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EXHIBIT 10.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Security Agreement") is made and entered
into this 26th day of January, 1996, by and among Oklahoma Medical Research
Foundation, an Oklahoma, not-for-profit corporation ("OMRF"), ZymeTx Purchase
Partners, a New York partnership ("ZPP"), and Presbyterian Health Foundation
("Presbyterian").
RECITALS:
WHEREAS, OMRF, ZymeTx, Inc., a Delaware corporation (the "Company"),
ZPP and Presbyterian have entered into a Bridge Loan Agreement, dated the 26th
day of January, 1996 (the "Credit Agreement");
WHEREAS, the Company has executed and delivered to OMRF, ZPP and
Presbyterian (collectively, the "Lenders") promissory notes (the "Bridge
Notes"), as described in the Credit Agreement;
WHEREAS, OMRF has agreed to grant a security interest to ZPP and
Presbyterian (collectively, the "Secured Parties") in the proceeds of certain
Collateral (as described below) as security for the payment of the Bridge Notes
issued to the Secured Parties and the performance by the Company of its
obligations thereunder.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Security Interest in Collateral. OMRF hereby grants a security
interest to the Secured Parties in and to all proceeds of any and all of the
Intellectual Property (as hereinafter defined), including, without limitation,
license royalties and proceeds of infringement suits, and, to the extent not
otherwise included, all payments under insurance (whether or not Secured
Parties are the loss payees thereof), or any indemnity, warranty, or guaranty,
payable by reason of loss or damage to or otherwise with respect to the
Intellectual Property (such proceeds and payments referred to herein as the
"Collateral"). For purposes of this Agreement, the term "proceeds" includes
whatever is receivable or received when the Intellectual Property is sold,
collected, exchanged or otherwise disposed of, whether such disposition is
voluntary or involuntary; however, under no circumstances may the Secured
Parties take possession of the Collateral or force OMRF to pledge, assign,
transfer, sell, or otherwise encumber the Collateral. As used herein,
"Intellectual Property" shall include:
(i) Each of the trademarks, service marks, designs,
logos, trade names, corporate names, business names, and trade styles
(collectively "Trademarks") which are presently, or in the future may
be owned, held (whether pursuant to a license or otherwise) or used by
OMRF, in whole or in part, in relation to the Trademarks "ZymeTx",
"ViraStat" and "ViraZyme", all rights and interests in the Trademarks
including all common law and other rights in and to the Trademarks in
the United States and any state thereof (hereinafter called "Trademark
Rights") with respect thereto and all registrations and applications
that have heretofore been or may hereafter be issued thereon or
applied for in the United States and any state thereof (hereinafter
called "Registrations") heretofore or hereafter granted or applied
for.
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(ii) Any and all interests of OMRF in and to any
patents, patent rights and patent applications that OMRF may now have
or hereafter acquire (collectively the "Patent Rights") in the Patent
Rights listed on Schedule A hereto, as Schedule A may, from time to
time, be supplemented and any and all re-issues, divisions,
continuations, renewals, extensions and continuations-in-part of the
foregoing.
(iii) All rights of OMRF in and to designs,
technical information, know-how, knowledge, data, discoveries,
inventions, specifications, test results and other information
relating to the Symex Technology (as hereinafter defined) or the
Patent Rights and known to, or discovered by, OMRF prior to or during
the term of this Agreement. "Symex Technology" means all intellectual
property, designs, technical information, know-how, knowledge, data,
specifications, test results and other information of Symex Corp., a
Delaware corporation ("Symex"), which was collateral under, and
retained by OMRF in full satisfaction of, the rights of OMRF under
that certain Security Agreement and Conditional Assignment dated
February 13, 1993 by and between OMRF and Symex and that certain
Security Agreement and Conditional Assignment dated March 18, 1993, by
and between OMRF and Symex.
2. Security for Obligations. This Agreement secures, and the proceeds
of the Collateral is collateral security for, the prompt payment or performance
in full when due (including the payment of amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. ss. 362(a)), of all of the indebtedness of Company to the
Secured Parties under the Credit Agreement (such obligations of Company being
the "Secured Obligations").
3. Representations and Warranties. OMRF represents, warrants, and
covenants as follows:
(a) A true and complete list of all Patent Rights owned, held
(whether pursuant to a license or otherwise) or used by OMRF, in whole or in
part, related to the Intellectual Property is set forth in Schedule A hereto.
(b) OMRF has full power, authority and legal right to pledge
all the proceeds of the Collateral pursuant to this Agreement and is the record
and beneficial owner of each of the Patent Rights listed on Schedule A.
