SECURITY AGREEMENT Dated as of September 22, 2008 between FORTICELL BIOSCIENCE, INC., as Grantor, and PAUL ROYALTY FUND, L.P., as Grantee
Execution
Copy
Dated
as
of September 22, 2008
between
as
Grantor,
and
▇▇▇▇
ROYALTY FUND, L.P.,
as
Grantee
TABLE
OF CONTENTS
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Page
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ARTICLE
I DEFINITIONS
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1
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Section
1.1.
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Certain
Terms.
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1
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Section 1.2.
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Sale
Agreement Definitions.
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2
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Section
1.3.
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UCC
Definitions.
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2
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Section
1.4.
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Other
Interpretive Provisions.
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3
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ARTICLE
II SECURITY INTEREST
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3
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Section
2.1.
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Grant
of Security.
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3
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Section
2.2.
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Continuing
Security Interest.
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4
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Section
2.3.
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Grantor
Remains Liable.
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5
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ARTICLE
III REPRESENTATIONS AND WARRANTIES
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5
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Section
3.1.
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Location
of Collateral, etc.
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5
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Section
3.2.
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Ownership;
No Liens.
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5
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Section
3.3.
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Validity.
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6
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Section
3.4.
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Intellectual Property.
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6
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Section
3.5.
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Authorization,
Approval.
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6
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Section
3.6.
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Enforceability.
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6
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ARTICLE
IV COVENANTS
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6
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Section
4.1.
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As
to Receivables.
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7
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Section
4.2.
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Insurance.
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8
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Section
4.3.
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Intellectual Property.
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8
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Section
4.4.
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Transfers
and Other Liens.
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8
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Section
4.5.
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Further
Assurances.
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9
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Section
4.6.
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General
Covenants.
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9
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ARTICLE
V RIGHTS AND DUTIES OF GRANTEE
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10
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Section
5.1.
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Grantee
Appointed Attorney-in-Fact.
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10
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Section
5.2.
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Grantee
May Perform.
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10
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Section
5.3.
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Limitations
on Duties of Grantee.
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11
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Section 5.4.
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Reasonable
Care.
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11
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ARTICLE
VI REMEDIES
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11
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Section
6.1.
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Certain
Remedies.
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11
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i
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ARTICLE
VII MISCELLANEOUS PROVISIONS
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12
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Section
7.1.
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Amendments.
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12
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Section 7.2.
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Release
of Collateral.
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13
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Section
7.3.
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Notices.
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13
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Section 7.4.
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Waiver;
Cumulative Remedies.
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14
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Section
7.5.
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Successors
and Assigns.
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14
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Section
7.6.
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Counterparts.
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14
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Section
7.7.
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Severability.
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14
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Section
7.8.
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Governing
Law and Jurisdiction.
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15
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Section
7.9.
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Waiver
of Jury Trial.
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15
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Exhibit
A
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Form
of Patent Security Agreement
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Schedules
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Schedule
I
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Locations
of Certain Collateral
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Offices
For Filing Financing Statements
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Schedule
3.1
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Names
and Corporate Reorganizations and Mergers
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Schedule
3.2
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Lien
Exceptions
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ii
SECURITY
AGREEMENT
(as
amended, supplemented or otherwise modified from time to time, this
"Security
Agreement"),
is
dated as of September 22, 2008 and entered into between FORTICELL
BIOSCIENCE, INC.,
a
Delaware corporation (the
"Grantor"),
and
▇▇▇▇ ROYALTY FUND, L.P.,
a
Delaware limited partnership (the "Grantee").
RECITALS
WHEREAS,
Grantor and Grantee have entered into an Agreement dated as of September 22,
2008 (the "Sale
Agreement")
pursuant to which Grantee is selling, and Grantor is purchasing and redeeming,
the Securities (as defined in the Sale Agreement) for consideration, including
payment by Grantor of the Deferred Purchase Price (as defined in the Sale
Agreement), subject to the terms and conditions in the Sale
Agreement;
WHEREAS,
in order to induce Grantee to enter into the Sale Agreement, Grantor is entering
into this Agreement as Security for the payment and performance by Grantor
of
its obligations under the Sale Agreement; and
WHEREAS,
it is a condition precedent to Grantee's entering into the Sale Agreement and
selling the Securities to Grantor that Grantor grant to Grantee the security
interests contemplated by this Agreement.
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, Grantor hereby agrees, for the benefit of
Grantee, as follows:
ARTICLE
I
DEFINITIONS
Section
1.1. Certain
Terms.
