THIS AGREEMENT IS SUBJECT TO THE TERMS OF THAT CERTAIN INTERCREDITOR AGREEMENT
OF EVEN DATE HEREWITH BY AND AMONG THE PARTIES HERETO, CO-LENDER, THE HUNTINGTON
NATIONAL BANK AND SUPERIOR PHARMACEUTICAL COMPANY.
SECURITY AGREEMENT
(Borrower)
THIS SECURITY AGREEMENT ("Agreement"), dated as of the 18th day of
June, 1997, is made and entered into by and between DYNAGEN, INC., a Delaware
corporation ("Borrower"), and SIRROM CAPITAL CORPORATION, a Tennessee
corporation ("Lender"), for itself and as agent for ODYSSEY INVESTMENT PARTNERS,
L.P., a Pennsylvania limited partnership ("Co-Lender").
WITNESSETH:
WHEREAS, Lender and Co-Lender have agreed to make a loan (the "Loan")
in the aggregate amount of $3,000,000 to Borrower, pursuant to that certain Loan
Agreement of even date herewith by and between Borrower, Lender and Co-Lender
(the "Loan Agreement"); and
WHEREAS, in connection with the making of the Loan, Lender desires to
obtain from Borrower and Borrower desires to grant to Lender, for itself and as
agent for Co- Lender, a security interest in certain collateral more
particularly described below.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Security Interest. Borrower hereby grants to Lender, for
itself and as agent for Co-Lender, a security interest in the following
described property and any and all proceeds (although proceeds are covered,
Lender does not authorize the sale of any of the following, except to the extent
permitted under Sections 10 and 11 hereof) and products thereof and accessions
thereto (collectively, the "Collateral"):
(a) Equipment. All equipment and other tangible personal
property of Borrower of any kind and description, whether now owned or
hereafter acquired and wherever located, together with all parts,
accessories and attachments and all replacements thereof and additions
thereto;
(b) Inventory, Accounts, Contract Rights, Chattel Paper,
Documents, Instruments and General Intangibles. All of Borrower's
inventory and any agreements for lease of same and rentals therefrom,
and all of Borrower's accounts, accounts receivable, contract rights,
chattel paper, software, documents, instruments and general intangibles
(including goodwill, but excluding patents, trademarks, copyrights and
other intellectual property) and the proceeds therefrom, whether now in
existence or owned or hereafter arising or acquired, entered into or
created, and wherever located; and whether held for lease or sale, or
furnished or to be furnished under contracts of service.
The term "Collateral" shall not include the shares of capital
stock of any Subsidiary (as defined in the Loan Agreement) owned by Borrower or
any assets of such Subsidiaries.
2. Secured Indebtedness. The obligations secured hereby shall include
(a) loans to be made concurrently or in connection with this Agreement or the
Loan Agreement as evidenced by one or more promissory notes payable to the order
of Lender and/or Co- Lender that shall be due and payable as set forth in such
promissory notes, and any renewals or extensions thereof, (b) the full and
prompt payment and performance of any and all other indebtedness and other
obligations of Borrower to Lender and/or Co-Lender, direct or contingent
(including but not limited to obligations incurred as indorser, guarantor or
surety), however evidenced or denominated, and however and whenever incurred,
including but not limited to indebtedness incurred pursuant to any present or
future commitment of Lender and/or Co-Lender to Borrower and any and all future
advances regardless of the class of such future advances, and (c) all future
advances made by Lender and/or Co-Lender for taxes, levies, insurance and
preservation of the Collateral and all attorney's fees, court costs and expenses
of whatever kind incident to the collection of any of said indebtedness or other
obligations and the enforcement and protection of the security interest created
hereby.
3. Representations, Warranties and Agreements of Borrower. Borrower
represents, warrants and agrees as follows:
(a) Borrower will promptly notify Lender, in writing, of any
change in Borrower's place or places of business if the Collateral is
used in business, or of any change in Borrower's residence if the
Collateral is not used in business, and regardless of use, of any
change in the location of the Collateral or any records pertaining
thereto.
(b) Except as set forth on Schedule 2.1(l) of the Loan
Agreement, Borrower is the owner of the Collateral free and clear of
any liens, security interests, claims and encumbrances, contingent or
otherwise. Borrower will defend the Collateral against the claims and
demands of all persons.
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(c) Borrower will pay to Lender and Co-Lender, amounts secured
hereby as and when the same shall be due and payable, whether at
maturity, by acceleration or otherwise, and will promptly perform all
terms of said indebtedness and this or any other security or loan
agreement between Borrower, Lender and/or Co-Lender, and will promptly
discharge all said liabilities.
