SECURITY AGREEMENT
SECURITY
AGREEMENT,
dated
as of December 31, 2007 (this "Agreement")
made
by RxElite,
Inc.,
a
Delaware corporation (the "Company"),
and
the undersigned subsidiaries of the Company (each a "Grantor"
and
collectively and together with the Company, the "Grantors"),
in
favor of Castlerigg
Master Investments
Ltd.,
a
company organized under the laws of the British Virgin Islands, in its capacity
as collateral agent (in such capacity, the "Collateral
Agent")
for
the Buyers (as defined below) party to the Securities Purchase Agreement, dated
as of even date herewith (as amended, restated or otherwise modified from time
to time, the "Securities
Purchase Agreement").
WITNESSETH:
WHEREAS,
the Company and each party listed as a "Buyer" on the Schedule of Buyers
attached to the Securities Purchase Agreement (collectively, the "Buyers")
are
parties to the Securities Purchase Agreement, pursuant to which the Company
has
agreed to sell, and the Buyers agreed to purchase, the "Notes" (as defined
in
the Securities Purchase Agreement) to be issued pursuant thereto (as such Notes
may be amended, restated, replaced or otherwise modified from time to time
in
accordance with the terms thereof, collectively, the "Notes");
WHEREAS,
each of the Grantors (other than the Company) (each a "Guarantor"
and
collectively, the "Guarantors")
has
executed and delivered a Guaranty dated the date hereof (the "Guaranty")
in
favor of the Collateral Agent for the benefit of itself and the Buyers, with
respect to the Company's obligations under the Securities Purchase Agreement,
the Notes and the Transaction Documents (as defined below);
WHEREAS,
it is a condition precedent to the Buyers purchasing the Notes pursuant to
the
Securities Purchase Agreement that the Grantors execute and deliver to the
Collateral Agent this Agreement providing for the grant to the Collateral Agent
for the benefit of the Buyers of a first priority perfected security interest
in
the personal property of each Grantor to secure all of the Company's obligations
under the Securities Purchase Agreement, the Notes and the "Transaction
Documents" (as defined in the Securities Purchase Agreement, collectively,
the
"Transaction
Documents")
and
the Guarantors' obligations under the Guaranty; and
WHEREAS,
the Grantors have determined that the execution, delivery and performance of
this Agreement directly benefits, and is in the best interest of, the
Grantors.
NOW,
THEREFORE, in consideration of the premises and the agreements herein and in
order to induce the Buyers to enter into the Securities Purchase Agreement,
each
Grantor agrees with the Collateral Agent, for the benefit of the Buyers, as
follows:
SECTION
1. Definitions.
(a) Reference
is hereby made to the Securities Purchase Agreement and the Notes for a
statement of the terms thereof. All terms used in this Agreement and the
recitals hereto which are defined in the Securities Purchase Agreement, the
Notes or in Articles 8 or 9 of the Uniform Commercial Code as in effect from
time to time in the State of New York (the "Code"),
and
which are not otherwise defined herein shall have the same meanings herein
as
set forth therein, as applicable; provided
that
terms used herein which are defined in the Code as in effect
in
the State of New York on the date hereof shall continue to have the same meaning
notwithstanding any replacement or amendment of such statute except as the
Collateral Agent may otherwise determine.
(b) The
following terms shall have the respective meanings provided for in the Code:
"Accounts", "Cash Proceeds", "Chattel Paper", "Commercial Tort Claim",
"Commodity Account", "Commodity Contracts", "Deposit Account", "Documents",
"Equipment", "Fixtures", "General Intangibles", "Goods", "Instruments",
"Inventory", "Investment Property", "Letter-of-Credit Rights", "Noncash
Proceeds", "Payment Intangibles", "Proceeds", "Promissory Notes", "Security",
"Record", "Security Account", "Software", and "Supporting
Obligations".
(c) As
used
in this Agreement, the following terms shall have the respective meanings
indicated below, such meanings to be applicable equally to both the singular
and
plural forms of such terms:
"Capital
Stock"
means
(i) with respect to any Person that is a corporation, any and all shares,
interests, participations or other equivalents (however designated and whether
or not voting) of corporate stock, and (ii) with respect to any Person that
is
not a corporation, any and all partnership, membership or other equity interests
of such Person.
"Copyright
Licenses"
means
all licenses, contracts or other agreements, whether written or oral, naming
any
Grantor as licensee or licensor and providing for the grant of any right to
use
or sell any works covered by any copyright (including, without limitation,
all
Copyright Licenses set forth in Schedule
II
hereto).
"Copyrights"
means
all domestic and foreign copyrights, whether registered or not, including,
without limitation, all copyright rights throughout the universe (whether now
or
hereafter arising) in any and all media (whether now or hereafter developed),
in
and to all original works of authorship fixed in any tangible medium of
expression, acquired or used by any Grantor (including, without limitation,
all
copyrights described in Schedule
II
hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States or
any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.
"Event
of Default"
shall
have the meaning set forth in the Notes.
"Governmental
Authority"
means
any nation or government, any Federal, state, city, town, municipality, county,
local or other political subdivision thereof or thereto and any department,
commission, board, bureau, instrumentality, agency or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers
or
functions of or pertaining to government.
"Insolvency
Proceeding"
means
any proceeding commenced by or against any Person under any provision of the
Bankruptcy Code (Chapter 11 of Title 11 of the United States Code) or under
any other bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, or extensions generally
with creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.
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"Intellectual
Property"
means
the Copyrights, Trademarks and Patents.
"Licenses"
means
the Copyright Licenses, the Trademark Licenses and the Patent
Licenses.
"Lien"
means
any mortgage, lien, pledge, charge, security interest or other encumbrance
upon
or in any Collateral (including accounts and contract rights).
"Patent
Licenses"
means
all licenses, contracts or other agreements, whether written or oral, naming
any
Grantor as licensee or licensor and providing for the grant of any right to
manufacture, use or sell any invention covered by any Patent (including, without
limitation, all Patent Licenses set forth in Schedule
II
hereto).
"Patents"
means
all domestic and foreign letters patent, design patents, utility patents,
industrial designs, inventions, trade secrets, ideas, concepts, methods,
techniques, processes, proprietary information, technology, know-how, formulae,
rights of publicity and other general intangibles of like nature, now existing
or hereafter acquired (including, without limitation, all domestic and foreign
letters patent, design patents, utility patents, industrial designs, inventions,
trade secrets, ideas, concepts, methods, techniques, processes, proprietary
information, technology, know-how and formulae described in Schedule
II
hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office, or in any similar office or agency of the United
States or any other country or any political subdivision thereof), and all
reissues, divisions, continuations, continuations in part and extensions or
renewals thereof.
"Person"
means an
individual, corporation, limited liability company, partnership, association,
joint-stock company, trust, unincorporated organization, joint venture or other
enterprise or entity or Governmental Authority.
"Trademark
Licenses"
means
all licenses, contracts or other agreements, whether written or oral, naming
any
Grantor as licensor or licensee and providing for the grant of any right
concerning any Trademark, together with any goodwill connected with and
symbolized by any such trademark licenses, contracts or agreements and the
right
to prepare for sale or lease and sell or lease any and all Inventory now or
hereafter owned by any Grantor and now or hereafter covered by such licenses
(including, without limitation, all Trademark Licenses described in Schedule
II
hereto).
"Trademarks"
means
all domestic and foreign trademarks, service marks, collective marks,
certification marks, trade names, business names, d/b/a's, internet domain
names, trade styles, designs, logos and other source or business identifiers
and
all general intangibles of like nature, now or hereafter owned, adopted,
acquired or used by any Grantor (including, without limitation, all domestic
and
foreign trademarks, service marks, collective marks, certification marks, trade
names, business names, d/b/a's, internet domain names, trade styles, designs,
logos and other source or business identifiers described in Schedule
II
hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any state thereof or any other country or any political subdivision
thereof), and all reissues, extensions or renewals thereof, together with all
goodwill of the business symbolized by such marks and all customer lists,
formulae and other Records of any Grantor relating to the distribution of
products and services in connection with which any of such marks are
used.
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"Vaporizers"
means
any medical device used to deliver Sevoflurane or other anesthetic
agents.
SECTION
2. Grant
of Security Interest.
