NOTE AND SECURITY AGREEMENT
Exhibit
2
|
$10,000,000
|
Dated
as of __________, 2008
|
FOR
VALUE
RECEIVED, Modigene Inc., a Nevada corporation with offices at 0 Xxxxx Xxxxxx,
Xxxxxxxx Science Park, Nes-Ziona, Israel 74140 ("Borrower"),
pursuant to this secured note (this "Note"),
hereby promises to pay to The Frost Group, LLC, a Florida limited liability
company ("Lender"),
at
such place as Lender may designate from time to time in writing, in lawful
money
of the United States of America, the principal amount of $10,000,000, or such
lesser amount as shall equal the outstanding principal balance of the loan
(the
"Loan")
made
to Borrower by Lender pursuant to the Credit Agreement, dated as of March 25,
2008, by and among Borrower and Lender (the "Credit
Agreement"),
and
to pay all other amounts due with respect to the Loan on the dates and in the
amounts set forth in the Credit Agreement and this Note.
1. Definitions.
All
terms used, but not defined herein, shall have the meanings ascribed to them
in
the Credit Agreement. In addition, the terms set forth below shall have the
following meanings:
(a) "Affiliate"
means
any Person that owns or controls directly or indirectly ten percent (10%) or
more of the stock of another entity, any Person that controls or is controlled
by or is under common control with such Persons or any Affiliate of such Persons
and each of such Person's officers, directors, joint venturers or
partners.
(b) "Code"
means
the Uniform Commercial Code as adopted and in effect in the State of Florida,
as
amended from time to time; provided that
if by
reason of mandatory provisions of law, the creation and/or perfection or the
effect of perfection or non-perfection of the security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than Florida, the term "Code"
shall
also mean the Uniform Commercial Code as in effect from time to time in such
jurisdiction for purposes of the provisions hereof relating to such creation,
perfection or effect of perfection or non-perfection.
(c) "Equity
Securities"
of
Borrower means (1) all common stock, preferred stock, participations, shares,
partnership interests, membership interests or other equity interests in and
of
Borrower (regardless of how designated and whether or not voting or non-voting)
and (2) all warrants, options and other rights to acquire any of the
foregoing.
(d) "Event
of Default"
shall
mean the occurrence of one or more of the following events:
(1) Borrower
shall fail to make any payment due to Lender under this Note when the same
shall
become due and payable, whether at maturity, by acceleration or otherwise,
within five (5) days after receipt of written notice from Lender that such
payment is due and unpaid.
(2) Borrower
materially violates any of the material covenants contained in Sections 6 and
7
of this Note and fails to remedy such violation within thirty (30) days after
receipt of written notice from Lender that such a violation has
occurred.
(3) Any
material portion of Borrower's assets is attached, seized, subjected to a writ
or distress warrant, or is levied upon, or comes into the possession of any
trustee, receiver or person acting in a similar capacity and such attachment,
seizure, writ or distress warrant or levy has not been removed, discharged
or
rescinded within ten (10) days, or if Borrower is enjoined, restrained, or
in
any way prevented by court order from continuing to conduct all or any material
part of its business affairs, or if a judgment or other claim becomes a lien
or
encumbrance upon any material portion of Borrower's assets, or if a notice
of
lien, levy, or assessment is filed of record with respect to any of Borrower's
assets by the United States Government, or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or governmental
agency, and the same is not paid within ten (10) days after Borrower receives
notice thereof; provided that none of the foregoing shall constitute an Event
of
Default where such action or event is stayed or an adequate bond has been posted
pending a good faith contest by Borrower.
(4) One
or
more defaults shall exist under any agreement with any third party or parties
which consists of the failure to pay any Indebtedness at maturity or which
results in a right by such third party or parties, whether or not exercised,
to
accelerate the maturity of Indebtedness in an aggregate amount in excess of
Two
Hundred Fifty Thousand Dollars ($250,000).
(5) A
judgment or judgments for the payment of money in an amount, individually or
in
the aggregate, of at least One Hundred Fifty Thousand Dollars ($150,000) shall
be rendered against Borrower and shall remain unsatisfied and unstayed for
a
period of ten (10) days or more beyond the date such payment is due.
(6) Any
material representation or material statement that exists now or hereafter
in
any warranty, representation, statement, certification, or report made to Lender
by Borrower pursuant to the Credit Agreement shall prove to have been false
or
misleading in any material respect when made or furnished.
(7) Any
material document executed in connection with the Loan ceases to be, or Borrower
asserts that such document is not, in any material respect, a legal, valid
and
binding obligation of Borrower enforceable in accordance with its
terms.
(8) A
proceeding shall have been instituted in a court having jurisdiction in the
premises seeking a decree or order for relief in respect of Borrower in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or for the appointment of a receiver,
liquidator, assignee, custodian, trustee (or similar official) of Borrower
or
for any substantial part of its property, or for the winding-up or liquidation
of its affairs, and such proceeding shall remain undismissed or unstayed and
in
effect for a period of sixty (60) consecutive days or such court shall enter
a
decree or order granting the relief sought in such proceeding.
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(9) Borrower
commences a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, consents to the entry of an order for
relief in an involuntary case under any such law, or consents to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee, custodian
(or other similar official) of Borrower or for any substantial part of its
property, or shall make a general assignment for the benefit of creditors,
or
shall fail generally to pay its debts as they become due, or shall take any
corporate action in furtherance of any of the foregoing.
