EXHIBIT 10.22
SECOND AMENDED AND RESTATED SECURITY AGREEMENT
This Second Amended and Restated Security Agreement dated as of
December 19, 2002, by and between KOS PHARMACEUTICALS, INC., a Florida
corporation having a principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (hereinafter called the "Borrower") and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, an individual residing in New York, New York (hereinafter called the
"Lender").
W I T N E S S E T H:
WHEREAS, the Lender has agreed to make a loan in the amount of
$30,000,000.00 (the "Additional Standby Facility") as more fully described and
set forth in a loan agreement of even date herewith between the Lender and the
Borrower (the "Additional Standby Facility Loan Agreement") and a promissory
note of even date herewith (the "Additional Standby Facility Note"); and
WHEREAS, the Lender previously entered into a Revolving Credit and Loan
Agreement dated as of September 1, 1999 with Borrower (the "Supplemental Credit
Facility Loan Agreement") whereby Lender agreed to extend a line of credit to
Borrower in the maximum principal amount of $50,000,000 (the "Supplemental
Credit Facility") pursuant to a promissory note of even date therewith (the
"Supplemental Credit Facility Note"), as amended by that certain Amendment
Agreement dated as of July 21, 2001, between Borrower and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇▇▇, pursuant to which the Supplemental Credit Facility Note was
replaced by two separate notes, one note from Borrower to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in the
amount of $25,000,000 and one note from Borrower to ▇▇▇▇ ▇▇▇▇▇▇▇ in the amount
of $25,000,000 (the "▇▇▇▇ ▇▇▇▇▇▇▇ Note"), and as further amended by that certain
Amendment Agreement dated as of December 17, 2001, between Borrower and ▇▇▇▇▇▇
Point Holdings, LP, a Delaware limited partnership ("▇▇▇▇▇▇ Point"), pursuant to
which the ▇▇▇▇ ▇▇▇▇▇▇▇ Note was replaced by a note from Borrower to ▇▇▇▇▇▇ Point
in the amount of $25,000,000; and
WHEREAS, the Lender also previously entered into a Revolving Credit and
Loan Agreement dated as of December 21, 1999 with Borrower (the "Standby
Facility Loan Agreement") (the Additional Standby Facility, Supplemental Credit
Facility and Standby Facility Loan Agreements being hereinafter referred to
collectively as the "Loan Agreements") whereby Lender agreed to extend a line of
credit to Borrower in the maximum principal amount of $50,000,000 (the "Standby
Facility") (the Additional Standby Facility, Supplemental Credit Facility and
Standby Facility Loans being hereinafter referred to collectively as the
"Loans"); and
WHEREAS, the Standby Facility is evidenced by a promissory note of even
date therewith in the amount of $50,000,000(the "Standby Facility Note") (the
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Additional Standby Facility, Supplemental Credit Facility and Standby Facility
Notes being hereinafter referred to collectively as the "Notes"); and
WHEREAS, the Additional Standby Facility Loan Agreement provides, in
part, that the Loans shall be secured by a blanket lien upon all personal
property owned by Borrower; and
WHEREAS, this Second Amended and Restated Security Agreement amends and
restates that Amended and Restated Security Agreement dated as of December 21,
1999 by and between Borrower and Lender (the "Security Agreement") granting a
blanket lien security interest to Lender to secure the Supplemental Credit
Facility and Standby Facility Loans;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and in the Additional Standby Facility Loan Agreement, and One
($1.00) Dollar, the receipt and sufficiency of which is hereby acknowledged, the
Lender and the Borrower hereby agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, all capitalized terms
used herein which are defined in the Additional Standby Facility Loan Agreement
shall have the respective meanings provided therefor in the Additional Standby
Facility Loan Agreement. All terms defined in Article 9 of the Uniform
Commercial Code of the State (as defined below) and used herein shall have the
same definitions herein as specified therein. In addition, the following
definitions shall apply to this Agreement:
(a) "Event of Default" means any of the occurrences set forth
in Section 14 below.
(b) "Loan Document(s)" means any of the instruments executed
in connection with the Loans, which instruments include, without limitation, the
Loan Agreements, the Notes and such other documentation as has been or may be
executed in connection with the Loans, together with any subsequent amendments
or modifications thereto.
(c) "Obligations" means all of the indebtedness, obligations
and liabilities of the Borrower to the Lender, individually or collectively,
whether direct or indirect, joint or several, absolute or contingent, due or to
become due, now existing or hereafter arising under or in respect of the Loan
Agreements, the Notes, and any other Loan Documents executed and delivered
pursuant thereto or in connection therewith or this Agreement.
(d) "State" means the State of New York.
(e) "Uniform Commercial Code" shall mean the Uniform
Commercial Code as in effect in the State from time to time or, if the context
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requires, as in effect from time to time in any relevant Uniform Commercial Code
jurisdiction.
2. GRANT OF SECURITY INTEREST. The Borrower hereby grants to the
Lender, and hereby confirms and ratifies its grant to Lender pursuant to the
Security Agreement, to secure the payment and performance in full of all of the
Obligations, a security interest in and pledges and assigns to the Lender the
properties, assets and rights of the Borrower listed on Schedule A attached
hereto and made a part hereof, wherever located, whether now owned or hereafter
acquired or arising, and all proceeds and products thereof (all of the same
being hereinafter called the "Collateral"), to secure the performance of the
following obligations of the Borrower (hereinafter collectively referred to as
the "Indebtedness"):
(i) Borrower's liabilities and obligations under the Loan
Documents executed in connection with the Additional Standby
Facility as hereafter amended and/or restated; and
(ii) Borrower's liabilities and obligations under the Loan
Documents executed in connection with the Supplemental Credit
Facility, as amended and/or restated; and
(iii) Borrower's liabilities and obligations under the Loan
Documents executed in connection with the Standby Facility, as
amended and/or restated; and
(iv) Any other obligations of the Borrower in favor of Lender which
may now exist or which may hereinafter arise pursuant to any
future loan transaction between the Borrower and the Lender.