(c) OMRF is the sole legal and beneficial owner of the entire
right, title and interest in and to each of the Trademarks, Registrations, and
Patent Rights listed on Schedules A. OMRF owns the Intellectual Property and
the Collateral free and clear of any lien or encumbrance, except for certain
rights which may be asserted by Biota Holdings, Ltd. ("Biota") under that
certain Termination Agreement between Biota and Symex dated February 16, 1993
(the "Termination Agreement"), that certain Royalty Agreement between Biota and
Symex dated February 16, 1993 (the "Royalty Agreement"), and that certain
Consent Agreement dated February 16, 1993 (the "Consent Agreement") between
OMRF and Biota (the Termination Agreement, Royalty Agreement and Consent
Agreement are referred to herein collectively as the "Biota Agreements"). No
effective financing statement or other instrument similar in effect covering
all or any part of the Intellectual Property or Collateral is on file in any
recording office. No effective filing with the United States Patent and
Trademark Office covering all or any part of the Intellectual Property or
Collateral is on file in the United States Patent and Trademark Office.
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(d) This Agreement will create in favor of Secured Parties a
valid and perfected priority security interest in the proceeds of the
Collateral upon the filing of a financing statement with the County Clerk for
Oklahoma County, Oklahoma.
(e) Except for the filing of a financing statement with the
County Clerk for Oklahoma County, Oklahoma under the Uniform Commercial Code
and filings with the United States Patent and Trademark Office, no
authorization, approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required either (a) for the
grant by OMRF of the security interest granted hereby or for the execution,
delivery, or performance of this Agreement by OMRF or (b) for the perfection of
or the exercise by Secured Parties of the rights and remedies hereunder.
(f) OMRF's chief executive office and principal place of
business is located in Oklahoma County, Oklahoma.
(g) OMRF will not encumber the Intellectual Property or the
Collateral except for the encumbrances already in existence as of the date of
this Security Agreement or those effected by the Documents.
(h) No exclusive or non-exclusive licenses have been granted
to or in the Collateral.
4. OMRF's Covenants. On a continuing basis, OMRF will make, execute,
acknowledge and deliver, and file and record in the proper filing and recording
places, all such instruments, including the appropriate financing and
continuation statements and collateral agreements, and take all such action as
may reasonably be deemed necessary or advisable by Secured Parties, or for
assuring and confirming to Secured Parties to carry out the intent and purposes
of this Agreement, or for assuring and confirming to Secured Parties the grant
or perfection of a priority security interest in the proceeds of the Collateral
or to enable Secured Parties to exercise and enforce their rights and remedies
hereunder with respect to the proceeds of the Collateral. Without limiting the
generality of the foregoing, OMRF (a) will not enter into any agreement that
would or might in any way impair or conflict with OMRF's obligations hereunder
without Secured Parties' prior written consent, and (b) will properly maintain
and care for the Intellectual Property and Collateral.
5. Secured Parties May Perform. If OMRF fails to perform any agreement
contained herein, after the expiration of thirty (30) days from receipt of
written notice by OMRF from Secured Parties, Secured Parties may perform, or
cause performance of, such agreement, and the expenses of Secured Parties,
including the reasonable fees and expenses of its counsel, so incurred in
connection therewith, all at the expense of OMRF and the Secured Parties, pro
rata.
6. Events of Default; Remedies Upon Default.
(a) Events of Default. The occurrence of any one or more of
the following events will constitute a default by OMRF under this Agreement
(herein referred to as an "Event of Default"): (i) Failure of the Company
punctually to make payment of any amount payable, whether principal or
interest, on any of the Secured Obligations when and as the same becomes due
and payable, whether at maturity, or at a date fixed for any prepayment or
partial prepayment, or by acceleration or otherwise; (ii) If any statement,
representation or warranty of OMRF made in this Agreement or in any other
document furnished in connection herewith to Secured Parties proves to have
been untrue, incorrect, misleading or incomplete in
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any material respect as of the date made; (iii) Failure of OMRF punctually and
fully to perform, observe, discharge or comply with any of the covenants set
forth in this Agreement; (iv) The occurrence of a default, an event of default
or an Event of Default under any other agreement between OMRF and the Secured
Parties pertaining to the Secured Obligations; (v) any default, or event of
default, under this Security Agreement; (vi) If the Company becomes insolvent
as defined in the Oklahoma Uniform Commercial Code or makes an assignment for
the benefit of creditors, or if any action is brought by the Company seeking
its dissolution or liquidation of its assets or seeking the appointment of a
trustee, interim trustee, receiver or other custodian for any of its property,
or if the Company commences a voluntary case under the Federal Bankruptcy Code,
or if any reorganization or arrangement proceeding is instituted by the Company
for the settlement, readjustment, composition or extension of any of its debts
upon any terms, or if any action or petition is otherwise brought by the
Company seeking similar relief or alleging that it is insolvent or unable to
pay its debts as they mature; (vii) If any action is brought against the
Company seeking its dissolution or liquidation of any of its assets or seeking
the appointment of a trustee, interim trustee, receiver or other custodian for
any of its property, and such action is consented to or acquiesced in by the
Company or is not dismissed within thirty (30) days of the date upon which it
was instituted; or if any proceeding under the Federal Bankruptcy Code is
instituted against the Company and (A) an order for relief is entered in such
proceeding or (B) such proceeding is consented to or acquiesced in by the
Company or is not dismissed within thirty (30) days of the date upon which it
was instituted; or if any reorganization or arrangement proceeding is
instituted against the Company for the settlement, readjustment, composition or
extension of any of its debts upon any terms, and such proceeding is consented
to or acquiesced in by the Company or is not dismissed within thirty (30) days
of the date upon which it was instituted; or if any action or petition is
otherwise brought against the Company seeking similar relief or alleging that
it is insolvent, unable to pay its debts as they mature or generally not paying
its debts as they become due, and such action or petition is consented to or
acquiesced in by the Company or is not dismissed within thirty (30) days of the
date upon which it was brought.