(e) "Indebtedness"
means,
with respect to Borrower, the aggregate amount of, without duplication, (a)
all
obligations of Borrower for borrowed money, (b) all obligations of Borrower
evidenced by bonds, debentures, notes or other similar instruments, (c) all
obligations of Borrower to pay the deferred purchase price of property or
services (excluding trade payables aged less than one hundred eighty (180)
days), (d) all capital lease obligations of Borrower, (e) all obligations or
liabilities of others secured by a Lien on any asset of Borrower, whether or
not
such obligation or liability is assumed, (f) all obligations or liabilities
of
others guaranteed by Borrower, and (g) any other obligations or liabilities
which are required by U.S. generally accepted accounting principles
(“GAAP”)
to be
shown as debt on the balance sheet of Borrower.
(f) "Intellectual
Property"
means
all of Borrower's right, title and interest in and to patents, patent rights
(and applications and registrations therefor), trademarks and service marks
(and
applications and registrations therefor), inventions, copyrights, mask works
(and applications and registrations therefor), trade names, trade styles,
software and computer programs, source code, object code, trade secrets,
methods, processes, know how, drawings, specifications, descriptions, and all
memoranda, notes, and records with respect to any research and development,
all
whether now owned or subsequently acquired or developed by Borrower and whether
in tangible or intangible form or contained on magnetic media readable by
machine together with all such magnetic media (but not including embedded
computer programs and supporting information included within the definition
of
"goods" under the Code).
(g) "Lien"
means
any voluntary or involuntary security interest, pledge, bailment, lease,
mortgage, hypothecation, conditional sales and title retention agreement,
encumbrance or other lien with respect to any property of the Borrower in favor
of any person.
(h) "Permitted
Indebtedness"
means
and includes:
(1) Indebtedness
of Borrower to Lender;
(2) Indebtedness
arising from the endorsement of instruments in the ordinary course of business;
(3) Indebtedness
existing on the date hereof and disclosed in the Schedules to the Credit
Agreement;
(4) Indebtedness
of Borrower in an aggregate original principal amount not to exceed $250,000
which is secured by Liens permitted under clause (5) of the definition of
Permitted Liens;
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(5) Other
Indebtedness in an aggregate amount not exceeding $500,000 at any time;
and
(6) Extensions,
refinancings, modifications, amendments and restatements of any items of
Permitted Indebtedness above, provided that the principal amount thereof is
not
increased or the terms thereof are not modified to impose materially more
burdensome terms upon Borrower.
(i) "Permitted
Investments"
means
and includes any of the following investments:
(1) Deposits
and deposit accounts with commercial banks organized under the laws of the
United States or a state thereof to the extent: (i) the deposit accounts of
each
such institution are insured by the Federal Deposit Insurance Corporation up
to
the legal limit; and (ii) each such institution has an aggregate capital and
surplus of not less than One Hundred Million Dollars
($100,000,000).
(2) Investments
in marketable obligations issued or fully guaranteed by the United States and
maturing not more than one (1) year from the date of issuance.
(3) Investments
in open market commercial paper rated at least "A1" or "P1" or higher by a
national credit rating agency and maturing not more than one (1) year from
the
creation thereof.
(4) Investments
pursuant to or arising under currency agreements or interest rate agreements
entered into in the ordinary course of business.
(5) Investments,
not requiring the use of cash or the assumption of liabilities, in joint
ventures, partnerships or similar business arrangements entered into in the
ordinary course of business in substantially the same industry and growth stage
as Borrower.
(6) Other
investments aggregating not in excess of Five Hundred Thousand Dollars
($500,000) at any time.
(j) "Permitted
Liens"
means:
(1) The
Lien
created by this Agreement.
(2) Liens
for
fees, taxes, levies, imposts, duties or other governmental charges of any kind
which are not yet delinquent or which are being contested in good faith by
appropriate proceedings which suspend the collection thereof (provided that
such
appropriate proceedings do not involve any substantial danger of the sale,
forfeiture or loss of any material item of Collateral or Collateral which in
the
aggregate is material to Borrower).
(3) Liens
existing as of the date of this Note and identified in the Schedules to the
Credit Agreement.
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(4) carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other similar Liens
arising in the ordinary course of business and which are not delinquent or
remain payable without penalty or which are being contested in good faith and
by
appropriate proceedings (provided that
such
appropriate proceedings do not involve any substantial danger of the sale,
forfeiture or loss of any material item of Collateral or Collateral which in
the
aggregate is material to Borrower).
(5) Liens
upon any equipment or other personal property acquired by Borrower after the
date hereof to secure (i) the purchase price of such equipment or other personal
property, or (ii) lease obligations or indebtedness incurred solely for the
purpose of financing the acquisition of such equipment or other personal
property; provided that such Liens are confined solely to the equipment or
other
personal property so acquired and the proceeds thereof and the amount secured
does not exceed the acquisition price thereof.
(6) licenses
of Intellectual Property entered into in the ordinary course of business
(whether as licensor or licensee);
(7) bankers'
liens, rights of setoff and similar Liens incurred on deposits made in the
ordinary course of business and Liens in favor of financial institutions arising
in connection with Borrower's deposit accounts or securities accounts held
at
such institutions to secure customary fees and charges;
(8) any
judgment, attachment or similar Lien not resulting in an Event of Default
hereunder;
(9) the
rights of third-party suppliers or other vendors having possession of
manufacturing equipment;
(10) the
rights of lessees, licensees and other third parties (a) having a right to
possess or use assets in the ordinary course of business and (b) in property
owned by them which is leased to another Person or which another Person has
a
right to use or possess;
(11) with
respect to real property, easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the use of such real
property in the ordinary course of business; and
(12) Liens
incurred in the extension, renewal or refinancing of the indebtedness secured
by
Liens described above but any extension, renewal or replacement Lien must be
limited to the property encumbered by the existing Lien and the principal amount
of the indebtedness may not increase.