(d) Borrower will at all times keep the Collateral insured
against all insurable hazards in amounts equal to the full cash value
of the Collateral. Such insurance shall be obtained from such companies
as may be acceptable to Lender, with provisions satisfactory to Lender
for payment of all losses thereunder to Lender as its interests may
appear. If required by Lender, Borrower shall deposit the policies with
Lender unless the possession of such policy is required by a senior
lender, in which case Borrower shall deposit copies thereof with
Lender. If an Event of Default (as defined in the Loan Agreement) has
occurred and is continuing, any money received by Lender under said
policies may be applied to the payment of any indebtedness secured
hereby, whether or not due and payable, otherwise said money shall be
delivered by Lender to Borrower for the purpose of repairing or
restoring the Collateral. Borrower assigns to Lender all right to
receive proceeds of insurance not exceeding the amounts secured hereby,
directs any insurer to pay all proceeds directly to Lender, and
appoints Lender Borrower's attorney in fact to endorse any draft or
check made payable to Borrower in order to collect the benefits of such
insurance. If Borrower fails to keep the Collateral insured as required
by Lender, Lender shall have the right to obtain such insurance at
Borrower's expense and add the cost thereof to the other amounts
secured hereby.
(e) Borrower will pay all costs of filing of financing,
continuation and termination statements with respect to the security
interests created hereby, and Lender is authorized to do all things
that it deems necessary to perfect and continue perfection of the
security interests created hereby and to protect the Collateral.
(f) The address set forth after Borrower's signature on this
Agreement is Borrower's principal place of business and the location
where the records concerning all intangible Collateral are kept and/or
maintained. The addresses set forth on Schedule 2.1(ad) of the Loan
Agreement are all of the locations where Borrower does business and the
locations of all tangible Collateral.
4. Default. Borrower shall be in default upon the occurrence of an
Event of Default under the Loan Agreement.
5. Remedies Upon Default. Upon the occurrence of an Event of Default
(as defined in the Loan Agreement), all sums secured hereby shall immediately
become due and payable at Lender's option without notice to Borrower, and Lender
may proceed to enforce payment of same and to exercise any and all rights and
remedies provided by the Uniform Commercial Code (Tennessee) or other applicable
law, as well as all other rights and remedies possessed by Lender, all of which
shall be cumulative. Upon the occurrence of an
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Event of Default and upon demand by Lender, Borrower shall assemble the
Collateral and make it available to Lender at a place reasonably convenient to
Lender and Borrower. Any notice of sale, lease or other intended disposition of
the Collateral by Lender sent to Borrower at the address hereinafter set forth,
or at such other address of Borrower as may be shown on Lender's records, at
least five (5) business days prior to such action, shall constitute reasonable
notice to Borrower.
Lender may waive any default before or after the same has been declared
without impairing its right to declare a subsequent default hereunder, this
right being a continuing one.
6. Severability. If any provision of this Agreement is held invalid,
such invalidity shall not affect the validity or enforceability of the remaining
provisions of this Agreement.
7. Binding Effect. This Agreement shall inure to the benefit of
Lender's and Co- Lender's successors and assigns and shall bind Borrower's
heirs, representatives, successors and assigns. If Borrower is composed of more
than one person, firm and/or entity, their obligations hereunder shall be joint
and several.
8. Termination Statement. Borrower agrees that, notwithstanding the
payment in full of all indebtedness secured hereby and whether or not there is
any outstanding obligation of Lender and Co-Lender to make future advances,
Lender shall not be required to send Borrower a termination statement with
respect to any financing statement filed to perfect Lender's security
interest(s) in any of the Collateral, unless and until Borrower shall have made
written demand therefor. Upon receipt of proper written demand, Lender may at
its option, in lieu of sending a termination statement to Borrower, cause said
termination statement to be filed with the appropriate filing officer(s).
9. Protection of Collateral. Except for Permitted Liens (as defined in
the Loan Agreement), Borrower will not permit any liens or security interests
other than those created by this Agreement to attach to any of the Collateral,
nor permit any of the Collateral to be levied upon under any legal process, nor
permit anything to be done that may impair the security intended to be afforded
by this Agreement, nor permit any tangible Collateral to become attached to or
commingled with other goods without the prior written consent of Lender.
10. Special Agreements With Respect to Certain Tangible Collateral.
Borrower additionally agrees and warrants as follows:
(a) Borrower will not permit any of the Collateral to be
removed from the location specified herein, except for temporary
periods in the normal and customary use thereof, without the prior
written consent of Lender, and will permit Lender to inspect the
Collateral during business hours upon reasonable prior notice.
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(b) If any of the Collateral is equipment or goods of a type
normally used in more than one state (whether or not actually so used),
Borrower will contemporaneously herewith furnish Lender a list of the
states wherein such equipment or goods are or will be used, and
hereafter will notify Lender in writing (i) of any other states in
which such equipment or goods are so used, and (ii) of any change in
the location of Borrower's principal place of business.
