transactions contemplated hereby or any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based
on
contract, tort or any other theory (including any investigation of, preparation
for, or defense of any pending or threatened claim, investigation, litigation
or
proceeding) and regardless of whether any Indemnified Person is a party thereto
(all the foregoing, collectively, the “Indemnified
Liabilities”),
in
all cases, whether or not caused by or arising, in whole or in part, out of
the
negligence of any Indemnified Person; provided that such indemnity shall not,
as
to any Indemnified Person, be available to the extent that such Indemnified
Liabilities are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Indemnified Person. In the case of an investigation,
litigation or other proceeding to which the indemnity in this Section
8
applies,
such indemnity shall be effective whether or not such investigation, litigation
or proceeding is brought by the Debtors, their directors, shareholders or
creditors or an Indemnified Party or any other Person, whether or not an
Indemnified Person is otherwise a party thereto and whether or not any of the
transactions contemplated hereunder or under any of the other Note Documents
are
consummated. All amounts due under this Section
8
shall be
payable within five Business Days after demand therefor. The agreements in
this
Section
8
shall
survive the resignation of the Collateral Agent, the assignment by a Secured
Party and the repayment, satisfaction or discharge of all the other Secured
Obligations. In the event that any investigation, litigation or proceeding
is
asserted or threatened in writing or instituted against any Indemnified Person,
or any remedial, removal or response action which is requested of it or any
other Indemnified Person, for which such Indemnified Person may desire indemnity
or defense hereunder, such Indemnified Person shall notify the Debtors in
writing of such event; provided that failure to so notify the Debtors shall
not
affect the right of any Indemnified Person to seek indemnification under this
Section
8.
(b) The
Debtors will upon demand pay to the Collateral Agent the amount of any and
all
reasonable expenses, including, without limitation, the fees and expenses of
its
counsel and of any experts and agents, that the Collateral Agent may incur
in
connection with (i) the administration of this Security Agreement, (ii) the
custody, preservation, use or operation of, or the sale of, collection from
or
other realization upon, any of the Collateral of the Debtors, (iii) the exercise
or enforcement of any of the rights of the Secured Parties hereunder or (iv)
the
failure by the Debtors to perform or observe any of the provisions hereof.
9
(c) The
Secured Parties and Collateral Agent shall use reasonable care with respect
to
the Collateral in their possession or under their control. The Secured Parties
and Collateral Agent shall not have any other duty as to any Collateral in
its
possession or control or in the possession or control of any agent or nominee
of
the Secured Parties, or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto.
9. Collateral
Agent.
(a) Collateral
Agent Has No Duty.
The
powers conferred on the Collateral Agent hereunder are solely to protect its
interest (on behalf of the Secured Parties) in the Collateral and shall not
impose any duty on it to exercise any such powers.
(b) Reasonable
Care.
The
Collateral Agent is required to exercise reasonable care in the custody and
preservation of any of the Collateral in its possession; provided, however,
that
the Collateral Agent shall be deemed to have exercised reasonable care in the
custody and preservation of any of the Collateral if it takes such action for
that purpose as any owner thereof reasonably requests in writing at times other
than upon the occurrence and during the continuance of any Event of Default,
but
failure of the Collateral Agent, to comply with any such request at any time
shall not in itself be deemed a failure to exercise reasonable
care.
(c) Other
Provisions Relating to the Collateral Agent.
(i) The
Collateral Agent has such powers, rights and obligations as are expressly
delegated to the Collateral Agent by the terms of this Security Agreement and
the other Note Documents. Subject to Section
9(c)(iv),
the
Collateral Agent may, from time to time, appoint another Person to act as
Collateral Agent. The Collateral Agent, acting in its capacity as such, shall
have only such duties with respect to the Collateral as are set forth herein.
(ii) Except
during the continuance of an Event of Default, the Collateral Agent need perform
only those duties that are specifically set forth in this Security Agreement
and
no others, and no implied covenants or obligations will be read into this
Security Agreement against the Collateral Agent. In case an Event of Default
has
occurred and is continuing, if so directed by the Required Holders, the
Collateral Agent shall exercise those rights and powers vested in it by this
Security Agreement, and use the same degree of care and skill in their exercise,
as a prudent man would exercise or use under the circumstances in the conduct
of
his own affairs.
