Exhibit 10.4
SECURITY AGREEMENT
SECURITY AGREEMENT
(this “ Agreement
”) dated as of September 26, 2008, between ISTA
PHARMACEUTICALS, INC. , a Delaware corporation (the “
Debtor ”), and the entities identified as secured
parties on the signature page of this Agreement . (together,
the “ Secured Party ”).
WHEREAS , the Debtor and the Secured Party have entered
into that certain Facility Agreement dated as of the date hereof
(the “ Facility Agreement ”) pursuant to which
the Secured Party has agreed to provide funds to the
Debtor;
WHEREAS , it is a condition precedent to the Secured
Party’s execution of the Facility Agreement that the Debtor
execute and deliver to the Secured Party a security agreement in
substantially the form hereof; and
WHEREAS , the Debtor wishes to grant a security interest
in favor of the Secured Party on the terms and subject to the
conditions set forth herein,
NOW, THEREFORE
, in consideration of the promises
contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 UCC Terms . The following
terms that are defined in the Uniform Commercial Code (as
hereinafter defined) are used in this Agreement as so defined (and,
in the event any such term is defined differently for purposes of
Article 9 of the Uniform Commercial Code than for any other purpose
or purposes of the Uniform Commercial Code, the Article 9
definition shall govern): Account, Equipment and
Inventory.
1.2 Facility Agreement Terms
. All other capitalized terms not otherwise defined herein shall
have the meanings ascribed to such terms in the Facility
Agreement.
1.3 Other Defined Terms . In
addition, the following terms shall have the meanings set forth
below:
“ Agreement ”
means all agreements to which the Debtor or any Subsidiary is a
party or in which the Debtor and any Subsidiary has rights relating
to the Intellectual Property and Royalty Products.
“ Collateral ”
means and includes the Registrations, the Intellectual Property and
all of the Accounts, Equipment, Inventory and Agreements arising
out of or relating specifically to the Royalty Products, wherever
located, of the Debtor now or hereafter held or received by, in
transit to, or in the possession or control of the Debtor or the
Secured Party, and any substitutions or replacements thereof and
any products and proceeds thereof, including without limitation,
insurance proceeds, but shall not include the Excluded
Property.
1
“ Collateral Accounts
” means any Accounts comprising any or all of the
Collateral.
“ Collateral Collection
Accounts ” has the meaning set forth in
Section 5.4 .
“ Collateral Equipment
” means Equipment comprising part of the
Collateral.
“ Collateral Inventory
” means any Inventory comprising any or all of the
Collateral.
“ Copyright ”
means the legal right provided by the Copyright Act of 1976, as
amended, to the expression contained in any work of authorship
fixed in any tangible medium of expression together with any
similar rights arising in any other country as a result of statute
or treaty, and any right that may exist to obtain a registration
with respect thereto from any Governmental Authority and any rights
arising under any such application.
“ Excluded Property
” means (a) any permit or license issued by a
Governmental Authority to the Debtor or any agreement (other than a
contract, subcontract and/or proposal with, by or issued to a
Governmental Authority) to which the Debtor is a party, in each
case, only to the extent and for so long as the terms of such
permit, license or agreement or any requirement of Law applicable
thereto, validly prohibit the creation by the Debtor of a security
interest in such permit, license or agreement in favor of the
Secured Party (after giving effect to Sections (9406(d), 9407(a),
9408(a) or 9409 of the Uniform Commercial Code (or any successor
provision or provisions) or any other applicable law (including the
Bankruptcy Code of the United States) or principles of equity), and
(b) Equipment owned by the Debtor on the date hereof or
hereafter acquired that is subject to a Lien securing a purchase
money obligation or capital lease obligation expressly permitted to
be incurred pursuant to the provisions of the Facility Agreement if
the contract or other agreement in which such Lien is granted (or
the documentation providing for such purchase money obligation or
capital lease obligation) validly prohibits the creation of any
other Lien on such Equipment; provided, however, that Excluded
Property shall not include any proceeds, substitutions or
replacements of any Excluded Property referred to in clauses
(a) or (b) unless such proceeds, substitutions or
replacements would constitute Excluded Property, as defined in such
clauses (a) or (b).
