EXHIBIT 10.4
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of May 22, 2006, by SYNOVICS
PHARMACEUTICALS, INC, a Nevada corporation (the "Grantor") in favor of BANK OF
INDIA, acting by and through its New York Branch (the "Bank").
WITNESSETH
WHEREAS, Grantor has requested the Bank to allow certain credit
facilities as provided for in the Credit Agreement, of even date herewith,
between the Bank and Grantor (the "Agreement") and the Grantor has agreed to
enter into and deliver this Security Agreement to secure its obligations to the
Bank arising under this Agreement, the Note and the other Credit Documents; and
WHEREAS, capitalized terms used and not otherwise defined herein
shall have the meanings given them in the Agreement.
NOW, THEREFORE, the Grantor agrees as follows:
ARTICLE I
GRANT OF SECURITY INTEREST
SECTION 1.01. GRANT. As general and continuing collateral security
for the full, prompt and complete payment and performance as and when due
(whether at stated maturity, by acceleration or otherwise) of all the
Obligations, the Grantor hereby assigns, conveys, mortgages, pledges,
hypothecates and transfers to the Bank, and hereby grants to the Bank, a
continuing lien upon and a general security interest in, all of the Grantor's
right, title and interest in, to and under the following, whether now owned or
existing or hereafter acquired, arising or coming into existence and wherever
located (all of which being hereinafter collectively referred to as the
"Collateral"):
(a) The following property:
(1) ACCOUNTS RECEIVABLE. All accounts, chattel paper,
contracts, contract rights, account receivable, tax
refunds, notes receivable, documents other choses in
action and general intangibles, including, but not
limited to, proceeds of inventory and returned goods and
proceeds from the sale of goods and services, and all
rights, liens, securities, guaranties, remedies and
privileges related thereto, including the right of
stoppage in transit and rights and property of any kind
forming the subject matter of any of the foregoing; and
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(2) DEPOSIT ACCOUNTS. All time, savings, demand, certificate
of deposit or other accounts deposits with or payable by
the Bank in the name of the Grantor or in which the
Grantor has any right, title or interest, including but
not limited to all sums now or at any time hereafter on
deposit, and any renewals, extensions or replacements of
and all other property which may from time to time be
acquired directly or indirectly using the proceeds of
any of the foregoing; and
(3) INVENTORY AND EQUIPMENT. All inventory and equipment of
every type or description wherever located, including,
but not limited to all raw materials, parts, containers,
work in process, finished goods, goods in transit,
wares, merchandise, furniture, fixtures, hardware,
machinery, tools, parts, supplies, automobiles, trucks,
other intangible personalty of whatever kind and
wherever located associated with Grantor's business,
tools and goods returned for credit, repossessed,
reclaimed or otherwise reacquired by the Grantor; and
(4) DOCUMENTS OF TITLE. All Documents of Title and other
property from time to time received, receivable or
otherwise distributed in respect of, exchange or
substitution for or addition to any of the foregoing
including but not limited to any Documents of Title; and
(5) RIGHTS UNDER THE TECHNOLOGY LICENSE AGREEMENT. All of
Grantor's right to develop, make, have made, use,
import, offer for sale, market, sell and otherwise
commercialize certain products under the Technology
License Agreement, dated as of March 16, 2005, entered
into between Nostrum Pharmaceuticals, Inc., a Delaware
corporation, and Grantor (under its previous name
Bionutrics, Inc), as amended from time to time (the
"Technology License Agreement").
(6) OTHER PROPERTY.
(a) All other intangible property; and
(b) All proceeds (including but not limited to
insurance proceeds) and products of and accessions
and annexations to any of the foregoing; and
(c) All assets of any type or description that may at
any time be assigned or delivered to or come into
possession of the Bank for any purpose for the
account of the Grantor or as to which the Grantor
may have any right, title, interest or power, and
property in the possession or custody of or in
transit to anyone for the account of the Bank, as
well as all proceeds and products thereof and
accessions and annexations thereto; and
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(d) All know-how, information, permits, patents,
copyrights, goodwill, trade marks, trade names,
licenses and approvals held by Grantor in its
subsidiaries and affiliates; and
(e) All of the books, records and documents pertaining
to any of the foregoing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
The Grantor represents and warrants as follows:
SECTION 2.01. FINANCING STATEMENTS. No agreement, certificate,
charge, instrument, financing statement or other document or notice evidencing
or relating to any Lien in the Collateral is or will be on file or has been or
will be recorded in any office, registry or place, other than those evidencing
or relating to Liens expressly permitted by the Agreement.