(iii) As
to any
matters not expressly provided for by this Security Agreement or the other
Note
Documents, the Collateral Agent shall not be required to take any action or
exercise any discretion, but shall be required to act or to refrain from acting
upon the instructions of the Required Holders and shall in all such cases be
fully protected in acting, or in refraining from acting, in accordance with
such
instructions of the Required Holders, and any action taken or failure to act
pursuant thereto shall be binding on the Holders. Notwithstanding any other
provisions herein, the Collateral Agent shall not be required to advance or
expend any funds or otherwise incur any financial liability in the performance
of its duties or the exercise of its powers or rights hereunder at the request
of the Required Holders unless the Debtors or the Holders have provided to
the
Collateral Agent security or indemnity, which the Collateral Agent, in its
reasonable discretion, deems sufficient against any and all liability or expense
which may be incurred by it by reason of taking or continuing to take such
action. The Collateral Agent shall have no liability to either the Borrowers
or
the Secured Parties, or any of them, for the performance or non-performance
of
its duties hereunder, provided such performance or non-performance is within
the
standards and obligations expressly set forth herein.
10
(iv) Subject
to the appointment and acceptance of a successor Collateral Agent, the
Collateral Agent may resign at any time by giving not less than thirty (30)
days’ notice thereof to the Holders and the Debtors. Upon the acceptance of any
appointment as Collateral Agent hereunder by a successor Collateral Agent,
(A)
such successor Collateral Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Collateral
Agent, and the retiring Collateral Agent shall be discharged from its duties
and
obligations hereunder, and (B) the retiring Collateral Agent shall promptly
transfer all Collateral within its possession or control to the possession
or
control of the successor Collateral Agent and shall execute and deliver such
notices, instructions and assignments as may be necessary or desirable to
transfer the rights of the Collateral Agent in respect of the Collateral to
the
successor Collateral Agent. After any retiring Collateral Agent’s resignation or
replacement hereunder as Collateral Agent, the provisions of this Section shall
continue in effect for its benefit in respect of any actions taken or omitted
to
be taken by it while it was acting as Collateral Agent. Upon any such
resignation or removal, the former Collateral Agent shall take all steps
necessary to assign the Collateral to the successor Collateral
Agent.
10. Reinstatement.
This
Security Agreement shall remain in full force and effect and continue to be
effective should any petition be filed by or against the Debtors for liquidation
or reorganization, should the Debtors become insolvent or make an assignment
for
the benefit of any creditor or creditors or should a receiver or trustee be
appointed for all or any significant part of the Debtors’ assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Secured Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise
be
restored or returned by any obligee of the Secured Obligations, whether as
a
“voidable preference,” “fraudulent conveyance,” or otherwise, all as though such
payment or performance had not been made. In the event that any payment, or
any
part thereof, is rescinded, reduced, restored or returned, the Secured
Obligations shall be reinstated and deemed reduced only by such amount paid
and
not so rescinded, reduced, restored or returned.
11. Notices.
Any
and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile or e-mail at the facsimile number or e-mail address
specified in this Section prior to 5:00 p.m. (New York City time) on a Business
Day, (b) the Business Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified
in
this Security Agreement later than 5:00 p.m. (New York City time) on any date
and earlier than 11:59 p.m. (New York City time) on such date, (c) the Business
Day following the date of mailing, if sent by nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice
is
required to be given. The address for such notices and communications shall
be
as follows:
|
If
to the Debtors:
|
00
Xxxxx Xxxxxx
Xxxxxxxxx,
XX 00000
Attention:
Chief Executive Officer
Fax:
(000) 000-0000
|
11
|
If
to Collateral Agent:
|
Xxxxxx-Xxxxxxxxx
Capital Focus III, L.P.
Two
Xxxxxxxxx Xxxxx, 0xx
Xxxxx
Xxxxxxxxx,
XX 00000
Attn:
Xxxx X. Xxxxxxxxxx
Fax:
(000) 000-0000
|
12. Severability.
Whenever
possible, each provision of this Security Agreement shall be interpreted in
a
manner as to be effective and valid under applicable law, but if any provision
of this Security Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition
or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Security Agreement. This Security Agreement is to be read,
construed and applied together with the Purchase Agreement and the other Note
Documents which, taken together, set forth the complete understanding and
agreement of the Collateral Agent, the Holders and the Debtors with respect
to
the matters referred to herein and therein.
13. No
Waiver; Cumulative Remedies.
The
Secured Parties shall not by any act, delay, omission or otherwise be deemed
to
have waived any of its rights or remedies hereunder, and no waiver shall be
valid unless in writing, signed by the Collateral Agent and then only to the
extent therein set forth. 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 had on any
future occasion. No failure to exercise nor any delay in exercising on the
part
of the Secured Parties, any right, power or privilege hereunder, shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or future exercise thereof
or
the exercise of any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law. None of the
terms or provisions of this Security Agreement may be waived, altered, modified
or amended except by an instrument in writing, duly executed by the Collateral
Agent and the Debtor.