The Borrower is hereby deemed a "debtor" and the Lender is hereby deemed a
"secured party" as those terms are used in the Uniform Commercial Code.
3. AUTHORIZATION TO FILE FINANCING STATEMENTS. The Borrower hereby
irrevocably authorizes the Lender at any time and from time to time to file in
any filing office in any Uniform Commercial Code jurisdiction any initial
financing statements and amendments thereto that (a) describe the Collateral (i)
as all assets of the Borrower or words of similar effect, regardless of whether
any particular asset comprised in the Collateral falls within the scope of
Article 9 of the Uniform Commercial Code of the State of such jurisdiction, or
(ii) as being of an equal or lesser scope or with greater detail, and (b)
provide any other information required by part 5 of Article 9 of the Uniform
Commercial Code of the State or such other jurisdictions for the sufficiency or
filing office acceptance of any financing statement or amendment, including
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whether the Borrower is an organization, the type of organization and any
organizational identification number issued to the Borrower. The Borrower agrees
to furnish any such information to the Lender promptly upon the Lender's
request. The Borrower also ratifies its authorization for the Lender to have
filed in any Uniform Commercial Code jurisdiction any like initial financing
statements or amendments thereto if filed prior to the date hereof.
4. OTHER ACTIONS. Further to insure the attachment, perfection and
first priority of, and the ability of the Lender to enforce, the Lender's
security interest in the Collateral, the Borrower agrees, in each case at the
Borrower's expense, to take the following actions with respect to the following
Collateral and without limitation on the Borrower's other obligations contained
in this Agreement:
4.1 PROMISSORY NOTES AND TANGIBLE CHATTEL PAPER. If the
Borrower shall now or at any time hereafter hold or acquire any
promissory notes or tangible chattel paper, the Borrower shall
forthwith endorse, assign and deliver the same to the Lender,
accompanied by such instruments of transfer or assignment duly executed
in blank as the Lender may from time to time specify.
4.2 DEPOSIT ACCOUNTS. For each deposit account that the
Borrower now or at any time hereafter opens or maintains, the Borrower
shall, at the Lender's request and option, pursuant to an agreement in
form and substance satisfactory to the Lender, either (a) cause the
depositary bank to agree to comply, without further consent of the
Borrower, at any time with instructions from the Lender to such
depositary bank directing the disposition of funds from time to time
credited to such deposit account, or (b) arrange for the Lender to
become the customer of the depositary bank with respect to the deposit
account, with the Borrower being permitted, only with the consent of
the Lender, to exercise rights to withdraw funds from such deposit
account. The Lender agrees with the Borrower that the Lender shall not
give any such instructions or withhold any withdrawal rights from the
Borrower, unless an Event of Default has occurred and is continuing, or
would occur if effect were given to any withdrawal not otherwise
permitted by the Loan Documents. The provisions of this paragraph shall
not apply to (i) any deposit account for which the Borrower, the
depositary bank and the Lender have entered into a cash collateral
agreement specially negotiated among the Borrower, the depositary bank
and the Lender for the specific purpose set forth therein, (ii) a
deposit account for which the Lender is the depositary bank and is in
automatic control, and (iii) any deposit accounts specially and
exclusively used for payroll, payroll taxes and other employee wage and
benefit payments to or for the benefit of the Borrower's employees.
4.3 INVESTMENT PROPERTY. If the Borrower shall now or at any
time hereafter hold or acquire any certificated securities, the
Borrower shall forthwith endorse, assign and deliver the same to the
Lender, accompanied by such instruments of transfer or assignment duly
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executed in blank as the Lender may from time to time specify. If any
securities now or hereafter acquired by the Borrower are uncertificated
and are issued to the Borrower or its nominee directly by the issuer
thereof, the Borrower shall immediately notify the Lender thereof and,
at the Lender's request and option, pursuant to an agreement in form
and substance satisfactory to the Lender, either (a) cause the issuer
to agree to comply, without further consent of the Borrower or such
nominee, at any time with instructions from the Lender as to such
securities, or (b) arrange for the Lender to become the registered
owner of the securities. If any securities, whether certificated or
uncertificated, or other investment property now or hereafter acquired
by the Borrower are held by the Borrower or its nominee through a
securities intermediary or commodity intermediary, the Borrower shall
immediately notify the Lender thereof and, at the Lender's request and
option, pursuant to an agreement in form and substance satisfactory to
the Lender, either (i) cause such securities intermediary or (as the
case may be) commodity intermediary to agree to comply, in each case
without further consent of the Borrower or such nominee, at any time
with entitlement orders or other instructions from the Lender to such
securities intermediary as to such securities or other investment
property, or (as the case may be) to apply any value distributed on
account of any commodity contract as directed by the Lender to such
commodity intermediary, or (ii) in the case of financial assets or
other investment property held through a securities intermediary,
arrange for the Lender to become the entitlement holder with respect to
such investment property, with the Borrower being permitted, only with
the consent of the Lender, to exercise rights to withdraw or otherwise
deal with such investment property. The Lender agrees with the Borrower
that the Lender shall not give any such entitlement orders or
instructions or directions to any such issuer, securities intermediary
or commodity intermediary, and shall not withhold its consent to the
exercise of any withdrawal or dealing rights by the Borrower, unless an
Event of Default has occurred and is continuing, or would occur after
giving effect to any such investment and withdrawal rights not
otherwise permitted by the Loan Documents. The provisions of this
paragraph shall not apply to any financial assets credited to a
securities account for which the Lender is the securities intermediary.