The
following terms (whether or not underscored) when used in this Security
Agreement, including its preamble and recitals, shall have the following
meanings:
"Account"
shall
have the meaning as provided in the UCC.
"Collateral"
shall
have the meaning set forth in Section 2.1.
"Event
of Default"
shall
mean there has occurred a breach or default by Grantor of any of the
Obligations.
"General
Intangible"
shall
have the meaning as provided in the UCC.
"Grantee"
shall
have the meaning set forth in the preamble hereto.
"Grantor"
shall
have the meaning set forth in the preamble hereto.
"Instrument"
shall
have the meaning as provided in the UCC.
"Intellectual
Property"
shall
have the meaning set forth in the Sale Agreement.
"Obligations"
shall
mean any and all obligations of Grantor under the Sale Agreement, including
the
obligation to pay the Deferred Purchase Price, and the Security
Documents.
"Patent
License"
means
any written agreement now or hereafter in existence granting to Grantor any
right to use any invention on which a patent is in existence.
"Patent
Security Agreement"
means
the Patent Security Agreement executed and delivered by Grantor to Grantee
and
attached hereto as Exhibit A, as such agreement may be amended, supplemented
or
otherwise modified from time to time.
"Proceeds"
shall
have the meaning as provided in the UCC.
"Receivables"
shall
have the meaning set forth in Section 2.1(c).
"Sale
Agreement"
shall
have the meaning set forth in the recitals hereto.
"Security
Agreement"
shall
have the meaning set forth in the preamble hereto.
"Security
Documents"
shall
mean this Security Agreement and the Patent Security Agreement.
"UCC"
means
the Uniform Commercial Code as in effect on the date hereof in the State of
New
York, as amended from time to time, and any successor statute; provided
that if
by reason of mandatory provision of law, the perfection or the effect of
perfection or non-perfection of the security interest in the Collateral is
governed by the Uniform Commercial Code of another jurisdiction, "UCC" means
the
Uniform Commercial Code as in effect in such other jurisdiction for purposes
of
the provision hereof relating to such perfection or effect of perfection or
non-perfection.
Section
1.2. Sale
Agreement Definitions.
Unless
otherwise defined herein or the context otherwise requires, terms used in this
Security Agreement, including its preamble and recitals, have the meanings
provided in the Sale Agreement.
Section
1.3. UCC
Definitions.
Unless
otherwise defined herein or the context otherwise requires, terms for which
meanings are provided in the UCC are used in this Security Agreement, including
its preamble and recitals, with such meanings.
2
Section
1.4. Other
Interpretive Provisions.
(a) The
meanings of defined terms are equally applicable to the singular and plural
forms of the defined terms.
(b) The
words
"hereof," "herein," "hereunder" and similar words refer to this Security
Agreement as a whole and not to any particular provision of this Security
Agreement; and subsection, Section, Schedule, and Exhibit references are to
this
Security Agreement unless otherwise specified.
(c) (i) The
term
"documents" includes any and all instruments, documents, agreements,
certificates, indentures, notices and other writings, however
evidenced.
(ii) The
term
"including" is not limiting and means "including without
limitation".
(iii) The
term
"property" includes any kind of property or asset, personal or mixed, tangible
or intangible, other than real property.
(d) Unless
otherwise expressly provided herein, (i) references to agreements
(including this Security Agreement) and other contractual instruments shall
be
deemed to include all subsequent amendments and other modifications thereto,
but
only to the extent such amendments and other modifications are not prohibited
by
the terms of this Security Agreement, and (ii) references to any statute or
regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, supplementing, or interpreting
the statute or regulation.
(e) The
captions and headings of this Security Agreement are for convenience of
reference only and shall not affect the interpretation of this Security
Agreement.
ARTICLE
II
SECURITY
INTEREST
Section
2.1. Grant
of Security.