“ Governmental
Authority ” means any nation or government, any state or
other political subdivision thereof, any municipal, local, city or
county government, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining
to government and any corporation or other entity owned or
controlled, through capital stock or otherwise, by any of the
foregoing.
“ Intellectual Property
” means all Patents, Marks, Trade Names, Copyrights,
Software, Trade Secrets, Know-How, tests, protocols, standard
operating procedures, results and data owned, licensed, possessed,
used or useful by the Debtor or the composition, manufacture,
quality control, testing, packaging, storage or use of the Royalty
Products. “Intellectual Property” includes the contents
of the drug master files owned by the Debtor or to which the Debtor
has rights, all adverse event reports made or received by the
Debtor and all submissions made to the FDA.
2
“ Know-How ”
means ideas, designs, inventions, discoveries, concepts,
compilations of information, methods, techniques, procedures and
processes, whether confidential or not, whether patentable or not
and whether reduced to practice or not.
“ Lien ” means
any mortgage, claim, lien, security interest, pledge, escrow,
charge, option, restriction or encumbrance of any kind or character
whatsoever.
“ Mark ” means
any word, name, symbol or device used by a Person to identify its
goods or services, whether or not registered, all goodwill
associated therewith, and any right that may exist to obtain a
registration with respect thereto from any Governmental Authority
and any rights arising under any such application.
“Mark” includes trademarks and service
marks.
“ Obligations ”
means all of the payment obligations and liabilities of the Debtor
to the Secured Party pursuant to the Facility Agreement.
“ Patent ” means
any patent granted by the U.S. Patent and Trademark Office or by
the comparable agency of any other country, and any renewal
thereof, and any rights arising under any patent application filed
with the U.S. Patent and Trademark Office or the comparable agency
of any other country and any rights that may exist to file any such
application.
“ Permitted Liens
” shall have the meaning set forth in the Facility
Agreement.
“ Person ” means
any corporation, association, joint venture, partnership, limited
liability company, organization, business, individual, trust,
Governmental Authority or other legal entity.
“ Registrations ”
means all investigational new drug applications, all new drug
applications and all abbreviated new drug applications, and
including in each case all supplements and amendments thereto, and
all approvals, codes, permits, authorizations and licenses issued
or approved by any Governmental Authority that are or may hereafter
be held by the Debtor relating to the development, manufacture,
warehousing, distribution, promotion, sale, importing or pricing of
the Royalty Products.
“ Royalty Products
” means Xibrom, Istalol, Vitrase and each other product
marketed by or under license from the Debtor.
“ Software ”
means, with respect to a Person, all types of computer software
programs owned, licensed, used or usable by such Person, including
operating systems, application programs, software tools, firmware
and software imbedded in equipment, including both object code and
source code versions thereof. The term “Software” also
includes all written or electronic materials that explain the
structure or use of the Software or that were used in the
development of the Software, including logic diagrams, flow charts,
procedural diagrams, error reports, manuals and training
materials.
“ Trade Names ”
means any words, names or symbols used by a Person to identify its
business.
“ Trade Secrets ”
means the business or technical information of any Person
including, but not limited to, customer lists, marketing data and
Know-How that is not generally known to other Persons who are not
subject to an obligation of nondisclosure and that derives actual
or potential commercial value from being not generally known to
other Persons.
3
“ Uniform Commercial
Code ” means the Uniform Commercial Code as the same may
be in effect from time to time in the State of Delaware; provided
that if, by reason of applicable law, the validity or perfection of
any security interest in any Collateral granted under this
Agreement is governed by the Uniform Commercial Code as in effect
in another jurisdiction, then as to the validity or perfection, as
the case may be, of such security interest, “Uniform
Commercial Code” means the Uniform Commercial Code as in
effect from time to time in such other jurisdiction.
1.4 Construction . Unless the
context requires otherwise, words in the singular include the
plural, words in the plural include the singular, and words
importing any gender shall be applicable to all genders. If a term
is defined as one part of speech (such as a noun), it shall have a
corresponding meaning when used as another part of speech (such as
a verb).