14. Limitation
By Law.
All
rights, remedies and powers provided in this Security Agreement may be exercised
only to the extent that the exercise thereof does not violate any applicable
provision of law, and all the provisions of this Security Agreement are intended
to be subject to all applicable mandatory provisions of law that may be
controlling and to be limited to the extent necessary so that they shall not
render this Security Agreement invalid, or unenforceable, in whole or in part,
or not entitled to be recorded, registered or filed under the provisions of
any
applicable law.
15. Termination
Of This Security Agreement.
Subject
to Section
10
hereof,
this Security Agreement shall terminate upon the Termination Date.
12
16. Successors
And Assigns.
This
Security Agreement and all obligations of the Debtors hereunder shall be binding
upon the successors and assigns of the Debtors (including any
debtor-in-possession on behalf of the Debtors) and shall, together with the
rights and remedies of the Collateral Agent, for the benefit of the Secured
Parties, hereunder, inure to the benefit of the Secured Parties and all future
holders of any instrument evidencing any of the Secured Obligations and their
respective successors and assigns. No sales of participations, other sales,
assignments, transfers or other dispositions of any agreement governing or
instrument evidencing the Secured Obligations or any portion thereof or interest
therein shall in any manner impair the Lien granted to the Collateral Agent,
for
the benefit of the Secured Parties, hereunder. The Debtors may not assign,
sell,
hypothecate or otherwise transfer any interest in or obligation under this
Security Agreement.
17. Counterparts.
This
Security Agreement may be authenticated in any number of separate counterparts,
each of which shall collectively and separately constitute one agreement. This
Security Agreement may be authenticated by manual signature, facsimile or,
if
approved in writing by the Collateral Agent, electronic means, all of which
shall be equally valid.
18. Governing
Law.
ALL
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK,
BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT,
ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. NOTHING IN THIS SECURITY AGREEMENT SHALL BE DEEMED OR OPERATE TO
PRECLUDE THE SECURED PARTIES FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION
IN
ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR
THE SECURED OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR
OF THE SECURED PARTIES. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE
OF
PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS
IN
EFFECT FOR NOTICES TO IT UNDER THIS SECURITY AGREEMENT AND AGREES THAT SUCH
SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT
TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY HEREBY WAIVES
ALL
RIGHTS TO A TRIAL BY JURY.
13
19. Waiver
Of Jury Trial.
BECAUSE
DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST
QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE
PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY, THE PARTIES DESIRE
THAT
DISPUTES ARISING HEREUNDER OR RELATING HERETO BE RESOLVED BY A JUDGE APPLYING
SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT
TO
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG THE SECURED PARTIES
AND
THE DEBTOR ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS SECURITY AGREEMENT OR ANY
OF
THE OTHER NOTES DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR
THERETO.
20. Expenses.
The
Debtors agree to reimburse the Secured Parties for all costs and expenses
incurred by them (including, without limitation, the fees and expenses of legal
counsel) in connection with (i) any Default or Event of Default and any
enforcement or collection proceeding resulting therefrom, including, without
limitation, all manner of participation in or other involvement with (w)
performance by the Collateral Agent of any obligations of the Debtors in respect
of the Collateral that the Debtors have failed or refused to perform, (x)
bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement in respect of any of the Collateral, and
for the care of the Collateral and defending or asserting rights and claims
of
the Collateral Agent in respect thereof, by litigation or otherwise, including
expenses of insurance, (y) judicial or regulatory proceedings and (z) workout,
restructuring or other negotiations or proceedings (whether or not the workout,
restructuring or transaction contemplated thereby is consummated) and (ii)
the
enforcement of this Section
20,
and all
such costs and expenses shall be Secured Obligations entitled to the benefits
of
the collateral security provided pursuant to Section
2.
21. Section
Titles.
The
Section titles contained in this Security Agreement are and shall be without
substantive meaning or content of any kind whatsoever and are not a part of
the
agreement among the parties hereto.
22. No
Strict Construction.
The
parties hereto have participated jointly in the negotiation and drafting of
this
Security Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Security Agreement shall be construed as if drafted
jointly by the parties hereto and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Security Agreement.
23. Benefit
Of Secured Party.
All
Liens
granted or contemplated hereby shall be for the benefit of the Secured Parties,
and all proceeds or payments realized from Collateral in accordance herewith
shall be applied to the Secured Obligations in the manner determined by the
Collateral Agent in its sole discretion.