4.4 COLLATERAL IN THE POSSESSION OF A BAILEE. If any
Collateral is now or at any time hereafter in the possession of a
bailee, the Borrower shall promptly notify the Lender thereof and, at
the Lender's request and option, shall promptly obtain an
acknowledgment from the bailee, in form and substance satisfactory to
the Lender, that the bailee holds such Collateral for the benefit of
the Lender and such bailee's agreement to comply, without further
consent of the Borrower, at any time with instructions of the Lender as
to such Collateral.
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4.5 ELECTRONIC CHATTEL PAPER AND TRANSFERABLE RECORDS. If the
Borrower now or at any time hereafter holds or acquires an interest in
any electronic chattel paper or any "transferable record," as that term
is defined in Section 201 of the federal Electronic Signatures in
Global and National Commerce Act, or in ss.16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction, the
Borrower shall promptly notify the Lender thereof and, at the request
and option of the Lender, shall take such action as the Lender may
reasonably request to vest in the Lender control, under ss.9-105 of the
Uniform Commercial Code, of such electronic chattel paper or control
under Section 201 of the federal Electronic Signatures in Global and
National Commerce Act or, as the case may be, ss.16 of the Uniform
Electronic Transactions Act, as in effect in such jurisdiction, of such
transferable record. The Lender agrees with the Borrower that the
Lender will arrange, pursuant to procedures satisfactory to the Lender
and so long as such procedures will not result in the Lender's loss of
control, for the Borrower to make alterations to the electronic chattel
paper or transferable record permitted under UCC ss. 9-105 or, as the
case may be, Section 201 of the federal Electronic Signatures in Global
and National Commerce Act or ss.16 of the Uniform Electronic
Transactions Act for a party in control to make without loss of
control, unless an Event of Default has occurred and is continuing or
would occur after taking into account any action by the Borrower with
respect to such electronic chattel paper or transferable record.
4.6 LETTER-OF-CREDIT RIGHTS. If the Borrower is now or at any
time hereafter a beneficiary under a letter of credit now or hereafter
issued, the Borrower shall promptly notify the Lender thereof and, at
the request and option of the Lender, the Borrower shall, pursuant to
an agreement in form and substance satisfactory to the Lender, either
(i) arrange for the issuer and any confirmer or other nominated person
of such letter of credit to consent to an assignment to the Lender of
the proceeds of the letter of credit or (ii) arrange for the Lender to
become the transferee beneficiary of the letter of credit, with the
Lender agreeing, in each case, that the proceeds of the letter of
credit are to be applied as provided in the Additional Standby Facility
Loan Agreement.
4.7 COMMERCIAL TORT CLAIMS. If the Borrower shall now or at
any time hereafter hold or acquire a commercial tort claim, the
Borrower shall immediately notify the Lender in a writing signed by the
Borrower of the particulars thereof and grant to the Lender in such
writing a security interest therein and in the proceeds thereof, all
upon the terms of this Agreement, with such writing to be in form and
substance satisfactory to the Lender.
4.8 OTHER ACTIONS AS TO ANY AND ALL COLLATERAL. The Borrower
further agrees, upon request of the Lender and at the Lender's option,
to take any and all other actions as the Lender may determine to be
necessary or useful for the attachment, perfection and first priority
of, and the ability of the Lender to enforce, the Lender's security
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interest in any and all of the Collateral, including, without
limitation, (a) executing, delivering and, where appropriate, filing
financing statements and amendments relating thereto under the Uniform
Commercial Code, to the extent, if any, that the Borrower's signature
thereon is required therefor, (b) causing the Lender's name to be noted
as secured party on any certificate of title for a titled good if such
notation is a condition to attachment, perfection or priority of, or
ability of the Lender to enforce, the Lender's security interest in
such Collateral, (c) complying with any provision of any statute,
regulation or treaty of the United States as to any Collateral if
compliance with such provision is a condition to attachment, perfection
or priority of, or ability of the Lender to enforce, the Lender's
security interest in such Collateral, (d) obtaining governmental and
other third party waivers, consents and approvals in form and substance
satisfactory to the Lender, including, without limitation, any consent
of any licensor, lessor or other person obligated on Collateral, (e)
obtaining waivers from mortgagees and landlords in form and substance
satisfactory to the Lender and (f) taking all actions under any earlier
versions of the Uniform Commercial Code or under any other law, as
reasonably determined by the Lender to be applicable in any relevant
Uniform Commercial Code or other jurisdiction, including any foreign
jurisdiction.
4.9 At the request of Lender made at any time during the term
of the Additional Standby Facility, the Supplemental Credit Facility or
the Standby Facility for any reason, Borrower shall execute a mortgage
and conveyance of patents, trademarks, licenses and other proprietary
rights in favor of Lender, in form acceptable for filing with the U.S.
Patent and Trademark Office in accordance with 35 U.S.C. ss.261. Such
mortgage and conveyance shall be on substantially the same terms as the
Second Amended and Restated Patent Security Agreement, except that such
mortgage and conveyance shall provide for the absolute mortgaging and
conveyancing of such rights, subject to defeasance by Borrower upon
payment of the indebtedness and the satisfaction of the obligations
hereby secured. Lender is hereby authorized to file such mortgage and
conveyance with the U.S. Patent and Trademark Office.
