Exhibit 4.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is dated and entered into as of June
22, 2001, by and between PILOT THERAPEUTICS, Inc., a North Carolina corporation
("Borrower"), and PHARMABIO DEVELOPMENT INC., a North Carolina corporation
("Lender"). WITNESSETH:
WHEREAS, Borrower and Lender are parties to a Loan Agreement (as
amended, modified or supplemented from time to time, the "Loan Agreement") dated
as of the same date hereof, pursuant to which, among other things, Borrower is
delivering to Lender the Note (as defined in the Loan Agreement); and
WHEREAS, it is a condition precedent to the performance of Lender under
the Loan Agreement that Borrower enter into this Agreement;
NOW, THEREFORE, in consideration of the benefits to Borrower, the
receipt and legal sufficiency of which are hereby acknowledged, Borrower hereby
makes the following representations and warranties to Lender and hereby
covenants and agrees with Lender as follows:
1. Definitions. The following terms, as used in this Agreement, shall
have the following meanings:
"Collateral" shall mean all monies, Contract Rights, Contracts, General
Intangibles, Instruments, Payment Intangibles, Promissory Notes and Receivables,
relating to or arising out of or in connection with any sale, lease, license,
conveyance, transfer or disposition of any right, title or interest in, to or
under the Product or the Covered Intellectual Property, and all Proceeds of any
and all of the foregoing, but excluding the Product itself and the Covered
Intellectual Property itself.
"Contracts" shall mean all contracts, agreements and licenses between
Borrower and one or more other parties.
"Contract Rights" shall mean all rights of Borrower (including, without
limitation, all rights to payment) under each Contract.
"Covered Intellectual Property" shall mean any and all Intellectual
Property which is embodied, used or included in, or which otherwise comprises
or constitutes, the Product.
"General Intangible" shall mean "general intangible" as such term is
defined in the Uniform Commercial Code as in effect on the date hereof and as
in effect from time to time in the State of North Carolina.
"Intellectual Property" shall have the meaning given to such term under
the Loan Agreement.
"Instrument" shall mean "instrument" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof and as in effect from
time to time in the State of North Carolina.
"License Agreement" shall mean the License Agreement between Borrower
and Wake Forest University dated December 11, 1998, as may be amended from time
to time.
"Liens" shall mean any lien, security interest, mortgage, pledge or
encumbrance.
"Obligations" shall mean all indebtedness, obligations and liabilities
of Borrower to Lender arising under or in connection with the Note (as defined
in the Loan Agreement) and under or in connection with each of the Loan
Agreement and the Security Documents.
"Payment Intangible" shall mean "payment intangible" as such term is
defined in the Uniform Commercial Code as in effect on the date hereof and as in
effect from time to time in the State of North Carolina.
"Proceeds" shall mean "proceeds," "cash proceeds" and "noncash
proceeds" as such terms are defined in the Uniform Commercial Code as in effect
on the date hereof and as in effect from time to time in the State of North
Carolina.
"Product" shall have the meaning given to such term under the Loan
Agreement.
"Promissory Note" shall mean "promissory note" as such term is defined
in the Uniform Commercial Code as in effect on the date hereof and as in effect
from time to time in the State of North Carolina.
"Receivable" shall mean any "account" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof and as in effect from
time to time in the State of North Carolina, and, in any event, shall include,
but shall not be limited to, all of Borrower's rights to payment for goods sold,
leased or licensed or services performed by Borrower, whether now in existence
or arising from time to time hereafter, including, without limitation, rights
evidenced by an account, note, contract, security agreement, chattel paper or
other evidence of indebtedness or security, together with (a) all security
pledged, assigned, hypothecated or granted to or held by Borrower to secure the
foregoing, (b) all of Borrower's right, title and interest in and to any goods,
the sale of which gave rise thereto, (c) all guarantees, endorsements and
indemnifications on, or of, any of the foregoing, (d) all powers of attorney for
the execution of any evidence of indebtedness or security or other writing in
connection therewith, (e) all books, records, ledger cards, and invoices
relating thereto, (f) all evidences of the filing of financing statements and
other statements and the registration of other instruments in connection
therewith and amendments thereto, notices to other creditors or secured parties,
and certificates from filing or other registration officers, (g) all credit
information, reports and memoranda relating thereto and (h) all other writings
related in any way to the foregoing.