14
IN
WITNESS WHEREOF, each of the parties hereto has caused this Security Agreement
to be executed and delivered by its duly authorized officer as of the date
first
set forth above.
|
The
Debtors:
|
||
| |
|
|
| By: | /s/ Xxxxx Xxxxxxxxxxx | |
|
Name:
Xxxxx Xxxxxxxxxxx
Title:
CFO
|
||
|
INTERPHARM,
INC.
|
||
| |
|
|
| By: | /s/ Xxxxx Xxxxxxxxxxx | |
|
Name:
Xxxxx Xxxxxxxxxxx
Title:
CFO
|
||
|
The
Collateral Agent:
XXXXXX-XXXXXXXXX
CAPITAL FOCUS III,
L.P.
By:
Xxxxxx Xxxxxxxxx Partners III, L.L.C., its
general partner
|
||
| |
|
|
| By: | /s/ Xxxx X. Xxxxxxxxxx | |
|
Name:
Xxxx X. Xxxxxxxxxx
Title:
Principal
|
||
15
ANNEX
A
to
SECURITY
AGREEMENT
DEFINITIONS
Capitalized
terms used in the Security Agreement shall have the following respective
meanings, and all references to Sections, Exhibits, Schedules or Annexes in
the
following definitions shall refer to Sections, Exhibits, Schedules or Annexes
of
or to the Security Agreement:
“Account
Debtor”
means
any Person who may become obligated to a Debtor under, with respect to, or
on
account of, an Account.
“Accounts”
means
all “accounts,” as such term is defined in the Code, now owned or hereafter
acquired by a Debtor, including (as the context may reasonably permit)
(a) all accounts receivable, other receivables, book debts and other forms
of obligations (other than forms of obligations evidenced by Chattel Paper,
or
Instruments), (including any such obligations that may be characterized as
an
account or contract right under the Code), (b) all of a Debtor’s rights in,
to and under all purchase orders or receipts for goods or services, (c) all
of a Debtor’s rights to any goods represented by any of the foregoing (including
unpaid sellers’ rights of rescission, reclamation and stoppage in transit and
rights to returned, reclaimed or repossessed goods), (d) all rights to
payment due to a Debtor for property sold, leased, licensed, assigned or
otherwise disposed of, for a policy of insurance issued or to be issued, for
a
secondary obligation incurred or to be incurred, for energy provided or to
be
provided, for the use or hire of a vessel under a charter or other contract,
arising out of the use of a credit card or charge card, or for services rendered
or to be rendered by a Debtor or in connection with any other transaction
(whether or not yet earned by performance on the part of a Debtor), (e) all
health care insurance receivables and (f) all collateral security of any
kind, given by any Account Debtor or any other Person with respect to any of
the
foregoing.
“Bankruptcy
Code”
means
the provisions of Title 11 of the United States Code, 11 U.S.C. §§ 101
et seq.
“Business
Day”
means
any day that is not a Saturday, a Sunday or a day on which banks are required
or
permitted to be closed in the City of New York.
“Chattel
Paper”
means
any “chattel paper,” as such term is defined in the Code, including electronic
chattel paper, now owned or hereafter acquired by a Debtor.
“Code”
means
the Uniform Commercial Code as the same may, from time to time, be enacted
and
in effect in the State of New York; provided,
that to
the extent that the Code is used to define any term herein and such term is
defined differently in different Articles of the Code, the definition of such
term contained in Article 9 of the Code shall govern; provided further,
that in
the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of, or remedies with respect to, the Lien
on
any Collateral under the Security Agreement is governed by the Uniform
Commercial Code as enacted and in effect in a jurisdiction other than the State
of New York, the term “Code”
shall
mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating to such
attachment, perfection, priority or remedies and for purposes of definitions
related to such provisions.
16
“Collateral”
has
the
meaning ascribed to it in Section 2(a).
“Copyright
License”
means
any and all rights now owned or hereafter acquired by a Debtor under any written
agreement granting any right to use any Copyright or Copyright
registration.
“Copyrights”
means
all of the following now owned or hereafter adopted or acquired by the Debtor:
(a) all copyrights, all General Intangibles of like nature (whether
registered or unregistered), all registrations and recordings thereof, and
all
applications in connection therewith, including all registrations, recordings
and applications in the United States Copyright Office or in any similar office
or agency of the United States, any state or territory thereof, or any other
country or any political subdivision thereof, (b) all reissues, extensions
or renewals thereof, (c) the right to recover for all past, present and future
infringements thereof and (d) all other rights of any kind whatsoever accruing
thereunder as pertaining thereto.