As
collateral security for the prompt, full and faithful payment and performance
when due of the Obligations, Grantor hereby assigns, pledges, transfers and
grants to Grantee a continuing lien on and a security interest in all of
Grantor's right, title, and interest in and to the following property, wherever
the same may be now or hereafter located, whether now owned or hereafter
existing or acquired (the "Collateral"):
(a) all
Intellectual Property (but with respect to Patents and Patent applications
and
trademark applications and registrations, only those registered and filed in
the
United States);
3
(b) all
contracts, agreements, Patent Licenses, and any other documents relating thereto
now or hereafter in effect, as they may be amended or otherwise modified from
time to time, that relate to the Intellectual Property or cryo-preserved or
fresh Orcel products (any and all such contracts, agreements, Patent Licenses
and documents being the "Agreements");
(c) all
Accounts, contract rights, payment intangibles, Instruments, and General
Intangibles, in each case, constituting, comprising, evidencing or otherwise
relating to any of the foregoing Collateral (any and all such Accounts, contract
rights, payments intangibles, Instruments, and General Intangibles being the
"Receivables");
(d) all
books, records, data bases, and information, in each case, specifically relating
to any of the foregoing Collateral;
(e) all
money
now or at any time in the possession or under the control of, or in transit
to
Grantee or Grantor relating to any of the foregoing Collateral; and
(f) all
products and Proceeds of and from any and all of the foregoing Collateral,
all
proceeds which constitute property of the types described in clauses (a)
through (e) and, to the extent not otherwise included, all payments under
insurance (whether or not Grantee is the loss payee thereof), including return
premiums with respect thereto, or any indemnity, warranty, or guaranty payable
by reason of loss or damage to or otherwise with respect to any of the foregoing
Collateral;
provided,
however,
that
the term "Collateral" shall not include, and Grantor shall not be deemed to
have
granted a security interest in, any of Grantor's right, title or interest in,
or
any rights under, any contract or other agreement existing on the Closing Date
to the extent that such grant would result in a breach of a term of such
contract or agreement prohibiting such grant without the consent of the other
party thereto, other than to the extent that any such term would be rendered
ineffective pursuant to Section 9-406 of the UCC.
Section
2.2. Continuing
Security Interest.
This
Security Agreement shall create a continuing security interest in the Collateral
and shall:
(a) remain
in
full force and effect until the payment and performance in full of all the
Obligations;
(b) be
binding upon Grantor and its successors, transferees and assigns; and
(c) inure,
together with the rights and remedies of Grantee, to the benefit of Grantee
and
its successors and assigns.
Upon
the
payment and performance in full of the Obligations, the security interest
granted herein shall terminate and all rights to the Collateral shall revert
to
Grantor. Upon any such termination, Grantee will, at Grantor's sole expense,
promptly execute and deliver to Grantor such instruments and documents necessary
and as Grantor shall reasonably request to evidence such termination.
4
Section
2.3. Grantor
Remains Liable.
Anything
herein to the contrary notwithstanding:
(a) Grantor
shall remain liable under the contracts and agreements included in the
Collateral to the extent set forth therein and shall perform all of its duties
and obligations under such contracts and agreements to the same extent as if
this Security Agreement had not been executed;
(b) the
exercise by Grantee of any of its rights and remedies hereunder shall not
release Grantor from any of its duties or obligations under any such contracts
or agreements included in the Collateral; and
(c) Grantee
shall not have any obligation or liability under any such contracts or
agreements included in the Collateral by reason of this Security Agreement,
and
Grantee shall not be obligated to perform or fulfill any of the obligations
or
duties of Grantor thereunder or to take any action to collect or (x) to make
any
inquiry as to the nature or sufficiency of any payment Grantor may be entitled
to receive thereunder; (y) present or file and claim or (z) enforce any claim
for payment assigned hereunder.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
Grantor
represents and warrants to Grantee as follows:
Section
3.1. Location
of Collateral, etc.
(a) On
the
date hereof, the place(s) of business and chief executive office of Grantor
and
the office(s) where Grantor keeps its records concerning the Receivables are
located at the addresses set forth on Item A of Schedule I.
(b) Grantor
has no trade name.
(c) Except
as
set forth on Schedule
3.1,
during
the past five years, Grantor has not been known by any name different from
the
one set forth on the signature page hereto, and Grantor has not been the subject
of any merger or other corporate reorganization.
(d) None
of
the Receivables is evidenced by a promissory note or other instrument.
5
Section
3.2. Ownership;
No Liens.
Grantor
owns the Collateral free and clear of any Liens except for the security interest
created by this Security Agreement and except as set forth on Schedule
3.2.
No
effective security agreement, financing statement, assignment, equivalent
security, lien or other instrument similar in effect covering all or any part
of
the Collateral is on file or of record in any public office, except such as
may
have been filed in favor of Grantee relating to this Security Agreement and
except as set forth on Schedule
3.2.
