EXHIBIT 7.5
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated March 16, 1998, is given by CHRYSALIS
INTERNATIONAL CORPORATION, a New Jersey corporation with its principal office
located at 000 Xxxxx 00, Xxxxxxx, Xxx Xxxxxx (the "Company") to PANLABS
INTERNATIONAL, INC., a Washington corporation, having its principal office at
c/o MDS Inc., 000 Xxxxxxxxxxxxx Xxxxxxxxx, Xxxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
("PanLabs").
Concurrently herewith, and in accordance with the terms and conditions of
that Note and Warrant Purchase by and between the Company and PanLabs, dated on
even date herewith (the "Purchase Agreement"), the Company is issuing a 6%
Subordinated Note in the principal amount of Five Million and 00/100 Dollars
($5,000,000) (the "Note") to PanLabs.
Unless otherwise expressly provided in this Security Agreement, all
capitalized terms in this Security Agreement shall have the meanings given to
them in the Purchase Agreement, and unless otherwise provided in this Security
Agreement or the Purchase Agreement, all terms shall have the same meanings as
given to them in the Uniform Commercial Code of the State of Delaware as amended
from time to time.
1. Security Interest. As security for payment of the Note and any other
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obligations of the Company to PanLabs pursuant to and under the Note, whether
now existing or hereafter created or incurred, matured or unmatured, direct or
contingent, including any extensions and renewals thereof or a part thereof,
together with interest and costs of enforcement and collection thereof and of
this Security Agreement, including all reasonable attorneys' fees and
disbursements incurred by PanLabs (collectively called the "Liabilities"), the
Company hereby grants to PanLabs a security interest in all of the following
properties (collectively, called the "Collateral"):
(i) All assets and property of the Company, excepting real property
but including, without limitation, all goods, tangible property, machinery,
equipment, furniture, fixtures, vehicles, parts, leasehold improvements,
accounts, inventory, chattel paper, contract rights, documents,
instruments, choses in action, general intangibles, goodwill and
intellectual property, of any kind or nature in which the Company has an
interest now or in the future, and which are now existing or hereafter
created or acquired, together with any and all additions, replacements,
accessions and substitutions thereto or therefore, and any proceeds
thereof; and
(ii) All insurance, to the extent it represents proceeds, covering the
properties described in Section 1(i) above against risk of fire, theft or
any other physical damage or loss, now owned or hereafter acquired.
2. Locations of the Company and Collateral. The principal office of the
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Company is at the address shown in the preamble to this Security Agreement. All
locations at which the Collateral will be kept or at which the Company does
business are indicated on the Schedule A attached to and made a part of this
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Security Agreement. The Company will notify PanLabs of any new or changed
locations at which any of the Collateral is kept or the Company does business.
If any of the Collateral is or will be a fixture, the Company will provide
legal descriptions and the names of record owners of the premises to which the
Collateral will be affixed sufficient for perfection of the security interests
of PanLabs.
3. PanLabs's Lien. Except for the Permitted Liens and the security
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interest granted hereby, the Company is the owner of the Collateral free from
all liens, encumbrances, and security
interests. The Company will not sell or transfer the Collateral or, except in
the case of securing Purchase Money Indebtedness, any interest therein
(including, without limitation, a security interest) without the prior written
consent of PanLabs except for sales of inventory and collection of accounts in
the ordinary course of business and prior to an Event of Default (as herein
defined). The Company will defend the Collateral against the claims and demands
of all persons, and will cause the immediate removal and termination of any
levy, execution, judgment or other lien, or similar claim of third persons to
the Collateral.
4. Perfection of Security Interest. The Company will execute and deliver
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to PanLabs such financing statements, security agreements, assignments
(including without limitation assignments of specific accounts and chattel
paper) as PanLabs or PanLabs's representatives may at any time or from time to
time reasonably request.