As
collateral security for all of the "Obligations" (as defined in Section
3
hereof),
each Grantor hereby pledges and assigns to the Collateral Agent for the benefit
of the Buyers, and grants to the Collateral Agent for the benefit of the Buyers
a continuing security interest in, all personal property of each Grantor,
wherever located and whether now or hereafter existing and whether now owned
or
hereafter acquired, of every kind and description, tangible or intangible
(collectively, the "Collateral"),
including, without limitation, the following:
(a) all
Accounts;
(b) all
Chattel Paper (whether tangible or electronic);
(c) the
Commercial Tort Claims specified on Schedule VI hereto;
(d) all
Deposit Accounts, all cash and other property from time to time deposited
therein and the monies and property in the possession or under the control
of
the Collateral Agent or Buyer or any affiliate, representative, agent or
correspondent of the Collateral Agent or Buyer;
(e) all
Documents;
(f) all
Equipment;
(g) all
Fixtures;
(h) all
General Intangibles (including, without limitation, all Payment
Intangibles);
(i) all
Goods;
(j) all
Instruments (including, without limitation, Promissory Notes and each
certificated Security);
(k) all
Inventory;
(l) all
Investment Property;
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(m) all
Copyrights, Patents and Trademarks, and all Licenses;
(n) all
Letter-of-Credit Rights;
(o) all
Supporting Obligations;
(p) all
other
tangible and intangible personal property of each Grantor (whether or not
subject to the Code), including, without limitation, all bank and other accounts
and all cash and all investments therein, all proceeds, products, offspring,
accessions, rents, profits, income, benefits, substitutions and replacements
of
and to any of the property of any Grantor described in the preceding clauses
of
this Section 2 (including, without limitation, any proceeds of insurance thereon
and all causes of action, claims and warranties now or hereafter held by each
Grantor in respect of any of the items listed above), and all books,
correspondence, files and other Records, including, without limitation, all
tapes, desks, cards, Software, data and computer programs in the possession
or
under the control of any Grantor or any other Person from time to time acting
for any Grantor, in each case, to the extent of such Grantors rights therein,
that at any time evidence or contain information relating to any of the property
described in the preceding clauses of this Section 2 or are otherwise necessary
or helpful in the collection or realization thereof;
and
(q) all
Proceeds, including all Cash Proceeds and Noncash Proceeds, and products of
any
and all of the foregoing Collateral;
in
each
case howsoever any Grantor's interest therein may arise or appear (whether
by
ownership, security interest, claim or otherwise).
Notwithstanding
anything herein to the contrary, the term "Collateral"
shall
not include, in the case of a Subsidiary organized under the laws of a
jurisdiction other than the United States, any of the states thereof or the
District of Columbia (a "Foreign
Subsidiary"),
more
than 65% (or
such
greater percentage that,
due
to a change in applicable law after the date hereof, (i) would not reasonably
be
expected to cause the undistributed earnings of such Foreign Subsidiary as
determined for United States federal income tax purposes to be treated as a
deemed dividend to such Foreign Subsidiary's United States parent and (ii)
would
not reasonably be expected to cause any
material
adverse tax consequences) of the issued and outstanding shares of Capital
Stock of such Foreign Subsidiary entitled to vote (within the meaning of Treas.
Reg. Section 1.956-2(c)(2)) (it being understood and agreed that the Collateral
shall include 100% of
the
issued and outstanding shares of Capital
Stock of such Foreign Subsidiary not entitled to vote (within the meaning of
Treas. Reg. Section 1.956-2(c)(2)) or other equity interest of such Foreign
Subsidiary).
The
Grantors agree that the pledge of the shares of Capital Stock acquired by a
Grantor of any and all Persons now or hereafter existing who is a Foreign
Subsidiary may be supplemented by one or more separate pledge agreements, deeds
of pledge, share charges, or other similar agreements or instruments, executed
and delivered by the relevant Grantors in favor of the Collateral Agent, which
pledge agreements will provide for the pledge of such shares of Capital Stock
in
accordance with the laws of the applicable foreign jurisdiction. With respect
to
such shares of Capital Stock, the Collateral Agent may, at any time and from
time to time, in its sole discretion, take actions in such foreign jurisdictions
that will result in the perfection of the Lien created in such shares of Capital
Stock.
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SECTION
3. Security
for Obligations.
The
security interest created hereby in the Collateral constitutes continuing
collateral security for all of the following obligations, whether now existing
or hereafter incurred (collectively, the "Obligations"):
(a) for
so
long as the Notes are outstanding, (i) the payment by the Company, as and when
due and payable (by scheduled maturity, required prepayment, acceleration,
demand or otherwise), of all amounts from time to time owing by it in respect
of
the Securities Purchase Agreement, the Notes and the other Transaction
Documents, and (ii) in the case of any Guarantors, the payment by such Grantors,
as and when due and payable of all "Guaranteed Obligations" under (and as
defined in) the Guaranty, including, without limitation, in both cases, (A)
all
principal of and interest on the Notes (including, without limitation, all
interest that accrues after the commencement of any Insolvency Proceeding of
any
Grantor, whether or not the payment of such interest is unenforceable or is
not
allowable due to the existence of such Insolvency Proceeding), and (B) all
fees,
commissions, expense reimbursements, indemnifications and all other amounts
due
or to become due under any of the Transaction Documents; and
(b) for
so
long as the Notes are outstanding, the due performance and observance by each
Grantor of all of its other obligations from time to time existing in respect
of
any of the Transaction Documents, including without limitation, with respect
to
any conversion or redemption rights of the Buyers under the Notes.
SECTION
4. Representations
and Warranties.
Each
Grantor represents and warrants as of the date of this Agreement as
follows:
(a) Schedule
I
hereto
sets forth (i) the exact legal name of each Grantor, and (ii) the state of
incorporation, organization or formation and the organizational identification
number of each Grantor in such state.
(b) There
is
no pending or, to its knowledge, written notice threatening any action, suit,
proceeding or claim affecting any Grantor before any Governmental Authority
or
any arbitrator, or any order, judgment or award issued by any Governmental
Authority or arbitrator, in each case, that may adversely affect the grant
by
any Grantor, or the perfection, of the security interest purported to be created
hereby in the Collateral, or the exercise by the Collateral Agent of any of
its
rights or remedies hereunder.
(c) All
Federal, state and local tax returns and other reports required by applicable
law to be filed by any Grantor have been filed, or extensions have been
obtained, and all taxes, assessments and other governmental charges imposed
upon
any Grantor or any property of any Grantor (including, without limitation,
all
federal income and social security taxes on employees' wages) and which have
become due and payable on or prior to the date hereof have been paid, except
to
the extent contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-payment thereof
and with respect to which adequate reserves have been set aside for the payment
thereof in accordance with generally accepted accounting principles consistently
applied ("GAAP").
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(d) All
Equipment, Fixtures, Goods and Inventory (other than the Vaporizers) of each
Grantor now existing are, and all Equipment, Fixtures, Goods and Inventory
(other than the Vaporizers) of each Grantor hereafter existing will be, located
and/or based at the addresses specified therefor in Schedule III hereto, except
that each Grantor will give the Collateral Agent written notice of any change
in
the location of any such Collateral within 20 days following such change, other
than to locations set forth on Schedule III hereto (or a new Schedule III
delivered by the Grantors to the Collateral Agent from time to time) and with
respect to which the Collateral Agent has filed financing statements and
otherwise fully perfected its Liens thereon or will take such actions pursuant
to Section 5(n). Each Grantor's chief place of business and chief executive
office, the place where each Grantor keeps its Records concerning Accounts
and
all originals of all Chattel Paper are located at the addresses specified
therefor in Schedule III hereto. None of the Accounts is evidenced by Promissory
Notes or other Instruments. Set forth in Schedule IV hereto is a complete and
accurate list, as of the date of this Agreement, of (i) each Promissory Note,
Security and other Instrument owned by each Grantor and (ii) each Deposit
Account, Securities Account and Commodities Account of each Grantor, together
with the name and address of each institution at which each such account is
maintained, the account number for each such account and a description of the
purpose of each such account. Set forth in Schedule II hereto is a complete
and
correct list of each trade name used by each Grantor.