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"Security Documents" shall mean, collectively, this Agreement and the
financing statements and security interest filing statements described herein.
2. Grant of Security Interests. (a) As security for the prompt and
complete payment and performance of all of the Obligations, Borrower does hereby
assign, transfer, pledge, and hypothecate unto Lender, and does hereby grant to
Lender a continuing security interest of first priority in, all of the right,
title, and interest of Borrower in, to, and under the Collateral.
(b) Lender and Borrower acknowledge and agree that the Covered
Intellectual Property is licensed by Borrower pursuant to the License Agreement
and that such License Agreement contains certain restrictions with respect to
the Covered Intellectual Property. Accordingly, notwithstanding anything in the
Security Documents to the contrary, the Collateral shall not include the Covered
Intellectual Property, any Product, the License Agreement or any of Borrower's
rights, title or interest (including, without limitation, any Contract Rights)
under the License Agreement. In furtherance of and not in limitation of the
foregoing: (i) neither the Collateral nor any component thereof shall include
any item or type of property (personal or real, tangible, intangible or
otherwise) in which the granting of a security interest is prohibited under the
License Agreement; (ii) the security interest granted hereunder is subordinate
in all respects to, and subject to, the rights of Wake Forest University under
the License Agreement (including, without limitation, any and all rights of Wake
Forest University thereunder to receive any royalties or other payments); and
(iii) the rights of Lender under this Agreement shall not conflict with,
diminish or otherwise adversely affect the rights of Wake Forest University
under the License Agreement. Borrower will not, by amendment of the License
Agreement or any other action taken after the date hereof, avoid or diminish or
seek to avoid or diminish the rights of Lender with respect to the Collateral.
(c) The security interest granted pursuant to this Agreement
shall terminate upon a Qualified Financing (as defined in the Loan Agreement),
in which event the Collateral shall be released and Lender shall promptly
deliver and execute or cause to be delivered and executed all termination
statements or other documents as Borrower may reasonably request to terminate
Lender's security interest in the Collateral.
3. Representations and Warranties of Borrower. Borrower represents and
warrants to Lender as follows:
(a) The execution and delivery by Borrower of the Security
Documents, and the performance of the terms and obligations therein, are within
Borrower's corporate powers and have been duly authorized by all necessary
corporate action on the part of Borrower. The Security Documents, when executed
and delivered hereunder, will constitute valid and legally binding obligations
of Borrower enforceable against Borrower in accordance with their terms.
(b) No agreements or contracts relating to the Collateral are
in effect that would likely have a material adverse impact on Borrower's
business relating to the Collateral.
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(c) Borrower is the owner of the Collateral and has good,
valid, marketable and insurable title to the Collateral, free and clear of all
Liens except for those in favor of Lender, subject to the terms of the License
Agreement.
(d) Except for the filing of financing statements with the
State of North Carolina and Forsyth County, North Carolina, and, only in the
case of any patent and trademark matters, filings with the United States Patent
and Trademark Office and, only in the case of any copyright matters, filings
with the United States Copyright Office, necessary to perfect the security
interests created hereunder, no authorization, approval, or other action by, and
no notice to or filing with, any governmental authority or regulatory body is
required either for the grant by Borrower of the security interest hereunder or
for the execution, delivery, or performance of this Agreement by Borrower or for
the perfection of such security interest or the exercise by Lender of its rights
hereunder to the Collateral. Upon the execution of this Agreement and the
completion of such filings, Lender will have a perfected, first priority
security interest in the Collateral.
(e) Neither the execution or delivery by Borrower of the
Security Documents, nor the performance of their respective terms and
obligations, will (i) violate Borrower's charter or bylaws, (ii) constitute a
breach or default under any agreement or instrument to which Borrower is a party
or by which Borrower is bound, which breach or default would have a material
adverse effect on Borrower; (iii) violate any applicable law, rule or
regulation, which violation would have a material adverse effect on Borrower, or
(iv) violate any order, writ, injunction, decree or judgment of any court or
governmental authority applicable to or binding upon Borrower, which violation
would have a material adverse effect on Borrower.
