EXECUTION COPY
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement") is made and entered into as
of December 17, 2002 by InKine Pharmaceutical Company, Inc., a New York
corporation (the "Grantor"), in favor of S.A.C. Capital Associates, LLC, Royal
Bank of Canada through RBC Dominion Securities Corporation, as its agent,
Solomon Strategic Holdings, Inc. and The Tail Wind Fund Ltd. as the holders of
the Notes (each a "Secured Party" and collectively the "Secured Parties").
BACKGROUND
WHEREAS, the Grantor has issued and sold, and the Secured Parties have
purchased, senior secured convertible notes (the "Notes") under that certain
Securities Purchase Agreement dated as of December 16, 2002 by and among the
Grantor, the Secured Parties and SDS Merchant Fund, L.P.
WHEREAS, as collateral security for payment and performance of its
obligations with respect to the Notes, the Grantor is willing to grant to the
Secured Parties a security interest in all of its personal property and assets.
AGREEMENT
NOW, THEREFORE, in order to induce the Secured Parties to purchase the
Notes and in consideration of the premises and the mutual covenants contained
herein, the parties hereto hereby agree as follows:
1. COLLATERAL. Except as provided below in this Section 1, as collateral
security for the payment and satisfaction of all indebtedness, obligations, and
liabilities of every kind and nature (whether primary or secondary, direct or
indirect, absolute or contingent, sole, joint, or several, secured or unsecured,
similar or dissimilar, or related or unrelated), heretofore, now, or hereafter
contracted or acquired, of the Grantor to the Secured Parties (collectively, the
"Secured Obligations"), the Grantor hereby affirms, grants, pledges and assigns
its pledge and collateral assignment to the Secured Parties and grants to the
Secured Parties a continuing first priority (except as expressly set forth
herein) security interest in and to all of the following property of the
Grantor, whether now owned or existing or hereafter acquired or arising and
wheresoever located (all of the same being hereinafter referred to as the
"Collateral"): all personal property and fixtures of every kind and nature,
including, without limitation all goods (including inventory, equipment and any
accessions thereto), instruments (including promissory notes), documents,
accounts (including, without limitation, health care receivables), chattel paper
(whether tangible or electronic), deposit accounts, letter-of-credit rights
(whether or not the letter of credit is evidenced by a writing), commercial tort
claims, securities and all other investment property, supporting obligations,
any other contract rights or rights to the payment of money, insurance claims
and proceeds, and all general intangibles including, without limitation, all
payment intangibles, patents, patent applications, trademarks, trademark
applications, trade names, copyrights, copyright applications, software,
engineering drawings, service marks, customer lists, goodwill, and all licenses,
permits, agreements of any kind or nature pursuant to which: (i) the Grantor
owns, and (ii) to the extent that Grantor is permitted to so grant, the Grantor
possesses, uses or has authority to possess or use property (whether tangible or
intangible) of others or others possess, use or have authority to possess or use
property (whether tangible or intangible) of the Grantor; and all recorded data
of any kind or nature, regardless of the medium of recording including, without
limitation, all software, writings, plans, specifications and schematics.
Notwithstanding any provision of this Section 1 to the contrary, term
"Collateral" shall not include those items set forth on Schedule 1; unless and
until such time as the Grantor is able to obtain all required consents in order
to permit the Grantor to grant a security interest in such items. In connection
with the foregoing, the Grantor shall use reasonable best efforts to obtain all
such required consents. The parties hereto agree that, without further action on
behalf of the parties hereto, upon the Grantor acquiring such required consents,
the definition of Collateral shall include such items set forth on Schedule 1 to
the fullest extent permitted by such consent(s).
2. FINANCING STATEMENTS. The Grantor hereby irrevocably authorizes the
Secured Parties at any time and from time to time to file in any Uniform
Commercial Code jurisdiction any initial financing statements and amendments or
continuations thereto that describe the Collateral. At the time of execution of
this Agreement, the Grantor shall have furnished the Secured Parties with
properly executed financing statements, amendments and assignments as prescribed
by the Uniform Commercial Code, as presently in effect in the states where the
Collateral is located, prepared and approved by the Secured Parties in form and
number sufficient for filing wherever required with respect to the Collateral.