SECTION 2.02. ASSURANCE OF TITLE. The Grantor is and shall remain
the owner of all of the Collateral, free and clear of all Liens, claims and
rights of others of any kind, except as expressly permitted by the Agreement, if
any, and except for sales of inventory in the ordinary course of business.
SECTION 2.03. ADDRESSES. The chief executive office and principal
place of business of the Grantor, and the books and records relating to the
Collateral, are each located at the Grantor's offices at 0000 Xxxx Xxxxxxxxx
Xxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000.
SECTION 2.04. CHARGES AND TAXES. Except for fees for filing
financing statements under the Uniform Commercial Code, there is no filing or
recording fee, documentary, stamp or other similar tax or other charge necessary
or appropriate to be paid in connection with the execution, delivery or
performance of this Security Agreement or any other document contemplated
hereby, the creation, preservation or perfection of any Lien or interest granted
hereby, the exercise or enforcement of any rights or remedies of the Bank
hereunder or in connection with this Security Agreement or the Obligations or
the realization upon any of the Collateral.
ARTICLE III
COVENANTS
The Grantor covenants and agrees as follows:
SECTION 3.01. FURTHER DOCUMENTS AND ACTIONS. From time to time the
Grantor shall (a) pay all filing and recording fees, documentary, stamp and
other similar taxes and other charges, (b) endorse, execute and deliver to the
Bank all agreements, certificates, charges, instruments, documents or notices,
including but not limited to financing and continuation statements, and (c) do
all acts and things necessary or appropriate in the Bank's sole discretion to
carry into effect the provisions of this Security Agreement or create, preserve
or
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perfect any Lien or interest granted hereby or to enable or assist the Bank to
exercise or enforce its rights or remedies hereunder or in connection with this
Security Agreement or with the Obligations or to facilitate realization upon the
Collateral in accordance with this Security Agreement. THE GRANTOR AUTHORIZES
THE BANK TO FILE ANY AGREEMENT, CERTIFICATE, CHARGE, INSTRUMENT, DOCUMENT,
NOTICE, FINANCING STATEMENT (OR AMENDMENT THERETO) OR CONTINUATION STATEMENT IN
SUCH FORM, WITH OR WITHOUT THE GRANTOR'S NAME SIGNED THEREON, AND IN SUCH PLACES
AS MAY BE APPROPRIATE IN THE BANK'S SOLE DISCRETION TO PRESERVE OR PERFECT THE
LIEN OR SECURITY INTEREST GRANTED HEREIN. To the extent permitted by law, the
Grantor agrees that filed photocopies of financing statements (or amendment
thereto) and continuation statements shall be sufficient to perfect the Bank's
Lien and security interests hereunder.
SECTION 3.02. INVENTORY. Except as otherwise notified by the Bank
upon the occurrence of an Event of Default, Collateral consisting of inventory
may be sold by the Grantor in the ordinary course of business.
SECTION 3.03. DOCUMENTS OF TITLE. With respect to documents of title
relating to any Collateral referred to in Section 1.01(a)(3) hereof:
(a) All such documents of title shall be delivered to the Bank in
form and substance satisfactory to the Bank so that title thereto passes to the
Bank without further acts or documents. Upon the occurrence of any Event of
Default, the Bank is hereby authorized, at its option and without any obligation
to do so, to deliver to the issuer of any such Collateral or any other person
pledge instructions, transfer instructions or both and notifications with
respect thereto, and to transfer to itself all or any part of Collateral
represented thereby; and
(b) Upon an Event of Default, the Bank shall have the right to
appoint one or more agents for the purpose of retaining physical possession of
any such Collateral.
SECTION 3.04. INDEMNIFICATION. The Grantor agrees to indemnify and
hold harmless the Bank and each of its officers, directors, agents, advisors and
employees from and against any and all claims, damages, liabilities, costs and
expenses (including without limitation, reasonable fees, expenses and
disbursements of counsel) that may be incurred by or asserted against the Bank
in connection with or arising out of any investigation, litigation or
proceeding, whether threatened or initiated, relating to the Collateral or this
Security Agreement, whether or not the Bank is a party thereto; provided
however, that the Grantor shall not be required to indemnify any such person
from or against any portion of such claims, damages, liabilities or expenses
found by final judgment after all appeals by a court of competent jurisdiction
to have arisen out of gross negligence, bad faith, or willful misconduct of such
person.