Section
3.3. Validity.
This
Security Agreement creates a valid security interest in the Collateral securing
the payment and performance in full of the Obligations. Upon the filing of
appropriate financing statements in the applicable filing offices in the
jurisdictions listed in Schedule
II,
all
filings, registrations and recordings necessary or appropriate to create,
preserve, protect and perfect the first priority security interest granted
by
Grantor to Grantee in the Collateral will have been accomplished and will create
a perfected security interest therein prior to the rights of all other Persons
therein and subject to no other Liens.
Section
3.4. Intellectual Property.
The
Patents constitute all registered Intellectual Property owned or used by Grantor
and the Agreements constitute all agreements relating to Intellectual Property
owned or used by Grantor. The execution, delivery and performance of this
Security Agreement by Grantor will not violate or cause a default under any
of
the Intellectual Property or any material agreement in connection
therewith.
Section
3.5. Authorization,
Approval.
No
authorization, approval, or other action by, and no notice to or filing with,
any Government Authority or other Person is required either:
(a) for
the
grant by Grantor of the security interest granted hereby or for the execution,
delivery, and performance of this Security Agreement by Grantor; or
(b) for
the
perfection of or exercise by Grantee of its rights and remedies hereunder,
other
than the filing of financing statements in the offices listed in Schedule II.
Section
3.6. Enforceability.
This
Security Agreement is the legally valid and binding obligation of Grantor,
enforceable against Grantor in accordance with its terms.
6
ARTICLE
IV
COVENANTS
Grantor
hereby covenants and agrees that, so long as this Security Agreement shall
remain in effect, Grantor agrees to the following:
Section
4.1. As
to
Receivables.
(a) Grantor
shall keep its place(s) of business and its chief executive office and the
office(s) where it keeps its books and records (including those concerning
the
Receivables) and all original copies of the Agreements located, in each case,
at
its address specified in Schedule
I,
or,
upon 30 days' prior written notice to Grantee, at such other locations in a
jurisdiction where all actions required by the first sentence of Section 4.4
shall have been taken with respect to the Receivables and the License
Agreements; not change its name or its state or place of incorporation or
organization except upon 30 days' prior written notice to Grantee; and hold
and
preserve such books and records.
(b) Except
as
otherwise provided in this subsection (b), until an Event of Default has
occurred and is continuing, Grantor shall continue to collect, at its own
expense, all amounts due or to become due Grantor under the Agreements. In
connection with such collections, provided no Event of Default shall have
occurred and be continuing, Grantor may take (and, at Grantee's direction,
shall
take) such action as Grantor may deem necessary or advisable to enforce
collection of the Agreements. At any time after an Event of Default has occurred
and is continuing, Grantee shall have the right to notify the account debtors
or
obligors under any Receivables of the security interest of Grantee in such
Receivables to Grantee and to direct such account debtors or obligors to make
payment to Grantee of any amounts due or to become due thereunder and enforce
collection of any of the Receivables by suit or otherwise and surrender, release
or exchange all or any part thereof, or adjust, settle or compromise or extend
or renew for any period (whether or not longer than the original period) any
indebtedness thereunder or evidenced thereby. If an Event of Default has
occurred and is continuing, upon the request of Grantee, Grantor will, at its
own expense, notify any parties obligated on any of the Receivables to make
payment to Grantee of any amounts due or to become due thereunder, and in such
event, Grantee is authorized to endorse, in the name of Grantor, any item
representing any payment on or other proceeds of any of the Receivables.
(c) After
delivery to Grantor by Grantee of a notice that an Event of Default has occurred
and is continuing: (i) all amounts and proceeds (including Instruments)
received by Grantor in respect of any Receivables shall be received in trust
for
the benefit of Grantee hereunder, shall be segregated from other funds of
Grantor, and shall be forthwith paid over to Grantee in the same form as so
received (with any necessary endorsements) to be held as cash collateral and
applied as provided by this Security Agreement; and (ii) Grantor shall not
adjust, settle, or compromise the amount or payment of any Receivable, or
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon.
7
(d) After
the
occurrence and during the continuance of an Event of Default, (A) Grantee may
in
its own name or in the name of others communicate with account debtors in order
to verify with them to Grantee's reasonable satisfaction the existence, amount
and terms of any Receivables and (B) Grantee shall have the right, at Grantor's
expense, to make test verifications of the Receivables in any reasonable manner
and through any medium that it considers advisable, and Grantor agrees to
furnish all such assistance as Grantee may reasonably require in connection
therewith.
