SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made as of the 9th day of January,
2004, by Derma Sciences Inc., a Pennsylvania corporation (hereinafter called
"Debtor", whether one or more), whose principal residence or place of business
and chief executive office, as applicable (as those terms are used in the Code)
is located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and whose tax
identification number is ▇▇-▇▇▇▇▇▇▇, in favor of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ CORPORATION
("Secured Party"), whose address is ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇. Debtor hereby agrees with Secured Party as follows:
1. Definitions. As used in this Agreement, the following terms shall have
the meanings indicated below:
(a) The term "Obligor" shall mean Debtor.
(b) The term "Code" shall mean the Texas Business and Commerce Code as
in effect in the State of Texas on the date of this Agreement or as it may
hereafter be amended from time to time.
(c) The term "Collateral" shall mean all of the personal property of
Debtor as set forth below (as indicated), wherever located, and now owned
or hereafter acquired:
The equipment described in Exhibit A attached hereto and made a part
hereof, together with all replacements, accessories, additions,
substitutions and accessions to all of the foregoing, and all manuals,
instructions and records relating in any way to the foregoing
(including, without limitation, any computer software, whether on
tape, disk, card, strip, cartridge or any other form).
The term Collateral, as used herein, shall also include all PROCEEDS
of all of the foregoing (including without limitation, insurance payable by
reason of loss or damage to the foregoing property) and any property,
securities, guaranties or monies of Debtor which may at any time come into
the possession of Secured Party. The designation of proceeds does not
authorize Debtor to sell, transfer or otherwise convey any of the foregoing
property.
(d) The term "Indebtedness" shall mean (i) all indebtedness,
obligations and liabilities of Obligor to Secured Party of any kind or
character, now existing or hereafter arising, whether direct, indirect,
related, unrelated, fixed, contingent, liquidated, unliquidated, joint,
several or joint and several, and regardless of whether such indebtedness,
obligations and liabilities may, prior to their acquisition by Secured
Party, be or have been payable to or in favor of a third party and
subsequently acquired by Secured Party (it being contemplated that Secured
Party may make such acquisitions from third parties), including without
limitation all indebtedness, obligations and liabilities of Obligor to
Secured Party now existing or hereafter arising by note, draft, acceptance,
guaranty, endorsement, letter of credit, assignment, purchase, overdraft,
discount, indemnity agreement or otherwise, including, without limitation
that one certain promissory note dated of even date herewith, in the
original principal amount of $1,566,000.00 executed by Obligor and payable
to the order of Secured Party (the "Note"), (ii) all accrued but unpaid
interest on any of the indebtedness described in (i) above, (iii) all
obligations of Obligor to Secured Party under any documents evidencing,
securing, governing and/or pertaining to all or any part of the
indebtedness described in (i) and (ii) above, (iv) all costs and expenses
incurred by Secured Party in connection with the collection and
administration of all or any part of the indebtedness and obligations
described in (i), (ii) and (iii) above or the protection or preservation
of, or realization upon, the collateral securing all or any part of such
indebtedness and obligations, including without limitation all reasonable
attorneys' fees, and (v) all renewals, extensions, modifications and
rearrangements of the indebtedness and obligations described in (i), (ii),
(iii) and (iv) above.
(e) The term "Loan Documents" shall mean all instruments and documents
evidencing, securing, governing, guaranteeing and/or pertaining to the
Indebtedness, including, without limitation, the Note and that certain
Purchase Agreement of even date herewith between Debtor and Secured Party.
(f) The term "Obligated Party" shall mean any party other than
Obligor, including, without limitation, Debtor, who secures, guarantees
and/or is otherwise obligated to pay all or any portion of the
Indebtedness.
All words and phrases used herein which are expressly defined in Section 1.201
or Chapter 9 of the Code shall have the meaning provided for therein. Other
words and phrases defined elsewhere in the Code shall have the meaning specified
therein except to the extent such meaning is inconsistent with a definition in
Section 1.201 or Chapter 9 of the Code.
2. Security Interest. As security for the Indebtedness, Debtor, for value
received, hereby pledges and grants to Secured Party a continuing security
interest in the Collateral. This is a purchase money security interest.
3. Representations and Warranties. In addition to any representations and
warranties of Debtor set forth in the Loan Documents, which are incorporated
herein by this reference, Debtor hereby represents and warrants the following to
Secured Party:
(a) Authority. The execution, delivery and performance of this
Agreement and all of the other Loan Documents by Debtor have been duly
authorized by all necessary corporate action of Debtor, to the extent
Debtor is a corporation, by all necessary partnership action, to the extent
Debtor is a partnership, or by all necessary limited liability company
action, to the extent Debtor is a limited liability company.
(b) Accuracy of Information. All information heretofore, herein or
hereafter supplied to Secured Party by or on behalf of Debtor with respect
to the Collateral is true and correct. The exact legal name, social
security number (if applicable), tax identification number, employee
identification number and organization number of Debtor is correctly shown
in the first paragraph hereof.
(c) Enforceability. This Agreement and the other Loan Documents
constitute legal, valid and binding obligations of Debtor, enforceable in
accordance with their respective terms, except as limited by bankruptcy,
insolvency or similar laws of general application relating to the
enforcement of creditors' rights and except to the extent specific remedies
may generally be limited by equitable principles.
(d) Ownership and Liens. Debtor has good and marketable title to the
Collateral free and clear of all liens, security interests, encumbrances or
adverse claims, except for the security interest created by this Agreement.