SECTION 3.05. CONTINUOUS PERFECTION. Except as permitted by the
following sentence, the Grantor will not change its name, identity or corporate
structure in any manner and will not change its principal place of business or
chief executive office or the places where it keeps the Collateral or the
records concerning the Collateral. If the Grantor wishes to
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make any such change, the Grantor will give the Bank at least thirty (30) days
prior written notice thereof and will take all action (or make arrangements to
take such action substantially simultaneously with such change if it is
impossible to take such action in advance) necessary or appropriate in the
Bank's sole discretion to amend each financing statement or continuation
statement and otherwise to cause the Bank to continue to maintain its first
perfected lien on, and security interest in, the Collateral.
ARTICLE IV
ADMINISTRATION
SECTION 4.01. BANK'S DUTY OF CARE. In the event that the Bank takes
possession of the Collateral, the Bank may, but shall be under no obligation to,
take such actions as it may deem appropriate to protect the Collateral by
insurance or otherwise. In such event, the Bank's sole duty with respect to the
Collateral shall be use reasonable care in the custody, use, operation and
physical preservation of the Collateral in its possession, and the Grantor
shall, as an Obligation, reimburse the Bank for all reasonable costs and
expenses, including but not limited to insurance costs, taxes and other charges,
incurred in connection with the custody, use, operation, care or physical
preservation of the Collateral. The Bank shall incur no liability to the Grantor
for any act of government, act of God, robbery, vandalism, war, insurrection,
riot, civil unrest, fire, flood or other destruction in whole or part, or its
failure to provide adequate protection or insurance for the Collateral. The Bank
shall have no obligation to take any action to preserve any rights in any of the
Collateral against the other persons and Grantor hereby agrees to take such
action; Grantor shall defend the Collateral against all such claims and demands
of all persons, at all times, as are adverse to the Bank. The Bank shall have no
obligation to realize upon any Collateral as authorized herein or by law.
SECTION 4.02. COLLATERAL ACCOUNT.
(a) All proceeds for the Collateral, other than proceeds for sales
of inventory in the ordinary course of business, shall be delivered to the Bank
in an account of Grantor designated by the Bank; and
(b) The Grantor shall receive all proceeds of the Collateral as
agent of and in trust for the Bank and shall transmit to the Bank on the day
thereof, or at other mutually agreed intervals, all cash, original checks,
drafts, acceptances, notes and other evidence of payment received in payment of
or on account of such Collateral. Until delivery, the Grantor shall keep all
such proceeds separate and apart from the Grantor's own funds, capable of
identification as the property of the Bank, and shall hold the same in trust for
the Bank; and
(c) All proceeds shall be accompanied by a report in such form as
the Bank shall require. The Grantor's name will appear, if at all, on an account
referred in Section 4.02(a) above for identification purposes only. Funds in
such account shall not be subject to withdrawal by the Grantor, but shall at all
times be subject to the sole dominion and control of the Bank. All funds held in
such account may be applied against the Obligations at the sole discretion of
the Bank. Notwithstanding the foregoing, in the event the Grantor notifies the
Bank that it intends to
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utilize such proceeds to replace such Collateral the Bank may consent to such
use, such consent not to be unreasonably withheld.
SECTION 4.03. COLLECTIONS. So long as no Event of Default has
occurred, the Bank authorizes and permits the Grantor to collect amounts owed to
the Grantor by account debtors. This Privilege may be terminated by the Bank at
any time without notice to the Grantor after the occurrence and during the
continuance of an Event of Default, and the Bank may thereupon notify any
account debtor or debtors of the assignment of their obligations to the Bank and
collect the same. Thereupon, the Grantor shall, if requested by the Bank, notify
any or all account debtors to make payment of any amounts owed under such
obligations directly to the Bank or for deposit to the account referred to in
Section 4.02(a) above.
ARTICLE V
EFFECT OF AN EVENT OF DEFAULT
SECTION 5.01. COSTS REIMBURSED.If the Bank pays any amounts in
connection with (a) any license, fee or similar charges, or penalties or
interest thereon, (b) obtaining any insurance or paying the premium or premiums
therefor, (c) performing or causing to be performed any repair, replacement,
rebuilding or other work or (d) taxes or municipal or governmental assessments,
rates, charges, impositions or liens with respect to the Collateral, then the
Grantor shall, on the demand of the Bank, repay or cause to be repaid such
amount to the Bank, and such amounts so required to be repaid shall be
Obligations.
SECTION 5.02. ACTION REGARDING COLLATERAL AND WAIVER OF CLAIMS.