(k) "Person"
means
and includes any individual, any partnership, any corporation, any business
trust, any joint stock company, any limited liability company, any
unincorporated association or any other entity and any domestic or foreign
national, state or local government, any political subdivision thereof, and
any
department, agency, authority or bureau of any of the
foregoing.
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(l) "Subsidiary"
means
any corporation or other entity of which a majority of the outstanding equity
securities entitled to vote for the election of directors or other governing
body (otherwise than as the result of a default) is owned by Borrower directly
or indirectly through Subsidiaries.
2. Payments
of Principal, Interest, Etc.
The
principal amount of the Loan evidenced hereby, together with any accrued and
unpaid interest, and any and all unpaid costs, fees and expenses accrued, shall
be due and payable on the earlier of (x) subject to the following sentence,
March 25, 2009 (the “One-Year
Anniversary”),
in
the event that no Advance has been made prior to such date, (y) March 25, 2013
(the “Five-Year
Anniversary”),
in
the event that an Advance has been made prior to the One-Year Anniversary,
and
(z) the consummation of a merger, stock exchange or other similar corporate
transaction involving the Company that results in the shareholders of the
Company immediately prior to such transaction owing less than 50% of the
outstanding voting securities of the Company (or the surviving company in a
merger) immediately after such transaction (the "Maturity
Date").
In
the event that the Maturity Date would occur on the One Year Anniversary because
no Advance had been made, Borrower shall have the option to extend the Maturity
Date to the Five-Year Anniversary by issuing to Lender on the One-Year
Anniversary the Warrants described in Section 1.12 of the Credit Agreement.
3. Interest.
All
amounts outstanding from time to time hereunder shall bear interest until such
amounts are paid, at the Interest Rate (as defined in the Credit Agreement).
Following any Event of Default (including before or after any judgment is
entered) and after the Maturity Date, the principal balance outstanding
hereunder, together with all such other amounts outstanding hereunder, shall
bear interest at a rate per annum equal to the Default Rate (as defined in
the
Credit Agreement).
4. Prepayments.
Borrower may prepay in cash, at any time or from time to time, all or any
portion of the amounts due hereunder, without penalty or premium; provided,
however,
that
any prepayment (whether voluntary or involuntary) shall be applied first to
accrued and unpaid interest and second to outstanding principal and other sums
due hereunder.
5. Security
Interest.
(a) Grant
of Security Interest.
Borrower grants to Lender a valid and continuing security interest in all
presently existing and hereafter acquired or arising Collateral in order to
secure prompt, full and complete payment of the amounts due hereunder and in
order to secure prompt, full and complete performance by Borrower of each of
its
covenants and duties under the Credit Agreement and this Note. The "Collateral"
shall
mean and include all right, title, interest, claims and demands of Borrower
in
and to all personal property of Borrower, including without limitation, all
of
the following:
(1) All
goods
(and embedded computer programs and supporting information included within
the
definition of "goods" under the Code) and equipment now owned or hereafter
acquired, including, without limitation, all laboratory equipment, computer
equipment, office equipment, machinery, fixtures, vehicles (including motor
vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located.
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(2) All
inventory now owned or hereafter acquired, including, without limitation, all
merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products including such inventory as is temporarily
out of Borrower's custody or possession or in transit and including any returns
upon any accounts or other proceeds, including insurance proceeds, resulting
from the sale or disposition of any of the foregoing and any documents of title
representing any of the above, and Borrower's books relating to any of the
foregoing.
(3) All
contract rights and general intangibles (except to the extent included within
the definition of Intellectual Property), now owned or hereafter acquired,
including, without limitation, goodwill, license agreements, franchise
agreements, blueprints, drawings, purchase orders, customer lists, route lists,
infringements, claims, software, computer programs, computer disks, computer
tapes, literature, reports, catalogs, design rights, income tax refunds, payment
intangibles, commercial tort claims, payments of insurance and rights to payment
of any kind.
(4) All
now
existing and hereafter arising accounts, contract rights, royalties, license
rights, license fees and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower (subject, in each case, to the contractual
rights of third parties to require funds received by Borrower to be expended
in
a particular manner), whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's books relating
to any of the foregoing.
(5) All
documents, cash, deposit accounts, letters of credit (whether or not the letter
of credit is evidenced by a writing), certificates of deposit, instruments,
promissory notes, chattel paper (whether tangible or electronic) and investment
property, including, without limitation, all securities, whether certificated
or
uncertificated, security entitlements, securities accounts, commodity contracts
and commodity accounts, and all financial assets held in any securities account
or otherwise, wherever located, now owned or hereafter acquired and Borrower's
books relating to the foregoing.
(6) Any
and
all claims, rights and interests in any of the above and all substitutions
for,
additions and accessions to and proceeds thereof, including, without limitation,
insurance, condemnation, requisition or similar payments and proceeds of the
sale or licensing of Intellectual Property to the extent such proceeds no longer
constitute Intellectual Property.
(7) Notwithstanding
the foregoing, the Collateral shall not include any Intellectual Property;
provided,
however,
that
the Collateral shall include all accounts receivables, accounts, and general
intangibles that consist of rights to payment and proceeds from the sale,
licensing or disposition of all or any part, or rights in, the foregoing (the
"Rights
to Payment").
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(b) After-Acquired
Property.
If
Borrower shall at any time acquire a commercial tort claim, as defined in the
Code, Borrower shall immediately notify Lender in writing signed by Borrower
of
the brief details thereof and grant to Lender in such writing a security
interest therein and in the proceeds thereof, all upon the terms of this Note,
with such writing to be in form and substance satisfactory to
Lender.