(b) Upon the occurrence and continuance of an Event of
Default:
(i) Secured Parties may exercise in respect of the
proceeds of the Collateral, any and all rights of a secured party
under the laws of the State of Oklahoma.
(ii) Upon the written demand of Secured Parties,
OMRF shall execute and deliver to Secured Parties an assignment or
assignments of the proceeds of the Collateral and such other documents
as are necessary or appropriate to carry out the intent and purposes
of this Agreement. OMRF agrees that the proceeds derived from such an
assignment shall be applied to reduce the Secured Obligations
outstanding only to the extent that Secured Parties receive cash
proceeds in respect of the realization of the Collateral.
7. Application of Proceeds. All proceeds received by Secured Parties
in respect of any voluntary sale by OMRF of, collection from, or any
realization upon all or any part of the Intellectual Property may, in the
discretion of Secured Parties, be held by Secured Parties as Collateral for,
and then or at any time thereafter applied in whole or in part by Secured
Parties against the Secured Obligations in the following order of priority:
First: To the payment of the costs and expenses of such sale,
collection or other realization, and all expenses, liabilities and
advances made or incurred by OMRF in connection therewith;
Second: After payment in full of the amounts specified in the
preceding subparagraph, payment of the Bridge Notes with payment
allocated pro rata to the Lenders first to accrued interest and then
to principal; and
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Third: After payment in full of the amounts specified in the preceding
subparagraphs, to the payment to or upon the order of OMRF, or to
whomsoever may be lawfully entitled to receive the same or as a court
of competent jurisdiction may direct, of any surplus then remaining
from such proceeds.
8. General Provisions.
(a) Effect of Waiver. Secured Parties and OMRF shall not be
deemed to have waived any of their rights hereunder or under any other
agreement or instrument executed by Secured Parties or OMRF. No delay or
omission on the part of Secured Parties or OMRF in exercising any right shall
operate as a waiver of such right or any other right. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right or remedy on
any future occasion.
(b) Remedies Cumulative. Secured Parties' rights and remedies,
whether evidenced hereby, by the Note, or by any other agreements, instruments,
or other documents or papers, shall be cumulative and may be exercised
singularly or concurrently.
(c) Notice. Any demand upon or notice to OMRF that Secured
Parties are required to give shall be in writing, certified mail return receipt
requested, or hand delivered, and shall be effective upon the receipt thereof
by OMRF.
(d) Termination of Security Agreement. This Security
Agreement shall terminate when the Secured Obligations have been indefeasibly
paid in full to Secured Parties or otherwise canceled with Secured Parties'
consent.
(e) Successors and Assigns. The rights and obligations of
Secured Parties and OMRF hereunder shall inure to the benefit of, and shall be
binding upon their respective successors and assigns.
(f) Severability. In case any provision in, or obligation
under, this Agreement shall be determined by a court of competent jurisdiction
to be invalid, illegal, or unenforceable, the validity, legality and
enforceability of the remaining provisions or obligations of this Agreement
shall not in any way be affected or impaired thereby.
(g) Counterparts. This Agreement may be executed in
counterparts including executed telecopy pages, each of which shall be deemed
an original and all of which together shall constitute one and the same
Agreement.
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This Security Agreement dated as of the day and year first above
written.
OMRF: OKLAHOMA MEDICAL RESEARCH FOUNDATION
an Oklahoma corporation
By: /s/ XXXXXXX X. XXXXXXX
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Xxxxxxx X. Xxxxxxx, President
SECURED PARTIES: ZYMETX PURCHASE PARTNERS
a New York partnership
By: /s/ XXX X. XXXXXXX
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Xxx X. Xxxxxxx, Consultant to
ML Oklahoma Venture Partners, L.P.
PRESBYTERIAN HEALTH FOUNDATION
an Oklahoma corporation
By: /s/ XXXXXX XXXXXXX
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Xxxxxx XxXxxxx, Vice President
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