4. Transfer and Other Liens. The provisions of Sections 6.02 and 6.04
of the Loan Agreement are hereby incorporated herein by reference.
5. Other Financing Statements. Borrower represents, warrants and
covenants to and with Lender that: there exists no financing statement (or
similar statement or instrument of registration under the law of any
jurisdiction) covering or purporting to cover any interest of any kind in the
Collateral, and Borrower will not execute or authorize to be filed in any public
office any financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) relating to the Collateral, as
applicable, except financing statements (or similar statements or instruments of
registration under the law of any jurisdiction) filed or to be filed in respect
of and covering the security interests granted to Lender by Borrower.
6. Further Assurances.
(a) Borrower, upon request of Lender, will promptly deliver
and execute or cause to be delivered and executed, in form and content
satisfactory to Lender, any financing, continuation, termination, or security
interest filing statements, security agreement, assignment, or other document as
Lender may reasonably request in order to perfect, preserve, maintain, or
continue the perfection of Lender's security interest in the Collateral, or its
priority, including without limitation any document necessary to record Lender's
security interest in any state or county of any state, the United States Patent
and Trademark Office or the United States
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Copyright Office. Borrower will pay the costs of filing any financing,
continuation, termination, or security interest filing statement, assignment or
other document as well as any recordation or transfer tax required by law to be
paid in connection with the filing or recording thereof.
(b) Borrower will, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to Lender from time to time such lists,
descriptions and designations of its Collateral, documents of title, vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports and
other assurances or instruments and take such further steps relating to the
Collateral and other property or rights covered by the security interest hereby
granted, which Lender deems reasonably appropriate or advisable to perfect,
preserve or protect its security interest in the Collateral.
7. Power of Attorney. Borrower hereby appoints Lender as Borrower's
true and lawful attorney, with full power of substitution, to do any or all of
the following, in the name, place, and stead of Borrower, as the case may be:
(a) file this Agreement (or an abstract hereof) or any other document describing
Lender's interest in the Collateral with any appropriate governmental office
(including, without limitation, the State of North Carolina or any political
subdivision thereof and the United States Patent and Trademark Office or the
United States Copyright Office); and (b) following an Event of Default, (i)
endorse Borrower's name on all applications, documents, papers, and instruments
necessary for Lender to use or maintain the Collateral, as applicable; (ii) ask,
demand, collect, xxx for, recover, impound, receive, and give acquittance and
receipts for money due or to become due under or in respect of any of the
Collateral; (iii) file any claims or take any action or institute any
proceedings that Lender may deem necessary or desirable for the collection of
any of the Collateral, or otherwise enforce Lender's rights with respect to any
of the Collateral; (iv) assign, pledge, convey, or otherwise transfer title in
or dispose of the Collateral, to any person; and (v) take any action and execute
any instrument that Lender may deem necessary or advisable to accomplish the
purposes of this Agreement.
8. Right to Inspect. Borrower grants to Lender and its employees and
agents the right to visit Borrower's plants, corporate offices, and facilities
to inspect the Collateral at reasonable times during regular business hours with
prior written notice to Borrower.
9. Name of Borrower, Place of Business, and Location of Collateral.
Borrower represents and warrants that its correct legal name is as specified on
the signature lines of this Agreement, and each legal or trade name of Borrower
for the previous seven (7) years (if different from Borrower's current legal
name) is as specified below the signature lines of this Agreement. Without the
prior written notice to Lender of at least thirty (30) days, Borrower will not
change its name, dissolve, merge, or consolidate with any other person. Borrower
represents and warrants that the address of its chief executive office is as
specified below the signature lines of this Agreement. The Collateral and all
books and records pertaining thereto will be located at Borrower's chief
executive office specified below. Borrower may establish a new location for the
Collateral or any part thereof, or the books and records concerning the
Collateral or any part thereof, only if (a) it shall have given to Lender prior
written notice of its intention so to do, clearly describing such new location
and providing such other information in connection
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therewith as Lender may request, and (b) with respect to such new location, it
shall have taken all action satisfactory to Lender to maintain the security
interest of Lender in the Collateral intended to be granted hereby at all times
fully perfected and in full force and effect.