“Default”
means
any condition or event which is, or, with notice or lapse of time or both,
would
become, an Event of Default.
“Deposit
Accounts”
means
all “deposit accounts” as such term is defined in the Code, now or hereafter
held in the names of a Debtor.
“Event
of Default”
means
any event of default under, or any failure by the Parties to perform, keep,
or
observe any covenant or agreement contained in, the Purchase Agreement, this
Security Agreement or any other Note Document, including, without limitation,
the Notes.
“General
Intangibles”
means
all “general intangibles,” as such term is defined in the Code, now owned or
hereafter acquired by a Debtor, including (as the context may reasonably permit)
all right, title and interest that a Debtor may now or hereafter have in or
under any Contract, all payment intangibles, customer lists, Licenses,
Copyrights, Trademarks, Patents, and all applications therefor and reissues,
extensions or renewals thereof, rights in Intellectual Property, interests
in
partnerships, joint ventures and other business associations, licenses, permits,
copyrights, trade secrets, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials and records, goodwill
(including the goodwill associated with any Trademark or Trademark License),
all
rights and claims in or under insurance policies (including insurance for fire,
damage, loss and casualty, whether covering personal property, real property,
tangible rights or intangible rights, all liability, life, key man and business
interruption insurance, and all unearned premiums), choses in action, rights
to
receive tax refunds and other payments, rights to receive dividends,
distributions, cash, Instruments and other property in respect of or in exchange
for any pledged Investment Property, rights of indemnification, all books and
records, correspondence, credit files, invoices and other papers, including
without limitation all tapes, cards, computer runs and other papers and
documents in the possession or under the control of a Debtor or any computer
bureau or service company from time to time acting for a Debtor.
17
“Instruments”
means
all “instruments,” as such term is defined in the Code, now owned or hereafter
acquired by a Debtor, wherever located, and, in any event, including all
certificates of deposit, and all promissory notes and other evidences of
indebtedness, other than instruments that constitute, or are a part of a group
of writings that constitute, Chattel Paper.
“Intellectual
Property”
means
collectively, all Copyrights, all Patents and all Trademarks, together with
(a)
all inventions, processes, production methods, proprietary information, know-how
and trade secrets; (b) all Copyright Licenses, Patent Licenses and Trademark
Licenses; (c) all information, customer lists, identification of suppliers,
data, plans, blueprints, specifications, designs, drawings, recorded knowledge,
surveys, engineering reports, test reports, manuals, materials standards,
processing standards, performance standards, catalogs, computer and automatic
machinery software and programs; (d) all field repair data, sales data and
other
information relating to sales or service of products now or hereafter
manufactured; (e) all accounting information and all media in which or on which
any information or knowledge or data or records may be recorded or stored and
all computer programs used for the compilation or printout of such information,
knowledge, records or data; (f) all licenses, consents, permits, variances,
certifications and approvals of governmental agencies now or hereafter held
by a
Debtors and (g) all clauses of action, claims, and warranties now or hereafter
owned or acquired by a Debtor in respect of any of the items listed
above.
“Inventory”
means
all “inventory,” as such term is defined in the Code, now owned or hereafter
acquired by a Debtor, wherever located, and in any event including (as the
context may reasonably permit) inventory, merchandise, goods and other personal
property that are held by or on behalf of a Debtor for sale or lease or are
furnished or are to be furnished under a contract of service, or that constitute
raw materials, work in process, finished goods, returned goods, or materials
or
supplies of any kind, nature or description used or consumed or to be used
or
consumed in a Debtor’s business or in the processing, production, packaging,
promotion, delivery or shipping of the same, including all supplies and embedded
software.
“Investment
Property”
means
all “investment property” as such term is defined in the Code now owned or
hereafter acquired by a Debtor, wherever located, including (as the context
may
reasonably permit) (i) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of a Debtor, including
the rights of a Debtor to any securities account and the financial assets held
by a securities intermediary in such securities account and any free credit
balance or other money owing by any securities intermediary with respect to
that
account; (iii) all securities accounts of a Debtor; (iv) all commodity
contracts of a Debtor; and (v) all commodity accounts held by a
Debtor.
“License”
means
any Copyright License, Patent License, Trademark License or other license of
rights or interests now held or hereafter acquired by a Debtor.