(e) Each
Grantor has delivered to the Collateral Agent complete and correct copies of
each License described in Schedule II hereto, including all schedules and
exhibits thereto, which represents all of the Licenses existing on the date
of
this Agreement. Each such License sets forth the entire agreement and
understanding of the parties thereto relating to the subject matter thereof,
and
there are no other agreements, arrangements or understandings, written or oral,
relating to the matters covered thereby or the rights of such Grantor or any
of
its affiliates in respect thereof. Each material License now existing is, and
any material License entered into in the future will be, the legal, valid and
binding obligation of the parties thereto, enforceable against such parties
in
accordance with its terms. No default under any material License by any such
party has occurred, nor does any defense, offset, deduction or counterclaim
exist thereunder in favor of any such party.
(f) Each
Grantor owns and controls, or otherwise possesses adequate rights to use, all
Trademarks, Patents and Copyrights, which are the only trademarks, patents,
copyrights, inventions, trade secrets, proprietary information and technology,
know-how, formulae, rights of publicity necessary to conduct its business in
substantially the same manner as conducted as of the date hereof. Schedule
II
hereto sets forth a true and complete list of all registered copyrights, issued
Patents, Trademarks, and Licenses annually owned or used by each Grantor as
of
the date hereof. To the best knowledge of each Grantor, all such Intellectual
Property of each Grantor is subsisting and in full force and effect, has not
been adjudged invalid or unenforceable, is valid and enforceable and has not
been abandoned in whole or in part. Except as set forth in Schedule II, no
such
Intellectual Property is the subject of any licensing or franchising agreement.
Each Grantor has no knowledge of any conflict with the rights of others to
any
such Intellectual Property and, to the best knowledge of each Grantor, each
Grantor is not now infringing or in conflict with any such rights of others
in
any material respect, and to the best knowledge of each Grantor, no other Person
is now infringing or in conflict in any material respect with any such
properties, assets and rights owned or used by each Grantor. No Grantor has
received any notice that it is violating or has violated the trademarks,
patents, copyrights, inventions, trade secrets, proprietary information and
technology, know-how, formulae, rights of publicity or other intellectual
property rights of any third party.
-7-
(g) Each
Grantor is and will be at all times the sole and exclusive owner of, or
otherwise has and will have adequate rights in, the Collateral free and clear
of
any Liens, except for Permitted Liens. No effective financing statement or
other
instrument similar in effect covering all or any part of the Collateral is
on
file in any recording or filing office except such as (i) may have been filed
in
favor of the Collateral Agent and/or the Buyers relating to this Agreement
or
the other Security Documents and (ii) are described on Schedule
4(g)
hereto.
(h) The
exercise by the Collateral Agent of any of its rights and remedies hereunder
will not contravene any law or any material contractual restriction binding
on
or otherwise affecting each Grantor or any of its properties and will not result
in or require the creation of any Lien, upon or with respect to any of its
properties.
(i) No
authorization or approval or other action by, and no notice to or filing with,
any Governmental Authority or other regulatory body, is required for
(i) the grant by each Grantor, or the perfection, of the security interest
purported to be created hereby in the Collateral, or (ii) the exercise by
the Collateral Agent of any of its rights and remedies hereunder, except
(A) for the filing under the Uniform Commercial Code as in effect in the
applicable jurisdiction of the financing statements described in Schedule
V
hereto
(or a new Schedule
V
delivered by the Grantors to the Collateral Agent from time to time), all of
which financing statements have been duly filed and are in full force and effect
or will be duly filed and in full force and effect, (B) with respect to Deposit
Accounts, and all cash and other property from time to time deposited therein,
for the execution of a control agreement with the depository institution with
which such account is maintained, as provided in Section
5(i),
(C) with respect to Commodity Contracts, for the execution of a control
agreement with the commodity intermediary with which such commodity contract
is
carried, as provided in Section
5(i),
(D) with respect to the perfection of the security interest created hereby
in the United States Intellectual Property and Licenses, for the recording
of
the appropriate Assignment for Security, substantially in the form of
Exhibit
A
hereto
in the United States Patent and Trademark Office or the United States Copyright
Office, as applicable, (E) with respect to the perfection of the security
interest created hereby in foreign Intellectual Property and Licenses, for
registrations and filings in jurisdictions located outside of the United States
and covering rights in such jurisdictions relating to such foreign Intellectual
Property and Licenses, (F) with respect to the perfection of the security
interest created hereby in Titled Collateral, for the submission of an
appropriate application requesting that the Lien of the Collateral Agent be
noted on the Certificate of Title or certificate of ownership, completed and
authenticated by the applicable Grantor, together with the Certificate of Title
or certificate of ownership, with respect to such Titled Collateral, to the
appropriate governmental authority, (G) with respect to the perfection of the
security interest created hereby in any Letter-of-Credit Rights, for the consent
of the issuer of the applicable letter of credit to the assignment of proceeds
as provided in the Uniform Commercial Code as in effect in the applicable
jurisdiction, (H) with respect to any action that may be necessary to obtain
control of Collateral constituting Deposit Accounts, Commodity Contracts,
Electronic Chattel Paper, Investment Property or Letter-of-Credit Rights, the
taking of such actions, and (I) the Collateral Agent having possession of all
Documents, Chattel Paper, Instruments and cash constituting
Collateral
(subclauses (A), (B), (C), (D), (E), (F), G), (H) and (I), each a "Perfection
Requirement"
and
collectively, the "Perfection
Requirements").
-8-
(j) This
Agreement creates in favor of the Collateral Agent a legal, valid and
enforceable security interest in the Collateral, as security for the
Obligations. The Perfection Requirements result in the perfection of such
security interests. Such security interests are, or in the case of Collateral
in
which each Grantor obtains rights after the date hereof, will be, perfected,
first priority security interests, subject only to Permitted Liens and the
Perfection Requirements and the financing statements described in Schedule
4(g).
Such
recordings and filings and all other action necessary to perfect and protect
such security interest have been duly taken or will be taken pursuant to Section
5(n), and, in the case of Collateral in which each Grantor obtains rights after
the date hereof, will be duly taken, except for the Collateral Agent's having
possession of all Documents, Chattel Paper, Instruments and cash constituting
Collateral after the date hereof and the other actions, filings and recordations
described above, including the Perfection Requirements.
(k) As
of the
date hereof, no Grantor holds any Commercial Tort Claims or has knowledge of
any
pending Commercial Tort Claims, except for such Commercial Tort Claims described
in Schedule
VI.
SECTION
5. Covenants
as to the Collateral.
So long
as any of the Obligations shall remain outstanding, unless the Collateral Agent
shall otherwise consent in writing:
(a) Further
Assurances.
Each
Grantor will at its expense, at any time and from time to time, promptly execute
and deliver all further instruments and documents and take all further action
that the Collateral Agent may reasonably request in order to: (i) perfect and
protect the security interest purported to be created hereby; (ii) enable the
Collateral Agent to exercise and enforce its rights and remedies hereunder
in
respect of the Collateral; or (iii) otherwise effect the purposes of this
Agreement, including, without limitation: (A) marking conspicuously all Chattel
Paper and each License and, at the request of the Collateral Agent, each of
its
Records pertaining to the Collateral with a legend, in form and substance
satisfactory to the Collateral Agent, indicating that such Chattel Paper,
License or Collateral is subject to the security interest created hereby, (B)
delivering and pledging to the Collateral Agent pursuant to the Pledge each
Promissory Note, Security, Chattel Paper or other Instrument, now or hereafter
owned by any Grantor, duly endorsed and accompanied by executed instruments
of
transfer or assignment, all in form and substance satisfactory to the Collateral
Agent, (C) executing and filing (to the extent, if any, that any Grantor's
signature is required thereon) or authenticating the filing of, such financing
or continuation statements, or amendments thereto, as may be necessary or that
the Collateral Agent may reasonably request in order to perfect and preserve
the
security interest purported to be created hereby, (D) furnishing to the
Collateral Agent from time to time statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral in each case as the Collateral Agent may reasonably request, all
in
reasonable detail, (E) if any Collateral shall be in the possession of a third
party, notifying such Person of the Collateral Agent's security interest created
hereby and obtaining a written acknowledgment from such Person that such Person
holds possession of the Collateral for the benefit of the Collateral Agent,
which such written acknowledgement shall be in form and substance reasonably
satisfactory to the Collateral Agent, (F) if at any time after the date hereof,
any Grantor acquires or holds any Commercial Tort Claim, promptly notifying
the
Collateral Agent in a writing signed by such Grantor setting forth a brief
description of such Commercial Tort Claim and granting to the Collateral Agent
a
security interest therein and in the proceeds thereof, which writing shall
incorporate the provisions hereof and shall be in form and substance
satisfactory to the Collateral Agent, (G) upon the acquisition after the date
hereof by any Grantor of any motor vehicle or other Equipment subject to a
certificate of title or ownership (other than a Motor Vehicle or Equipment
that
is subject to a purchase money security interest), causing the Collateral Agent
to be listed as the lienholder on such certificate of title or ownership and
delivering evidence of the same to the Collateral Agent in accordance with
Section 5(j) hereof; and (H) taking all actions required by any earlier versions
of the Uniform Commercial Code or by other law, as applicable, in any relevant
Uniform Commercial Code jurisdiction, or by other law as applicable in any
foreign jurisdiction.
