SECURITY AGREEMENT
(PARENT)
THIS SECURITY AGREEMENT (this " Agreement
"), dated as of this ____ day of March, 2009, is made by and
between Vyteris, Inc., a Nevada corporation (“ Parent
”), and Ferring Pharmaceuticals, Inc., a Delaware corporation
(the " Ferring ”).
Recitals
A. Reference
is hereby made to (a) the Letter Agreement dated the date hereof by
and among Parent, Vyteris, Inc, a Delaware corporation and
Parent’s wholly-owned subsidiary (“ Vyteris
”), and Ferring (the “ Letter Agreement
”); (b) the License and Development Agreement dated as of
September 27, 2004, as amended prior to the date hereof and
pursuant to the Letter Agreement, by and between Ferring and
Vyteris (the “ License Agreement ”); and (c) the
Supply Agreement dated September 27, 2004, as amended prior to the
date hereof and pursuant to the Letter Agreement, by and between
Ferring and Vyteris (together with the related Technical Agreement
by and between Ferring and Vyteris, the “ Supply
Agreement ”) (all of the foregoing, together with the
Transaction Documents (as defined in the Letter Agreement), the
“ Underlying Agreements ”).
B. In
order to induce Ferring to enter into the Letter Agreement and the
other Transactions Documents (as defined therein) and for other
good and valuable consideration, receipt and sufficiency of which
are hereby acknowledged, and as security for the performance by
Parent of the Obligations (as hereinafter defined), Parent has
agreed to grant to Ferring, for the benefit of Ferring, a security
interest in the Collateral (as hereinafter defined) on the terms
and conditions hereinafter set forth.
NOW, THEREFORE, Parent and Ferring, intending to
be legally bound, hereby agree as follows:
(a) "
Collateral " shall mean all personal property of Parent,
wherever located, and whether now owned or hereafter acquired or
arising, including, without limitation, all:
(ii) Chattel
paper, including Electronic Chattel Paper;
(iii) Goods,
including all Inventory and Equipment and any accessions
thereto;
(iv) Instruments,
including Promissory Notes;
(viii) Commercial
Tort Claims, if any, identified on Schedule A annexed
hereto;
(ix) Letter-of-Credit
Rights;
(x) General
Intangibles, including Payment Intangibles and Software;
(xi) Supporting
Obligations; and
(xii) to
the extent not listed above as original collateral proceeds and
products of the foregoing.
(b) “
Obligations " shall mean all obligations, liabilities and
indebtedness of Parent to Ferring, whether now existing or
hereafter created, absolute or contingent, direct or indirect, due
or not, whether created directly or acquired by assignment or
otherwise, including, without limitation, arising under or relating
to any of the Underlying Agreements; all fees, costs, expenses and
indemnity obligations of Parent to Ferring hereunder or thereunder;
any amendments, extensions, renewals and increases of or
to any of the foregoing; and all costs and expenses of Ferring
incurred in the modification, enforcement, collection and otherwise
in connection with any of the foregoing, including reasonable
attorneys' fees and expenses.
(c) "
UCC " shall mean the Uniform Commercial Code, as adopted and
enacted and as in effect from time to time in the State whose law
governs pursuant to the Section 22 of this Agreement entitled "
Governing Law and Jurisdiction . Terms used
herein which are defined in the UCC and not otherwise defined
herein shall have the respective meanings ascribed to such terms in
the UCC. To the extent the definition of any category or type of
collateral is modified by any amendment, modification or revision
to the UCC, such modified definition will apply automatically as of
the date of such amendment, modification or revision.
2.
Grant of Security Interest. To secure the
Obligations, Parent hereby assigns and grants to Ferring, as
secured party, a continuing first priority lien on and a security
interest in the Collateral.
3.
Change in Name or Locations. Parent hereby
agrees that if the location of the Collateral changes from the
locations listed on Exhibit "A" hereto and made part hereof (other
than transport to its headquarter in Fair Lawn, New Jersey), or if
Parent changes its name, its type of organization, its state of
organization or its chief executive office or establishes a name
under which it may do business that is not listed as a tradename on
Exhibit "A" hereto, Parent will immediately notify Ferring in
writing of the additions or changes.
4.