(c) Duration
of Security Interest.
Lender's security interest in the Collateral shall continue until the payment
in
full and the satisfaction of all obligations of Borrower under this Note, and
the termination of any commitment to fund any Loan, whereupon such security
interest shall terminate. Lender shall, at Borrower's sole cost and expense,
execute such further documents and take such further actions as may be
reasonably necessary to make effective the release contemplated by this Section
5(c). including duly executing and delivering termination statements for filing
in all relevant jurisdictions under the Code.
(d) Location
and Possession of Collateral.
The
Collateral is and shall remain in the possession of Borrower at its location(s)
at 0 Xxxxx Xxxxxx, Xxxxxxxx Xxxxxxx Xxxx, Xxx-Xxxxx, Xxxxxx 00000. Borrower
shall remain in full possession, enjoyment and control of the Collateral (except
only as may be otherwise required by Lender for perfection of its security
interest therein) and so long as no Event of Default has occurred and is
continuing, shall be entitled to manage, operate and use the same and each
part
thereof with the rights and franchises appertaining thereto; provided that
the
possession, enjoyment, control and use of the Collateral shall at all time
be
subject to the observance and performance of the terms of this
Note.
(e) Delivery
of Additional Documentation Required.
Borrower shall from time to time execute and deliver to Lender, at the request
of Lender, all financing statements and other documents Lender may reasonably
request, in form reasonably satisfactory to Lender, to perfect and continue
Lender's perfected security interests in the Collateral and in order to
consummate fully all of the transactions contemplated under this Note and the
Credit Agreement.
(f) Right
to Inspect.
Lender
(through any of its officers, employees, or agents) shall have the right, upon
reasonable prior notice, from time to time during Borrower's usual business
hours, to inspect Borrower's books and records and to make copies thereof and
to
inspect, test, and appraise the Collateral in order to verify Borrower’s
financial condition or the amount, condition of, or any other matter relating
to, the Collateral.
(g) Protection
of Intellectual Property.
Borrower shall use its commercially reasonable efforts to (i) protect, defend
and maintain the validity and enforceability of its material Intellectual
Property and promptly advise Lender in writing of material infringements which
become known to Borrower, and (ii) not allow any Intellectual Property material
to Borrower's business to be abandoned, forfeited or dedicated to the public
except in the ordinary course of Borrower's business.
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(h) Other
Lien Subordination.
Lender
agrees that the Liens granted to it hereunder in equipment and other personal
property acquired by Borrower after the date hereof ("Third
Party Equipment")
which
secure Indebtedness constituting Permitted Indebtedness under Subclause (4)
of
the definition of Permitted Indebtedness shall be subordinate to the Liens
of
existing or future lenders providing equipment financing and equipment lessors
for Third Party Equipment or if such lenders prohibit the granting of Liens
to
other lenders, Lender shall release its Lien on such Third Party Equipment
and
the proceeds thereof; provided that such Liens are confined solely to the
equipment so financed and the proceeds thereof and are Permitted Liens. Upon
the
expiration of the Liens of such other lenders or the termination of their
prohibition of Liens in favor of other lenders, the Third Party Equipment shall
automatically become part of the Collateral, and Lender is authorized at that
time to amend any filed financing statement(s) to reflect that change.
Notwithstanding the foregoing, except as set forth in this Section 5(h), the
obligations hereunder shall not be subordinate in right of payment to any
obligations to other lenders, equipment lenders or equipment lessors, and
Lender's rights and remedies hereunder shall not in any way be subordinate
to
the rights and remedies of any such lenders or equipment lessors.
6. Affirmative
Covenants.
Borrower covenants that, so long as any amounts are due and payable hereunder
to
Lender or any commitment to make any Loan still exists, Borrower
shall:
(a) Maintain
its corporate existence and its good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could reasonably be expected to have a Material Adverse
Effect. Borrower shall maintain in force all licenses, approvals and agreements,
the loss of which could reasonably be expected to have a Material Adverse
Effect.
(b) Comply
with all statutes, laws, ordinances and government rules and regulations to
which it is subject, noncompliance with which could reasonably be expected
to
have a Material Adverse Effect.
(c) Deliver
to Lender: (i) as soon as available, but in any event within ninety (90)
days after the end of Borrower's fiscal year or the date of Borrower's board
of
directors' adoption, Borrower's operating budget and plan for the next fiscal
year; (ii) at the time of filing of Borrower's Form 10-K with the Securities
and
Exchange Commission after the end of each fiscal year of Borrower, the financial
statements of Borrower filed with such Form 10-K; (iii) at the time of filing
of
Borrower's Form 10-Q with the Securities and Exchange Commission after the
end
of each of the first three fiscal quarters of Borrower, the financial statements
of Borrower filed with such Form 10-Q; and (iv) such other financial information
as Lender may reasonably request from time to time. In addition, Borrower shall
deliver to Lender (x) promptly upon becoming available, copies of all
statements, reports and notices sent or made available generally by Borrower
to
its security holders; and (y) promptly upon receipt of notice thereof, a report
of any material legal actions pending or threatened against Borrower or the
commencement of any action, proceeding or governmental investigation involving
Borrower is commenced that is reasonably expected to result in damages or costs
to Borrower of One Hundred Fifty Thousand Dollars ($150,000).
(d) Each
time
financial statements are furnished pursuant to Section 6(c)
above,
deliver to Lender an Officer's Certificate signed by Borrower’s chief executive
officer, president, treasurer or chief financial officer (each a “Responsible
Officer”)
in
form reasonably satisfactory to Lender, certifying such financial statements,
Borrower's compliance with the terms of this Note and that no Event of Default
has occurred under this Note.