No dispute, right of setoff, counterclaim or defense exists with respect to
all or any part of the Collateral. Debtor has not executed any other
security agreement currently affecting the Collateral and no effective
financing statement or other instrument similar in effect covering all or
any part of the Collateral is on file in any recording office except as may
have been executed or filed in favor of Secured Party.
(e) No Conflicts or Consents. Neither the ownership, the intended use
of the Collateral by Debtor, the grant of the security interest by Debtor
to Secured Party herein nor the exercise by Secured Party of its rights or
remedies hereunder, will (i) conflict with any provision of (A) any
domestic or foreign law, statute, rule or regulation, (B) the articles or
certificate of incorporation, charter, bylaws, partnership agreement,
articles or certificate of organization, or regulations as the case may be,
of Debtor, or (C) any agreement, judgment, license, order or permit
applicable to or binding upon Debtor, or (ii) result in or require the
creation of any lien, charge or encumbrance upon any assets or properties
of Debtor or of any person except as may be expressly contemplated in the
Loan Documents. Except as expressly contemplated in the Loan Documents, no
consent, approval, authorization or order of, and no notice to or filing
with, any court, governmental authority or third party is required in
connection with the grant by Debtor of the security interest herein or the
exercise by Secured Party of its rights and remedies hereunder.
(f) Security Interest. Debtor has and will have at all times full
right, power and authority to grant a security interest in the Collateral
to Secured Party in the manner provided herein, free and clear of any lien,
security interest or other charge or encumbrance. This Agreement creates a
legal, valid and binding security interest in favor of Secured Party in the
Collateral securing the Indebtedness. To the extent permitted in the Code,
possession by Secured Party of all certificates, instruments and cash
constituting Collateral from time to time and/or the filing of the
financing statements delivered prior hereto and/or concurrently herewith by
Debtor to Secured Party will perfect and establish the first priority of
Secured Party's security interest hereunder in the Collateral.
(g) Location/Identity. Debtor's principal residence or place of
business and chief executive office (as those terms are used in the Code),
as the case may be is located at the address set forth on the first page
hereof. Except as specified elsewhere herein, all Collateral and records
concerning the Collateral shall be kept at such address and such other
addresses as may be listed in Schedule 1 attached hereto and made a part
hereof.
Debtor's organizational structure, state of organization, and
organizational number (the "Organizational Information") are as set forth
on the first page hereof. Except as specified herein, the Organizational
Information shall not change.
(h) Solvency of Debtor. As of the date hereof, and after giving effect
to this Agreement and the completion of all other transactions contemplated
by Debtor at the time of the execution of this Agreement, (i) Debtor is and
will be solvent, (ii) the fair saleable value of Debtor's assets exceeds
and will continue to exceed Debtor's liabilities (both fixed and
contingent), (iii) Debtor is paying and will continue to be able to pay its
debts as they mature, and (iv) if Debtor is not an individual, Debtor has
and will have sufficient capital to carry on Debtor's businesses and all
businesses in which Debtor is about to engage.
4. Affirmative Covenants. In addition to all covenants and agreements of
Debtor set forth in the Loan Documents, which are incorporated herein by this
reference, Debtor will comply with the covenants contained in this Section 4 at
all times during the period of time this Agreement is effective unless Secured
Party shall otherwise consent in writing.
(a) Ownership and Liens. Debtor will maintain good and marketable
title to all Collateral free and clear of all liens, security interests,
encumbrances or adverse claims, except for the security interest created by
this Agreement and the security interests and other encumbrances expressly
permitted herein or by the other Loan Documents or by virtue of agreements
currently in force between Debtor or Debtor's subsidiaries and Laurentian
Bank of Canada and/or ▇▇▇▇▇▇▇ ▇▇▇▇▇ Business Financial Services, Inc.
Except for the foregoing, Debtor will not permit any dispute, right of
setoff, counterclaim or defense to exist with respect to all or any part of
the Collateral. Debtor will cause any financing statement or other security
instrument with respect to the Collateral to be terminated, except as may
exist or as may have been filed in favor of Secured Party. Debtor will
defend at its expense Secured Party's right, title and security interest in
and to the Collateral against the claims of any third party.
(b) Further Assurances. Debtor will from time to time at its expense
promptly execute and deliver all further instruments and documents and take
all further action necessary or appropriate or that Secured Party may
request in order (i) to perfect and protect the security interest created
or purported to be created hereby and the first priority of such security
interest, (ii) to enable Secured Party to exercise and enforce its rights
and remedies hereunder in respect of the Collateral, and (iii) to otherwise
effect the purposes of this Agreement, including without limitation: (A)
executing (if requested) and filing such financing or continuation
statements, or amendments thereto; and (B) furnishing to Secured Party from
time to time statements and schedules further identifying and describing
the Collateral and such other reports in connection with the Collateral,
all in reasonable detail satisfactory to Secured Party.
(c) Inspection of Collateral. Debtor will keep adequate records
concerning the Collateral and will permit Secured Party and all
representatives and agents appointed by Secured Party to inspect any of the
Collateral and the books and records of or relating to the Collateral at
any time during normal business hours, to make and take away photocopies,
photographs and printouts thereof and to write down and record any such
information.