5. REPRESENTATIONS AND WARRANTIES CONCERNING BORROWER'S LEGAL STATUS.
The Borrower has previously delivered to the Lender a certificate signed by the
Borrower and entitled "Perfection Certificate" (the "Perfection Certificate"), a
copy of which in final form is attached hereto and made a part hereof. The
Borrower represents and warrants to the Lender as follows:
(a) The Borrower's exact legal name is that indicated on the
Perfection Certificate and on the signature page hereof.
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(b) The Borrower is an organization of the type, and is
organized in the jurisdiction, set forth in the Perfection Certificate.
(c) The Perfection Certificate accurately sets forth the
Borrower's organizational identification number or accurately states that the
Borrower has none.
(d) The Perfection Certificate accurately sets forth the
Borrower's place of business or, if more than one, its chief executive office,
as well as the Borrower's mailing address, if different.
(e) All other information set forth on the Perfection
Certificate pertaining to the Borrower is accurate and complete.
(f) There has been no change in any of such information since
the date on which the Perfection Certificate was signed by the Borrower.
6. COVENANTS CONCERNING BORROWER'S LEGAL STATUS. The Borrower covenants
with the Lender as follows:
(a) Without providing at least 30 days prior written notice to
the Lender, the Borrower will not change its name, its place of business or, if
more than one, chief executive office, or its mailing address.
(b) The Borrower will not change its type of organization,
jurisdiction of organization or other legal structure.
7. REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL, ETC. The
Borrower further represents and warrants to the Lender as follows:
(a) The Borrower is the owner of or has other rights in or
power to transfer the Collateral, free from any right or claim of any person or
any adverse lien, security interest or other encumbrance, except for the
security interest created or permitted by this Agreement or other liens
permitted by the Additional Standby Facility Loan Agreement or as set forth in
Schedule B attached hereto and made a part hereof.
(b) None of the Collateral constitutes, or is the proceeds of,
"farm products" as defined in ss.9-102(a)(34) of the Uniform Commercial Code of
the State.
(c) Except as set forth in Schedule B attached hereto, none of
the account debtors or other persons obligated on any of the Collateral is a
governmental authority covered by the Federal Assignment of Claims Act or like
federal, state or local statute or rule in respect of such Collateral.
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(d) The Borrower holds no commercial tort claim except as
indicated on the Perfection Certificate.
(e) The Borrower has at all times and in all material respects
operated its business in compliance with all applicable provisions of the
federal Fair Labor Standards Act, as amended, and with all applicable provisions
of federal, state and local statutes and ordinances dealing with the control,
shipment, storage or disposal of hazardous materials or substances.
(f) All other information set forth on the Perfection
Certificate pertaining to the Collateral is accurate and complete.
(g) There has been no change in any of such information since
the date on which the Perfection Certificate was signed by the Borrower.
8. COVENANTS CONCERNING COLLATERAL, ETC. The Borrower further covenants
with the Lender as follows:
(a) The Collateral, to the extent not delivered to the Lender
pursuant to Section 4, will be kept at those locations listed on the Perfection
Certificate, attached hereto as Schedule C, and the Borrower will not remove the
Collateral from such locations, without providing at least 30 days prior written
notice to the Lender.
(b) Except for the security interest herein granted and liens
permitted by the Additional Standby Facility Loan Agreement, the Borrower shall
be the owner of or have other rights in the Collateral free from any right or
claim of any other person or any lien, security interest or other encumbrance,
and the Borrower shall defend the same against all claims and demands of all
persons at any time claiming the same or any interests therein adverse to the
Lender.
(c) The Borrower shall not pledge, mortgage or create, or
suffer to exist any right of any person in or claim by any person to the
Collateral, or any security interest, lien or other encumbrance in the
Collateral in favor of any person, other than the Lender except for liens
permitted by the Additional Standby Facility Loan Agreement.
(d) The Borrower will keep the Collateral in reasonably good
order and repair and will not use the same in violation of law or any material
provision of any policy of insurance thereon.
(e) Unless otherwise provided in the Additional Standby
Facility Loan Agreement, the Borrower will permit the Lender, or its designee,
to inspect the Collateral at any reasonable time, wherever located.
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(f) The Borrower will pay promptly when due or contest in a
timely manner and in good faith all taxes, assessments, governmental charges and
levies upon the Collateral or incurred in connection with the use or operation
of the Collateral or incurred in connection with this Agreement.
(g) The Borrower will continue to operate in all material
respects, its business in compliance with all applicable provisions of the
federal Fair Labor Standards Act, as amended, and with all applicable provisions
of federal, state and local statutes and ordinances dealing with the control,
shipment, storage or disposal of hazardous materials or substances.
(h) The Borrower will not sell or otherwise dispose, or offer
to sell or otherwise dispose, of the Collateral or any interest therein except
for (i) sales and leases of inventory and licenses of general intangibles in the
ordinary course of business and (ii) so long as no Event of Default has occurred
and is continuing, sales or other dispositions of obsolescent items of equipment
consistent with past practices or as permitted by the Additional Standby
Facility Loan Agreement.
(i) At the time any account receivable becomes subject to a
security interest in favor of the Lender said account shall be a good and valid
account representing to the knowledge of Borrower an undisputed, bona fide
indebtedness incurred by the account debtor named therein (the "Account Debtor")
for merchandise held subject to delivery instructions or theretofore shipped or
delivered pursuant to a contract of sale, or for services theretofore performed
by the Borrower with or for the Account Debtor. No agreement under which any
extraordinary deduction or discount may be claimed shall have been made with the
Account Debtor of any such account except as disclosed in writing to the Lender.