The Grantor shall execute and deliver as reasonably required by the Secured
Parties any additional financing statements or other documents, together with
any necessary amendments or continuation statements so long as this Agreement
remains in effect.
3. MAINTENANCE OF SECURITY INTEREST. The Grantor will, from time to time,
upon the request of the Secured Parties, deliver specific assignments of
Collateral, together with such other instruments and documents, financing
statements, amendments thereto, assignments or other writings as the Secured
Parties may reasonably request to carry out the terms of this Agreement or to
protect or enforce the Secured Parties' security interest in the Collateral.
With respect to any and all Collateral to be secured and conveyed under this
Agreement, the Grantor agrees to do and cause to be done all things necessary to
perfect and keep in full force the security interest granted in favor of the
Secured Parties, including, but not limited to, the prompt payment of all fees
and expenses incurred in connection with any filings made to perfect or continue
a security interest in the Collateral in favor of the Secured Parties. The
Grantor agrees to make appropriate entries upon its financial statements and
books and records disclosing the Secured Parties' security interest granted
hereunder.
4. COVENANTS. The Grantor covenants with the Secured Parties that from and
after the date of this Agreement until termination hereof in accordance
herewith:
(a) DEPOSIT ACCOUNTS. With the exception of the account set forth on
Schedule 1, for which the Grantor shall use its reasonable best efforts to
obtain a control agreement that is reasonably satisfactory to the Secured
Parties, for each deposit account that the Grantor at any time opens or
maintains, the Grantor shall, at the Secured Parties' request and option,
pursuant to an agreement in form and substance satisfactory to the Secured
Parties, cause the depositary bank to agree to comply at any time with
instructions from the Secured Parties to such depositary bank directing the
disposition of funds from time to time credited to such deposit account, without
further consent of the Grantor. The Secured Parties agree with the Grantor that
the Secured Parties shall not give any such instructions or withhold any
withdrawal rights from the Grantor, unless an Event of Default has occurred and
is continuing.
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(b) INVESTMENT PROPERTY. With the exception of those held in the
account set forth on Schedule 1, for which the Grantor shall use its reasonable
best efforts to obtain a control agreement that is reasonably satisfactory to
the Secured Parties, if any securities, whether certificated or uncertificated,
or other investment property now or hereafter acquired by the Grantor are held
by the Grantor or its nominee through a securities intermediary, the Grantor
shall immediately notify the Secured Parties thereof and, at the Secured
Parties' request and option, pursuant to an agreement in form and substance
satisfactory to the Secured Parties, cause such securities intermediary to agree
to comply with entitlement orders or other instructions from the Secured Parties
to such securities intermediary as to such securities or other investment
property without further consent of the Grantor or such nominee. The Secured
Parties agree with the Grantor that the Secured Parties shall not give any such
entitlement orders or instructions or directions to any such issuer, securities
intermediary or commodity intermediary, and shall not withhold its consent to
the exercise of any withdrawal or dealing rights by the Grantor, unless an Event
of Default has occurred and is continuing.
5. GENERAL WARRANTIES AND REPRESENTATIONS
(a) Except as set forth on Schedule 5(a), the Grantor warrants and
represents that it has not granted a security interest in the Collateral to any
other person, and that it will defend such Collateral and any products and
proceeds thereof against all claims and demands of all persons at any time
claiming the same or any interest therein adverse to the Secured Parties other
than those set forth on Schedule 5(a). The security interests set forth on
Schedule 5(a) have a priority over the security interests granted hereby.
(b) The Grantor has the full legal right and power and all authority
and approval required to enter into, execute and deliver this Agreement and to
perform fully each of its respective obligations hereunder. This Agreement has
been duly executed and delivered and constitutes the valid and binding
obligation of the Grantor enforceable in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to creditor's rights generally. No approval
or consent of any foreign, federal, state, county, local or other governmental
or regulatory body, and no approval or consent of any other Person is required
in connection with the execution and delivery by the Grantor of this Agreement,
and the consummation and performance by each of the undersigned of the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated under this Agreement will
not conflict with or result in the breach or violation of any of the terms or
conditions of, or constitute (or with notice or lapse of time or both would
constitute) a default under any instrument, contract or other agreement to which
either the Grantor is a party or by or to which it or its assets or properties
are bound or subject or any statute or any regulation, order, judgment or decree
of any court or governmental or regulatory body.