(d) Payment of Taxes. Debtor (i) will timely pay all property and
other taxes, assessments and governmental charges or levies imposed upon
the Collateral or any part thereof, (ii) will timely pay all lawful claims
which, if unpaid, might become a lien or charge upon the Collateral or any
part thereof, and (iii) will maintain appropriate accruals and reserves for
all such liabilities in a timely fashion in accordance with generally
accepted accounting principles. Debtor may, however, delay paying or
discharging any such taxes, assessments, charges, claims or liabilities so
long as the validity thereof is contested in good faith by proper
proceedings and provided Debtor has set aside on Debtor's books adequate
reserves therefor; provided, however, Debtor understands and agrees that in
the event of any such delay in payment or discharge and upon Secured
Party's written request, Debtor will establish with Secured Party an escrow
acceptable to Secured Party adequate to cover the payment of such taxes,
assessments and governmental charges with interest, costs and penalties and
a reasonable additional sum to cover possible costs, interest and penalties
(which escrow shall be returned to Debtor upon payment of such taxes,
assessments, governmental charges, interests, costs and penalties or
disbursed in accordance with the resolution of the contest to the claimant)
or furnish Secured Party with an indemnity bond secured by a deposit in
cash or other security acceptable to Secured Party. Notwithstanding any
other provision contained in this Subsection, Secured Party may at its
discretion exercise its rights under Subsection 6(c) at any time to pay
such taxes, assessments, governmental charges, interest, costs and
penalties.
(e) Intentionally Deleted
(f) Condition of Goods. Debtor will maintain, preserve, protect and
keep all Collateral which constitutes goods in good condition, repair and
working order and will cause such Collateral to be used and operated in
good and workmanlike manner, in accordance with applicable laws and in a
manner which will not make void or cancelable any insurance with respect to
such Collateral. Debtor will promptly make or cause to be made all repairs,
replacements and other improvements to or in connection with the Collateral
which Secured Party may request from time to time.
(g) Insurance. Debtor will, at its own expense, maintain insurance
with respect to all Collateral which constitutes goods in such amounts,
against such risks, in such form and with such insurers, as shall be
satisfactory to Secured Party from time to time. If requested by Secured
Party, each policy for property damage insurance shall provide for all
losses to be paid directly to Secured Party. If requested by Secured Party,
each policy of insurance maintained by Debtor shall (i) name Debtor and
Secured Party as insured parties thereunder (without any representation or
warranty by or obligation upon Secured Party) as their interests may
appear, (ii) contain the agreement by the insurer that any loss thereunder
shall be payable to Secured Party notwithstanding any action, inaction or
breach of representation or warranty by Debtor, (iii) provide that there
shall be no recourse against Secured Party for payment of premiums or other
amounts with respect thereto, and (iv) provide that at least thirty (30)
days prior written notice of cancellation or of lapse shall be given to
Secured Party by the insurer. Debtor will, if requested by Secured Party,
deliver to Secured Party original or duplicate policies of such insurance
and, as often as Secured Party may reasonably request, a report of a
reputable insurance broker with respect to such insurance. Debtor will
also, at the request of Secured Party, duly execute and deliver instruments
of assignment of such insurance policies and cause the respective insurers
to acknowledge notice of such assignment. All insurance payments in respect
of loss of or damage to any Collateral shall be paid to Secured Party and
applied as Secured Party in its sole discretion deems appropriate.
5. Negative Covenants. Debtor will comply with the covenants contained in
this Section 5 at all times during the period of time this Agreement is
effective, unless Secured Party shall otherwise consent in writing.
(a) Transfer or Encumbrance. Debtor will not (i) sell, assign (by
operation of law or otherwise), transfer, exchange, lease or otherwise
dispose of any of the Collateral, (ii) grant a first priority lien or first
priority security interest in or execute, authorize, file or record any
financing statement or other security instrument with respect to the
Collateral to any party other than Secured Party, or (iii) deliver actual
or constructive possession of any of the Collateral to any party other than
Secured Party.
(b) Impairment of Security Interest. Debtor will not take or fail to
take any action which would in any manner impair the value or
enforceability of Secured Party's security interest in any Collateral.
(c) Possession of Collateral. Debtor will not cause or permit the
removal of any Collateral from its possession, control and risk of loss,
nor will Debtor cause or permit the removal of any Collateral (or records
concerning the Collateral) from the address on the first page hereof and
the addresses specified on Schedule 1 to this Agreement other than (i) as
permitted by Subsection 5(a), or (ii) in connection with the possession of
any Collateral by Secured Party or by its bailee. If any Collateral is in
the possession of a third party, Debtor will join with Secured Party in
notifying the third party of Secured Party's security interest therein and
obtaining an acknowledgment from the third party that it is holding the
Collateral for the benefit of Secured Party.
(d) Goods. Except as otherwise provided herein, Debtor will not permit
any Collateral which constitutes goods to at any time (i) be covered by any
document except documents in the possession of the Secured Party, (ii)
become so related to, attached to or used in connection with any particular
real property so as to become a fixture upon such real property, or (iii)
be installed in or affixed to other goods so as to become an accession to
such other goods unless such other goods are subject to a perfected first
priority security interest under this Agreement.
(e) Financing Statement Filings. Debtor recognizes that financing
statements pertaining to the Collateral have been or may be filed in one or
more of the following jurisdictions: the location of Debtor's principal
residence, the location of Debtor's place of business, the location of
Debtor's chief executive office, or other such place as the Debtor may be
"located" under the provisions of the Code; where Debtor maintains any
Collateral, or has its records concerning any Collateral, as the case may
be. Without limitation of any other covenant herein, Debtor will neither
cause or permit any change in the location of (i) any Collateral, (ii) any
records concerning any Collateral, or (iii) Debtor's principal residence,
the location of Debtor's place of business, or the location of Debtor's
chief executive office, as the case may be, to a jurisdiction other than as
represented in Subsection 3(g), nor will Debtor change its name or the
Organizational Information as represented in Subsection 3(g), unless Debtor
shall have notified Secured Party in writing of such change at least thirty
(30) days prior to the effective date of such change, and shall have first
taken all action required by Secured Party for the purpose of further
perfecting or protecting the security interest in favor of Secured Party in
the Collateral. In any written notice furnished pursuant to this
Subsection, Debtor will expressly state that the notice is required by this
Agreement and contains facts that may require additional filings of
financing statements or other notices for the purpose of continuing
perfection of Secured Party's security interest in the Collateral.