The Borrower shall be the lawful owner of all such accounts and shall have good
right to pledge, sell, assign and transfer the same and to subject the same to a
security interest in favor of the Lender. No such account shall have been or
shall thereafter be sold, assigned or transferred to any person other than the
Lender or in any way encumbered except to the Lender, and the Borrower shall
defend the same against the lawful claims and demands of all persons.
(j) The Borrower shall immediately notify the Lender of all
cases involving the return, rejection, repossession, loss or damage of or to
merchandise covered by accounts receivable, except in the ordinary course of the
Borrower's business; of any request for credit or adjustment or replacement
merchandise or other dispute arising with respect to accounts receivable, except
in the ordinary course of the Borrower's business; and generally of all
extraordinary happenings and events affecting accounts receivable or the value
or amount thereof, if, within sixty (60) days after the extraordinary event, the
matter at issue has not been satisfactorily resolved.
9. INSURANCE.
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9.1 MAINTENANCE OF INSURANCE. The Borrower will maintain with
financially sound and reputable insurers insurance with respect to its
properties and business against such casualties and contingencies as shall be in
accordance with general practices of businesses engaged in similar activities in
similar geographic areas. Such insurance shall be in such minimum amounts that
the Borrower will not be deemed a co-insurer under applicable insurance laws,
regulations and policies and otherwise shall be in such amounts, contain such
terms, be in such forms and be for such periods as may be reasonably
satisfactory to the Lender. In addition, all such insurance shall be payable to
the Lender as loss payee under a "standard" loss payee clause. Without limiting
the foregoing, the Borrower will (i) keep all of its physical property insured
with a policy of insurance covering such property on an "all risks" basis,
subject to policy terms, conditions and exclusions, with flood coverage, except
for that certain property located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and electronic data processing coverage, with a full
replacement cost endorsement in an amount equal to 100% of the full replacement
cost of such property, (ii) maintain all such workers' compensation or similar
insurance as may be required by law and (iii) maintain, in amounts and with
deductibles equal to those generally maintained by businesses engaged in similar
activities in similar geographic areas, general public liability insurance
against claims of bodily injury, death or property damage occurring, on, in or
about the properties of the Borrower; business interruption insurance; and
product liability insurance.
9.2 INSURANCE PROCEEDS. The proceeds of any casualty insurance
in respect of any casualty loss of any of the Collateral shall, at Lender's
discretion, be disbursed to the Borrower for direct application by the Borrower
solely to the repair or replacement of the Borrower's property so damaged or
destroyed or be held by the Lender as cash collateral for the Obligations, or
any combination thereof. The Lender may, at its sole option, disburse from time
to time all or any part of such proceeds so held as cash collateral, upon such
terms and conditions as the Lender may reasonably prescribe, for direct
application by the Borrower solely to the repair or replacement of the
Borrower's property so damaged or destroyed, or the Lender may apply all or any
part of such proceeds to the Obligations, with the Obligations (if not then
terminated) being reduced by the amount so applied.
9.3 CONTINUATION OF INSURANCE. All policies of insurance shall
provide for at least thirty (30) days prior written cancellation notice to the
Lender. In the event of failure by the Borrower to provide and maintain
insurance as herein provided, the Lender may, at its option, provide such
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insurance and charge the amount thereof to the Borrower. The Borrower shall
furnish the Lender with certificates of insurance and policies evidencing
compliance with the foregoing insurance provision.
10. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.
10.1 LENDER'S RIGHTS TO DISCHARGE ENCUMBRANCES, ETC. At its
option, Lender may discharge taxes, liens or security interests or
other third party encumbrances at any times levied or placed on the
Collateral, and may pay for insurance and the maintenance and
preservation of the Collateral. The Lender shall have no obligation to
the Borrower to make any such expenditures nor shall the making thereof
relieve the Borrower of any default provision contained in this Second
Amended and Restated Security Agreement, the Additional Standby
Facility Loan Agreement, or any other Loan Document. Any such payments
made under this Section 10 and not reimbursed by the Borrower within
ten (10) days of demand therefor shall be added to the outstanding
principal balance of the Loan. The total amount of additional payments
so made by the Lender and not otherwise reimbursed by the Borrower
shall be secured by this Second Amended and Restated Security Agreement
in the same manner as this Second Amended and Restated Security
Agreement secures the repayment of the Loans.
10.2 LENDER'S OBLIGATIONS AND DUTIES. Anything herein to the
contrary notwithstanding, the Borrower shall remain obligated and
liable under each contract or agreement comprised as part of the
Collateral to be observed or performed by the Borrower thereunder. The
Lender shall not have any obligation or liability under any such
contract or agreement by reason of or arising out of this Agreement or
the receipt by the Lender of any payment relating to any of the
Collateral, nor shall the Lender be obligated in any manner to perform
any of the obligations of the Borrower under or pursuant to any such
contract or agreement, to make inquiry as to the nature or sufficiency
of any payment received by the Lender in respect of the Collateral or
as to the sufficiency of any performance by any party under any such
contract or agreement, to present or file any claim, to take any action
to enforce any performance or to collect the payment of any amounts
which may have been assigned to the Lender or to which the Lender may
be entitled at any time or times. The Lender's sole duty with respect
to the custody, safe keeping and physical preservation of the
Collateral in its possession, under ss.9-207 of the Uniform Commercial
Code of the State or otherwise, shall be to deal with such Collateral
in the same manner as the Lender deals with similar property for its
own account.