“Lien”
means
any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, easement or encumbrance,
or
preference, priority or other security agreement or preferential arrangement
of
any kind or nature whatsoever (including any lease or title retention agreement,
any financing lease having substantially the same economic effect as any of
the
foregoing, and the filing of, or agreement to give, any financing statement
perfecting a security interest under the Code or comparable law of any
jurisdiction).
18
“Patent
License”
means
rights under any written agreement now owned or hereafter acquired by a Debtor
granting any right with respect to any invention on which a Patent is in
existence.
“Patents”
means
all of the following in which a Debtor now hold or hereafter acquire any
interest: (a) all letters patent of the United States or of any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States or of any other country, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State, or any other country, (b) all reissues, continuations,
continuations-in-part or extensions thereof, (c) all income, royalties,
damages and payments now or hereafter due and/or payable under and with respect
thereto, including, without limitation, damages and payments for past or future
infringements thereof, (d) the right to xxx for past, present and future
infringements thereof, and (e) all rights corresponding thereto throughout
the world.
“Person”
means
a
corporation, an association, a partnership, an organization, a business, an
individual, a government or political subdivision thereof or governmental
authority.
“Proceeds”
means
“proceeds,” as such term is defined in the Code, including (as the context may
reasonably permit) (a) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to a Debtor from time to time with respect to
any
of the Collateral, (b) any and all payments (in any form whatsoever) made
or due and payable to a Debtor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any Person acting
under
color of governmental authority), (c) any claim of a Debtor against third
parties (i) for past, present or future infringement of any Patent or
Patent License, or (ii) for past, present or future infringement or
dilution of any Copyright, Copyright License, Trademark or Trademark License,
or
for injury to the goodwill associated with any Trademark or Trademark License,
(d) any recoveries by a Debtor against third parties with respect to any
litigation or dispute concerning any of the Collateral including claims arising
out of the loss or nonconformity of, interference with the use of, defects
in,
or infringement of rights in, or damage to, Collateral, (e) all amounts
collected on, or distributed on account of, other Collateral, including
dividends, interest, distributions and Instruments with respect to Investment
Property, and (f) any and all other amounts, rights to payment or other
property acquired upon the sale, lease, license, exchange or other disposition
of Collateral and all rights arising out of Collateral.
“Secured
Obligations”
means
any and all obligations, liabilities and indebtedness of every kind, nature
and
description owing by a Debtor or any obligor to the Secured Parties under the
Note Documents, including principal, interest, charges, fees, premiums,
indemnities and expenses, however evidenced, whether as principal, surety,
endorser, a debtor or otherwise, whether arising under this Agreement or Note
Documents, whether now existing or hereafter arising, whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary
or
secondary, liquidated or unliquidated, secured or unsecured, and whether arising
directly or howsoever acquired by a Secured Party.
19
“Security
Agreement”
means
this Security Agreement, as the same may be amended, supplemented, restated
or
otherwise modified from time to time.
“Termination
Date”
means
the date on which all obligations of a Debtor to the Secured Parties or their
assigns under the Note Documents, and the obligations of a Debtor under this
Security Agreement and each other Note Document to which it is a party, have
been indefeasibly satisfied.
“Trademark
License”
means
rights under any written agreement now owned or hereafter acquired by a Debtor
granting any right to use any Trademark.
“Trademarks”
means
all of the following now owned or hereafter existing or adopted or acquired
by a
Debtor: (a) all trademarks, trade names, corporate names, business names,
trade styles, service marks, logos, other source or business identifiers, prints
and labels on which any of the foregoing have appeared or appear, designs and
General Intangibles of like nature (whether registered or unregistered), all
registrations and recordings thereof, and all applications in connection
therewith, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any state or territory thereof, or any other country or any
political subdivision thereof, (b) all reissues, extensions or renewals
thereof, (c) all rights corresponding thereto throughout the world
(d) the right to recover for all past, present and future infringements
thereof and (e) all other rights of any kind whatsoever accruing thereunder
or
pertaining thereto, together, in each case, with the product lines and goodwill
of the business connected with the use of, and symbolized by, any of the
foregoing.
The
words
“herein,” “hereof” and “hereunder” and other words of similar import refer to
the Security Agreement as a whole, including all Annexes, Exhibits and
Schedules, as the same may from time to time be amended, restated, modified
or
supplemented, and not to any particular section, subsection or clause contained
in the Security Agreement or any such Annex, Exhibit or Schedule.