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(e) As
soon
as possible, and in any event within five (5) business days after the discovery
of an Event of Default, provide Lender with an Officer's Certificate signed
by a
Responsible Officer setting forth the facts relating to or giving rise to such
Event of Default and the action which Borrower proposes to take with respect
thereto.
(f) Make
due
and timely payment or deposit of all Taxes required of it by applicable law
or
imposed upon any property belonging to it, and will execute and deliver to
Lender, on demand, appropriate certificates attesting to the payment or deposit
thereof; provided that Borrower need not make any payment if the amount or
validity of such payment is contested in good faith by appropriate proceedings
which suspend the collection thereof; provided that such proceedings do not
involve any substantial danger of the sale, forfeiture or loss of any material
item of Collateral or Collateral which in the aggregate is material to
Borrower.
(g) Keep
and
maintain all items of equipment and other similar types of personal property
that form any significant portion or portions of the Collateral in good
operating condition and repair. Borrower shall not permit any such material
item
of Collateral to become a fixture to real estate or an accession to other
personal property, without the prior written consent of Lender. With respect
to
items of leased equipment (to the extent Lender has any security interest in
any
residual Borrower's interest in such equipment under the lease), Borrower shall
keep, maintain, repair, replace and operate such leased equipment in accordance
with the terms of the applicable lease.
(h) Insure
its business and the Collateral with policies in a form, with companies, and
in
amounts determined by the Board of Directors of the Borrower and appropriate
for
companies of Borrower’s size in Borrower’s industry. All property policies shall
have a lender's loss payable endorsement showing Lender as an additional loss
payee and all liability policies shall show Lender as an additional insured
and
all policies shall provide that the insurer must give Lender at least thirty
(30) days notice before canceling its policy. At Lender's request, Borrower
shall deliver certified copies of policies and evidence of all premium payments.
Proceeds payable under any policy shall, at Lender's option, be payable to
Lender on account of the Obligations. Notwithstanding the foregoing, so long
as
no Event of Default has occurred and is continuing, Borrower shall have the
option of applying the proceeds of any casualty policy, toward the replacement
or repair of destroyed or damaged property; provided that (i) any such replaced
or repaired property (a) shall be of equal or like value as the replaced or
repaired Collateral and (b) shall be deemed Collateral in which Lender has
been
granted a security interest and (ii) after the occurrence and during the
continuation of an Event of Default all proceeds payable under such casualty
policy shall, at the option of Lender, be payable to Lender, on account of
the
Indebtedness evidenced by this Note and the Credit Agreement. If Borrower fails
to obtain insurance as required under Section
6(h)
or to
pay any amount or furnish any required proof of payment to third persons and
Lender, Lender may make all or part of such payment or obtain such insurance
policies required in Section
6(h),
and
take any action under the policies Lender deems prudent. On or prior to the
Initial Closing Date and prior to each policy renewal, Borrower shall furnish
to
Lender certificates of insurance or other evidence satisfactory to Lender that
insurance complying with all of the above requirements is in
effect.
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(i) Assuming
the proper filing of one or more financing statement(s) identifying the
Collateral with the proper state and/or local authorities, to the extent
perfection may be achieved under the uniform commercial code by filing, the
security interests in the Collateral granted to Lender pursuant to this
Agreement (i) constitute and will continue to constitute first priority security
interests (except to the extent any Permitted Liens may have a superior priority
to Lender's Lien under this Agreement) and (ii) are and will continue to be
superior and prior to the rights of all other creditors of Borrower (except
to
the extent of such Permitted Liens).
(j) At
any
time and from time to time Borrower shall execute and deliver such further
instruments and take such further action as may reasonably be requested by
Lender to make effective the purposes of this Note, including without
limitation, the continued perfection and priority of Lender's security interest
in the Collateral.
7. Negative
Covenants.
Borrower covenants that, so long as any amounts are due and payable hereunder
to
Lender or any commitment to make any Loan still exists, without the prior
approval of Lender (which shall not be unreasonably withheld or delayed),
Borrower shall not:
(a) Change
its name, jurisdiction of incorporation, or principal place of business without
thirty (30) days prior written notice to Lender.
(b) Subject
to its rights under Section
7(d)
and
except in the ordinary course of business, remove any items of Collateral from
the Collateral location(s) specified in this Note.
(c) Create,
incur, assume or suffer to exist any Lien of any kind upon any of the
Collateral, whether now owned or hereafter acquired, except Permitted
Liens.
(d) Convey,
sell, lease or otherwise dispose of all or any part of the Collateral to any
Person (collectively, a "Transfer"),
except for: (i) Transfers of inventory in the ordinary course of business;
or
(ii) Transfers of worn-out or obsolete equipment.
(e) Except
as
set forth in the Schedules to the Credit Agreement delivered by Borrower as
of
the date hereof or except in an amount as would not be material, (i) pay
any dividends or make any distributions on its Equity Securities; (ii) purchase,
redeem, retire, defease or otherwise acquire for value any of its Equity
Securities (other than repurchases pursuant to the terms of employee stock
purchase plans, employee restricted stock agreements or similar arrangements
in
an aggregate amount not to exceed One Hundred Thousand Dollars ($100,000));
(iii) return any capital to any holder of its Equity Securities as such; (iv)
make any distribution of assets, Equity Securities, obligations or securities
to
any holder of its Equity Securities as such; or (v) reserve any sum for any
purpose listed in clauses (i) through (iv) of this paragraph; provided,
however,
Borrower may pay dividends payable solely in Common Stock.