Representations and Warranties. Parent
represents, warrants and covenants to Ferring that: (a) all
information, including its type of organization, jurisdiction of
organization and chief executive office, are as set forth on
Exhibit "A" hereto and are true and correct on the date hereof;
(b) Parent has paid to the manufacturer(s) and all supplier(s)
of the Collateral the entire purchase payable therefor, and no
amounts remain to be paid to any such manufacturer or supplier for
or in connection with the acquisition by Parent of the Collateral;
(c) as of date hereof, the Collateral is located at the locations
listed on Exhibit “A” hereto; (d) Parent has good,
marketable and indefeasible title to the Collateral, has not made
any prior sale, pledge, encumbrance, assignment or other
disposition of any of the Collateral, and the Collateral is free
from all encumbrances and rights of setoff of any kind except the
lien in favor of Ferring created by this Agreement; and any liens
or security interests of Spencer Trask Specialty Group, LLC (the
“ Subordinate Lienholder ”), which are subject,
junior and subordinate to the lien and security interest granted to
Ferring hereunder pursuant to a Subordination Agreement dated as of
the date hereof among the Subordinate Lienholder and Ferring;
(e) except as herein provided, Parent will not hereafter
without Ferring's prior written consent sell, pledge, encumber,
assign or otherwise dispose of any of the Collateral or permit any
right of setoff, lien or security interest to exist thereon except
to Ferring; (f) Parent will defend the Collateral against all
claims and demands of all persons and entities at any time claiming
the same or any interest therein; (g) Ferring's security interest
in the Collateral constitutes and will continue to constitute a
perfected first priority security interest in favor of Ferring; and
(h) each of this Agreement and the other Underlying Agreements has
been duly authorized, executed and delivered by Parent and
constitutes its legal, valid and binding obligations, enforceable
in accordance with their respective terms.
5.
Personal Property. The Collateral shall remain
personal property at all times. Parent shall not affix any of the
Collateral to real property in any manner which would change its
nature from that of personal property to real property or to a
fixture.
6.
Enforceability of Security Interests. Upon the
execution of this Agreement by Parent and the filing of financing
statements properly describing the Collateral and identifying
Parent, as the grantor and Ferring, as the secured party, in the
applicable jurisdiction required pursuant to the UCC, security
interests and liens granted to the Ferring, as the secured party
under Section 2 hereof shall constitute valid, perfected and first
priority security interests and liens in and to the Collateral of
Parent, other than Collateral which may not be perfected by filing
under the UCC, in each case enforceable against all third parties
and securing the payment of the Obligations.
7.
Parent's Covenants. Parent covenants that it
shall:
(a) from
time to time and at all reasonable times allow Ferring, by or
through any of its officers, agents, attorneys, or accountants, to
examine or inspect the Collateral, wherever
located. Parent shall do, obtain, make, execute and
deliver all such additional and further acts, things, deeds,
assurances and instruments as Ferring may require to vest in and
assure to Ferring its rights hereunder and in or to the Collateral,
and the proceeds thereof, including waivers from landlords,
warehousemen and mortgagees. Parent agrees that Ferring
has full power and authority to collect, compromise, endorse, sell
or otherwise deal with the Collateral in its own name or that of
Parent at any time upon an Event of Default (as defined
below);
(b) keep
the Collateral in good order and repair at all times and
immediately notify Ferring of any event causing a material loss or
decline in value of the Collateral, whether or not covered by
insurance, and the amount of such loss or depreciation;
(c) only
use or permit the Collateral to be used in accordance with all
applicable federal, state, county and municipal laws and
regulations; and
(d) have
and maintain public liability and property damage insurance at all
times with respect to all Collateral against such risks, including
fire (including so-called extended coverage), theft, sprinkler
leakage, and other risks (including risk of flood if any Collateral
is maintained at a location in a flood hazard zone and, for the
period that the Collateral is being transported to Parent’s
headquarters located in Fair Lawn, New Jersey, risks of loss during
transportation) as Ferring may require, in such form, in such
amount, for such period and written by such companies as may be
satisfactory to Ferring in its sole discretion. Each
such casualty insurance policy shall contain a standard Loss
Payable Clause issued in favor of Ferring under which all losses
thereunder shall be paid to Ferring as Ferring's interests may
appear. Each public liability policy shall name Ferring
as an additional insured. Such policies shall expressly
provide that the requisite insurance cannot be altered or canceled
without at least thirty (30) days prior written notice to Ferring
and shall insure Ferring notwithstanding the act or neglect of
Parent. Upon Ferring's demand, Parent shall furnish
Ferring with duplicate original policies of insurance or such other
evidence of insurance as Ferring may require. In the
event of failure to provide insurance as herein provided, Ferring
may, at its option, obtain such insurance and Parent shall pay to
Ferring, on demand, the cost thereof. Proceeds of
insurance may be applied by Ferring to reduce the Obligations or to
repair or replace Collateral, all in Ferring's sole
discretion.