ARTICLE 2
GRANT OF SECURITY
INTEREST
2.1 Pledge and Grant of Security
Interest . The Debtor hereby pledges, assigns and delivers to
the Secured Party and grants to the Secured Party, to secure the
payment and performance in full of the Obligations, a lien upon and
security interest in all of its right, title and interest in and to
the Collateral, wherever located, whether now owned or hereafter
acquired or arising, and all proceeds and products
thereof.
2.2 Security Interests
Absolute . All rights of the Secured Party and the security
interests hereunder, and all obligations of the Debtor hereunder,
shall be absolute and unconditional and, without limiting the
generality of the foregoing, shall not be released, discharged or
otherwise affected by:
(a) any release, non-perfection or
invalidity of any direct or indirect security for any
Obligation;
(b) any insolvency, bankruptcy,
reorganization or other similar proceeding affecting the Debtor or
its assets or any resulting disallowance, release or discharge of
all or any portion of any Obligation;
(c) the existence of any claim,
set-off or other right that the Secured Party may have at any time
against the Debtor or any other Person, whether in connection
herewith or any unrelated transactions; provided ,
however , that nothing herein shall prevent the assertion of
any such claim by separate suit or compulsory
counterclaim;
(d) any invalidity or
unenforceability relating to or against the Debtor for any reason
of any Obligation, or any provision of applicable law or regulation
purporting to prohibit the payment by the Debtor of any
Obligation;
4
(e) any failure by the Secured Party
(A) to file or enforce a claim against the Debtor (in a
bankruptcy or other proceeding), (B) to give notice of the
existence, creation or incurrence by the Debtor of any new or
additional indebtedness or obligation under or with respect to the
Obligations, (C) to commence any action against the Debtor or
(D) to proceed with due diligence in the collection,
protection or realization upon any Collateral; or
(f) any other act or omission to act
or delay of any kind by the Secured Party or the Debtor or any
other Person or any other circumstance whatsoever which might, but
for the provisions of this clause, constitute a legal or equitable
discharge of the Debtor’s obligations hereunder.
ARTICLE 3
REPRESENTATIONS AND
WARRANTIES
The Debtor hereby represents and
warrants to the Secured Party that, as of the date of this
Agreement:
3.1 Ownership of Collateral .
The Debtor owns, or has valid rights as a licensee with respect to,
the Collateral free and clear of any Liens except for Permitted
Liens. Except as set forth in Schedule 3.1 hereto, no Lien
with respect to all or any part of the Collateral is on file or of
record in any government or public office, and the Debtor has not
filed or consented to the filing of any such Lien, except Uniform
Commercial Code financing statements naming the Secured Party as
secured party.
3.2 Security Interests;
Filings . This Agreement, together with (i) the filing of
duly completed and executed Uniform Commercial Code financing
statements naming the Debtor as debtor, the Secured Party as
secured party, and describing the Collateral, in the jurisdictions
set forth with respect to the Debtor on Schedule 3.2 hereto
(which filing is hereby authorized by the Debtor) and (ii) to
the extent required by applicable law, the filing of duly completed
and executed assignments in the forms required by the U.S.
Copyright Office or the U.S. Patent and Trademark Office, creates,
and at all times shall constitute, a valid and perfected security
interest in and Lien upon the Collateral in favor of the Secured
Party superior and prior to the rights of all other Persons therein
except as set forth on Schedule 3.2A.
3.3 Locations . Schedule
3.3 lists as to the Debtor, (i) its exact legal name,
(ii) the jurisdiction of its incorporation and its federal tax
identification number, (iii) the addresses of its chief
executive office and each other place of business and (iv) the
address of each location at which any of the Collateral Inventory
or Collateral Equipment is kept, except for any new locations
established in accordance with the provisions of
Section 4.2 . The Debtor does not presently conduct
business under any prior or other corporate or company name or
under any trade or fictitious names, and the Debtor has not entered
into any contract or granted any Lien within the past five
(5) years under any name other than its legal corporate
name.