Section
4.2. Insurance.
Grantor
will maintain or cause to be maintained at all times insurance against loss
or
damage sufficient to cover all the Collateral that are of an insurable nature
to
the same extent assets of a similar character are usually so insured by
companies similarly situated and owning like assets, with insurers believed
by
Grantor to be responsible and reputable. If an Event of Default exists at the
time any insurance proceeds relating to the Collateral are received, all such
proceeds shall be paid to Grantee for application in accordance with the terms
and conditions of this Security Agreement.
Section
4.3. Intellectual Property.
Grantor
shall concurrently herewith deliver to Grantee the Patent Security Agreement
and
all other documents, instruments and other items as may be necessary for Grantee
to file such agreements with the United States Patent and Trademark Office
and
any similar domestic or foreign office, department or agency. If, before the
Obligations are paid in full, Grantor obtains any new Intellectual Property
or
rights thereto or becomes entitled to the benefit of any Intellectual Property
not listed on the schedules to each security agreement, Grantor shall give
to
Grantee prompt written notice thereof, and shall amend the respective security
agreement to include any such new Intellectual Property. Grantor shall: (a)
preserve and maintain all rights in the Intellectual Property; and (b) upon
and
after the occurrence of an Event of Default, use its best efforts to obtain
any
consents, waivers or agreements necessary to enable Grantor to exercise its
remedies with respect to the Intellectual Property. Grantor shall not abandon
any right to file a patent or trademark application relating to the Intellectual
Property nor shall Grantor abandon any pending patent or trademark application
or patent, trademark or copyright (including without limitation any Patents
or
Patent Licenses) without the prior written consent of Grantee.
Section
4.4. Transfers
and Other Liens.
Grantor
shall not:
(a) grant
a
security interest in the Collateral that in any way conflicts with Grantee's
security interest pursuant to this Security Agreement or any of Grantee's rights
under this Security Agreement, including without limitation, the exercise of
remedies hereunder; or
(b) sell,
assign (by operation of law or otherwise), lease, transfer or otherwise dispose
of any of, or grant any Person an option with respect to, the Collateral.
8
Section
4.5. Further
Assurances.
Grantor
agrees that, from time to time at its own cost and expense, Grantor will
promptly execute and deliver and will cause to be executed and delivered all
further instruments, assignments, notices, agreements and documents, including,
without limitation, financing and continuation statements, and will take all
further action and will cause all further action to be taken, that may be
reasonably necessary or desirable, or that Grantee may reasonably request,
in
order to create, preserve, perfect and protect any security interest granted
or
purported to be granted hereby and the priority thereof or to enable Grantee
to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing Grantor
will:
(a) if
any
Collateral shall be evidenced by a promissory note or other instrument or
negotiable document, deliver and pledge to Grantee hereunder such promissory
note, instrument or negotiable document duly endorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and substance
reasonably satisfactory to Grantee;
(b) execute
and file, record or register such financing or continuation statements, or
amendments thereto, and such other instruments, assignments or notices, as
may
be necessary or desirable, or as Grantee may request, in order to create,
preserve, perfect and protect the security interests and other rights granted
or
purported to be granted to Grantee;
(c) furnish
to Grantee, from time to time, statements and schedules further identifying
and
describing the Collateral and such other reports in connection with the
Collateral as Grantee may reasonably request, and all in reasonable detail;
and
(d) at
Grantee's request, appear in and defend any action or proceeding that may affect
Grantor's title to or Grantee's security interest in the
Collateral.
With
respect to the foregoing and the grant of the security interest hereunder,
Grantor hereby authorizes Grantee to file one or more financing or continuation
statements, and amendments thereto, relative to all or any part of the
Collateral without the signature of Grantor where permitted by law. A carbon,
photographic, or other reproduction of this Security Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as
a
financing statement where permitted by law.
Section
4.6. General
Covenants.
Without
limiting any of the foregoing covenants, Grantor agrees (a) not to use or permit
any Collateral to be used unlawfully or in material violation of any provision
of this Security Agreement, any other Transaction Document or any applicable
statute, regulation or ordinance or any policy of insurance covering the
Collateral; and (b) to pay promptly when due all taxes, assessments, charges,
encumbrances and Liens now or hereafter imposed upon or affecting any
Collateral.
9
ARTICLE
V
RIGHTS
AND DUTIES OF GRANTEE
Section
5.1. Grantee
Appointed Attorney-in-Fact.