Without limiting Secured Party's rights hereunder, Debtor authorizes
Secured Party to file financing statements and amendments thereto under the
provisions of the Code as amended from time to time.
6. Rights of Secured Party. Secured Party shall have the rights contained
in this Section 6 at all times during the period of time this Agreement is
effective.
(a) Additional Financing Statements Filings. Debtor hereby authorizes
Secured Party to file, without the signature of Debtor, one or more
financing or continuation statements, and amendments thereto, relating to
the Collateral. Debtor further agrees that a carbon, photographic or other
reproduction of this Security Agreement or any financing statement
describing any Collateral is sufficient as a financing statement and may be
filed in any jurisdiction Secured Party may deem appropriate.
(b) Power of Attorney. Debtor hereby irrevocably appoints Secured
Party as Debtor's attorney-in-fact, such power of attorney being coupled
with an interest, with full authority in the place and stead of Debtor and
in the name of Debtor or otherwise, after the occurrence of an Event of
Default, to take any action and to execute any instrument which Secured
Party may deem necessary or appropriate to accomplish the purposes of this
Agreement, including without limitation: (i) to obtain and adjust insurance
required by Secured Party hereunder; (ii) to demand, collect, ▇▇▇ for,
recover, compound, receive and give acquaintance and receipts for moneys
due and to become due under or in respect of the Collateral; (iii) to
receive, endorse and collect any drafts or other instruments, documents and
chattel paper in connection with clause (i) or (ii) above; and (iv) to file
any claims or take any action or institute any proceedings which Secured
Party may deem necessary or appropriate for the collection and/or
preservation of the Collateral or otherwise to enforce the rights of
Secured Party with respect to the Collateral.
(c) Performance by Secured Party. If Debtor fails to perform any
agreement or obligation provided herein, Secured Party may itself perform,
or cause performance of, such agreement or obligation, and the expenses of
Secured Party incurred in connection therewith shall be a part of the
Indebtedness, secured by the Collateral and payable by Debtor on demand.
7. Events of Default. Each of the following constitutes an "Event of
Default" under this Agreement:
(a) Default in Payment. The failure, refusal or neglect of Obligor to
make any payment of principal or interest on the Indebtedness, or any
portion thereof, as the same shall become due and payable; or
(b) Non-Performance of Covenants. The failure of Obligor or any
Obligated Party to timely and properly observe, keep or perform any
covenant, agreement, warranty or condition required herein or in any of the
other Loan Documents; or
(c) Default Under other Loan Documents. The occurrence of an event of
default under any of the other Loan Documents; or
(d) False Representation. Any representation contained herein or in
any of the other Loan Documents made by Obligor or any Obligated Party is
false or misleading in any material respect; or
(e) Default to Third Party. The occurrence of any event which permits
the acceleration of the maturity of any indebtedness owing by Obligor or
any Obligated Party to any third party under any agreement or undertaking;
or
(f) Debtor's Bankruptcy or Insolvency. If Obligor: (i) becomes
insolvent, or makes a transfer in fraud of creditors, or makes an
assignment for the benefit of creditors, or admits in writing its inability
to pay its debts as they become due; (ii) generally is not paying its debts
as such debts become due; (iii) has a receiver, trustee or custodian
appointed for, or take possession of, all or substantially all of the
assets of such party or any of the Collateral, either in a proceeding
brought by such party or in a proceeding brought against such party and
such appointment is not discharged or such possession is not terminated
within sixty (60) days after the effective date thereof or such party
consents to or acquiesces in such appointment or possession; (iv) files a
petition for relief under the United States Bankruptcy Code or any other
present or future federal or state insolvency, bankruptcy or similar laws
(all of the foregoing hereinafter collectively called "Applicable
Bankruptcy Law") or an involuntary petition for relief is filed against
such party under any Applicable Bankruptcy Law and such involuntary
petition is not dismissed within sixty (60) days after the filing thereof,
or an order for relief naming such party is entered under any Applicable
Bankruptcy Law, or any composition, rearrangement, extension,
reorganization or other relief of debtors now or hereafter existing is
requested or consented to by such party; (v) fails to have discharged
within a period of sixty (60) days any attachment, sequestration or similar
writ levied upon any property of such party; or (vi) fails to pay within
thirty (30) days any final money judgment against such party.
(g) Execution on Collateral. The Collateral or any portion thereof is
taken on execution or other process of law in any action against Debtor; or
(h) Abandonment. Debtor abandons the Collateral or any portion
thereof; or
(i) Action by Other Lienholder. The holder of any lien or security
interest on any of the assets of Debtor, including without limitation, the
Collateral (without hereby implying the consent of Secured Party to the
existence or creation of any such lien or security interest on the
Collateral), declares a default thereunder or institutes foreclosure or
other proceedings for the enforcement of its remedies thereunder; or
(j) Liquidation and Related Events. The liquidation, dissolution,
merger or consolidation of Obligor.