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(c) The Grantor's exact legal name is that indicated on the signature
page hereof. The Grantor is a corporation organized in the State of New York and
its state organizational identification number and federal employer
identification number are as set forth in its filings with the United States
Securities and Exchange Commission.
6. INVENTORY WARRANTIES AND REPRESENTATIONS. Grantor warrants and
represents to the Secured Parties that the total value of its inventory is less
than $1,000,000 on the date hereof.
7. EQUIPMENT REPRESENTATIONS AND WARRANTIES. Grantor warrants and
represents to the Secured Parties that the total value of its equipment is less
than $1,000,000 on the date hereof.
8. CASUALTY AND LIABILITY INSURANCE REQUIRED. The Grantor will keep the
Collateral continuously insured against such risks as are customarily insured
against by businesses of like size and type engaged in the same or similar
operations.
9. EVENTS OF DEFAULT. For purposes of this Agreement, the term "Event of
Default" shall be as defined in the Notes.
10. RIGHTS AND REMEDIES UPON AN EVENT OF DEFAULT. Upon and after an Event
of Default, the Secured Parties shall have all of the rights and remedies of a
secured party under the Uniform Commercial Code of the state where such rights
and remedies are asserted, or under other applicable law, all of which rights
and remedies shall be cumulative, and none of which shall be exclusive, to the
extent permitted by law. The rights of the Secured Parties to the Collateral, as
among themselves, shall be in proportion to their then current holding of Notes.
11. SUPPLEMENTAL DOCUMENTATION. At the Secured Parties' request, the
Grantor shall execute and deliver to the Secured Parties, at any time or times
hereafter, all documents, instruments and other written matter that the Secured
Parties may request to perfect and maintain perfected the Secured Parties'
security interest in the Collateral, in form and substance acceptable to the
Secured Parties, and pay all charges, expenses and fees the Secured Parties may
reasonably incur in filing any of such documents. Grantor agrees that a carbon,
photographic, photostatic, or other reproduction of this Agreement or a
financing statement is sufficient as a financing statement and may be filed by
the Secured Parties in any filing office.
12. WAIVERS. In addition to the other waivers contained herein, Grantor
hereby expressly waives, to the extent permitted by law: presentment for
payment, demand, protest, notice of demand, notice of protest, notice of default
or dishonor, notice of payments and nonpayments and all other notices and
consents to any action taken by the Secured Parties unless expressly required by
this Agreement.
13. ANTI-MARSHALLING PROVISIONS. Grantor hereby waives any and all right to
require the marshalling of assets in connection with the exercise of any of the
remedies permitted by applicable law or provided herein.
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14. APPOINTMENT OF THE SECURED PARTIES AS GRANTOR'S LAWFUL ATTORNEY.
Without limitation of any other provision of this Agreement, upon and after an
Event of Default, Grantor irrevocably designates, makes, constitutes and
appoints the Secured Parties (and all Persons designated by the Secured
Parties), as Grantor's true and lawful attorney (and agent-in-fact) to take all
actions and to do all things required to be taken or done by Grantor under this
Agreement. All acts of the Secured Parties or their designees taken pursuant to
this Section 14 are hereby ratified and confirmed and the Secured Parties or its
designees shall not be liable for any acts of omission or commission nor for any
error of judgment or mistake of fact or law, other than as a result of its gross
negligence or willful misconduct. This power, being coupled with an interest, is
irrevocable by Grantor until this Agreement has been terminated in accordance
with Section 22 hereof.