Grantor
hereby irrevocably appoints Grantee (and all Persons designated for that
purpose) as Grantor's true and lawful attorney-in-fact, with full authority
and
power in the place and stead of Grantor and in the name of Grantor, Grantee
or
otherwise, from time to time in Grantee's discretion from and after the
occurrence and during the continuation of an Event of Default and at such time
or times thereafter as Grantee may, in its sole discretion determine, to take
any appropriate action and to execute any instrument that Grantee may deem
reasonably necessary or advisable to accomplish the purposes of this Security
Agreement (but Grantee shall not be obligated to and shall have no liability
to
Grantor or any third party for failure so to do) including, without limitation:
(a) to
ask,
demand, collect, enforce, ▇▇▇ for, recover, compromise, receive, and give
acquittance and receipts for moneys due and to become due under or in respect
of
any of the Collateral;
(b) to
receive, endorse, and collect any checks, drafts or other instruments,
documents, and chattel paper in connection with clause (a) above;
(c) to
file
any claims or take any action or institute any proceedings (or to settle, adjust
or compromise any such proceeding) that Grantee may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the rights
of Grantee with respect to any of the Collateral;
(d) to
perform the affirmative obligations of Grantor hereunder (including all
obligations of Grantor pursuant to Section 4.4);
(e) to
execute and deliver for and on behalf of Grantor any and all instruments,
documents, agreements, and other writings necessary or advisable for the
exercise on behalf of Grantor of any rights, benefits or options created or
existing under or pursuant to the Collateral; and
(f) to
execute endorsements, assignments, or other instruments of conveyance and
transfer.
Grantor
hereby acknowledges, consents and agrees that the power of attorney granted
pursuant to this Section 5.1 is irrevocable and coupled with an interest.
Section
5.2. Grantee
May Perform.
If
Grantor fails to perform any agreement contained herein, Grantee may itself
(but
shall not be obliged to) perform, or cause performance of, such agreement,
provided
that
Grantee shall in any event first have given Grantor written notice of its intent
to do the same and Grantor shall not have, within 30 days of such notice (or
such shorter period as Grantee may reasonably determine is necessary in order
to
preserve the benefits of this Security Agreement with respect to any material
portion of the Collateral), paid such claim or obtained to Grantee's
satisfaction the release of the claim or Lien to which such notice relates.
Grantor agrees to reimburse Grantee upon demand for any costs and expenses,
including, without limitation, reasonable attorneys' fees, Grantee incurs while
acting as Grantor's attorney-in-fact hereunder, all of which costs and expenses
are included in the Obligations secured hereby.
10
Section
5.3. Limitations
on Duties of Grantee.
Grantee
shall be obligated to perform such duties and only such duties as are
specifically set forth in this Security Agreement, and no implied covenants
or
obligations shall be read into this Security Agreement against Grantee. If
an
Event of Default has occurred and is continuing, Grantee shall exercise the
rights and powers vested in it by this Security Agreement, and shall not be
liable (except for its gross negligence or willful misconduct) with respect
to
any action taken by it, or omitted to be taken by it, in accordance herewith.
Section
5.4. Reasonable
Care.
It
is
understood and agreed between the parties hereto that Grantee's duty with
respect to the custody, safekeeping, and physical preservation of the Collateral
in its possession should be to deal with it in the same manner as Grantee deals
with similar property for its own account; provided,
however,
that
Grantee shall not be required to make any presentment, demand, or protest,
or
give any notice, and need not take any action to preserve any rights against
any
other Person with respect to the Collateral.
ARTICLE
VI
REMEDIES
Section
6.1. Certain
Remedies.