(f) Engage
in
or permit any of its Subsidiaries to engage in any business other than the
businesses currently engaged in by Borrower or reasonably related
thereto.
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(g) Enter
into any contractual obligation with any Affiliate or engage in any other
transaction with any Affiliate except upon terms at least as favorable to
Borrower as an arms-length transaction with persons who are not Affiliates
of
Borrower.
(h) (i)
Except in an amount as would not be material, prepay, redeem, purchase, defease
or otherwise satisfy in any manner prior to the scheduled repayment thereof
any
Indebtedness for borrowed money (other than amounts due or permitted to be
prepaid under this Note and the Credit Agreement) or lease obligations, (ii)
amend, modify or otherwise change the terms of any Indebtedness for borrowed
money or lease obligations so as to accelerate the scheduled repayment thereof
or (iii) repay any notes to officers, directors or shareholders except as
provided for in this Note.
(i) Create,
incur, assume or permit to exist any Indebtedness except Permitted
Indebtedness.
(j) Make
any
investment except for Permitted Investments.
(k) Become
an
"investment company" or a company controlled by an "investment company" under
the Investment Company Act of 1940 or undertake as one of its important
activities extending credit to purchase or carry margin stock, or use the
proceeds of any Loan for that purpose; fail to meet the minimum funding
requirements of ERISA; permit a Reportable Event or Prohibited Transaction,
as
defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards
Act or violate any other law or regulation, if the violation could reasonably
be
expected to have a material adverse effect on Borrower's business or operations
or could reasonably be expected to cause a material adverse change, or permit
any of its Subsidiaries to do so.
(l) Except
as
currently exists as of the date hereof or as provided under that certain
Exclusive License Agreement by Washington University, as licensor, and Modigene
Inc., a Delaware corporation and a wholly-owned subsidiary of the Borrower,
dated as of February 15, 2007, create, incur, assume or suffer to exist any
Lien
of any kind upon any Intellectual Property or Transfer any Intellectual
Property, whether now owned or hereafter acquired, other than licenses of
Intellectual Property entered into in the ordinary course of
business.
8. Lender's
Rights and Remedies.
(a) Rights
and Remedies.
Upon
the occurrence of an Event of Default, while such Event of Default is continuing
(provided that an Event of Default shall be continuing at all times after any
cure period therefor expires), Lender shall not have any further obligation
to
advance money or extend credit to or for the benefit of Borrower. In addition,
upon the occurrence and during the continuance of an Event of Default, the
entire unpaid principal sum hereunder, plus any and all interest accrued
thereon, plus all other sums due and payable to Lender hereunder shall, at
the
option of Lender, become due and payable immediately without presentment,
demand, notice of nonpayment, protest, notice of protest, or other notice of
dishonor, all of which are hereby expressly waived by Borrower. Lender shall
have the rights, options, duties and remedies of a secured party as permitted
by
law and, in addition to and without limitation of the foregoing, Lender may,
at
its election, without notice of election and without demand, do any one or
more
of the following, all of which are authorized by Borrower:
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(1) Make
such
payments and do such acts as Lender considers necessary or reasonable to protect
Lender's security interest in the Collateral. Borrower agrees to assemble the
Collateral if Lender so requires and to make the Collateral available to Lender
as Lender may designate. Borrower authorizes Lender and its designees and agents
to enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any Lien which in Lender's determination appears or is claimed
to
be prior or superior to its security interest and to pay all expenses incurred
in connection therewith. With respect to any of Borrower's owned premises,
Borrower hereby grants Lender a license to enter into possession of such
premises and to occupy the same, without charge, for up to one hundred twenty
(120) days in order to exercise any of Lender's rights or remedies provided
herein, at law, in equity, or otherwise;
(2) Ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell (in the manner provided for herein) the Collateral. Lender
and its agents and any purchasers at or after foreclosure are hereby granted
a
non-exclusive, irrevocable, perpetual, fully paid, royalty-free license or
other
right, solely pursuant to the provisions of this Section
8,
to use,
without charge, Borrower's Intellectual Property, including without limitation,
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service marks, and advertising matter, or any property of
a
similar nature, now or at any time hereafter owned or acquired by Borrower
or in
which Borrower now or at any time hereafter has any rights; provided that
such
license shall only be exercisable in connection with the disposition of
Collateral upon Lender's exercise of its remedies hereunder;
(3) Sell
the
Collateral at either a public or private sale, or both, by way of one or more
contracts or transactions, for cash or on terms, in such manner and at such
places (including Borrower's premises) as Lender determines are commercially
reasonable; and
(4) Credit
bid and purchase all or any portion of the Collateral at any public
sale.
Any
deficiency that exists after disposition of the Collateral as provided above
will be paid immediately by Borrower.
(b) Effect
of Sale.
Upon
the occurrence of an Event of Default and during the continuation thereof,
to
the extent permitted by law, Borrower covenants that it will not at any time
insist upon or plead, or in any manner whatsoever claim or take any benefit
or
advantage of, any stay or extension law now or at any time hereafter in force,
nor claim, take nor insist upon any benefit or advantage of or from any law
now
or hereafter in force providing for the valuation or appraisement of the
Collateral or any part thereof prior to any sale or sales thereof to be made
pursuant to any provision herein contained, or to the decree, judgment or order
of any court of competent jurisdiction; nor, after such sale or sales, claim
or
exercise any right under any statute now or hereafter made or enacted by any
state or otherwise to redeem the property so sold or any part thereof, and,
to
the full extent legally permitted, except as to rights expressly provided
herein, hereby expressly waives for itself and on behalf of each and every
Person, except decree or judgment creditors of Borrower, acquiring any interest
in or title to the Collateral or any part thereof subsequent to the date of
this
Note, all benefit and advantage of any such law or laws, and covenants that
it
will not invoke or utilize any such law or laws or otherwise hinder, delay
or
impede the execution of any power herein granted and delegated to Lender, but
will suffer and permit the execution of every such power as though no such
power, law or laws had been made or enacted. Any sale, whether under any power
of sale hereby given or by virtue of judicial proceedings, shall operate to
divest all right, title, interest, claim and demand whatsoever, either at law
or
in equity, of Borrower in and to the property sold, and shall be a perpetual
bar, both at law and in equity, against Borrower, its successors and assigns,
and against any and all Persons claiming the property sold or any part thereof
under, by or through Borrower, its successors or assigns.