-9-
(b) Location
of Equipment and Inventory.
Each
Grantor will keep the Equipment and Inventory (i) at the locations specified
therefor on Schedule III hereto, or (ii) at such other locations set forth
on
Schedule III (or a new Schedule III delivered by the Grantors to Collateral
Agent from time to time) and with respect to which the Collateral Agent has
filed financing statements and otherwise fully perfected its Liens thereon,
or
(iii) at such other locations in the United States, provided that within 20
days
following the relocation of Equipment or Inventory to such other location or
the
acquisition of Equipment or Inventory, such Grantor shall deliver to the
Collateral Agent a new Schedule III indicating such new locations.
(c) Condition
of Equipment.
Each
Grantor will maintain or cause the Equipment (necessary or useful to its
business) to be maintained and preserved in good condition, repair and working
order, ordinary wear and tear excepted, and will forthwith, or in the case
of
any loss or damage to any Equipment of any Grantor within a commercially
reasonable time after the occurrence thereof, make or cause to be made all
repairs, replacements and other improvements in connection therewith which
are
necessary or desirable, consistent with past practice, or which the Collateral
Agent may request to such end. Any Grantor will promptly furnish to the
Collateral Agent a statement describing in reasonable detail any such loss
or
damage in excess of $250,000 per occurrence to any Equipment.
(d) Taxes,
Etc.
Each
Grantor agrees to pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Equipment
and
Inventory, except to the extent the validity thereof is being contested in
good
faith by proper proceedings which stay the imposition of any penalty, fine
or
Lien resulting from the non-payment thereof and with respect to which adequate
reserves in accordance with GAAP have been set aside for the payment
thereof.
-10-
(e) Insurance.
(i) Each
Grantor will, at its own expense, maintain insurance (including, without
limitation, commercial general liability and property insurance) with respect
to
the Equipment and Inventory in such amounts, against such risks, in such form
and with responsible and reputable insurance companies or associations as is
required by any governmental authority having jurisdiction with respect thereto
or as is carried generally in accordance with sound business practice by
companies in similar businesses similarly situated and in any event, in amount,
adequacy and scope reasonably satisfactory to the Collateral Agent. To the
extent requested by the Collateral Agent at any time and from time to time,
each
such policy for liability insurance shall provide for all losses to be paid
on
behalf of the Collateral Agent and any Grantor as their respective interests
may
appear, and each policy for property damage insurance shall provide for all
losses to be adjusted with, and paid directly to, the Collateral Agent. To
the
extent requested by the Collateral Agent at any time and from time to time,
each
such policy shall in addition (A) name the Collateral Agent as an additional
insured party thereunder (without any representation or warranty by or
obligation upon the Collateral Agent) as their interests may appear, (B) contain
an agreement by the insurer that any loss thereunder shall be payable to the
Collateral Agent on its own account notwithstanding any action, inaction or
breach of representation or warranty by any Grantor, (C) provide that there
shall be no recourse against the Collateral Agent for payment of premiums or
other amounts with respect thereto, and (D) provide that at least 30 days'
prior
written notice of cancellation, lapse, expiration or other adverse change shall
be given to the Collateral Agent by the insurer. Any Grantor will, if so
requested by the Collateral Agent, deliver to the Collateral Agent original
or
duplicate policies of such insurance and, as often as the Collateral Agent
may
reasonably request, a report of a reputable insurance broker with respect to
such insurance. Any Grantor will also, at the request of the Collateral Agent,
execute and deliver instruments of assignment of such insurance policies and
cause the respective insurers to acknowledge notice of such
assignment.
(ii) Reimbursement
under any liability insurance maintained by any Grantor pursuant to this Section
5(e) may be paid directly to the Person who shall have incurred liability
covered by such insurance. Following an Event of Default, in the case of any
loss involving damage to Equipment or Inventory, any proceeds of insurance
maintained by any Grantor pursuant to this Section 5(e) shall be paid to the
Collateral Agent (except as to which paragraph (iii) of this Section 5(e) is
not
applicable), any Grantor will make or cause to be made the necessary repairs
to
or replacements of such Equipment or Inventory, and any proceeds of insurance
maintained by any Grantor pursuant to this Section 5(e) shall be paid by the
Collateral Agent to any Grantor as reimbursement for the costs of such repairs
or replacements.
(iii) Following
and during the continuance of an Event of Default, all insurance payments in
respect of such Equipment or Inventory shall be paid to the Collateral Agent
and
applied as specified in Section
7(b)
hereof.
(f) Provisions
Concerning the Accounts and the Licenses.
(i) Each
Grantor will (A) give the Collateral Agent at least 10 Business Days' prior
written notice of any change in such Grantor's name, identity, organizational
structure or jurisdiction of incorporation, organization or formation, (B)
immediately notify the Collateral Agent upon obtaining an organizational
identification number, if on the date hereof such Grantor did not have such
identification number, and (C) keep adequate records concerning the Accounts,
in
accordance with Section 4 (i) of the Securities Purchase Agreement and Chattel
Paper.
-11-
(ii) Each
Grantor will, except as otherwise provided in this subsection (f), continue
to
collect, at its own expense, all amounts due or to become due under the
Accounts. In connection with such collections, any Grantor may (and, at the
Collateral Agent's direction, will) take such action as any Grantor or the
Collateral Agent may deem necessary or advisable to enforce collection or
performance of the Accounts; provided, however, that the Collateral Agent shall
have the right at any time, upon the occurrence and during the continuance
of an
Event of Default, to notify the account debtors or obligors under any Accounts
of the assignment of such Accounts to the Collateral Agent and to direct such
account debtors or obligors to make payment of all amounts due or to become
due
to any Grantor thereunder directly to the Collateral Agent or its designated
agent and, upon such notification and at the expense of any Grantor and to
the
extent permitted by law, to enforce collection of any such Accounts and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as any Grantor might have done. After receipt by any
Grantor of a notice from the Collateral Agent that the Collateral Agent has
notified, intends to notify, or has enforced or intends to enforce any Grantor's
rights against the account debtors or obligors under any Accounts as referred
to
in the proviso to the immediately preceding sentence, (A) all amounts and
proceeds (including Instruments) received by any Grantor in respect of the
Accounts shall be received in trust for the benefit of the Collateral Agent
hereunder, shall be segregated from other funds of any Grantor and shall be
forthwith paid over to the Collateral Agent in the same form as so received
(with any necessary endorsement) to be applied as specified in Section 7(b)
hereof, and (B) no Grantor will adjust, settle or compromise the amount or
payment of any Account or release wholly or partly any account debtor or obligor
thereof or allow any credit or discount thereon. In addition, upon the
occurrence and during the continuance of an Event of Default, the Collateral
Agent may (in its sole and absolute discretion) direct any or all of the banks
and financial institutions with which any Grantor either maintains a Deposit
Account or a lockbox or deposits the proceeds of any Accounts to send
immediately to the Collateral Agent by wire transfer (to such account as the
Collateral Agent shall specify, or in such other manner as the Collateral Agent
shall direct) all or a portion of such securities, cash, investments and other
items held by such institution. Any such securities, cash, investments and
other
items so received by the Collateral Agent shall be applied as specified in
accordance with Section 7(b) hereof.