5. Taxes. The Company will pay promptly, when due, all taxes and
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assessments upon the Collateral or its use or operation, or upon this Security
Agreement.
6. Insurance. The Company at all times will keep the Collateral fully
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insured with financially sound and reputable insurers, against such casualties
and contingencies and of such types and in such amounts as is reasonable. In
any event and without specific request by PanLabs, the Company will insure the
Collateral against fire, including so-called extended coverage and theft. The
Company will deliver certificates and policies evidencing the insurance coverage
of the Collateral to PanLabs upon its reasonable requests.
The Company will notify PanLabs in the event of any loss, damage, or other
casualty affecting the Collateral. The Company hereby assigns to PanLabs any
and all monies which may become due and payable under any policy insuring the
Collateral, directs any such insurance company to make payments directly to
PanLabs, and authorizes PanLabs to apply such monies in payment on account of
the Liabilities, whether or not due, and to remit any surplus to the Company.
7. Protection of PanLabs's Interest. Ten or more days after the day
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PanLabs mails the Company notice, upon failure of the Company to: (i) remove
liens or interests prohibited by Section 3 of this Security Agreement, (ii) pay
taxes or assessments as required by Section 5 of this Security Agreement, or
(iii) provide evidence satisfactory to PanLabs of insurance as required by
Section 7 of this Security Agreement, PanLabs in its discretion may discharge
any such liens or interests, pay taxes or assessments, and obtain insurance
coverage on the Collateral. The Company agrees to reimburse PanLabs on demand
for any and all expenditures so made, and until paid the amount thereof also
shall be part of the Liabilities secured by the Collateral. PanLabs shall have
no obligation to the Company to make any such expenditures nor shall the making
thereof relieve any default hereunder.
8. Representations Regarding Collateral. The Company represents and
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warrants to PanLabs, and so long as this Security Agreement remains in effect
shall be deemed to continue to represent and warrant that: (i) the Collateral is
genuine and what it purports to be; (ii) each account and chattel paper
represents a bona fide transaction and is enforceable according to the contract
underlying the account or the writings constituting the chattel paper; (iii) the
amount shown on Company's books and on any invoice or statement delivered to
PanLabs with respect to accounts, chattel paper, and appropriate general
intangibles is correct and duly owing to the Company; (iv) no set-off or
counterclaim to any account or chattel paper exists, and other discounts or
deductions given in the ordinary course of business are fully disclosed on the
books and records of the Company and on financial statements given to PanLabs;
and (v) no agreement has been made with any person under which any deduction or
discount may be claimed, except regular discounts allowed by the Company for
prompt payments of accounts.
9. Events of Default. The following events or conditions shall be an
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"Event of Default" under this Security Agreement: (i) any failure to comply
with any term of this Security Agreement and (ii) upon the occurrence of any
Event of Default specified in the Note.
10. Remedies. Upon the occurrence of an Event of Default, PanLabs shall
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have the rights and remedies of a secured party under the Uniform Commercial
Code of the State of Delaware as amended from time to time in any jurisdiction
where enforcement of this Security Agreement is sought in addition to all other
rights and remedies at law or in equity. Among other remedies, PanLabs may take
immediate possession of the Collateral and for that purpose PanLabs may, so far
as the Company can give authority therefor, enter upon any premises on which the
Collateral or any part thereof may be situated and secure or remove the same
therefrom. Upon request of the PanLabs, the Company will assemble and make the
Collateral available to PanLabs, at a reasonable place and time designated by
PanLabs. The Company's failure to take possession of any Collateral at any time
and place reasonably specified by PanLabs in writing to the Company shall
constitute an abandonment of such property by the Company and PanLabs shall have
no liability or responsibility with respect to such property. The Company
agrees that notice of the time and place of public sale of any of the Collateral
or of the time after which any private sale thereof is to be made or of other
disposition of the Collateral shall be deemed reasonable notice ten (10) days
after such notice is deposited in the mail or otherwise delivered to Company at
the address shown in the preamble of this Security Agreement.