8. Remedies and Related Rights. If an Event of Default shall have occurred,
and without limiting any other rights and remedies provided herein, under any of
the other Loan Documents or otherwise available to Secured Party, Secured Party
may exercise one or more of the rights and remedies provided in this Section.
(a) Remedies. Secured Party may from time to time at its discretion,
without limitation and without notice except as expressly provided in any
of the Loan Documents:
(i) exercise in respect of the Collateral all the rights and
remedies of a secured party under the Code (whether or not the Code
applies to the affected Collateral);
(ii) require Debtor to, and Debtor hereby agrees that it will at
its expense and upon request of Secured Party, assemble the Collateral
as directed by Secured Party and make it available to Secured Party at
a place to be designated by Secured Party which is reasonably
convenient to both parties;
(iii) reduce its claim to judgment or foreclose or otherwise
enforce, in whole or in part, the security interest granted hereunder
by any available judicial procedure;
(iv) sell or otherwise dispose of, at its office, on the premises
of Debtor or elsewhere, the Collateral, as a unit or in parcels, by
public or private proceedings, and by way of one or more contracts (it
being agreed that the sale or other disposition of any part of the
Collateral shall not exhaust Secured Party's power of sale, but sales
or other dispositions may be made from time to time until all of the
Collateral has been sold or disposed of or until the Indebtedness has
been paid and performed in full), and at any such sale or other
disposition it shall not be necessary to exhibit any of the
Collateral;
(v) buy the Collateral, or any portion thereof, at any public
sale;
(vi) buy the Collateral, or any portion thereof, at any private
sale if the Collateral is of a type customarily sold in a recognized
market or is of a type which is the subject of widely distributed
standard price quotations;
(vii) apply for the appointment of a receiver for the Collateral,
and Debtor hereby consents to any such appointment; and
(viii) at its option, retain the Collateral in satisfaction of
the Indebtedness whenever the circumstances are such that Secured
Party is entitled to do so under the Code or otherwise, to the full
extent permitted by the Code, Secured Party shall be permitted to
elect whether such retention shall be in full or partial satisfaction
of the Indebtedness.
In the event Secured Party shall elect to sell the Collateral, Secured
Party may sell the Collateral without giving any warranties and shall be
permitted to specifically disclaim any warranties of title or the like. Further,
if Secured Party sells any of the Collateral on credit, Debtor will be credited
only with payments actually made by the purchaser, received by Secured Party and
applied to the Indebtedness. In the event the purchaser fails to pay for the
Collateral, Secured Party may resell the Collateral and Debtor shall be credited
with the proceeds of the sale. Debtor agrees that in the event Debtor or any
Obligor is entitled to receive any notice under the Code, as it exists in the
state governing any such notice, of the sale or other disposition of any
Collateral, reasonable notice shall be deemed given when such notice is
deposited in a depository receptacle under the care and custody of the United
States Postal Service, postage prepaid, at such party's address set forth on the
first page hereof, ten (10) days prior to the date of any public sale, or after
which a private sale, of any of such Collateral is to be held. Secured Party
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given. Secured Party 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.
(b) Application of Proceeds. If any Event of Default shall have
occurred, Secured Party may at its discretion apply or use any cash held by
Secured Party as Collateral, and any cash proceeds received by Secured
Party in respect of any sale or other disposition of, collection from, or
other realization upon, all or any part of the Collateral as follows in
such order and manner as Secured Party may elect:
(i) to the repayment or reimbursement of the reasonable costs and
expenses (including, without limitation, reasonable attorneys' fees
and expenses) incurred by Secured Party in connection with (A) the
administration of the Loan Documents, (B) the custody, preservation,
use or operation of, or the sale of, collection from, or other
realization upon, the Collateral, and (C) the exercise or enforcement
of any of the rights and remedies of Secured Party hereunder;
(ii) to the payment or other satisfaction of any liens and other
encumbrances upon the Collateral;
(iii) to the satisfaction of the Indebtedness;
(iv) by holding such cash and proceeds as Collateral;
(v) to the payment of any other amounts required by applicable
law (including without limitation, Section 9.615(a)(3) of the Code or
any other applicable statutory provision); and
(vi) by delivery to Debtor or any other party lawfully entitled
to receive such cash or proceeds whether by direction of a court of
competent jurisdiction or otherwise.
(c) Deficiency. In the event that the proceeds of any sale of,
collection from, or other realization upon, all or any part of the
Collateral by Secured Party are insufficient to pay all amounts to which
Secured Party is legally entitled, Obligor and any party who guaranteed or
is otherwise obligated to pay all or any portion of the Indebtedness shall
be liable for the deficiency, together with interest thereon as provided in
the Loan Documents, to the full extent permitted by the Code.
(d) Non-Judicial Remedies. In granting to Secured Party the power to
enforce its rights hereunder without prior judicial process or judicial
hearing, Debtor expressly waives, renounces and knowingly relinquishes any
legal right which might otherwise require Secured Party to enforce its
rights by judicial process. Debtor recognizes and concedes that
non-judicial remedies are consistent with the usage of trade, are
responsive to commercial necessity and are the result of a bargain at arm's
length. Nothing herein is intended to prevent Secured Party or Debtor from
resorting to judicial process at either party's option.
(e) Other Recourse. Debtor waives any right to require Secured Party
to proceed against any third party, exhaust any Collateral or other
security for the Indebtedness, or to have any third party joined with
Debtor in any suit arising out of the Indebtedness or any of the Loan
Documents, or pursue any other remedy available to Secured Party. Debtor
further waives any and all notice of acceptance of this Agreement and of
the creation, modification, rearrangement, renewal or extension of the
Indebtedness. Debtor further waives any defense arising by reason of any
disability or other defense of any third party or by reason of the
cessation from any cause whatsoever of the liability of any third party.