Wherever
from the context it appears appropriate, each term stated in either the singular
or plural shall include the singular and the plural, and pronouns stated in
the
masculine, feminine or neuter gender shall include the masculine, feminine
and
neuter genders. The words “including”, “includes” and “include” shall be deemed
to be followed by the words “without limitation”; the word “or” is not
exclusive; references to Persons include their respective successors and assigns
or, in the case of governmental Persons, Persons succeeding to the relevant
functions of such Persons; and all references to statutes and related
regulations shall include any amendments of the same and any successor statutes
and regulations. Whenever any provision in this Security Agreement refers to
the
knowledge (or an analogous phrase) of the Debtor, such words are intended to
signify that the Debtor has actual knowledge or awareness of a particular fact
or circumstance or a Debtor, if it had exercised reasonable diligence, would
have known or been aware of such fact or circumstance.
20
SCHEDULE
I
to
SECURITY
AGREEMENT
FILING
JURISDICTIONS
|
Debtors
|
Jurisdiction
|
|
|
Secretary
of State of Delaware
|
||
|
Interpharm,
Inc.
|
Secretary
of State of New York
|
SCHEDULE
II
to
SECURITY
AGREEMENT
SCHEDULE
OF OFFICES, LOCATIONS OF COLLATERAL
AND
RECORDS CONCERNING DEBTORS’ COLLATERAL
| I. |
The
Debtors’ official names:
|
| II. |
Types
of entity (e.g. corporation, partnership, business trust, limited
partnership, limited liability company):
|
Corporation
| III. |
Organizational
identification number issued by the Debtors’ jurisdiction of incorporation
or organization or a statement that no such number has been
issued:
|
| IV. |
Jurisdictions
of Incorporation or Organization of the Debtors:
|
| V. |
Chief
Executive Offices and principal places of business of the
Debtors:
|
| VI. |
Other
Premises at which Collateral is Stored or
Located:
|
SCHEDULE
III
to
SECURITY
AGREEMENT
SCHEDULE
OF INTELLECTUAL PROPERTY
A. Trademarks
1. Owned
|
Trademark
|
Registration
Number
|
Registration
Date
|
Expiration
Date
|
|||
|
Trademark
Application
|
Application/Serial
Number
|
Application
Date
|
||
2. Licensed
|
Trademark
|
Registration
Number
|
Registration
Date
|
Expiration
Date
|
Owner/
Licensor
|
||||
|
Trademark
Application
|
Application/Serial
Number
|
Application
Date
|
||
B. Patents
1. Owned
|
Patent
Description
|
Registration
Number
|
Registration
Date
|
Expiration
Date
|
|||
|
Patent
Application
|
Application/Serial
Number
|
Application
Date
|
2. Licensed
|
Patent
Description
|
Registration
Number
|
Registration
Date
|
Expiration
Date
|
Owner/
Licensor
|
||||
|
Patent
Application
|
Application/Serial
Number
|
Application
Date
|
||
C. Copyrights
1. Owned
|
Copyright
|
Registration
Number
|
Registration
Date
|
||
2. Licensed
|
Patent
Description
|
Registration
Number
|
Registration
Number
|
Expiration
Date
|
Owner/
Licensor
|
|||
D. Other
EXHIBIT
A
FORM
OF
POWER
OF ATTORNEY
This
Power of Attorney is executed and delivered by INTERPHARM HOLDINGS INC., a
Delaware corporation and INTERPHARM, INC., a New York corporation, (the
“Grantors”)
to
Xxxxxx-Xxxxxxxxx Capital Focus III, L.P. (hereinafter referred to the
“Attorney”),
as
the Collateral Agent for the benefit of the Secured Parties under a Security
Agreement, dated as of November 14, 2007 and other related documents
collectively (the “Documents”).
No
person to whom this Power of Attorney is presented, as authority for the
Attorney to take any action or actions contemplated hereby, shall be required
to
inquire into or seek confirmation from the Grantors as to the authority of
the
Attorney to take any action described below, or as to the existence of or
fulfillment of any condition to this Power of Attorney, which is intended to
grant to the Attorney unconditionally the authority to take and perform the
actions contemplated herein. The power of attorney granted hereby is coupled
with an interest, and may not be revoked or canceled by the Grantors without
the
Attorney’s written consent.