In addition to its other rights, PanLabs may but shall not be obligated to
notify any parties which are obligated to pay the Company any Collateral or
proceeds thereof, to make all payments directly to PanLabs. The Company
authorizes such parties to make such payments directly to PanLabs and to rely on
notice from PanLabs without further inquiry. PanLabs may demand and take all
necessary or desirable steps to collect such Collateral in either PanLabs's or
the Company's, name, with the right to enforce, compromise, settle, or discharge
any of the foregoing. PanLabs may endorse the Company's name on any checks,
commercial paper, instruments, and the like pertaining to the foregoing.
PanLabs shall not be responsible to the Company for loss or damage
resulting from PanLabs's failure to enforce or collect any Collateral or any
monies due or to become due under any Liability of the Company to PanLabs.
PanLabs shall have no obligation to take, and Company shall have the sole
responsibility for taking, any and all steps to preserve rights against any and
all prior parties to any Collateral, whether or not in PanLabs's possession.
After an Event of Default, the Company (i) will make no change in any
account (or the contract underlying such account), chattel paper, or general
intangible, and (ii) shall receive as the sole property of PanLabs and hold in
trust for PanLabs all monies, checks, notes, drafts, and other property
(collectively called "items of payment") representing the proceeds of any
Collateral. After an Event of Default, PanLabs may but shall be under no
obligation to: (a) notify all appropriate parties that the Collateral, or any
part thereof, has been assigned to PanLabs; (b) collect any or all accounts,
chattel paper or general intangibles in the Company's name, apply any such
collections against such Liabilities as PanLabs may select; (c) take control of
any cash or non-cash proceeds of any item of the Collateral; (d) compromise,
extend or renew any account, chattel paper, general intangible document, or deal
with the same as PanLabs may deem advisable; and (e) make exchanges,
substitutions or surrender of items compromising the Collateral.
The rights of PanLabs are cumulative, and PanLabs may enforce its rights
under this Security Agreement irrespective of any other collateral, guaranty,
right, or remedy it may have. The exercise of all or a part of PanLabs's rights
or remedies hereunder shall not prevent the PanLabs from exercising at the same
or any other time any other right or remedy with respect to the Liabilities.
The Company authorizes PanLabs in its sole discretion to direct the order or
manner of the disposition of the Collateral.
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From the proceeds realized from the Collateral PanLabs shall be entitled to
retain all sums secured hereby as well as its reasonable expenses of collection
including without limitation those of retaking, holding, safeguarding,
accounting for, preparing for sale, selling, and reasonable attorneys' fees and
legal expenses. If the proceeds realized from the Collateral are not sufficient
to defray said expenses and to satisfy the balance due on the Liabilities, the
Company shall remain liable for such expenses and any deficiency with respect to
the Liabilities. Any payments or proceeds from realization on the Collateral
may be applied to the Liabilities in whatever order or manner the PanLabs
elects.
11. Continuing Agreement, Termination. This is a continuing Agreement,
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and no notice of the creation or existence of the Liabilities, renewal,
extension or modification thereof need be given to Company. This security
interest shall continue in effect notwithstanding that from time to time no
Liabilities may exist. This Security Agreement may be terminated only (i) by a
written agreement of PanLabs, or (ii) upon written request of the Company at
such time as the Liabilities have been satisfied in full.
12. No Waiver. The Company agrees that no representation, promise, or
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agreement made by PanLabs, at, prior, or subsequent to the execution and
delivery of this Security Agreement shall modify, alter, limit, or otherwise
abridge the rights and remedies of PanLabs hereunder unless agreed by PanLabs in
writing. None of the rights and remedies of PanLabs hereunder shall be modified,
altered, limited, or otherwise abridged or waived by any representation,
promise, or agreement hereafter made or by any course of conduct hereafter
pursued by PanLabs. No delay or omission on the part of the PanLabs in
exercising any right hereunder shall operate as a waiver of such right or of any
other right under this Security Agreement, and waiver of any right shall not be
deemed waiver of any other right unless expressly agreed by PanLabs in writing.