11. SECURITIES AND DEPOSITS. The Lender may at any time following and
during the continuance of an Event of Default, at its option, transfer to itself
or any nominee any securities constituting Collateral, receive any income
thereon and hold such income as additional Collateral or apply it to the
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Obligations. Whether or not any Obligations are due, the Lender may following
and during the continuance of an Event of Default demand, ▇▇▇ for, collect, or
make any settlement or compromise which it deems desirable with respect to the
Collateral. Regardless of the adequacy of Collateral or any other security for
the Obligations, any deposits or other sums at any time credited by or due from
the Lender to the Borrower may at any time be applied to or set off against any
of the Obligations.
12. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON
COLLATERAL. If an Event of Default shall have occurred and be continuing, the
Borrower shall, at the request and option of the Lender, notify account debtors
and other persons obligated on any of the Collateral of the security interest of
the Lender in any account, chattel paper, general intangible, instrument or
other Collateral and that payment thereof is to be made directly to the Lender
or to any financial institution designated by the Lender as the Lender's agent
therefor, and the Lender may itself, if a Default or an Event of Default shall
have occurred and be continuing, without notice to or demand upon the Borrower,
so notify account debtors and other persons obligated under the Collateral.
After the making of such a request or the giving of any such notification, the
Borrower shall hold any proceeds of collection of accounts, chattel paper,
general intangibles, instruments and other Collateral received by the Borrower
as trustee for the Lender without commingling the same with other funds of the
Borrower and shall turn the same over to the Lender in the identical form
received, together with any necessary endorsements or assignments. The Lender
shall apply the proceeds of collection of accounts, chattel paper, general
intangibles, instruments and other Collateral received by the Lender to the
Obligations, such proceeds to be immediately credited after final payment in
cash or other immediately available funds of the items giving rise to them.
13. POWER OF ATTORNEY.
13.1 APPOINTMENT AND POWERS OF LENDER. The Borrower hereby
irrevocably constitutes and appoints the Lender and any officer or
agent thereof for so long as any Obligations remain outstanding, with
full power of substitution, as its true and lawful attorney-in-fact
with full irrevocable power and authority in the place and stead of the
Borrower or in the Lender's own name, for the purpose of carrying out
the terms of this Agreement, to take any and all appropriate action and
to execute any and all documents and instruments that may be necessary
or useful to accomplish the purposes of this Agreement. Without
limiting the generality of the foregoing, Borrower further hereby gives
said attorneys the power and right, on behalf of the Borrower, without
notice to or assent by the Borrower, upon the occurrence and during the
continuance of an Event of Default, generally to sell, transfer,
pledge, make any agreement with respect to or otherwise dispose of or
deal with any of the Collateral in such manner as is consistent with
the Uniform Commercial Code of the State and as fully and completely as
though the Lender were the absolute owner thereof for all purposes, and
to do, at the Borrower's expense, at any time, or from time to time,
all acts and things which the Lender deems necessary or useful to
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protect, preserve or realize upon the Collateral and the Lender's
security interest therein, in order to effect the intent of this
Agreement, all no less fully and effectively as the Borrower might do,
including, without limitation, (i) the filing and prosecuting of
registration and transfer applications with the appropriate federal,
state or local agencies or authorities with respect to trademarks,
copyrights and patentable inventions and processes, (ii) upon written
notice to the Borrower, the exercise of voting rights with respect to
voting securities, which rights may be exercised, if the Lender so
elects, with a view to causing the liquidation of assets of the issuer
of any such securities, and (iii) the execution, delivery and
recording, in connection with any sale or other disposition of any
Collateral, of the endorsements, assignments or other instruments of
conveyance or transfer with respect to such Collateral.
13.2 RATIFICATION BY BORROWER. To the extent permitted by law,
the Borrower hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. This power of attorney is a power
coupled with an interest and is irrevocable for so long as any
Obligations remain outstanding.
13.3 NO DUTY ON LENDER. The powers conferred on the Lender
hereunder are solely to protect its interests in the Collateral and
shall not impose any duty upon it to exercise any such powers. The
Lender shall be accountable only for the amounts that it actually
receives as a result of the exercise of such powers, and neither it nor
any of its officers, directors, employees or agents shall be
responsible to the Borrower for any act or failure to act, except for
the Lender's own gross negligence or willful misconduct.
14. DEFAULT. The Borrower shall be in default under this Second Amended
and Restated Security Agreement upon the occurrence (an "Event of Default") of
any of the following events or conditions:
(a) failure to make any payments due, or perform any of the
obligations required, or comply with any covenant, under this Second Amended and
Restated Security Agreement; or
(b) any event of default by the Borrower or any guarantor of
the Loan under any Loan Document.
15. RIGHTS AND REMEDIES.
15.1 RIGHTS PRIOR TO DEFAULT. Until an Event of Default has
occurred, the Borrower may have possession of the Collateral and use it
in any lawful manner not inconsistent with this Second Amended and
Restated Security Agreement, the Additional Standby Facility Loan
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Agreement or any other Loan Documents, and not inconsistent with any
policy of insurance thereon.