(iii) Upon
the
occurrence and during the continuance of any breach or default under any
material License referred to in Schedule II hereto by any party thereto other
than any Grantor, each Grantor party thereto will, promptly after obtaining
knowledge thereof, give the Collateral Agent written notice of the nature and
duration thereof, specifying what action, if any, it has taken and proposes
to
take with respect thereto and thereafter will take reasonable steps to protect
and preserve its rights and remedies in respect of such breach or default,
or
will obtain or acquire an appropriate substitute License.
(iv) Each
Grantor will, at its expense, promptly deliver to the Collateral Agent a copy
of
each notice or other communication received by it by which any other party
to
any material License referred to in Schedule II hereto purports to exercise
any
of its rights or affect any of its obligations thereunder, together with a
copy
of any reply by such Grantor thereto.
-12-
(v) Each
Grantor will exercise promptly and diligently each and every right which it
may
have under each material License (other than any right of termination) and
will
duly perform and observe in all respects all of its obligations under each
material License and will take all action reasonably necessary to maintain
such
Licenses in full force and effect. No Grantor will, without the prior written
consent of the Collateral Agent, cancel, terminate, amend or otherwise modify
in
any respect, or waive any provision of, any material License referred to in
Schedule II hereto.
(g) Transfers
and Other Liens.
(i) No
Grantor will sell, assign (by operation of law or otherwise), lease, license,
exchange or otherwise transfer or dispose of any of the Collateral, except
(A)
Inventory in the ordinary course of business, and (B) worn out or obsolete
assets, not necessary to such Grantor's business.
(ii) No
Grantor will create, suffer to exist or grant any Lien upon or with respect
to
any Collateral, other than a Permitted Lien.
(h) Intellectual
Property.
(i) If
applicable, any Grantor shall, upon the Collateral Agent's written request,
duly
execute and deliver the applicable Assignment for Security in the form attached
hereto as Exhibit A. Each Grantor (either itself or through licensees) will,
and
will cause each licensee thereof to, take all action necessary to maintain
all
of the Intellectual Property in full force and effect, including, without
limitation, using the proper statutory notices and markings and using the
Trademarks on each applicable trademark class of goods in order to so maintain
the Trademarks in full force and free from any claim of abandonment for non-use,
and each Grantor will not (nor permit any licensee thereof to) do any act or
knowingly omit to do any act whereby any Intellectual Property may become
invalidated; provided, however, that so long as no Event of Default has occurred
and is continuing, no Grantor shall have an obligation to use or to maintain
any
Intellectual Property (A) that relates solely to any product or work, that
has
been, or is in the process of being, discontinued, abandoned or terminated,
(B)
that is being replaced with Intellectual Property substantially similar to
the
Intellectual Property that may be abandoned or otherwise become invalid, so
long
as the failure to use or maintain such Intellectual Property does not materially
adversely affect the validity of such replacement Intellectual Property and
so
long as such replacement Intellectual Property is subject to the Lien created
by
this Agreement or (C) that is substantially the same as another Intellectual
Property that is in full force, so long the failure to use or maintain such
Intellectual Property does not materially adversely affect the validity of
such
replacement Intellectual Property and so long as such other Intellectual
Property is subject to the Lien and security interest created by this Agreement.
Each Grantor will cause to be taken all reasonably necessary steps in any
proceeding before the United States Patent and Trademark Office and the United
States Copyright Office or any similar office or agency in any other country
or
political subdivision thereof to maintain each registration of the Intellectual
Property (other than the Intellectual Property described in the proviso to
the
immediately preceding sentence), including, without limitation, filing of
renewals, affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings and payment of maintenance fees,
filing fees, taxes or other governmental fees. If any Intellectual Property
(other than Intellectual Property described in the proviso to the first sentence
of subsection (i) of this clause (h)) is infringed, misappropriated, diluted
or
otherwise violated in any material respect by a third party, each Grantor shall
(x) upon learning of such infringement, misappropriation, dilution or other
violation, promptly notify the Collateral Agent and (y) to the extent any
Grantor shall deem appropriate under the circumstances, promptly xxx for
infringement, misappropriation, dilution or other violation, seek injunctive
relief where appropriate and recover any and all damages for such infringement,
misappropriation, dilution or other violation, or take such other actions as
such Grantor shall deem appropriate under the circumstances to protect such
Intellectual Property. Each Grantor shall furnish to the Collateral Agent from
time to time upon its request statements and schedules further identifying
and
describing the Intellectual Property and Licenses and such other reports in
connection with the Intellectual Property and Licenses as the Collateral Agent
may reasonably request, all in reasonable detail and promptly upon request
of
the Collateral Agent, following receipt by the Collateral Agent of any such
statements, schedules or reports, each Grantor shall modify this Agreement
by
amending Schedule II hereto, as the case may be, to include any Intellectual
Property and License, as the case may be, which becomes part of the Collateral
under this Agreement and shall execute and authenticate such documents and
do
such acts as shall be necessary or, in the reasonable judgment of the Collateral
Agent, desirable to subject such Intellectual Property and Licenses to the
Lien
and security interest created by this Agreement. Notwithstanding anything herein
to the contrary, upon the occurrence and during the continuance of an Event
of
Default, no Grantor may abandon or otherwise permit any Intellectual Property
to
become invalid without the prior written consent of the Collateral Agent, and
if
any Intellectual Property is infringed, misappropriated, diluted or otherwise
violated in any material respect by a third party, each Grantor will take such
action as the Collateral Agent shall deem appropriate under the circumstances
to
protect such Intellectual Property.
-13-
(ii) In
no
event shall any Grantor, either itself or through any agent, employee, licensee
or designee, file an application for the registration of any Trademark or
Copyright or the issuance of any Patent with the United States Patent and
Trademark Office or the United States Copyright Office, as applicable, or in
any
similar office or agency of the United States or any country or any political
subdivision thereof unless it gives the Collateral Agent prior written notice
thereof. Upon request of the Collateral Agent, any Grantor shall execute,
authenticate and deliver any and all assignments, agreements, instruments,
documents and papers as the Collateral Agent may reasonably request to evidence
the Collateral Agent's security interest hereunder in such Intellectual Property
and the General Intangibles of any Grantor relating thereto or represented
thereby, and each Grantor hereby appoints the Collateral Agent its
attorney-in-fact to execute and/or authenticate and file all such writings
for
the foregoing purposes, all acts of such attorney being hereby ratified and
confirmed, and such power (being coupled with an interest) shall be irrevocable
until the indefeasible payment in full in cash of all of the Obligations in
full.
-14-
(i) Deposit,
Commodities and Securities Accounts.
Upon
the Collateral Agent's written request, each Grantor shall deliver to the
Collateral Agent a control agreement, in form and substance reasonably
satisfactory to the Collateral Agent, duly executed by each Grantor and such
bank or financial institution with an account referred to in Schedule IV hereto,
or enter into other arrangements in form and substance reasonably satisfactory
to the Collateral Agent, pursuant to which such institution shall irrevocably
agree, inter alia,
that
(i) upon the continuance of an Event of Default, it will comply at any time
with the instructions originated by the Collateral Agent to such bank or
financial institution directing the disposition of cash, Commodity Contracts,
securities, Investment Property and other items from time to time credited
to
such account, without further consent of each Grantor, which
instructions the Collateral Agent will not give to such bank or other financial
institution in the absence of a continuing Event of Default, (ii)
all
Commodity Contracts, securities, Investment Property and other items of each
Grantor deposited with such institution shall be subject to a perfected, first
priority security interest in favor of the Collateral Agent, (iii) any
right of set off (other than recoupment of standard fees), banker's Lien or
other similar Lien, security interest or encumbrance shall be fully waived
as
against the Collateral Agent, and (iv) upon receipt of written notice from
the Collateral Agent during the continuance of an Event of Default, such bank
or
financial institution shall immediately or within a timeframe acceptable to
Collateral Agent set forth in the Control Agreement send to the Collateral
Agent
by wire transfer (to such account as the Collateral Agent shall specify, or
in
such other manner as the Collateral Agent shall direct) all such cash, the
value
of any Commodity Contracts, securities, Investment Property and other items
held
by it. Without the prior written consent of the Collateral Agent, such consent
not to be unreasonably withheld, each Grantor shall not make or maintain any
Deposit Account, Commodity Account or Securities Account except for the accounts
set forth in Schedule IV hereto. The provisions of this paragraph 5(i) shall
not
apply to (i) Deposit Accounts for which the Collateral Agent is the depositary
and (ii) Deposit Accounts specially and exclusively used for payroll, payroll
taxes and other employee wage and benefit payments to or for the benefit of
each
Grantor's salaried or hourly employees.