8.
Negative Pledge; No Transfer. Parent will not
sell or offer to sell or otherwise transfer or grant or allow the
imposition of a lien or security interest upon the Collateral
except for the existing subordinate security interest in favor of
the Subordinate Lienholder, will not allow any third party to gain
control of all or any part of the Collateral, and will not use any
portion thereof in any manner inconsistent with this Agreement or
with the terms and conditions of any policy of insurance
thereon.
9.
Further Assurances. By its signature hereon,
Parent hereby irrevocably authorizes Ferring to execute (on behalf
of Parent) and file against Parent one or more financing,
continuation or amendment statements pursuant to the UCC in form
satisfactory to Ferring in all jurisdictions in which such filing
is deemed by Ferring to be necessary or desirable in order to
perfect, preserve and protect its security interests. If
required by Ferring, Parent will execute all documentation
necessary for Ferring to obtain and maintain perfection of its
security interests in the Collateral.
10.
Events of Default; Remedies. Upon the
occurrence of any breach or default by Parent or Vyteris of any of
the Underlying Agreements or the Obligations (an " Event of
Default ") and at any time thereafter, Ferring may declare all
Obligations secured hereby immediately due and payable and shall
have, in addition to any remedies provided herein or by any
applicable law or in equity, all the remedies of a secured party
under the UCC. Ferring's remedies include, but are not limited to,
the right to (a) peaceably by its own means or with judicial
assistance enter Parent’s premises and take possession of the
Collateral without prior notice to Parent or the opportunity for a
hearing; (b) render the Collateral unusable; (c) dispose of the
Collateral on Parent’s premises; and (d) require Parent to
assemble the Collateral and make it available to Ferring at a place
designated by Ferring. Ferring will give Parent
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
commercially reasonable notice shall be met if such notice is sent
to Parent at least five (5) days before the time of the intended
sale or disposition. Expenses of retaking, holding,
preparing for disposition, disposing or the like shall include
Ferring's reasonable attorneys' fees and legal expenses, incurred
or expended by Ferring to enforce any payment due it under this
Agreement either as against Parent, or in the prosecution or
defense of any action, or concerning any matter growing out of or
connection with the subject matter of this Agreement and the
Collateral pledged hereunder. Parent waives all relief from all
appraisement or exemption laws now in force or hereafter
enacted.
11.
Indemnification. Parent agrees to indemnify the
Ferring and hold it harmless from and against any and all injuries,
claims, damages, judgments, liabilities, costs and expenses
(including, without limitation, reasonable fees and disbursements
of counsel), charges and encumbrances which may be incurred by or
asserted against Ferring in connection with or arising out of any
assertion, declaration or defense of the Ferring's rights or
security interest under the provisions of this Agreement,
permitting it to collect, settle or adjust Accounts or to deal with
account debtors in any way or in connection with the realization,
repossession, safeguarding, insuring or other protection of the
Collateral or in connection with the collecting, perfecting or
protecting the Ferring's liens and security interests
hereunder.
12.
Power of Attorney. Parent does hereby make,
constitute and appoint any officer or agent of Ferring as
Parent’s true and lawful attorney-in-fact, with power to
(a) endorse the name of Parent or any of Parent’s
officers or agents upon any notes, checks, drafts, money orders, or
other instruments of payment or Collateral that may come into
Ferring's possession in full or part payment of any Obligations;
(b) sue for, compromise, settle and release all claims and disputes
with respect to, the Collateral; and (c) sign, for Parent, such
documentation required by the UCC, or supplemental intellectual
property security agreements; granting to Parent’s said
attorney full power to do any and all things necessary to be done
in and about the premises as fully and effectually as Parent might
or could do. Parent hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue
hereof. This power of attorney is coupled with an
interest and is irrevocable.
13.