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(c) Power
of Attorney in Respect of the Collateral.
Borrower does hereby irrevocably appoint Lender (which appointment is coupled
with an interest), the true and lawful attorney in fact of Borrower with full
power of substitution, for it and in its name to file any notices of security
interests, financing statements and continuations and amendments thereof
pursuant to the Code or federal law, as may be necessary to perfect, or to
continue the perfection of Lender's security interests in the Collateral.
Borrower does hereby irrevocably appoint Lender (which appointment is coupled
with an interest) on the occurrence of an Event of Default and during the
continuation thereof, the true and lawful attorney in fact of Borrower with
full
power of substitution, for it and in its name: (a) to ask, demand, collect,
receive, receipt for, xxx for, compound and give acquittance for any and all
rents, issues, profits, avails, distributions, income, payment draws and other
sums in which a security interest is granted under Section
5
with
full power to settle, adjust or compromise any claim thereunder as fully as
if
Lender were Borrower itself; (b) to receive payment of and to endorse the name
of Borrower to any items of Collateral (including checks, drafts and other
orders for the payment of money) that come into Lender's possession or under
Lender's control; (c) to make all demands, consents and waivers, or take any
other action with respect to, the Collateral; (d) in Lender's discretion to
file
any claim or take any other action or proceedings, either in its own name or
in
the name of Borrower or otherwise, which Lender may reasonably deem necessary
or
appropriate to protect and preserve the right, title and interest of Lender
in
and to the Collateral; (e) endorse Borrower's name on any checks or other forms
of payment or security; (f) sign Borrower's name on any invoice or xxxx of
lading for any account or drafts against account debtors; (g) make, settle,
and
adjust all claims under Borrower's insurance policies; (h) settle and adjust
disputes and claims about the accounts directly with account debtors, for
amounts and on terms Lender determines reasonable; (i) transfer the Collateral
into the name of Lender or a third party as the Code permits; and (j) to
otherwise act with respect thereto as though Lender were the outright owner
of
the Collateral.
9. Remedies
Cumulative, Etc.
(a) No
right
or remedy conferred upon or reserved to Lender hereunder or now or hereafter
existing at law or in equity is intended to be exclusive of any other right
or
remedy, and each and every such right or remedy shall be cumulative and
concurrent, and in addition to every other such right or remedy, and may be
pursued singly, concurrently, successively or otherwise, at the sole discretion
of Lender, and shall not be exhausted by any one exercise thereof but may be
exercised as often as occasion therefor shall occur.
-14-
(b) Borrower
hereby waives presentment, demand, notice of nonpayment, protest, notice of
protest, notice of dishonor and any and all other notices in connection with
any
default in the payment of, or any enforcement of the payment of, all amounts
due
under this Note. To the extent permitted by law, Borrower waives the right
to
any stay of execution and the benefit of all exemption laws now or hereafter
in
effect.
10. Costs
and Expenses.
Following the occurrence of any Event of Default, Borrower shall pay upon demand
all reasonable costs and expenses (including reasonable attorneys' fees and
expenses) incurred by Lender in the exercise of any of its rights, remedies
or
powers under this Note and any amount thereof not paid promptly following demand
therefor shall be added to the principal sum hereunder and shall bear interest
at the Default Rate from the date of such demand until paid in
full.
11. Indemnification
and Waiver.
(a) General
Indemnity.
Borrower agrees upon demand to pay or reimburse Lender for all liabilities,
obligations and out-of-pocket expenses, including Lender's Expenses and
reasonable fees and expenses of counsel for Lender from time to time arising
in
connection with the enforcement or collection of sums due under this Note or
the
Credit Agreement, and in connection with any amendment or modification of such
documents or any "work-out" in connection with such documents. Borrower shall
indemnify, reimburse and hold Lender, and each of its respective successors,
assigns, agents, attorneys, officers, directors, shareholders, servants, agents
and employees (each an "Indemnified
Person")
harmless from and against all liabilities, losses, damages, actions, suits,
demands, claims of any kind and nature (including claims relating to
environmental discharge, cleanup or compliance), all costs and expenses
whatsoever to the extent they may be incurred or suffered by such Indemnified
Person in connection therewith (including reasonable attorneys' fees and
expenses), fines, penalties (and other charges of any applicable governmental
authority), licensing fees relating to any item of Collateral, damage to or
loss
of use of property (including consequential or special damages to third parties
or damages to Borrower's property), or bodily injury to or death of any person
(including any agent or employee of Borrower) (each, a "Claim"),
directly or indirectly relating to or arising out of the use of the proceeds
of
the Loans or otherwise, the falsity of any representation or warranty of
Borrower or Borrower's failure to comply with the terms of this Note or the
Credit Agreement. The foregoing indemnity shall cover, without limitation,
(i)
any Claim in connection with a design or other defect (latent or patent) in
any
item of equipment or product included in the Collateral, (ii) any Claim for
infringement of any patent, copyright, trademark or other intellectual property
right, (iii) any Claim resulting from the presence on or under or the escape,
seepage, leakage, spillage, discharge, emission or release of any Hazardous
Substances on the premises owned, occupied or leased by Borrower, including
any
Claims asserted or arising under any environmental law, or (iv) any Claim for
negligence or strict or absolute liability in tort; provided,
however,
Borrower shall not indemnify Lender for any liability incurred by Lender to
the
extent it is the result of Lender's gross negligence or willful misconduct.