15. RIGHTS AND REMEDIES CUMULATIVE; NON-WAIVER; ETC. The enumeration of the
rights and remedies of the Secured Parties, set forth in this Agreement is not
intended to be exhaustive and the exercise by the Secured Party of any right or
remedy shall not preclude the exercise of any other rights or remedies, all of
which shall be cumulative, and shall be in addition to any other right or remedy
given hereunder, or under any other agreement between Grantor and the Secured
Party or which may now or hereafter exist in law or in equity or by suit or
otherwise. No delay or failure to take action on the part of the Secured Party
in exercising any right, power or privilege shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any Event of Default.
No waiver by a party hereunder shall be effective unless it is in writing and
signed by the party making such waiver, and then only to the extent specifically
stated in such writing. No course of dealing between Grantor and the Secured
Parties or the Secured Parties' agents or employees shall be effective to
change, modify or discharge any provision of this Agreement or to constitute a
waiver of any Event of Default. The Secured Parties shall not have any liability
for any error, omission or delay of any kind occurring in the handling or
liquidation of the Collateral or for any damages resulting therefrom, other than
as a result of its gross negligence or willful misconduct.
16. NOTICE. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally, by responsible overnight carrier or by
confirmed facsimile, and shall be effective five (5) days after being placed in
the mail, if mailed, or upon receipt or refusal of receipt, if delivered
personally or by responsible overnight carrier or confirmed facsimile, in each
case addressed to a party. The addresses for such communications shall be:
If to the Grantor, to:
InKine Pharmaceutical Company, Inc.
0000 Xxxxxx Xxxxxxx Xxxx
Xxxxxxxx 00, Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attn: Chief Executive Officer
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with a copy simultaneously transmitted by like means to:
Xxxx Xxxxx XXX
Xxxxxx Xxxxxx Xxxx, 00xx Xxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: Xxxxxxx X. Xxxx, Esquire
If to the Secured Parties, to:
S.A.C. Capital Associates, LLC
c/o S.A.C. Capital Advisors, LLC
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: General Counsel
AND
Royal Bank of Canada
c/o RBC Dominion Securities Corporation
One Liberty Plaza
000 Xxxxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: XxXxxxx X. Xxxxxx, Managing Director & General Counsel
in either case with a copy simultaneously transmitted by like
means to:
Drinker Xxxxxx & Xxxxx LLP
One Xxxxx Square
00xx xxx Xxxxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esquire
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AND
Solomon Strategic Holdings, Inc.
Greenlands
The Red Gap
Xxxxxxxxxx
XX0 0XX
Xxxxxxx Xxxxx
Telephone: (00) 0000 000000
Facsimile: (00) 0000 000000
Attention: Xxxxxx XxxXxxxxx, Director
AND
The Tail Wind Fund Ltd.
c/o Tail Wind Advisory and Management Ltd.
0xx Xxxxx, Xx. 0 Xxxxxx Xxxxxx
Xxxxxx, XX0X 0XX XX
Telephone: 00-000-000-0000
Facsimile: 00-000-000-0000
Attention: Xxxxx Xxxxx
in either case with a copy simultaneously transmitted by like
means to:
Xxxxx X. Xxxxxxx, P.C.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
Each party shall provide notice to the other party of any change in
address.
17. DEFINITIONS. All terms defined in Article 9 of the Uniform Commercial
Code of the State of New York and used in this Agreement shall have the same
definitions herein as specified in Article 9 of the Uniform Commercial Code of
the State of New York, and such definitions are hereby incorporated herein by
reference and made a part hereof.
18. ENTIRE AGREEMENT. This Agreement, together with the Notes and the
Securities Purchase Agreement, constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements and understandings, inducements,
commitments or conditions, express or implied, oral or written, except as herein
or therein contained. The express terms hereof control and supersede any course
of performance or usage of the trade inconsistent with any of the terms hereof.
Neither this Agreement nor any portion or provision hereof may be changed,
altered, modified, supplemented, discharged, canceled, terminated, or amended
orally or in any manner other than by an agreement, in writing signed by the
parties hereto.
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19. SEVERABILITY. The provisions of this Agreement are independent of and
separable from each other. If any provision hereof shall for any reason be held
invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity or enforceability of any other provision hereof, but this Agreement
shall be construed as if such invalid or unenforceable provision had never been
contained herein.
20. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
successors and assigns of the Grantor, and the rights, remedies, powers, and
privileges of the Secured Parties hereunder shall inure to the benefit of the
successors and assigns of the Secured Parties; provided, however, that Grantor
shall not make any assignment hereof without the prior written consent of the
Secured Parties.
21. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
22. TERMINATION; RELEASE. Upon the indefeasible payment in full of all
Secured Obligations, this Agreement and all obligations of the Grantor hereunder
shall terminate without delivery of any instrument or performance of any act by
any party, and the Collateral shall automatically be released from the liens
created by this Agreement and all rights to such Collateral shall automatically
revert to Grantor. Notwithstanding the immediately preceding sentence, upon such
termination of this Agreement, the Secured Parties shall reassign and redeliver
such Collateral then held by or for the Secured Parties and execute and deliver
to the Grantor such documents as the Grantor shall reasonably request to
evidence such termination.
23. GOVERNING LAW.
(a) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York applicable to contracts executed, and to
be fully performed, in such state.
(b) Each party hereby expressly and irrevocably agrees and consents
that any suit, action or proceeding arising out of or relating to this Agreement
and the transactions contemplated herein may be instituted in any state or
federal court sitting in the County of New York, State of New York, United
States of America and, by the execution and delivery of this Agreement, each
party expressly waives any objection that it may have now or hereafter to the
laying of the venue or to the jurisdiction of any such suit, action or
proceeding, and irrevocably submits generally and unconditionally to the
jurisdiction of any such court in any such suit, action or proceeding.
(c) Each party agrees that service of process may be made by personal
service of a copy of the summons and complaint or other legal process in any
such suit, action or proceeding, or by registered or certified mail (postage
prepaid) to the address of such party provided by Section 16 hereof, or by any
other method of service provided for under the applicable laws in effect in the
State of New York.
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(d) Nothing contained in subsections (b) or (c) hereof shall preclude
any party from bringing any suit, action or proceeding arising out of or
relating to this Agreement in the courts of any place where any party or any of
such party's property or assets may be found or located. To the extent permitted
by the applicable laws of any such jurisdiction, each party hereby irrevocably
submits to the jurisdiction of any such court and expressly waives, in respect
of any such suit, action or proceeding, the jurisdiction of any other court or
courts which now or hereafter, by reason of its present or future domicile, or
otherwise, may be available to it.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY AND EACH PARTY HEREBY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY HAVE THAT EACH ACTION OR
PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
[Remainder of Page Intentionally Blank]
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IN WITNESS WHEREOF, the parties have duly executed this Security
Agreement on the day and year first written above.
INKINE PHARMACEUTICAL COMPANY, INC.
By: /s/
----------------------------------------------
Name: Xxxxxx X. Apple
Title: Executive Vice President and
Chief Financial Officer
SECURED PARTIES:
S.A.C. CAPITAL ASSOCIATES, LLC
By: /s/
----------------------------------------------
Name:
Title:
ROYAL BANK OF CANADA
By its agent, RBC Dominion Securities Corporation
By: /s/
----------------------------------------------
Name:
Title:
THE TAIL WIND FUND LTD.
By Tail Wind Advisory and Management Ltd., as
investment advisor
By: /s/
----------------------------------------------
Name:
Title:
SOLOMON STRATEGIC HOLDINGS, INC.
By: /s/
----------------------------------------------
Name:
Title:
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Schedule 1
Exclusions To Collateral
All of the Grantors existing lines of credit from and accounts at
Xxxxxxx Xxxxx Business Financial Services, Inc. (including affiliates thereof).
Schedule 5(a)
Prior Security Interests Granted; Priority
In connection with the lines of credit and accounts set for on Schedule
1, and any future lines of credit and accounts which the Grantor may obtain,
provided such lines of credit and accounts replace Xxxxxxx Xxxxx lines of credit
and accounts (or replacements thereof), the Grantor has granted (or in the
context of replacement lines of credit and accounts will grant) a security
interest in the assets thereof and held therein. The aforementioned security
interest has (or in the context of replacement lines of credit and accounts will
have) priority over the security interest granted in the Security Agreement to
which this Schedule 5(a) is a part of.
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