Until all of the Indebtedness shall have been paid in full, Debtor shall
have no right of subrogation and Debtor waives the right to enforce any
remedy which Secured Party has or may hereafter have against any third
party, and waives any benefit of and any right to participate in any other
security whatsoever now or hereafter held by Secured Party. Debtor
authorizes Secured Party, and without notice or demand and without any
reservation of rights against Debtor and without affecting Debtor's
liability hereunder or on the Indebtedness to (i) take or hold any other
property of any type from any third party as security for the Indebtedness,
and exchange, enforce, waive and release any or all of such other property,
(ii) apply such other property and direct the order or manner of sale
thereof as Secured Party may in its discretion determine, (iii) renew,
extend, accelerate, modify, compromise, settle or release any of the
Indebtedness or other security for the Indebtedness, (iv) waive, enforce or
modify any of the provisions of any of the Loan Documents executed by any
third party, and (v) release or substitute any third party.
9. Indemnity. As provided in the Code, Debtor hereby indemnifies and agrees
to hold harmless Secured Party, and its officers, directors, employees, agents
and representatives (each an "Indemnified Person") from and against any and all
liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
(collectively, the "Claims") which may be imposed on, incurred by, or asserted
against, any Indemnified Person arising in connection with this Agreement. The
indemnification provided for in this Section shall survive the termination of
this Agreement and shall extend and continue to benefit each individual or
entity who is or has at any time been an Indemnified Person hereunder.
10. Miscellaneous.
(a) Entire Agreement. This Agreement and the Loan Documents contain
the entire agreement of Secured Party and Debtor with respect to the
Collateral. If the parties hereto are parties to any prior agreement,
either written or oral, relating to the Collateral, the terms of this
Agreement shall amend and supersede the terms of such prior agreements as
to transactions on or after the effective date of this Agreement, but all
security agreements, financing statements, guaranties, other contracts and
notices for the benefit of Secured Party shall continue in full force and
effect to secure the Indebtedness unless Secured Party specifically
releases its rights thereunder by separate release.
(b) Amendment. No modification, consent or amendment of any provision
of this Agreement or any of the other Loan Documents shall be valid or
effective unless the same is authenticated by the party against whom it is
sought to be enforced, except to the extent of amendments specifically
permitted by the Code without authentication by the Debtor or Obligor.
(c) Actions by Secured Party. The lien, security interest and other
security rights of Secured Party hereunder shall not be impaired by (i) any
renewal, extension, increase or modification with respect to the
Indebtedness, (ii) any surrender, compromise, release, renewal, extension,
exchange or substitution which Secured Party may grant with respect to the
Collateral, or (iii) any release or indulgence granted to any endorser,
guarantor or surety of the Indebtedness. The taking of additional security
by Secured Party shall not release or impair the lien, security interest or
other security rights of Secured Party hereunder or affect the obligations
of Debtor hereunder.
(d) Waiver by Secured Party. Secured Party may waive any Event of
Default without waiving any other prior or subsequent Event of Default.
Secured Party may remedy any default without waiving the Event of Default
remedied. Neither the failure by Secured Party to exercise, nor the delay
by Secured Party in exercising, any right or remedy upon any Event of
Default shall be construed as a waiver of such Event of Default or as a
waiver of the right to exercise any such right or remedy at a later date.
No single or partial exercise by Secured Party of any right or remedy
hereunder shall exhaust the same or shall preclude any other or further
exercise thereof, and every such right or remedy hereunder may be exercised
at any time. No waiver of any provision hereof or consent to any departure
by Debtor therefrom shall be effective unless the same shall be in writing
and signed by Secured Party and then such waiver or consent shall be
effective only in the specific instances, for the purpose for which given
and to the extent therein specified. No notice to or demand on Debtor in
any case shall of itself entitle Debtor to any other or further notice or
demand in similar or other circumstances.
(e) Costs and Expenses. Debtor will upon demand pay to Secured Party
the amount of any and all costs and expenses (including without limitation,
attorneys' fees and expenses), which Secured Party may incur in connection
with (i) the preparation of this Agreement and the perfection and
preservation of the security interests granted under this Agreement, (ii)
the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, the Collateral, (iii) the exercise or
enforcement of any of the rights of Secured Party under this Loan
Agreement, or (iv) the failure by Debtor to perform or observe any of the
provisions hereof.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL
LAWS, EXCEPT TO THE EXTENT PERFECTION AND THE EFFECT OF PERFECTION OR
NON-PERFECTION OF THE SECURITY INTEREST GRANTED HEREUNDER, IN RESPECT OF
ANY PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF TEXAS.
(g) Venue. This Agreement has been entered into in the county in Texas
where Secured Party's address for notice purposes is located, and it shall
be performable for all purposes in such county. Courts within the State of
Texas shall have jurisdiction over any and all disputes arising under or
pertaining to this Agreement and venue for any such disputes shall be in
the county or judicial district where this Agreement has been executed and
delivered.
(h) Severability. If any provision of this Agreement is held by a
court of competent jurisdiction to be illegal, invalid or unenforceable
under present or future laws, such provision shall be fully severable,
shall not impair or invalidate the remainder of this Agreement and the
effect thereof shall be confined to the provision held to be illegal,
invalid or unenforceable.
(i) No Obligation. Nothing contained herein shall be construed as an
obligation on the part of Secured Party to extend or continue to extend
credit to Obligor.