Such
indemnities shall continue in full force and effect, notwithstanding the
expiration or termination of this Note. Upon Lender's written demand, Borrower
shall assume and diligently conduct, at its sole cost and expense, the entire
defense of Lender, each of its partners, and each of their respective, agents,
employees, directors, officers, shareholders, successors and assigns against
any
indemnified Claim described in this Section
11.
Borrower shall not settle or compromise any Claim against or involving Lender
without first obtaining Lender's written consent thereto, which consent shall
not be unreasonably withheld.
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12. Notices.
All
notices required to be given to any of the parties hereunder shall be in writing
and shall be deemed to have been sufficiently given for all purposes when
presented personally to such party or sent by hand delivery, facsimile, courier
service guaranteeing next business day delivery, or overnight U.S. express
mail,
return receipt requested, to such party at its address set forth in the Credit
Agreement with copies to the parties designated to receive copies in the Credit
Agreement. Such notice shall be deemed to be given when received. Any notice
of
any change in such address shall also be given in the manner set forth above.
Whenever the giving of notice is required, the giving of such notice may be
waived in writing by the party entitled to receive such notice.
13. Severability.
In the
event that any provision of this Note is held to be invalid, illegal or
unenforceable in any respect or to any extent, such provision shall nevertheless
remain valid, legal and enforceable in all such other respects and to such
extent as may be permissible. Any such invalidity, illegality or
unenforceability shall not affect any other provisions of this Note, but this
Note shall be construed as if such invalid, illegal or unenforceable provision
had never been contained herein.
14. Successors
and Assigns.
This
Note inures to the benefit of Lender and binds Borrower, and their respective
successors and assigns, and the words "Borrower"
and
"Lender"
whenever occurring herein shall be deemed and construed to include such
respective permitted successors and assigns as provided in the Credit Agreement;
provided,
however,
neither
this Note nor any rights hereunder may be assigned by Borrower without Lender's
prior written consent, which consent may be granted or withheld in Lender's
sole
discretion.
15. Governing
Law.
This
Note shall be governed by and construed in accordance with the laws of the
State
of Florida. Borrower agrees that any action or proceeding against it to enforce
the Note may be commenced in state or federal court in any county in the State
of Florida, and Borrower waives personal service or process and agrees that
a
summons and complaint commencing an action or proceeding in any such court
shall
be properly served and shall confer personal jurisdiction if serviced by
registered or certified mail in accordance with the notice provisions set forth
herein.
16. Entire
Agreement; Construction; Amendments and Waivers.
(a) Entire
Agreement.
This
Note and the Credit Agreement taken together, constitute and contain the entire
agreement between Borrower and Lender with respect to the subject matter hereof
and supersede any and all prior agreements, negotiations, correspondence,
understandings and communications between the parties, whether written or oral,
with respect to such subject matter. Borrower acknowledges that it is not
relying on any representation or agreement made by Lender or any employee,
attorney or agent thereof, other than the specific agreements set forth in
this
Note and the Credit Agreement. Lender acknowledges that it is not relying on
any
representation or agreement made by Borrower or any employee, attorney or agent
thereof, other than the specific agreements set forth in this Note and Credit
Agreement.
-16-
(b) Construction.
This
Note is the result of negotiations between and has been reviewed by each of
Borrower and Lender as of the date hereof and their respective counsel;
accordingly, this Note shall be deemed to be the product of the parties hereto,
and no ambiguity shall be construed in favor of or against Borrower or Lender.
Borrower and Lender agree that they intend the literal words of this Note and
the Credit Agreement and that no parol evidence shall be necessary or
appropriate to establish Borrower's or Lender's actual intentions.
(c) Amendments
and Waivers.
Any and
all amendments, modifications, discharges or waivers of, or consents to any
departures from any provision of this Note or of the Credit Agreement shall
not
be effective without the written consent of Lender and Borrower. Any waiver
or
consent with respect to any provision of such loan documents shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on Borrower in any case shall entitle Borrower
to
any other or further notice or demand in similar or other circumstances. Any
amendment, modification, waiver or consent affected in accordance with this
Section
16(c)
shall be
binding upon Lender and on Borrower.
17. No
Set-Offs by Borrower.
All
sums payable by Borrower pursuant to this Note or the Credit Agreement shall
be
payable without notice or demand and shall be payable in United States Dollars
without set-off or reduction of any manner whatsoever.
18. Survival.
All
covenants, representations and warranties made in this Agreement shall continue
in full force and effect so long as any obligations
hereunder or commitment to fund remain outstanding. The obligations of Borrower
to indemnify Lender with respect to the expenses, damages, losses, costs and
liabilities described in Section
11
shall
survive until all applicable statute of limitations periods with respect to
actions that may be brought against Lender with respect to this Note have
run.
19. WAIVER
OF TRIAL BY JURY. EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO TRIAL BY JURY.
SIGNATURE
PAGE FOLLOWS
-17-
IN
WITNESS WHEREOF, Borrower has duly executed this Note as of the day and year
first above written.
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By:
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Title:
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Chief
Executive Officer
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