(j) Motor
Vehicles.
(i) Upon
the
Collateral Agent's written request, each Grantor shall deliver to the Collateral
Agent originals of the certificates of title or ownership for all motor vehicles
with a value in excess of $50,000, owned by it with the Collateral Agent listed
as lienholder, for the benefit of the Buyers.
(ii) Each
Grantor hereby appoints the Collateral Agent as its attorney-in-fact, effective
the date hereof and terminating upon the termination of this Agreement, for
the
purpose of (A) executing on behalf of such Grantor title or ownership
applications for filing with appropriate state agencies to enable motor vehicles
now owned or hereafter acquired by such Grantor to be retitled and the
Collateral Agent listed as lienholder thereof, (B) filing such applications
with
such state agencies, and (C) executing such other documents and instruments
on
behalf of, and taking such other action in the name of, such Grantor as the
Collateral Agent may deem necessary or advisable to accomplish the purposes
hereof (including, without limitation, for the purpose of creating in favor
of
the Collateral Agent a perfected Lien on the motor vehicles and exercising
the
rights and remedies of the Collateral Agent hereunder). This appointment as
attorney-in-fact is coupled with an interest and is irrevocable until all of
the
Obligations are indefeasibly paid in full in cash.
(iii) Any
certificates of title or ownership delivered pursuant to the terms hereof shall
be accompanied by odometer statements for each motor vehicle covered
thereby.
-15-
(iv) So
long
as no Event of Default shall have occurred and be continuing, upon the request
of any Grantor, the Collateral Agent shall execute and deliver to any Grantor
such instruments as any Grantor shall reasonably request to remove the notation
of the Collateral Agent as lienholder on any certificate of title for any motor
vehicle; provided,
however,
that
any such instruments shall be delivered, and the release effective, only upon
receipt by the Collateral Agent of a certificate from any Grantor stating that
such motor vehicle is to be sold or has suffered a casualty loss (with title
thereto in such case passing to the casualty insurance company therefor in
settlement of the claim for such loss) and the amount that any Grantor will
receive as sale proceeds or insurance proceeds.
(k) Control.
Each
Grantor hereby agrees to take any or all action that may be necessary or that
the Collateral Agent may reasonably request in order for the Collateral Agent
to
obtain control in accordance with Sections 9-105 through 9-107 of the Code
with
respect to the following Collateral: (i) Electronic Chattel Paper, (ii)
Investment Property, and (iii) Letter-of-Credit Rights.
(l) Inspection
and Reporting.
Each
Grantor shall permit in accordance with Section 4(i) of the Securities Purchase
Agreement, the Collateral Agent, or any agent or representatives thereof or
such
professionals or other Persons as the Collateral Agent may designate, during
normal business hours, after reasonable prior notice, in the absence of an
Event
of Default and not more than once a year in the absence of an Event of Default,
(i) to examine and make copies of and abstracts from any Grantor's records
and
books of account, (ii) to visit and inspect its properties, (iii) to verify
materials, leases, Instruments, Accounts, Inventory and other assets of any
Grantor from time to time, (iii) to conduct audits, physical counts, appraisals
and/or valuations, examinations at the locations of any Grantor. Each Grantor
shall also permit, in accordance with Section 4(i) of the Securities Purchase
Agreement, the Collateral Agent, or any agent or representatives thereof or
such
professionals or other Persons as the Collateral Agent may designate to discuss
such Grantor's affairs, finances and accounts with any of its directors,
officers, managerial employees, independent accountants or any of its other
representatives.
(m) Future
Subsidiaries.
If any
Grantor shall hereafter create or acquire any Subsidiary, simultaneously with
the creation or acquisition of such Subsidiary, such Grantor shall (i) cause
such Subsidiary to become a party to this Agreement as an additional "Grantor"
hereunder, (ii) such Grantor shall deliver to Collateral Agent revised Schedules
to this Agreement, as appropriate, (iii) shall duly execute and deliver a
guaranty of the Obligations in favor of the Collateral Agent in form and
substance reasonably acceptable to the Collateral Agent, and (iv) shall duly
execute and/or deliver such opinions of counsel and other documents, in form
and
substance reasonably acceptable to the Collateral Agent, as the Collateral
Agent
shall reasonably request with respect thereto, provided that any Grantor that
acquires a subsidiary on or within two days after the Closing Date shall have
10
Business Days in which to satisfy the requirements of this Section
5(m).
-16-
SECTION
6. Additional
Provisions Concerning the Collateral.
(a) To
the
maximum extent permitted by applicable law, and for the purpose of taking any
action that the Collateral Agent may deem necessary or advisable to accomplish
the purposes of this Agreement, each Grantor hereby (i) authorizes the
Collateral Agent to execute any such agreements, instruments or other documents
in such Grantor's name and to file such agreements, instruments or other
documents in such Grantor's name and in any appropriate filing office, (ii)
authorizes the Collateral Agent at any time and from time to time to file,
one
or more financing or continuation statements, and amendments thereto, relating
to the Collateral (including, without limitation, any such financing statements
that (A) describe the Collateral as "all assets" or "all personal property"
(or
words of similar effect) or that describe or identify the Collateral by type
or
in any other manner as the Collateral Agent may determine regardless of whether
any particular asset of such Grantor falls within the scope of Article 9 of
the
Uniform Commercial Code or whether any particular asset of such Grantor
constitutes part of the Collateral, and (B) contain any other information
required by Part 5 of Article 9 of the Code for the sufficiency or filing office
acceptance of any financing statement, continuation statement or amendment,
including, without limitation, whether such Grantor is an organization, the
type
of organization and any organizational identification number issued to such
Grantor) and (iii) ratifies such authorization to the extent that the Collateral
Agent has filed any such financing or continuation statements, or amendments
thereto, prior to the date hereof. A photocopy or other reproduction of this
Agreement or any financing statement covering the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by
law.
(b) Each
Grantor hereby irrevocably appoints the Collateral Agent as its attorney-in-fact
and proxy, with full authority in the place and stead of such Grantor and in
the
name of such Grantor or otherwise, from time to time in the Collateral Agent's
discretion, so long as an Event of Default shall have occurred and is
continuing, to take any action and to execute any instrument which the
Collateral Agent may reasonably deem necessary or advisable to accomplish the
purposes of this Agreement (subject to the rights of each Grantor under Section
5 hereof), including, without limitation, (i) to obtain and adjust insurance
required to be paid to the Collateral Agent pursuant to Section 5(e) hereof,
(ii) to ask, demand, collect, xxx for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect
of
any Collateral, (iii) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper in connection with clause (i) or (ii)
above, (iv) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the collection
of
any Collateral or otherwise to enforce the rights of the Collateral Agent and
the Buyers with respect to any Collateral, and (v) to execute assignments,
licenses and other documents to enforce the rights of the Collateral Agent
and
the Buyers with respect to any Collateral. This power is coupled with an
interest and is irrevocable until all of the Obligations are indefeasibly paid
in full in cash.