15.2 RIGHTS OF LENDER UPON DEFAULT. Without limiting the
rights of the Lender as contained in the Supplemental Credit Facility
and Standby Facility Loan Agreements and the Second Amended and
Restated Patent Security Agreement or contained elsewhere in this
Agreement, which rights shall be cumulative, upon an Event of Default
and at any time thereafter the Lender shall have the remedies of a
secured party under the State Uniform Commercial Code, or the law of
another jurisdiction if it shall be applicable, including, without
limitation, the right to take possession of the Collateral, and for
that purpose the Lender may, without legal process, so far as the
Borrower can give authority therefor, enter upon any premises on which
the Collateral or any part thereof may be situated and remove the same
therefrom, provided such entry shall be done lawfully. The Lender may
require the Borrower to assemble the Collateral and make it available
to the Lender at a place to be designated by the Lender which is
reasonably convenient to both parties. Unless the Collateral is
perishable or threatens to decline rapidly in value or is of a type
customarily sold on a recognized market, the Lender will give the
Borrower reasonable notice of the time and place of any public sale
thereof or of the time after which any private sale or any other
intended disposition thereof is to be made. The requirements of
reasonable notice shall be met if such notice is mailed, postage
prepaid, to the address of the Borrower shown in paragraph 2 (b) hereof
at least three days before the time of the scheduled sale or
disposition.
15.3 STANDARDS FOR EXERCISING RIGHTS AND REMEDIES. To the
extent that applicable law imposes duties on the Lender to exercise
remedies in a commercially reasonable manner, the Borrower acknowledges
and agrees that it is not commercially unreasonable for the Lender (a)
to fail to incur expenses reasonably deemed significant by the Lender
to prepare Collateral for disposition or otherwise to fail to complete
raw material or work in process into finished goods or other finished
products for disposition, (b) to fail to obtain third party consents
for access to Collateral to be disposed of, or to obtain or, if not
required by other law, to fail to obtain governmental or third party
consents for the collection or disposition of Collateral to be
collected or disposed of, (c) to fail to exercise collection remedies
against account debtors or other persons obligated on Collateral or to
fail to remove liens or encumbrances on or any adverse claims against
Collateral, (d) to exercise collection remedies against account debtors
and other persons obligated on Collateral directly or through the use
of collection agencies and other collection specialists, (e) to
advertise dispositions of Collateral publications or media of general
circulation, whether or not the Collateral is of a specialized nature,
(f) to contact other persons, whether or not in the same business as
the Borrower, for expressions of interest in acquiring all or any
portion of the Collateral, (g) to hire one or more professional
auctioneers to assist in the disposition of Collateral, whether or not
the collateral is of a specialized nature, (h) to dispose of Collateral
by utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable
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capability of doing so, or that match buyers and sellers of assets, (i)
to dispose of assets in wholesale rather than retail markets, (j) to
disclaim disposition warranties, (k) to purchase insurance or credit
enhancements to insure the Lender against risks of loss, collection or
disposition of Collateral or to provide to the Lender a guaranteed
return from the collection or disposition of Collateral, or (l) to the
extent deemed appropriate by the Lender, to obtain the services of
brokers, investment bankers, consultants and other professionals to
assist the Lender in the collection or disposition of any of the
Collateral. The Borrower acknowledges that the purpose of this Section
15.3 is to provide non-exhaustive indications of what actions or
omissions by the Lender would fulfill the Lender's duties under the
Uniform Commercial Code of the State or any other relevant jurisdiction
in the Lender's exercise of remedies against the Collateral and that
other actions or omissions by the Lender shall not be deemed to fail to
fulfill such duties solely on account of not being indicated in this
Section 15.3. Without limitation upon the foregoing, nothing contained
in this Section 15.3 shall be construed to grant any rights to the
Borrower or to impose any duties on the Lender that would not have been
granted or imposed by this Agreement or by applicable law in the
absence of this Section 15.3.
15.4 NO WAIVER BY LENDER, ETC. The Lender shall not be deemed
to have waived any of its rights and remedies in respect of the
Obligations or the Collateral unless such waiver shall be in writing
and signed by the Lender. No delay or omission on the part of the
Lender in exercising any right or remedy shall operate as a waiver of
such right or remedy or any other right or remedy. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right or
remedy on any future occasion. All rights and remedies of the Lender
with respect to the Obligations or the Collateral, whether evidenced
hereby or by any other instrument or papers, shall be cumulative and
may be exercised singularly, alternatively, successively or
concurrently at such time or at such times as the Lender deems
expedient.
15.5 MARSHALLING. The Lender shall not be required to marshal
any present or future collateral security (including but not limited to
the Collateral) for, or other assurances of payment of, the Obligations
or any of them or to resort to such collateral security or other
assurances of payment in any particular order, and all of its rights
and remedies hereunder and in respect of such collateral security and
other assurances of payment shall be cumulative and in addition to all
other rights and remedies, however existing or arising. To the extent
that it lawfully may, the Borrower hereby agrees that it will not
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invoke any law relating to the marshalling of collateral which might
cause delay in or impede the enforcement of the Lender's rights and
remedies under this Agreement or under any other instrument creating or
evidencing any of the Obligations or under which any of the Obligations
is outstanding or by which any of the Obligations is secured or payment
thereof is otherwise assured, and, to the extent that it lawfully may,
the Borrower hereby irrevocably waives the benefits of all such laws.
15.6 PROCEEDS OF DISPOSITIONS; EXPENSES. The Borrower shall
pay to the Lender on demand amounts equal to any and all expenses,
including, without limitation, reasonable attorneys' fees and
disbursements, incurred or paid by the Lender in protecting, preserving
or enforcing the Lender's rights and remedies under or in respect of
any of the Obligations or any of the Collateral. After deducting all of
said expenses, the residue of any proceeds of collection or sale or
other disposition of Collateral shall, to the extent actually received
in cash, be applied to the payment of the Obligations in such order or
preference as the Lender may determine or in such order or preference
as is provided in the Additional Standby Facility Loan Agreement,
proper allowance and provision being made for any Obligations not then
due. Upon the final payment and satisfaction in full of all of the
Obligations and after making any payments required by Sections
9-608(a)(1)(C) or 9-615(a)(3) of the Uniform Commercial Code of the
State, any excess shall be returned to the Borrower. In the absence of
final payment and satisfaction in full of all of the Obligations, the
Borrower shall remain liable for any deficiency.