13. Subordination. Notwithstanding anything to the contrary contained
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herein, the security interest herein granted, and all rights and remedies of
PanLabs and its successors and assigns hereunder or in connection with this
Security Agreement, are and shall be subject and subordinate and junior to all
Senior Indebtedness, any and all liens and security interests securing any
Senior Indebtedness, and the rights and remedies of the holders of any Senior
Indebtedness or of any collateral security or guarantees of any Senior
Indebtedness, as provided in the Purchase Agreement and Note. In the case of
Corestates Bank, N.A. ("Corestates"), the terms and conditions of subordination
of the Senior Indebtedness to Corestates are set forth in the Subordination
Agreement, dated March 16, 1998, by and among, the Company, the PanLabs and
Corestates.
14. Governing Law. This Security Agreement shall be shall be deemed to be
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a contract made under the laws of the State of Delaware and for all purposes
shall be construed in accordance with the laws of said State without giving
effect to the rules of said State governing the conflicts of laws.
15. Counterparts. This Security Agreement may be executed in two or more
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16. Titles and Subtitles. The titles and subtitles used in this Security
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Agreement are used for convenience only and are not to be considered in
construing or interpreting this Security Agreement.
17. Notices. Any notice required or permitted under this Security
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Agreement shall be given in writing and shall be deemed effectively given upon
(a) personal delivery to the person to be notified (b) 7 days after deposit with
a domestic Post Office, by registered mail, postage prepaid and
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addressed to the person to be notified at the address indicated for such person
below, or at such other address as such person may designate by advance written
notice to the other party or (c) confirmed transmission by electronic facsimile
to the fax number specified for such person below or such other number as such
person may designate by advance written notice to the other party.
(1) If to the Company, to: With a copy to:
Chrysalis International Corporation Xxxxx, Day, Xxxxxx & Xxxxx
000 Xxxxx 00 Xxxxx Xxxxx, 000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxx Xxxxxx 00000 Xxxxxxxxx, Xxxx 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Attention: Xxxx Xxxxxx Attention: Xxxxxx X. Xxxxxxx, Esq.
(2) If to the Purchaser, to: With a copy to:
PanLabs International, Inc. Xxxxxx Beach & Xxxxxx, LLP
c/o MDS Inc. 000 Xxxx Xxxx Xxxxxx
000 Xxxxxxxxxxxxx Xxxxxxxxx Xxxxxxxxx, Xxx Xxxx 00000
Xxxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Fax: (000) 000-0000 Fax: (000) 000-0000
Attention: Vice President, Legal Affairs Attention: Xxxxxx X. Xxxxxxx, Esq.
18. Entire Agreement. This Security Agreement, together with the Note and
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the Purchase Agreement and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the Parties
with regard to the subjects hereof and thereof.
19. Severability. If one or more provisions of this Security Agreement
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are held to be unenforceable under applicable law, such provision shall be
excluded from this Security Agreement and the balance of this Security Agreement
shall be interpreted as if such provision were so excluded and shall be
enforceable in accordance with its term.
IN WITNESS WHEREOF, the Company has caused this Security Agreement to be
executed by a duly authorized representative as of the date and year first above
written.
CHRYSALIS INTERNATIONAL CORPORATION
By:/s/ Xxxx X. Xxxxxx
____________________________________
Name: Xxxx X. Xxxxxx
_________________________________
Title: Senior Vice President & Chief
Financial Officer
___________________________________
Accepted and acknowledged as of
the 16th day of March, 1998 by
PANLABS INTERNATIONAL, INC.
By:/s/ Xxxxx X. Xxxxx
______________________________
Name: Xxxxx X. Xxxxx
___________________________
Title: Director & Assistant Secretary
______________________________
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