The
Grantors hereby irrevocably constitute and appoint the Attorney (and all
officers, employees or agents designated by the Attorney), with full power
of
substitution, as the Grantors’ true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the Grantors and
in
the name of the Grantors or in its own name, from time to time in the Attorney’s
discretion, without notice to or assent by the Grantors, and at any time in
the
case of clause (h) below and at any time an Event of Default (as defined in
the
Security Agreement) has occurred and is continuing in the case of (a), (b),
(c),
(d), (e), (f), (g), (i) and (j) below, to do the following: (a) change the
mailing address of the Grantors, open a post office box on behalf of the
Grantors, open mail for Grantor, and ask, demand, collect, give acquittances
and
receipts for, take possession of, endorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, and notices in connection with any property of
the
Grantors constituting Collateral; (b) effect any repairs to any asset of the
Grantors, or continue or obtain any insurance and pay all or any part of the
premiums therefor and costs thereof, and make, settle and adjust all claims
under such policies of insurance, and make all determinations and decisions
with
respect to such policies; (c) pay or discharge any taxes, liens, security
interests, or other encumbrances levied or placed on or threatened against
the
Grantors or its property constituting Collateral; (d) defend any suit, action
or
proceeding brought against the Grantors if the Grantors do not defend such
suit,
action or proceeding or if the Attorney believes that the Grantors are not
pursuing such defense in a manner that will maximize the recovery to the
Attorney, and settle, compromise or adjust any suit, action, or proceeding
described above and, in connection therewith, give such discharges or releases
as the Attorney may deem appropriate; (e) file or prosecute any claim,
litigation, suit or proceeding in any court of competent jurisdiction or before
any arbitrator, or take any other action otherwise deemed appropriate by the
Attorney for the purpose of collecting any and all such moneys due to the
Grantors whenever payable and to enforce any other right in respect of the
Grantors’ property constituting Collateral; (f) cause the certified public
accountants then engaged by the Grantors to prepare and deliver to the Attorney
at any time and from time to time, promptly upon the Attorney’s request, the
following reports: (1) a reconciliation of all accounts, (2) an aging of all
accounts, (3) trial balances, (4) test verifications of such accounts as the
Attorney may request, and (5) the results of each physical verification of
inventory; (g) communicate in its own name with any party to any contract with
regard to the assignment of the right, title and interest of the Grantors in
and
under the contracts and other matters relating thereto; (h) file such financing
statements with respect to the aforesaid Security Agreement, with or without
the
Grantors’ signatures, or to file a photocopy of the Security Agreement in
substitution for a financing statement, as the Collateral Agent may deem
appropriate and to execute in the Grantors’ names such financing statements and
amendments thereto and continuation statements which may require the Grantors’
signatures; (i) execute, in connection with any sale provided for in any
Document, any endorsements, assignments or other instruments of conveyance
or
transfer with respect to the Collateral and to otherwise direct such sale or
resale, all as though the Attorney were the absolute owner of the property
of
the Grantors for all purposes, and (j) at the Attorney’s option and the
Grantors’ expense, at any time or from time to time, all acts and other things
that the Attorney reasonably deems necessary to perfect, preserve, or realize
upon the Grantors’ property or assets and the Collateral Agent’s Liens thereon,
all as fully and effectively as the Grantors might do. The Grantors hereby
ratify, to the extent permitted by law, all that said Attorney shall lawfully
do
or cause to be done by virtue hereof.
[signature
page follows]
IN
WITNESS WHEREOF, this Power of Attorney is executed by each of the Grantors,
and
the Grantors have caused their seals to be affixed pursuant to the authority
of
its board of directors this 14th
day of
November, 2007.
|
The
Grantors:
|
||
| |
|
|
| By: | /s/ Xxxxx Xxxxxxxxxxx | |
|
Name:
Xxxxx Xxxxxxxxxxx
Title:
CFO
|
||
|
INTERPHARM,
INC.
|
||
| |
|
|
| By: | /s/ Xxxxx Xxxxxxxxxxx | |
|
Name:
Xxxxx Xxxxxxxxxxx
Title:
CFO
|
||
NOTARY
PUBLIC CERTIFICATES
On
this
14th
day of
November, 2007, Xxxxx
Xxxxxxxxxxx,
who is
personally known to me appeared before me in his/her capacity as the CFO of
INTERPHARM HOLDINGS INC. and executed on behalf of such entity the Power of
Attorney in favor of XXXXXX-XXXXXXXXX CAPITAL FOCUS III, L.P. to which this
Certificate is attached.
| /s/ Xxx Xxxx | ||
|
|
||
| Notary Public | ||
On
this
14th day of November, 2007, Xxxxx
Xxxxxxxxxxx
who is
personally known to me appeared before me in his/her capacity as the CFO of
INTERPHARM, INC. and executed on behalf of such entity the Power of Attorney
in
favor of XXXXXX-XXXXXXXXX CAPITAL FOCUS III, L.P. to which this Certificate
is
attached.
| /s/ Xxx Xxxx | ||
|
Notary Public |
||