(a) Upon the occurrence and during the continuance of an Event of
Default, the Bank, at any time and in its sole discretion, may enter any
premises in which the Collateral may be located and may remove such Collateral
to such place as the Bank may deem advisable, or require the Grantor to assemble
and make all Collateral available at such place as the Bank may direct, and may
sell, dispose of, resell, assign, transfer, lease and deliver or otherwise deal
or decline to deal with all or any part of the Collateral, in each case without
advertisement, in one or more sales, at such price or prices, and upon such
commercially reasonable terms (such as requiring any purchaser of any stock to
represent that such purchase is for investment purposes only) either for cash or
credit or future delivery as the Bank may elect. The Grantor authorizes the Bank
to grant extensions or modifications of terms to, or adjust claims of, or make
compromises with, debtors, guarantors or any other parties with respect to
accounts or any securities, guaranties or insurance or other obligations
comprising Collateral without notice to, or consent of, the Grantor, without
affecting the Obligations and without liability of the Bank to account except in
the event of gross negligence, bad faith, or willful misconduct. The Grantor
waives notice of non-payment, protest and all other notices to which the Grantor
might otherwise be entitled. The proceeds of any such liquidation, less all
reasonable costs and expenses incurred in connection therewith, and, at the
option of the Bank, less any other Liens or claims discharged with such
proceeds, shall be applied by the Bank against the Obligations in accordance
with this Security Agreement and the Agreement. Their Grantor shall remain
liable to the Bank for any deficiency in payment of the Obligations.
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(b) Except as otherwise provided in this Security Agreement, THE
GRANTOR HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, NOTICE
AND JUDICIAL HEARING IN CONNECTION WITH THE BANK'S TAKING POSSESSION OR THE
BANK'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY
AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY
SUCH RIGHT WHICH THE GRANTOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY
STATUTE OF THE UNITED STATES OR OF ANY STATE, and the Grantor hereby further
waives, to the fullest extent permitted by law:
1. all damages occasioned by such taking of possession, except
any damages that are the direct result of the Bank's gross
negligence, bad faith, or willful misconduct; and
2. all other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the
Bank's rights hereunder; and
3. any obligation of the Bank to marshal assets, and all rights
of redemption following sale, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any
applicable law in order to prevent or delay the enforcement of
this Security Agreement or the absolute sale of the Collateral
or any portion thereof, and the Grantor, for itself and all
who may claim under it, insofar as it or they now or hereafter
lawfully may, hereby waives the benefit of all such laws.
(c) Any sale or disposition of, or any other realization upon, any
Collateral shall operate to divest all right, title, interest, claim and demand,
either at law or in equity, of the Grantor therein and thereto, and shall be a
perpetual bar both at law and in equity against the Grantor and against any and
all Persons claiming or attempting to claim the Collateral so sold, disposed of,
or realized upon, or any part thereof, from, through or under the Grantor.
(d) Without limiting any other provision of the Agreement, upon
the occurrence and during the continuance of an Event of Default, the Bank shall
have all rights and remedies of a secured party under the Uniform Commercial
Code.
SECTION 5.03. BANK APPOINTED ATTORNEY-IN-FACT. The Grantor hereby
irrevocably appoints the Bank the attorney-in-fact of the Grantor with full
power in the name and on behalf of the Grantor to take any action, including the
defense or initiation of any litigation and to execute and deliver any
agreement, certificate, charge document, notice or instrument (including, but
not limited to financing statements, amendments thereto and continuation
statements) that the Bank may deem necessary or appropriate in its sole
discretion to accomplish the purposes hereof, which appointment is irrevocable
and coupled with an interest. All acts of said attorney are hereby ratified and
approved and said attorney and its designees shall not be liable for, and the
Grantor shall hold the same harmless from liability for, any acts or failure to
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act, or for any error of judgment or mistake of law or fact, absent gross
negligence, bad faith, or willful misconduct.
ARTICLE VI
GRANTOR'S OBLIGATIONS ABSOLUTE
SECTION 6.01. GRANTOR'S OBLIGATIONS ABSOLUTE. The obligations of the
Grantor under this Security Agreement shall be absolute and unconditional and
shall remain in full force and effect without regard to, and shall not be
released, suspended, discharged, terminated or otherwise affected by, any
circumstances or occurrence whatsoever, including, without limitation:
(a) any renewal, extension, amendment or modification of, or
addition or supplement to or deletion from, or waiver, consent, extension,
indulgence or other action or inaction, or any exercise or nonexercise of any
right, remedy, power or privilege under or in respect of, the Agreement, the
Note or any other Credit Documents or any other instrument or agreement referred
to in any thereof, or any assignment or transfer of any thereof; or
(b) any furnishing of any additional security to the Bank or any
acceptance thereof or any sale, exchange, release, surrender or realization of
or upon any security by the Bank.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. CONTINUITY. The security Agreement shall become
effective immediately, shall be continuing and remain in effect, notwithstanding
any intermittent absence of Obligations.