10. Taxes. Borrower shall pay as and when due and payable all taxes,
levies, license fees, assessments, and other impositions levied on the
Collateral or any part thereof for its use and operations.
11. Litigation and Proceedings. Borrower shall commence and diligently
prosecute in its own name, as the real party in interest, for its own benefit,
and at its own expense, such suits, administrative proceedings, or other actions
for infringement or other damages as are necessary to protect the Collateral.
Borrower shall provide to Lender any information with respect thereto reasonably
requested by Lender.
12. Rights, Remedies and Agreements upon Event of Default.
(a) Borrower agrees that, if any Event of Default (as defined
in the Loan Agreement) shall have occurred and is continuing, then and in every
such case, Lender, in addition to any rights now or hereafter existing under
applicable law, and upon written notice to Borrower, shall have all rights as a
secured creditor under the Uniform Commercial Code in all relevant jurisdictions
and may:
(i) personally, or by agents or attorneys,
immediately take or retake possession of the Collateral or any
part thereof;
(ii) instruct the obligor or obligors on any
agreement, instrument or other obligation constituting the
Collateral to make any payment required by the terms of such
agreement, instrument or obligation directly to Lender;
(iii) sell, assign or otherwise liquidate, or direct
Borrower to sell, assign or otherwise liquidate, any or all of
the Collateral or any part thereof, and take possession of the
proceeds of any such sale or liquidation; and
(iv) take possession of the Collateral or any part
thereof by directing Borrower in writing to deliver the same
to Lender at any place or places designated by Lender; it
being understood that Borrower's obligation so to deliver the
Collateral is of the essence of this Agreement and that,
accordingly, upon application to a court of equity having
jurisdiction, Lender shall be entitled to a decree requiring
specific performance by Lender of said obligation.
(b) Borrower shall pay on demand all costs and expenses,
including, without limitation, reasonable attorneys' fees and expenses, incurred
by or on behalf of Lender (i) in enforcing the Obligations, and (ii) in
connection with the taking, holding, preparing for sale or other disposition,
selling, managing, collecting, or otherwise disposing of the Collateral. All of
such costs and expenses (collectively, the "Liquidation Costs") together with
interest thereon at the interest rate specified in the Note, from the date of
payment until repaid in full, shall be paid
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by Borrower to Lender on demand and shall constitute and become a part of the
Obligations secured hereby. Any proceeds of sale or other disposition of the
Collateral will be applied by Lender to the payment of Liquidation Costs, and
any balance of such proceeds will be applied by Lender to the payment of the
remaining Obligations in such order and manner of application as Lender may
determine. Borrower hereby grants to Lender, as security for the full and
punctual payment and performance of the Obligations, a continuing security
interest in and lien on all now or hereafter existing balances, credits,
accounts, deposits, and all other sums credited by, maintained with, or due from
Lender or any affiliate of Lender to Borrower; and regardless of the adequacy of
any Collateral or other means of obtaining repayment of the Obligations, Lender
may at any time and without notice to Borrower set off the whole or any portion
or portions of any or all such balances, credits, accounts, deposits, and other
sums against any and all of the Obligations.
(c) If the sale or other disposition of the Collateral fails
to satisfy in full the Obligations, Borrower shall remain liable to Lender for
any deficiency.
(d) Borrower agrees that, if an Event of Default (as defined
in the Loan Agreement) shall have occurred and is continuing under Section
7.01(g) (regarding bankruptcy, etc.) or Section 7.01 (l) (regarding License
Agreement termination) of the Loan Agreement, then and in every such case,
Borrower, acting in good faith, shall (i) use commercially reasonable efforts to
cause Wake Forest University to license to Lender the Covered Intellectual
Property and such other rights with respect to the Product, including without
limitation the rights of Borrower under the License Agreement, as Lender may
reasonably request in order for Lender, in lieu of Borrower or any other party,
to commercialize and market the Product or (ii) in the case of Section 7.01(g)
but not 7.01(l), at the request of Lender, grant an exclusive sublicense to
Lender of all of Borrower's right, title and interest under the License
Agreement.