(c) Borrower will not sell, exchange, lease or otherwise
dispose of any of the Collateral or any interest therein (except in the
ordinary course of conduct of its business) without the prior written
consent of Lender.
(d) Borrower will keep the Collateral in good condition and
repair and will pay and discharge all taxes, levies and other
impositions levied thereon as well as the cost of repairs to or
maintenance of same, and will not permit anything to be done that may
impair the value of any of the Collateral. If Borrower fails to pay
such sums, Lender may do so for Borrower's account and add the amount
thereof to the other amounts secured hereby.
(e) Until default in any of the terms hereof, or the terms of
any indebtedness secured hereby, Borrower shall be entitled to
possession of the Collateral and to use the same in any lawful manner,
provided that such use does not cause excessive wear and tear to the
Collateral, cause it to decline in value at an excessive rate, or
violate the terms of any policy of insurance thereon.
(f) Borrower will not allow the Collateral to be attached to
real estate in such manner as to become a fixture or a part of any real
estate.
11. Special Agreements With Respect to Intangible and Certain Tangible
Collateral. Borrower additionally warrants and agrees as follows:
(a) So long as Borrower is not in default hereunder, Borrower
shall have the right to process and sell Borrower's inventory in the
regular course of business. Lender's security interest hereunder shall
attach to all proceeds of all sales or other dispositions of the
Collateral. If at any time any such proceeds shall be represented by
any instruments, chattel paper or documents of title, then such
instruments, chattel paper or documents of title shall be promptly
delivered to Lender and shall be subject to the security interest
granted hereby. If at any time any of Borrower's inventory is
represented by any document of title, such document of title will be
delivered promptly to Lender and shall be subject to the security
interest granted hereby.
(b) By the execution of this Agreement, Lender shall not be
obligated to do or perform any of the acts or things provided in any
contracts covered hereby that are to be done or performed by Borrower,
but if there is a default by Borrower in the payment of any amount due
in respect of any indebtedness secured hereby, then
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Lender may, at its election, perform some or all of the obligations
provided in said contracts to be performed by Borrower, and if Lender
incurs any liability or expenses by reason thereof, the same shall be
payable by Borrower upon demand and shall also be secured by this
Agreement.
(c) At any time after Borrower is in default hereunder or
under the Loan Agreement, Lender shall have the right to notify the
account debtors obligated on any or all of Borrower's accounts
receivable to make payment thereof directly to Lender, and to take
control of all proceeds of any such accounts receivable. Until such
time as Lender elects to exercise such right by mailing to Borrower
written notice thereof, Borrower is authorized, as agent of the Lender,
to collect and enforce said accounts receivable.
12. Power of Attorney. Borrower hereby constitutes the Lender or its
designee, as Borrower's attorney-in-fact with power, upon the occurrence and
during the continuance of an Event of Default, to endorse Borrower's name upon
any notes, acceptances, checks, drafts, money orders, or other evidences of
payment or Collateral that may come into either its or the Lender's possession;
to sign the name of Borrower on any invoice or ▇▇▇▇ of lading relating to any of
the accounts receivable, drafts against customers, assignments and verifications
of accounts receivable and notices to customers; to send verifications of
accounts receivable; to notify the Post Office authorities to change the address
for delivery of mail addressed to Borrower to such address as the Lender may
designate; to execute any of the documents referred to in Section 3(e) hereof in
order to perfect and/or maintain the security interests and liens granted herein
by Borrower to the Lender; and to do all other acts and things necessary to
carry out this Security Agreement. All acts of said attorney or designee are
hereby ratified and approved, and said attorney or designee shall not be liable
for any acts of commission or omission (other than acts of gross negligence or
willful misconduct), nor for any error of judgment or mistake of fact or law;
this power being coupled with an interest is irrevocable until all of the
obligations secured hereby are paid in full and any and all promissory notes
executed in connection therewith are terminated and satisfied.
13. Governing Law and Amendments. This Agreement and all of the Loan
Documents shall be construed and enforced under the laws of the State of
Tennessee applicable to contracts to be wholly performed in such State. No
amendment or modification hereof shall be effective except in a writing executed
by each of the parties hereto.
14. Survival of Representations and Warranties. All representations and
warranties contained herein or made by or furnished on behalf of the Borrowers
in connection herewith shall survive the execution and delivery of this
Agreement.
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15. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
16. Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that the Borrower, Lender and their respective agents have participated in the
preparation hereof.
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement,
or have caused this Agreement to be executed as of the date first above written.
BORROWER:
DYNAGEN, INC.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Title: Executive Vice President
--------------------------------
Address: ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
LENDER:
SIRROM CAPITAL CORPORATION, a Tennessee
corporation, for itself and in its
capacity as Collateral Agent for
Co-Lender and itself
By: /s/ [Illegible]
--------------------------------
Title: Vice President
--------------------------------
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