If
any
Event of Default shall have occurred and is continuing:
(a) Grantee
may exercise in respect of the Collateral, in addition to other rights available
to it at law or in equity or otherwise, all the rights and remedies of a secured
party on default under the UCC (whether or not the UCC applies to the affected
Collateral) and also may (i) require Grantor to, and Grantor hereby agrees
that it will, at its expense and upon request of Grantee forthwith, assemble
all
or part of the Collateral as directed by Grantee and make it available to
Grantee at a place to be designated by Grantee that is reasonably convenient
to
both parties, (ii) exercise any and all rights and remedies of Grantor
under or in connection with the Collateral, (iii) withdraw all monies,
securities and other property in the Grantor accounts for application to the
Obligations, (iv) foreclose or otherwise enforce Grantee's security interest
in
any manner permitted by law or provided for in this Security Agreement,
(v) without notice except as specified below, sell the Collateral or any
part thereof in one or more parcels at public or private sale, at any place
or
places for cash, on credit, or for future delivery, and upon such other terms
as
Grantee may deem commercially reasonable, (vi) recover from Grantor all
costs and expenses, including, without limitation, reasonable attorneys' fees,
incurred or paid by Grantee in exercising any right, power, privilege or remedy
provided by this Security Agreement or by law, (vii) without notice or
demand of legal process, all of which are hereby expressly waived by Grantor,
enter into property where any Collateral is located and take possession thereof,
and (viii) prior to the disposition of the Collateral, prepare it for
disposition in any manner and to the extent Grantee deems appropriate;
provided,
however,
that
notwithstanding the foregoing to the contrary, Grantee may sell or otherwise
dispose the Collateral or any portion thereof in its then condition without
any
preparation or processing. Grantor agrees that, to the extent notice of sale
shall be required by law, at least ten (10) days' prior notice to Grantor of
the
time and place of any public sale or the time after which any private sale
is to
be made shall constitute reasonable notification. Grantee shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
Grantee 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. Upon any sale or
other disposition pursuant to this Security Agreement, Grantee shall have the
right to deliver, assign and transfer to grantee thereof the Collateral or
portion thereof and transfer to grantee thereof the Collateral or portion
thereof so sold or disposed of. Each grantee at any such sale or other
disposition (including Grantee) shall hold the Collateral free from any claim
or
right of whatever kind, including any equity or right of redemption of Grantor
and Grantor specifically waives (to the extent permitted by law) all rights
of
redemption, stay or appraisal which it has or may have under any rule of law
or
statute now existing or hereafter adopted.
11
(b) All
cash
proceeds received by Grantee in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral shall be applied:
first,
to all
costs, fees and expenses incurred by Grantee; and second,
to the
Obligations. If any non-cash proceeds are received in connection with any sale
of Collateral, Grantee shall not apply such non-cash proceeds to the Obligations
unless and until such proceeds are converted to cash; provided,
however,
that if
such non-cash proceeds are not expected on the date of receipt thereof to be
converted to cash within one year after such date, Grantee shall nonetheless
use
commercially reasonable efforts to convert such non-cash proceeds to cash within
such one-year period. Any surplus of such cash or cash proceeds held by Grantee
after payment in full of all the Obligations shall be paid over to Grantor
or to
whomsoever may be lawfully entitled to receive such surplus.
ARTICLE
VII
MISCELLANEOUS
PROVISIONS
Section
7.1. Amendments.
No
amendment, modification or waiver of any provision of this Security Agreement,
and no consent to any departure by Grantor herefrom shall in any event be
effective unless the same shall be in writing and signed by Grantee, and then
such waiver or consent shall be effective only in the specific instance and
for
the specific purpose for which given.
12
Section
7.2. Release
of Collateral.
If
any of
the Collateral shall be sold, transferred, or otherwise disposed of by Grantor
in a transaction not prohibited by this Agreement, then Grantee shall, at
Grantor's written request, promptly execute and deliver to Grantor (at the
sole
cost and expense of Grantor) such instruments or documents necessary and as
Grantor shall reasonably request to release the Liens created hereby on such
Collateral, including any necessary UCC amendment, termination statement or
partial termination statement.
Section
7.3. Notices.
Any
notice, demand, request, waiver or other communication required or permitted
to
be given hereunder shall be in writing and shall be effective (a) upon
hand
delivery, by telecopy or facsimile at the address or number designated below
(if
delivered on a business day during normal business hours where such notice
is to
be received), or the first business day following such delivery (if delivered
other than on a business
day during normal business hours where such notice is to be received) or (b)
on
the
second business day following the date of mailing by express courier service,
fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall
first occur.
Address
of Grantee
▇▇▇▇
Royalty Fund, L.P.
c/o
▇▇▇▇
Capital Advisors, L.L.C.
Two
Grand
Central Tower
▇▇▇
▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a copy to
▇▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇ LLP
▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and A. ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Address
of the Grantor
▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
13
with
a copy to
▇▇▇▇▇
Kaszovitz ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ Bass & Rhine LLP
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Section
7.4. Waiver;
Cumulative Remedies.
(a) No
failure to exercise and no delay in the exercise, on the part of Grantee, of
any
right, remedy, power, or privilege hereunder and no course of dealing with
respect thereto shall impair such right, remedy, power or privilege or be
construed to or operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof, or the exercise of any other right, remedy, power
or privilege.
(b) Grantor
waives any right to require Grantee to proceed against any Person or to exhaust
any Collateral or to pursue any remedy in such Grantee's power.