-17-
(c) For
the
purpose of enabling the Collateral Agent to exercise rights and remedies
hereunder, at such time as the Collateral Agent shall be lawfully entitled
to
exercise such rights and remedies, and for no other purpose, each Grantor hereby
grants to the Collateral Agent, to the extent assignable, an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to any Grantor) to use, assign, license or sublicense any
Intellectual Property now owned or hereafter acquired by such Grantor, wherever
the same may be located, including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer programs used for the compilation or printout thereof. Notwithstanding
anything contained herein to the contrary, but subject to the provisions of
the
Securities Purchase Agreement that limit the right of any Grantor to dispose
of
its property, and Section 5(g) and Section 5(h) hereof, so long as no Event
of
Default shall have occurred and be continuing, any Grantor may exploit, use,
enjoy, protect, license, sublicense, assign, sell, dispose of or take other
actions with respect to the Intellectual Property in the ordinary course of
its
business. In furtherance of the foregoing, unless an Event of Default shall
have
occurred and be continuing, the Collateral Agent shall from time to time, upon
the request of any Grantor, execute and deliver any instruments, certificates
or
other documents, in the form so requested, which such Grantor shall have
certified are appropriate (in such Grantor's judgment) to allow it to take
any
action permitted above (including relinquishment of the license provided
pursuant to this clause (c) as to any Intellectual Property. Further, upon
the
indefeasible payment in full in cash of all of the Obligations, the Collateral
Agent (subject to Section 10(e) hereof) shall release and reassign to any
Grantor all of the Collateral Agent's right, title and interest in and to the
Intellectual Property, and the Licenses, all without recourse, representation
or
warranty whatsoever. The exercise of rights and remedies hereunder by the
Collateral Agent shall not terminate the rights of the holders of any licenses
or sublicenses theretofore granted by each Grantor in accordance with the second
sentence of this clause (c). Each Grantor hereby releases the Collateral Agent
from any claims, causes of action and demands at any time arising out of or
with
respect to any actions taken or omitted to be taken by the Collateral Agent
under the powers of attorney granted herein other than actions taken or omitted
to be taken through the Collateral Agent's gross negligence or willful
misconduct, as determined by a final determination of a court of competent
jurisdiction.
(d) If
any
Grantor fails to perform any agreement or obligation contained herein, the
Collateral Agent may itself perform, or cause performance of, such agreement
or
obligation, in the name of such Grantor or the Collateral Agent, and the
expenses of the Collateral Agent incurred in connection therewith shall be
payable by such Grantor pursuant to Section 8 hereof and shall be secured by
the
Collateral.
(e) The
powers conferred on the Collateral Agent hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise
any
such powers. Except for the safe custody of any Collateral in its possession
and
the accounting for moneys actually received by it hereunder, the Collateral
Agent shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
(f) Anything
herein to the contrary notwithstanding (i) each Grantor shall remain liable
under the Licenses and otherwise with respect to any of the Collateral to the
extent set forth therein to perform all of its obligations thereunder to the
same extent as if this Agreement had not been executed, (ii) the exercise by
the
Collateral Agent of any of its rights hereunder shall not release any Grantor
from any of its obligations under the Licenses or otherwise in respect of the
Collateral, and (iii) the Collateral Agent shall not have any obligation or
liability by reason of this Agreement under the Licenses or with respect to
any
of the other Collateral, nor shall the Collateral Agent be obligated to perform
any of the obligations or duties of any Grantor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.
-18-
SECTION
7. Remedies
Upon Event of Default.
If any
Event of Default shall have occurred and be continuing:
(a) The
Collateral Agent may exercise in respect of the Collateral, in addition to
any
other rights and remedies provided for herein or otherwise available to it,
all
of the rights and remedies of a secured party upon default under the Code
(whether or not the Code applies to the affected Collateral), and also may
(i)
take absolute control of the Collateral, including, without limitation, transfer
into the Collateral Agent's name or into the name of its nominee or nominees
(to
the extent the Collateral Agent has not theretofore done so) and thereafter
receive, for the benefit of the Collateral Agent, all payments made thereon,
give all consents, waivers and ratifications in respect thereof and otherwise
act with respect thereto as though it were the outright owner thereof, (ii)
require each Grantor to, and each Grantor hereby agrees that it will at its
expense and upon request of the Collateral Agent forthwith, assemble all or
part
of its respective Collateral as directed by the Collateral Agent and make it
available to the Collateral Agent at a place or places to be designated by
the
Collateral Agent that is reasonably convenient to both parties, and the
Collateral Agent may enter into and occupy any premises owned or leased by
any
Grantor where the Collateral or any part thereof is located or assembled for
a
reasonable period in order to effectuate the Collateral Agent's rights and
remedies hereunder or under law, without obligation to any Grantor in respect
of
such occupation, and (iii) without notice except as specified below and without
any obligation to prepare or process the Collateral for sale, (A) sell the
Collateral or any part thereof in one or more parcels at public or private
sale,
at any of the Collateral Agent's offices or elsewhere, for cash, on credit
or
for future delivery, and at such price or prices and upon such other terms
as
the Collateral Agent may deem commercially reasonable and/or (B) lease, license
or dispose of the Collateral or any part thereof upon such terms as the
Collateral Agent may deem commercially reasonable. Each Grantor agrees that,
to
the extent notice of sale or any other disposition of its respective Collateral
shall be required by law, at least ten (10) days' notice to any Grantor of
the
time and place of any public sale or the time after which any private sale
or
other disposition of its respective Collateral is to be made shall constitute
reasonable notification. The Collateral Agent shall not be obligated to make
any
sale or other disposition of any Collateral regardless of notice of sale having
been given. The Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such
sale
may, without further notice, be made at the time and place to which it was
so
adjourned. Each Grantor hereby waives any claims against the Collateral Agent
and the Buyers arising by reason of the fact that the price at which its
respective Collateral may have been sold at a private sale was less than the
price which might have been obtained at a public sale or was less than the
aggregate amount of the Obligations, even if the Collateral Agent accepts the
first offer received and does not offer such Collateral to more than one
offeree, and waives all rights that any Grantor may have to require that all
or
any part of such Collateral be marshaled upon any sale (public or private)
thereof. Each Grantor hereby acknowledges that (i) any such sale of its
respective Collateral by the Collateral Agent shall be made without warranty,
(ii) the Collateral Agent may specifically disclaim any warranties of title,
possession, quiet enjoyment or the like, and (iii) such actions set forth in
clauses (i) and (ii) above shall not adversely affect the commercial
reasonableness of any such sale of Collateral. In addition to the foregoing,
(1)
upon written notice to any Grantor from the Collateral Agent after and during
the continuance of an Event of Default, such Grantor shall cease any use of
the
Intellectual Property or any trademark, patent or copyright similar thereto
for
any purpose described in such notice; (2) the Collateral Agent may, at any
time
and from time to time after and during the continuance of an Event of Default,
upon 10 days' prior notice to such Grantor, license, whether general, special
or
otherwise, and whether on an exclusive or non-exclusive basis, any of the
Intellectual Property, throughout the universe for such term or terms, on such
conditions, and in such manner, as the Collateral Agent shall in its sole
discretion determine; and (3) the Collateral Agent may, at any time, pursuant
to
the authority granted in Section 6 hereof (such authority being effective upon
the occurrence and during the continuance of an Event of Default), execute
and
deliver on behalf of such Grantor, one or more instruments of assignment of
the
Intellectual Property (or any application or registration thereof), in form
suitable for filing, recording or registration in any country.
-19-
(b) Any
cash
held by the Collateral Agent as Collateral and all Cash Proceeds received by
the
Collateral Agent in respect of any sale of or collection from, or other
realization upon, all or any part of the Collateral shall be applied (after
payment of any amounts payable to the Collateral Agent pursuant to Section
8
hereof)
by the Collateral Agent against, all or any part of the Obligations in such
order as the Collateral Agent shall elect, consistent with the provisions of
the
Securities Purchase Agreement. Any surplus of such cash or Cash Proceeds held
by
the Collateral Agent and remaining after the indefeasible payment in full in
cash of all of the Obligations shall be paid over to whomsoever shall be
lawfully entitled to receive the same or as a court of competent jurisdiction
shall direct.
(c) In
the
event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Collateral Agent and the Buyers
are
legally entitled, each Grantor shall be liable for the deficiency, together
with
interest thereon at the highest rate specified in the Notes for interest on
overdue principal thereof or such other rate as shall be fixed by applicable
law, together with the costs of collection and the reasonable fees, costs,
expenses and other client charges of any attorneys employed by the Collateral
Agent to collect such deficiency.
(d) Each
Grantor hereby acknowledges that if the Collateral Agent complies with any
applicable state, provincial, or federal law requirements in connection with
a
disposition of the Collateral, such compliance will not adversely affect the
commercial reasonableness of any sale or other disposition of the
Collateral.