5
3.4 No Violations . The
signing, delivery and performance of this Agreement by the Debtor
is not prohibited or limited by, and will not result in the breach
of or a default under, any provision of the certificate of
incorporation or bylaws of the Debtor or any legal requirement
applicable to the Debtor. The execution, delivery and performance
of this Agreement by the Debtor, the Debtor’s compliance with
the terms and provisions hereof and the Secured Party’s
exercise of any of its rights hereunder, do not and will not
conflict with or result in a breach of any of the terms and
provisions of or constitute a default or create a termination right
under, with or without the passage of time and the giving of
notice, any contract or other instrument or obligation binding or
affecting the Debtor, the Royalty Products or the
Collateral.
3.5 No Restrictions . There
are no statutory or regulatory restrictions, prohibitions or
limitations on the Debtor’s ability to grant to the Secured
Party a Lien upon and security interest in the Collateral pursuant
to this Agreement or on the exercise by the Secured Party of its
rights and remedies hereunder (including any foreclosure upon or
collection of the Collateral), and there are no contractual
restrictions on the Debtor’s ability to grant such Lien and
security interest.
3.6 Accounts . Each
Collateral Account is, or at the time it arises will be, (i) a
bona fide, valid and legally enforceable indebtedness of the
account debtor according to its terms, arising out of or in
connection with the sale, lease or performance of goods or services
by the Debtor or any of them, (ii) subject to no offsets,
discounts, counterclaims, contra accounts or any other defense of
any kind and character, other than warranties and discounts
customarily given by the Debtor in the ordinary course of business
and warranties provided by applicable law, (iii) to the extent
listed on any schedule of Collateral Accounts at any time furnished
to the Secured Party, a true and correct statement of the amount
actually and unconditionally owing thereunder, maturing as stated
in such schedule and in the invoice covering the transaction
creating such Collateral Account, and (iv) not evidenced by
any other instrument; or if so, such other instrument (other than
invoices and related correspondence and supporting documentation)
shall promptly be duly endorsed to the order of the Secured Party
and delivered to the Secured Party to be held as Collateral
hereunder. To the knowledge of the Debtor, there are no facts,
events or occurrences that would in any way impair the validity or
enforcement of any Collateral Accounts except as set forth
above.
ARTICLE 4
COVENANTS
The Debtor agrees that so long as
any Obligation remains unpaid:
4.1 Use and Disposition of
Collateral . So long as no Event of Default shall have occurred
and be continuing, the Debtor may, in any lawful manner not
inconsistent with the provisions of this Agreement, use, control
and manage the Collateral in the operation of its business, and
receive and use the income, revenue and profits arising therefrom
and the proceeds thereof, in the same manner and with the same
effect as if this Agreement had not been made; provided ,
however , that the Debtor will not sell or otherwise dispose
of (other than sales of Royalty Products in the ordinary course of
the Debtor’s business), grant any option with respect to or
grant any Lien with respect to or otherwise encumber any of the
Collateral or any interest therein, except for Permitted Liens and
as may be otherwise expressly permitted in accordance with the
terms of this Agreement or the Facility Agreement; provided
further, however, that Debtor may sell or otherwise dispose of
Collateral in connection with a sale of Royalty Products which
constitute less than 10% of Debtor’s consolidated revenue
based on the last four calendar quarters that have been
reported.
6
4.2 Change of Name, Locations,
etc . The Debtor will not (i) change its name, identity or
corporate structure, (ii) change its chief executive office
from the location thereof listed on Schedule 3.3 ,
(iii) change the jurisdiction of its incorporation from the
jurisdiction listed on Schedule 3.3 (whether by merger or
otherwise) or (iv) remove any Collateral, or any books,
records or other information relating to such Collateral, from the
applicable location thereof listed on Schedule 3.3 , or keep
or maintain any Collateral at a location not listed on Schedule
3.3 (except for Collateral with an aggregate fair market value
not to exceed $100,000 at any time, in the ordinary course of
business, including, without limitation, for testing or evaluation
purposes) unless in each case the Debtor has (A) given prior
written notice to the Secured Party of its intention to do so,
together with information regarding any such new location and such
other information in connection with such proposed action as the
Secured Party may reasonably request, and
(B) delive