SECTION 7.02. OTHER DOCUMENTS. All Obligations and all notes,
guaranties or other agreements, certificates, instruments or documents
evidencing Obligations are separate agreements and may be negotiated, executed,
modified, cancelled or released by the Bank without releasing the Grantor or the
Collateral (or any endorser, guarantor or co-maker of any Collateral or
Obligations). The Grantor consents to any extension of time of payment of any
Obligations and all actions or inactions with respect thereto or to any
Collateral, guaranties or other security therefor.
SECTION 7.03. REMEDIES CUMULATIVE. All rights, remedies and powers
of the Bank hereunder and in connection herewith are irrevocable and cumulative,
and not alternative or exclusive, and shall be in addition to all other rights,
remedies and powers of the Bank whether under law, equity or agreement.
SECTION 7.04. NO WAIVER. No Waiver or amendment of, or forbearance
to enforce, any of the Bank's rights hereunder shall be effective unless
expressly granted in writing, and shall be limited to the extent expressed
therein. No delay on the part of the Bank or in the
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exercise of any right or remedy shall operate as a waiver thereof and no single
or partial exercise by the Bank of any right or remedy shall preclude other or
further exercise thereof or the exercise of any other right or remedy. The Bank
may from time to time, whether before or after any of the Obligations shall
become due and payable, without notice to, demand of or any reservation of
rights against, the Grantor, all of which the Grantor (and any endorser,
guarantor or co-maker) hereby acknowledges to be waived, at the expense of the
Grantor, take all or any of the following actions: (a) retain or obtain a Lien
in any property, in addition to the Collateral, to secure any of the
Obligations; (b) retain or obtain the primary or secondary liability of any
party or parties, in addition to the Grantor, with respect to any of the
Obligations; (c) renew, extend, accelerate, modify, compromise, settle, release
or surrender any Obligation or any obligations of any other person primarily or
secondarily liable for all or any part of the Obligations with respect to any or
all of the Obligations; (d) renew, extend, accelerate, modify, compromise,
settle, release or surrender all or any part of any property, in addition to the
Collateral, securing any of the Obligations or any obligations of any nature of
any person with respect to any such property; (e) resort to the Collateral for
payment of any of the Obligations in accordance with this Security Agreement,
whether or not it shall have resorted to any other property securing the
Obligations or shall have proceeded or exhausted its remedies against any other
person primarily or secondarily liable on any of the Obligations; or (f) release
or substitute any other person primarily liable for all or any part of the
Obligations.
SECTION 7.05. GOVERNING LAW; SEVERABILITY. This Security Agreement
shall be governed by, and construed and interpreted in accordance with the
internal laws, excluding any laws regarding the conflict or choice of laws, of,
the State of New York, except to the extent that the validity or perfection of
the security interest hereby granted in the Collateral, or remedies hereunder,
are governed by the laws of a jurisdiction other than the State of New York.
Each provision of this Security Agreement shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Security Agreement shall be prohibited by, or invalid under, such law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Security Agreement.
SECTION 7.06. LITIGATION. Notwithstanding any termination hereof,
the Grantor hereby irrevocably consents and submits to the jurisdiction and
venue of any court of competent jurisdiction sitting in the City, County and
State of New York for adjudication of any dispute concerning this Security
Agreement, the Note or other Credit Documents. To the extent permitted by
applicable law, the Grantor waives trial by jury and waives and agrees not to
raise any claim it may have that any such court is not a convenient forum.
SECTION 7.07. ASSIGNMENT. This security Agreement shall inure to and
be binding upon the successors and assigns of the Grantor and the Bank. The
Grantor shall have no right to assign this Security Agreement without the prior
written consent of the Bank and any purported assignment without such consent
shall be null and void.
SECTION 7.08. NOTICE. Notice shall be given in the manner provided
in the Agreement.
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IN WITNESS WHEREOF, the Grantor has caused this Security Agreement to be
executed and delivered by its duly authorized officer as of the day and year
first above written.
SYNOVICS PHARMACEUTICALS, INC.
By: _____________________________
Name:
Title:
Tax I.D. No.:
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XXXXX XX XXX XXXX )
) ss.:
COUNTY OF NEW YORK)
On the _____ day of May in the year 2006 before me, the undersigned a
notary public in and for said state, personally appeared ___________________,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s), in the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.
__________________________________
Signature and office of individual
taking acknowledgment
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