(j) Notices. All notices, requests, demands or other communications
required or permitted to be given pursuant to this Agreement shall be in
writing and given by (i) personal delivery, (ii) expedited delivery service
with proof of delivery, or (iii) United States mail, postage prepaid,
registered or certified mail, return receipt requested, sent to the
intended addressee at the address set forth on the first page hereof or to
such different address as the addressee shall have designated by written
notice sent pursuant to the terms hereof and shall be deemed to have been
received either, in the case of personal delivery, at the time of personal
delivery, in the case of expedited delivery service, as of the date of
first attempted delivery at the address and in the manner provided herein,
or in the case of mail, upon deposit in a depository receptacle under the
care and custody of the United States Postal Service. Either party shall
have the right to change its address for notice hereunder to any other
location within the continental United States by notice to the other party
of such new address at least thirty (30) days prior to the effective date
of such new address.
(k) Binding Effect and Assignment. This Agreement (i) creates a
continuing security interest in the Collateral, (ii) shall be binding on
Debtor and the heirs, executors, administrators, personal representatives,
successors and assigns of Debtor, and (iii) shall inure to the benefit of
Secured Party and its successors and assigns. Without limiting the
generality of the foregoing, Secured Party may pledge, assign or otherwise
transfer the Indebtedness and its rights under this Agreement and any of
the other Loan Documents to any other party. Debtor's rights and
obligations hereunder may not be assigned or otherwise transferred without
the prior written consent of Secured Party.
(l) Cumulative Rights. All rights and remedies of Secured Party
hereunder are cumulative of each other and of every other right or remedy
which Secured Party may otherwise have at law or in equity or under any of
the other Loan Documents, and the exercise of one or more of such rights or
remedies shall not prejudice or impair the concurrent or subsequent
exercise of any other rights or remedies. Further, except as specifically
noted as a waiver herein, no provision of this Agreement is intended by the
parties to this Agreement to waive any rights, benefits or protection
afforded to Secured Party under the Code.
(m) Gender and Number. Within this Agreement, words of any gender
shall be held and construed to include the other gender, and words in the
singular number shall be held and construed to include the plural and words
in the plural number shall be held and construed to include the singular,
unless in each instance the context requires otherwise.
(n) Descriptive Headings. The headings in this Agreement are for
convenience only and shall in no way enlarge, limit or define the scope or
meaning of the various and several provisions hereof.
EXECUTED as of the date first written above.
DEBTOR: SECURED PARTY:
------ -------------
DERMA SCIENCES, INC., a ▇▇▇▇▇▇▇▇-▇▇▇▇▇ CORPORATION
Pennsylvania corporation
By:____________________________ By:____________________________________
Printed Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Printed Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Title: President, Business-to-Business
Chief Executive Officer
SCHEDULE 1
TO
SECURITY AGREEMENT
DATED JANUARY 9, 2004
BY AND BETWEEN
▇▇▇▇▇▇▇▇-▇▇▇▇▇ CORPORATION
AND
DERMA SCIENCES, INC.
The other addresses referenced in Subsection 3(g) are as follows:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇
Security Agreement Exhibit A (Equipment List)
---------------------------------------------
ASSET CATEGORY ASSET# ASSET DESCRIPTION
-------------- ------ -----------------
Low Volume Bottle Filling T003986AA 305-A UNIV.FILL.SYST
Emplex Sealer T001370AA EMPLEX BAG SEALER
Emplex Sealer T002833AA IMC SEALER UPGR#309
Large Circle/Oil Emulsion T002723AA LRG CIRCL MACH UPGRA
Large Circle/Oil Emulsion T002859AA CHEVRON SINGLE ▇▇▇▇▇
Large Circle/Oil Emulsion T002959AA LARGE CIRCLE MACHINE
Large Circle/Oil Emulsion T003022AA KNIFE ASSEMLY
Large Circle/Oil Emulsion T002926AA REFURB CIRCLE MACHIN
Large Circle/Oil Emulsion T002851AA ADDITION TO ▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇▇▇
Impregnator T004415AA #S114 OIL EMULS.IMP
Impregnator T005010AA OIL EMULSION AUTOMATION S153
Impregnator T003641AA OIL EMULSION IMPREGNATOR