(c) The
rights, powers and remedies of Grantee under this Security Agreement shall
be in
addition to all rights, powers and remedies given to Grantee by virtue of any
statute or rule of law, the Sale Agreement or any other agreement, all of which
rights, powers and remedies shall be cumulative and may be exercised
successively or concurrently without impairing Grantee's security interest
in
the Collateral.
Section
7.5. Successors
and Assigns.
The
provisions of this Security Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that Grantor may not assign or transfer any of its rights or obligations
under this Security Agreement without the prior written consent of
Grantee.
Section
7.6. Counterparts.
This
Security Agreement may be executed in any number of separate counterparts,
each
of which, when so executed, shall be deemed an original, and all of said
counterparts taken together shall be deemed to constitute but one and the same
instrument.
Section
7.7. Severability.
The
illegality or unenforceability of any provision of this Security Agreement
or
any instrument or agreement required hereunder shall not in any way affect
or
impair the legality or enforceability of the remaining provisions of this
Security Agreement or any instrument or agreement required
hereunder.
14
Section
7.8. Governing
Law and Jurisdiction.
(a) THIS
SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE
LAW OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAW
PRINCIPLES).
(b) ANY
LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT MAY BE BROUGHT
IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇. BY EXECUTION AND DELIVERY OF THIS SECURITY AGREEMENT, GRANTOR
HEREBY IRREVOCABLY CONSENTS TO AND ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY THE NON-EXCLUSIVE JURISDICTION OF SUCH
COURTS. GRANTOR HEREBY FURTHER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING
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 ACTION OR PROCEEDING IN
SUCH
JURISDICTION IN RESPECT OF THIS SECURITY AGREEMENT OR ANY DOCUMENT RELATED
HERETO.
Section
7.9. Waiver
of Jury Trial.
EACH
OF
GRANTOR AND GRANTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING,
CLAIM OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT
OR
THE TRANSACTIONS CONTEMPLATED HEREBY. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS SECURITY
AGREEMENT.
[Signature
page follows]
15
IN
WITNESS WHEREOF, Grantor and Grantee have caused this Security Agreement to
be
duly executed and delivered by their respective duly authorized officers as
of
the date first above written.
|
GRANTOR:
|
||||
|
By:
|
/s/
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
|
|||
|
Name:
|
▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇
|
|||
|
Title:
|
Chief
Executive Officer
|
|||
|
GRANTEE:
|
▇▇▇▇
ROYALTY FUND, L.P.
|
|||||
|
By:
|
▇▇▇▇
Capital Management, LLC,
|
|||||
|
its
General Partner
|
||||||
|
By:
|
▇▇▇▇
Capital Advisors, L.L.C.
|
|||||
|
Its
Manager
|
||||||
|
By:
|
/s/
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
|
|||||
|
Name:
|
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
|
|||||
|
Title:
|
Manager
|
|||||
[SIGNATURE
PAGE TO SECURITY AGREEMENT]
EXHIBIT
A
to
Security Agreement
FORM
OF PATENT SECURITY AGREEMENT
SCHEDULE
I
to
Security Agreement
LOCATIONS
OF CERTAIN COLLATERAL
Place(s)
Of Business And Chief Executive Office of Grantor:
Grantor's
principal place of business and chief executive offices are located at ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
Addresses
of the Properties at which Grantor Maintains Records Relating to the
Collateral:
▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
SCHEDULE
II
to
Security Agreement
OFFICES
FOR FILING FINANCING STATEMENTS
Delaware
Secretary of State
UCC
Division
▇.▇.
▇▇▇
▇▇▇
▇▇▇▇▇,
▇▇
▇▇▇▇▇
SCHEDULE
3.1
to
Security Agreement
NAMES
AND CORPORATE REORGANIZATIONS AND MERGERS
On
December 26, 2007 at 5:46 p.m., Orcel LLC, a Delaware limited liability company,
merged with and into Hapto Biotech, Inc., a Delaware corporation and a
wholly-owned subsidiary of Forticell Bioscience, Inc. (then known as Ortec
International, Inc.) with Hapto Biotech, Inc. as the surviving entity. On
December 26, 2007 at 6:04 p.m. Hapto Biotech, Inc. merged with and into
Forticell Bioscience, Inc. (then known as Ortec International, Inc.) with
Forticell Bioscience, Inc. the surviving entity.
On
December 27, 2008, Forticell Bioscience, Inc. changed its name from Ortec
International, Inc. to Forticell Bioscience, Inc.
SCHEDULE
3.2
to
Security Agreement
LIEN
EXCEPTIONS
None.