(e) The
Collateral Agent shall not be required to marshal any present or future
collateral security (including, but not limited to, this Agreement and the
Collateral) for, or other assurances of payment of, the Obligations or any
of
them or to resort to such collateral security or other assurances of payment
in
any particular order, and all of the Collateral Agent's rights hereunder and
in
respect of such collateral security and other assurances of payment shall be
cumulative and in addition to all other rights, however existing or arising.
To
the extent that any Grantor lawfully may, each Grantor hereby agrees that it
will not invoke any law relating to the marshaling of collateral which might
cause delay in or impede the enforcement of the Collateral Agent's rights under
this Agreement or under any other instrument creating or evidencing any of
the
Obligations or under which any of the Obligations is outstanding or by which
any
of the Obligations is secured or payment thereof is otherwise assured, and,
to
the extent that it lawfully may, each Grantor hereby irrevocably waives the
benefits of all such laws.
-20-
SECTION
8. Indemnity
and Expenses.
(a) Each
Grantor agrees, jointly and severally, to defend, protect, indemnify and hold
the Collateral Agent and each of the Buyers, jointly and severally, harmless
from and against any and all claims, damages, losses, liabilities, obligations,
penalties, fees, costs and expenses (including, without limitation, reasonable
legal fees, costs, expenses, and disbursements of such Person's counsel) to
the
extent that they arise out of or otherwise result from this Agreement
(including, without limitation, enforcement of this Agreement), except to the
extent resulting from such Person's gross negligence or willful misconduct,
as
determined by a final judgment of a court of competent
jurisdiction.
(b) Each
Grantor agrees, jointly and severally, to pay to the Collateral Agent upon
demand the amount of any and all costs and expenses, including the reasonable
fees, costs, expenses and disbursements of counsel for the Collateral Agent
and
of any experts and agents (including, without limitation, any collateral trustee
which may act as agent of the Collateral Agent), which the Collateral Agent
may
incur in connection with (i) the preparation, negotiation, execution, delivery,
recordation, administration, amendment, waiver or other modification or
termination of this Agreement, (ii) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization upon, any Collateral,
(iii) the exercise or enforcement of any of the rights of the Collateral Agent
hereunder, or (iv) the failure by any Grantor to perform or observe any of
the
provisions hereof.
SECTION
9. Notices,
Etc.
All
notices and other communications provided for hereunder shall be in writing
and
shall be mailed (by certified mail, postage prepaid and return receipt
requested), telecopied, e-mailed or delivered, (a) if to any Grantor, to it
at
its address below, or (b) if to the Collateral Agent to it, at its address
specified on the signature pages below, or (c) as to any such Person, at such
other address as shall be designated by such Person in a written notice to
all
other parties hereto complying as to delivery with the terms of this Section
9.
All such notices and other communications shall be effective (a) if sent by
certified mail, return receipt requested, when received or three days after
deposited in the mails, whichever occurs first, (b) if telecopied or e-mailed,
when transmitted (during normal business hours) and confirmation is received,
and otherwise, the day after the notice or communication was transmitted and
confirmation is received, or (c) if delivered in person, upon delivery. For
the
avoidance of doubt, the Foreign Subsidiaries, as Grantors, hereby appoint the
Company as its agent for receipt of service of process and all notices and
other
communications in the United States at the address specified below.
SECTION
10. Miscellaneous.
(a) No
amendment of any provision of this Agreement shall be effective unless it is
in
writing and signed by each Grantor and the Collateral Agent, and no waiver
of
any provision of this Agreement, and no consent to any departure by each Grantor
therefrom, shall be effective unless it is in writing and signed by each Grantor
and the Collateral Agent, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which
given.
-21-
(b) No
failure on the part of the Collateral Agent to exercise, and no delay in
exercising, any right hereunder or under any of the other Transaction Documents
shall operate as a waiver thereof; nor shall any single or partial exercise
of
any such right preclude any other or further exercise thereof or the exercise
of
any other right. The rights and remedies of the Collateral Agent or any Buyer
provided herein and in the other Transaction Documents are cumulative and are
in
addition to, and not exclusive of, any rights or remedies provided by law.
The
rights of the Collateral Agent or any Buyer under any of the other Transaction
Documents against any party thereto are not conditional or contingent on any
attempt by such Person to exercise any of its rights under any of the other
Transaction Documents against such party or against any other Person, including
but not limited to, any Grantor.
(c) Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(d) This
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the indefeasible payment in
full
of the Obligations, and (ii) be binding on each Grantor and all other Persons
who become bound as debtor to this Agreement in accordance with Section 9-203(d)
of the Code and shall inure, together with all rights and remedies of the
Collateral Agent and the Buyers hereunder, to the benefit of the Collateral
Agent and the Buyers and their respective permitted successors, transferees
and
assigns. Without limiting the generality of clause (ii) of the immediately
preceding sentence, without notice to any Grantor, the Collateral Agent and
the
Buyers may assign or otherwise transfer their rights and obligations under
this
Agreement and any of the other Transaction Documents in accordance with the
respective Transaction Documents, to any other Person and such other Person
shall thereupon become vested with all of the benefits in respect thereof
granted to the Collateral Agent and the Buyers herein or otherwise. Upon any
such assignment or transfer, all references in this Agreement to the Collateral
Agent or any such Buyer shall mean the assignee of the Collateral Agent or
such
Buyer. None of the rights or obligations of any Grantor hereunder may be
assigned or otherwise transferred without the prior written consent of the
Collateral Agent, and any such assignment or transfer without the consent of
the
Collateral Agent shall be null and void.
(e) Upon
the
indefeasible payment in full of the Obligations, (i) this Agreement and the
security interests created hereby shall terminate and all rights to the
Collateral shall revert to the respective Grantor that granted such security
interests hereunder, and (ii) the Collateral Agent will, upon any Grantor's
request and at such Grantor's expense, (A) return to such Grantor such of the
Collateral as shall not have been sold or otherwise disposed of or applied
pursuant to the terms hereof, and (B) execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such termination,
all without any representation, warranty or recourse whatsoever.
(f) THIS
AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE
LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF
LAW
AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION
AND
THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST CREATED
HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW
YORK.
-22-
(g) ANY
LEGAL
ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO MAY BE BROUGHT IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX IN THE
COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
OF
NEW YORK, AND APPELLATE COURTS THEREOF, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH GRANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO
THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT.
(h) EACH
GRANTOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) THE COLLATERAL
AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OF
THE OTHER TRANSACTION DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
ORAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.
(i) Each
Grantor irrevocably consents to the service of process of any of the aforesaid
courts in any such action, suit or proceeding by the mailing of copies thereof
by registered or certified mail (or any substantially similar form of mail),
postage prepaid, to any Grantor at its address provided herein, such service
to
become effective 10 days after such mailing.
(j) Nothing
contained herein shall affect the right of the Collateral Agent to serve process
in any other manner permitted by law or commence legal proceedings or otherwise
proceed against any Grantor or any property of any Grantor in any other
jurisdiction.
(k) Each
Grantor irrevocably and unconditionally waives any right it may have to claim
or
recover in any legal action, suit or proceeding referred to in this Section
any
special, exemplary, punitive or consequential damages.
(l) Section
headings herein are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
-23-
(m) This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which shall be deemed to be an
original, but all of which taken together constitute one in the same
Agreement.
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
-24-
IN
WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and
delivered by its officer thereunto duly authorized, as of the date first above
written.
|
By:
|
/s/ Xxxxxxxx Xxxxxxxx | ||
|
Name:
Xxxxxxxx Xxxxxxxx
|
|||
|
Title:
President and Chief Executive Officer
|
|||
|
RxElite
Holdings Inc.
|
|||
|
By:
|
/s/ Xxxxxxxx Xxxxxxxx | ||
|
Name:
Xxxxxxxx Xxxxxxxx
|
|||
|
Title:
President and Chief Executive
Officer
|
|||
ACCEPTED
BY:
|
CASTLERIGG
MASTER INVESTMENTS LTD.
|
|||
| By: | XXXXXXX ASST MANAGEMENT CORP. | ||
|
By:
|
/s/ Xxxxxxx Xxxxx | ||
|
Name:
Xxxxxxx Xxxxx
|
|||
|
Title:
Senior Managing Director
|
|||