15.7 OVERDUE AMOUNTS. Until paid, all amounts due and payable
by the Borrower hereunder, whether occurring prior to or after an Event
of Default, shall be a debt secured by the Collateral and shall bear,
whether before or after judgment, interest at the rate of interest for
overdue principal set forth in the Additional Standby Facility Loan
Agreement.
16. MODIFICATION. This Second Amended and Restated Security Agreement
may not be modified or amended except by a writing signed by both the Borrower
and the Lender.
17. NOTICES. All notices provided for by this Second Amended and
Restated Security Agreement shall be made in writing, either by actual delivery
of the notice into the hands of the party thereunto entitled, by facsimile
transmission, by e-mail (if the other party is notified of an e-mail address
below or in accordance with the terms of this Section) or by either overnight
delivery or the mailing of the notice in the United States mails, certified
mail, return receipt requested, to the last known address of the party entitled
thereto. The notice shall be deemed to be delivered on (i) the date of its
actual receipt by the party in the event of hand delivery, (ii) the date of
facsimile transmission or of confirmation of effective transmission of e-mail if
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made before 5:00 p.m. or on the following date if made after 5:00 p.m., (iii)
four days after the date of its postmark in the event of mailing (ten days in
the case of international mail), or (iv) the date following timely receipt by
the overnight delivery service in the event of overnight delivery. Any notices
given pursuant to this Agreement shall be delivered to the respective parties at
the following addresses or at any change of address upon written notification
thereof.
18. SEVERABILITY. A provision of this Second Amended and Restated
Security Agreement deemed invalid or unenforceable under any applicable law
shall not serve to invalidate the remainder of Second Amended and Restated
Security Agreement .
19. CONSTRUCTION. Second Amended and Restated Security Agreement and
all rights and obligations hereunder, including matters of construction,
validity and performance, shall be governed by the laws of the State of New
York.
20. BINDING EFFECT. All rights of the Lender hereunder shall inure to
the benefit of its successors and assigns, and all obligations of the Borrower
shall bind its heirs, personal representatives, successors and assigns.
21. BORROWER WAIVERS. THE BORROWER ACKNOWLEDGES THAT THE TRANSACTION OF
WHICH THIS SECOND AMENDED AND RESTATED SECURITY AGREEMENT IS A PART IS A
COMMERCIAL TRANSACTION AND MAKES THE FOLLOWING WAIVERS:
A. THE BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, THE BENEFITS OF ALL VALUATION, APPRAISEMENT, HOMESTEAD, EXEMPTION, STAY,
REDEMPTION AND MORATORIUM LAWS, NOW IN FORCE OR WHICH MAY HEREAFTER BECOME LAWS.
B. THE BORROWER HEREBY WAIVES THE RIGHT TO A JURY TRIAL.
C. THE BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY
LOCAL, STATE, OR FEDERAL COURT LOCATED WITHIN THE STATE OF FLORIDA OR NEW YORK
AND WAIVES ANY OBJECTION WHICH THE BORROWER MAY HAVE BASED ON IMPROPER VENUE OR
FORUM NON CONVENIENS, TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON BORROWER, AND CONSENTS THAT
ALL SUCH SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER DIRECTED TO BORROWER AT
THE ADDRESS SET FORTH IN SECTION 8.02 OF THE ADDITIONAL STANDBY FACILITY LOAN
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE
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EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN
POSTED TO THE BORROWER'S ADDRESS. THE BORROWER WAIVES ANY BOND OR SURETY OR
SECURITY UPON SUCH BOND WHICH, MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE
LENDER. NOTHING CONTAINED IN THIS SECTION AFFECTS THE RIGHT OF THE LENDER TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECTS THE RIGHT OF
THE LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR BORROWER'S
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
D. THE BORROWER HEREBY AGREES NOT TO COMMENCE ANY LEGAL
PROCEEDING AGAINST THE LENDER IN THE JURISDICTION OF ANY LOCAL, STATE, OR
FEDERAL COURT LOCATED WITHIN THE STATE OF FLORIDA UNLESS THE LENDER EXPRESSLY
CONSENTS THERETO IN WRITING.
22. COUNTERPARTS. This Second Amended and Restated Security Agreement
may be executed simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which shall constitute one and the same
instrument.
23. HEADINGS. Headings are for convenience only and shall not be deemed
part of this Second Amended and Restated Security Agreement.
IN WITNESS WHEREOF, the parties have signed and delivered this
agreement on the day and year first above written.
KOS PHARMACEUTICALS, INC.
By:
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
LENDER
-----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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STATE OF NEW YORK )
) ss.:
COUNTY OF )
On the ______ day of December, 2002, before me came ▇▇▇▇▇▇ ▇▇▇▇▇, to me
known, who, being by me duly sworn, did depose and say that he resides at
_______________________________________________________________; that he is the
President of Kos Pharmaceuticals, Inc., the corporation described in and which
executed, the foregoing instrument; that the foregoing instrument was executed
without corporate seal by order of the Board of Directors of said corporation;
that he signed his name thereto by like order.
-------------------------------
Notary Public
My commission expires:
STATE OF NEW YORK )
) ss:
COUNTY OF )
On the ____ day of December, 2002, before me came ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, to
me known to be the individual described in, and who executed the foregoing
instrument, and acknowledged that he executed the same.
-------------------------------
Notary Public
My commission expires:
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