Impregnator T004372AA #▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ "6CON,7BAR&ROL,1CLOTH"
Impregnator T003927AA IMPREGNATION ASSBLY
Impregnator T004858AA S159 OIL EMULSION PR
Impregnator T003042AA CUSTOM ▇▇▇▇▇-▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇ T003147AA ▇▇▇▇▇▇▇ PKGMACHMD573
▇▇▇▇▇▇▇ ▇▇▇▇▇ 1 T002836AA CHEVRON SEALS
▇▇▇▇▇▇▇ ▇▇▇▇▇ 1 T003146AA HYDROGEL DISPENSERS
T003665AA DISPENSING SYSTEM
▇▇▇▇▇▇▇ ▇▇▇▇▇ 2 T003178AA BODPRAT MD12 PKGMACH
▇▇▇▇▇▇▇ ▇▇▇▇▇ 2 T005012AA LABELING MACHINE S166
▇▇▇▇▇▇▇ ▇▇▇▇▇ 2 T004861AA S138 SSD PROJECT #1
Prodo-Pak T003179AA PRPAK FORM/FILL/SEAL
Prodo-Pak T004417AA #S116 PRODO PAK TOOL
Auto Pleater 1 T004184AA SP ACQ:91 STD GAUZE
Tiromat 2000 (Kutter 1) T004185AA SP ACQ:91 ALPHA LAVA
Tiromat 2000 (Kutter 1) T004860AA S145 SSD PROJECT #2
Tiromat 2000 (Kutter 1) T005221AA TRAVERSING UNTI 2
Tiromat 2000 (Kutter 2) T004186AA SP ACQ:92 ALPH LAVAL
Tiromat 2000 (Kutter 2) T004485AA KUTTER MACHINE TOOLS
Tiromat 2000 (Kutter 2) T004801AA SEAL BRILLE PLATE
Tiromat 2000 (Kutter 2) T004859AA S146 SSD PROJECT #3
Tiromat 2000 (Kutter 2) T005220AA TRAVERSING ▇▇▇▇ ▇
▇▇▇▇▇ ▇▇▇▇▇▇ T004192AA SMALL CIRCLE MACHINE
▇▇▇▇ ▇▇▇▇ (Silk Strips) T004450AA 3 DIECUTTING ROLLS
▇▇▇▇ Andy (Silk Strips) T001653AA SILK STRIPS MACHINE
▇▇▇▇ ▇▇▇▇ (Silk Strips) T003096AA 4 ROTARY DIE-7MAPRES
Bottling Line T004606AA ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇.▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ #S103 DISP.SYST.HYDR
Bottling Line T004411AA #S109 PACK.STRIP PRO
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ #S113 BOTTLE ▇▇▇▇.▇▇
Bottling Line (Auto) T005007AA PACKING STRIP AUTOMATION ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ (▇▇▇▇) ▇▇▇▇▇▇▇▇▇ PACKING STRIP PHASE III ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ (▇▇▇▇) ▇▇▇▇▇▇▇▇▇ CONVEYOR BELT
Mech Pleater T004857AA S161 ▇▇▇▇▇▇▇▇ PLEATR
Auto Pleater 2 T005008AA GAUZE PLEATER - D&B S127
Printers T005013AA INK JET PRINTER - ▇▇▇▇▇▇▇ S169
Printers T005218AA WILLET460 PRINTER #99291406302
Printers T005219AA WILLET460 PRINTER #99291406305
Exhibit A Page 1 of 2
ASSET CATEGORY ASSET# ASSET DESCRIPTION
-------------- ------ -----------------
Printers T004416AA #S115 INK JET PRINTE
Printers T004925AA PRINTHEAD UNIT
Mixing Kettles T005011AA Kette L - 60 GALLON KETTLE S164
Mixing Kettles Kettle K - ▇▇▇▇▇ 10 gallon Mixer
Mixing Kettles Kettle G -325 g Vessel w/Lightning Mixer
Mixing Kettles Kettle H - 300lbs - No heater
Mixing Kettles Kettle F - 150 lbs Vessel w/Silverson Mixer
Mixing Kettles Kettle X - 500 lb capacity
Mixing Kettles Kettle A - 500 lb capacity (warehouse)
Mixing Kettles Stainless steel cabinets (mixing parts room)
Mixing Kettles Mixing Spare Parts
Mixing Kettles Silverson Mixer
Mixing Kettles Wakashaw Recycling Pump
Mixing Kettles Control Units for Kettle Heaters (in walls)
Mixing Kettles Remaining Mixing Equipment
Mixing Kettles T005015AA Kettle C - 60 GALLON KETTLE S164
Mixing Kettles T005016AA Kettle D - 60 GALLON KETTLE S164
Mixing Kettles T005017AA Kettle E - 60 GALLON KETTLE S164
Mixing Kettles T003635AA Kettle N - MIXING KETTLS FOR OE
Mixing Kettles T003141AA Kettle B - HEATING & DISPENSING
Miscellaneous Equipment T004353AA ANALYTICAL BALANCE
Miscellaneous Equipment T004227AA 42 LABEL BINS
Miscellaneous Equipment T005305AA ROLL STOCK LIFT
Miscellaneous Equipment T003879AA SHELV.SYST.FOR PROD.
Miscellaneous Equipment T005303AA DRUM HEATER S/N 201922
Miscellaneous Equipment T005304AA RODI TOC ANALYZER S/N 9912643
Miscellaneous Equipment T002928AA AIR COMPRESSOR
Miscellaneous Equipment T001356AA ARO BURST TESTER - MODEL 2600
Miscellaneous Equipment T001357AA ARO TEST FIXTURE NEEDLE
Miscellaneous Equipment T003921AA 8 SECT.OF SHELVING
Miscellaneous Equipment T004323AA MECHANICAL TORQUE TESTER
Miscellaneous Equipment T004412AA #S110 PETRO/XERO MAN
Miscellaneous Equipment T003170AA INSTRON - MOD 4411 SN C1514
Miscellaneous Equipment T003722AA INSTRON LOAD CELL FOR ASSET T003336
Untagged Assets Particulate Tester (Innovation by Climate)
Untagged Assets Vacuum Pouch Tester
Untagged Assets Density Tester (oil)
Untagged Assets Brookfield Viscometer (Wet Lab)
Untagged Assets ▇▇▇▇ ▇▇▇▇▇▇ Stability Chamber (oven)
Untagged Assets 1 Stainless shelf w/ measuring tape
Untagged Assets Baking racks with trays (4-5 racks)
Untagged Assets Azco Cutter for gauze cutting
Untagged Assets 2 Tables & 10 chair inventory
Untagged Assets 3 Bug killers
Untagged Assets "Maintenance area tools, equipment, tables"
Untagged Assets Spare Parts @ Wound Care Facility
Untagged Assets Spare Parts @ 6625 in stores
Exhibit A Page 2 of 2