13. Remedies Cumulative. Each right, power, and remedy of Lender as
provided for in this Agreement or now or hereafter existing at law or in equity
or by statute or otherwise shall be cumulative and concurrent and shall be in
addition to every other right, power, or remedy provided for in this Agreement
or now or hereafter existing at law or in equity or by statute or otherwise, and
the exercise or beginning of the exercise by Lender of any one or more of such
rights, powers, or remedies shall not preclude the simultaneous or later
exercise by Lender of any or all such other rights, powers, or remedies.
14. Amendments, Etc. No amendment or waiver of any provision of this
Agreement, nor consent to any departure by Borrower herefrom, shall in any event
be effective unless the same shall be in writing and signed by Borrower and
Lender, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
15. Notices. All notices and other communications provided for
hereunder shall be in writing, shall specifically refer to this Agreement and
shall be deemed to have been sufficiently given to Borrower and Lender for all
purposes if mailed by first class certified or registered mail, postage prepaid,
express delivery service, personally delivered, or telecopied, to the following
names and addresses:
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If to Lender:
PharmaBio Development Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx Xxxx., Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxx Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Smith, Anderson, Blount, Dorsett, Xxxxxxxx & Xxxxxxxx, L.L.P.
0000 Xxxxx Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
If to Borrower:
Pilot Therapeutics, Inc.
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxx Xxxx
Xxxxxxx-Xxxxx, XX 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxxx & Xxxx, PLLC
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx-Xxxxx, XX 00000
Attention: Xxxxx X. Xxxx
Facsimile: (000) 000-0000
16. No Waiver; Remedies. No failure on the part of Lender to exercise,
and no delay in exercising, any right hereunder or under the Loan Agreement or
the Notes 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 remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
17. Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of Borrower and Lender and their respective successors
and assigns, provided that Borrower may not assign or transfer any or all of its
rights or obligations under the Security Documents without the prior written
consent of Lender, unless such an assignment or transfer is
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effected in connection with the assignment or transfer of Borrower's rights and
obligations under the Loan Agreement as permitted thereunder, in which case no
such consent shall be required.
18. Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of North
Carolina, without reference to the conflicts or choice of law principles
thereof. Borrower and Lender hereby irrevocably consent to the exclusive
personal jurisdiction of any state or federal courts located in North Carolina,
in any action, claim or other proceeding arising out of any dispute in
connection with the Security Documents, any rights or obligations hereunder or
the performance of such rights and obligations. Lender and Borrower agree to
waive their respective rights to a jury trial with respect to any action, claim,
or other proceeding arising out of any dispute in connection with the Security
Documents, any rights or obligations hereunder or thereunder, or the performance
of such rights and obligations.
19. Severability. To the extent any provision of this Agreement is
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
20. Entire Agreement. This Agreement, the other Security Documents, the
Loan Agreement and the Investment and Royalty Agreement between Borrower and
Lender embody the entire agreement and understanding between the parties hereto
and supersede all prior oral or written agreements and understandings relating
to the subject matter hereof. No statement, representation, warranty, covenant
or agreement of any kind not expressly set forth in the Security Documents or
the Loan Agreement shall affect, or be used to interpret, change or restrict,
the express terms and provisions of the Security Documents.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which,
when taken together, shall constitute one and the same instrument.
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SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed by their respective duly authorized officers, as
of the date first above written.
BORROWER:
PILOT THERAPEUTICS, INC.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------
Name: Xxxxx X. Xxxxxxx
Title: CEO
Legal or tradename of Borrower for the previous seven (7) years
---------------------------------------------------------------
Pilot Therapeutics, Inc.
Pilot Biotechnologies, Inc.
Pinnacle Biotechnologies, Inc.
Address of chief executive office of Borrower
---------------------------------------------
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxx Xxxx
Xxxxxxx-Xxxxx, XX 00000
LENDER:
PHARMABIO DEVELOPMENT INC.
By: /s/ Xxx Xxxxxxx
-----------------------
Name: Xxx Xxxxxxx
Title: VP & General Council
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