Payment of Expenses. At its option, Ferring
may discharge taxes, liens, security interests or such other
encumbrances as may attach to the Collateral, may pay for required
insurance on the Collateral and may pay for the maintenance,
appraisal or reappraisal, and preservation of the Collateral, as
determined by Ferring to be necessary. Parent will reimburse
Ferring on demand for any payment so made or any expense incurred
by Ferring pursuant to the foregoing authorization, and the
Collateral also will secure any advances or payments so made or
expenses so incurred by Ferring.
14.
Notices. All notices, demands, requests,
consents, approvals and other communications required or permitted
hereunder (" Notices ") must be in writing and will be
effective upon receipt. Notices may be given in any
manner to which the parties may separately agree, including
electronic mail. Without limiting the foregoing,
first-class mail, facsimile transmission and commercial courier
service are hereby agreed to as acceptable methods for giving
Notices. Regardless of the manner in which provided, Notices may be
sent to a party's address as set forth above or to such other
address as any party may give to the other for such purpose in
accordance with this section.
15.
Preservation of Rights. No delay or omission
on Ferring's part to exercise any right or power arising hereunder
will impair any such right or power or be considered a waiver of
any such right or power, nor will Ferring's action or inaction
impair any such right or power. Ferring's rights and
remedies hereunder are cumulative and not exclusive of any other
rights or remedies which Ferring may have under other agreements,
at law or in equity.
16.
Illegality. If any provision contained in this
Agreement should be invalid, illegal or unenforceable in any
respect, it shall not affect or impair the validity, legality and
enforceability of the remaining provisions of this
Agreement.
17.
Changes in Writing. No modification, amendment
or waiver of, or consent to any departure by Parent from, any
provision of this Agreement will be effective unless made in a
writing signed by Ferring, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for
which given. No notice to or demand on Parent will
entitle Parent to any other or further notice or demand in the
same, similar or other circumstance.
18.
Entire Agreement. This Agreement (including
the documents and instruments referred to herein) constitutes the
entire agreement and supersedes all other prior agreements and
understandings, both written and oral, between the parties with
respect to the subject matter hereof.
19.
Counterparts. This Agreement may be signed in
any number of counterpart copies and by the parties hereto on
separate counterparts, but all such copies shall constitute one and
the same instrument. Delivery of an executed counterpart
of signature page to this Agreement by facsimile transmission shall
be effective as delivery of a manually executed
counterpart. Any party so executing this Agreement by
facsimile transmission shall promptly deliver a manually executed
counterpart, provided that any failure to do so shall not affect
the validity of the counterpart executed by facsimile
transmission.
20.
Successors and Assigns. This Agreement will be
binding upon and inure to the benefit of Parent and Ferring and
their respective successors and assigns; provided, however, that
Parent may not assign this Agreement in whole or in part without
Ferring's prior written consent and Ferring at any time may assign
this Agreement in whole or in part.
21.
Interpretation. In this Agreement, unless
Ferring and Parent otherwise agree in writing, the singular
includes the plural and the plural the singular; references to
statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; the
word "or" shall be deemed to include "and/or", the words
"including", "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to articles,
sections (or subdivisions of sections) or exhibits are to those of
this Agreement; and references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments
and other modifications to such instruments, but only to the extent
such amendments and other modifications are not prohibited by the
terms of this Agreement. Section headings in this
Agreement are included for convenience of reference only and shall
not constitute a part of this Agreement for any other
purpose.
22.
Governing Law and Jurisdiction. This Agreement
will be interpreted and the rights and liabilities of the parties
hereto determined in accordance with the laws of the State of New
Jersey, except that the laws of the State of Nevada shall govern
the creation, perfection and foreclosure of the liens created
hereunder on such property or any interest
therein. Parent hereby irrevocably consents to the
exclusive jurisdiction of any state or federal court in the City of
Newark, State of New Jersey; provided that nothing contained in
this Agreement will prevent Ferring from bringing any action,
enforcing any award or judgment or exercising any rights against
Parent individually, against any security or against any property
of Parent within any other county, state or other foreign or
domestic jurisdiction. Ferring and Parent agree that the
venue provided above is the most convenient forum for both Ferring
and Parent. Parent waives any objection to venue and any
objection based on a more convenient forum in any action instituted
under this Agreement.
23.
WAIVER OF JURY TRIAL. EACH OF VYTERIS AND
FERRING IRREVOCABLY WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING
TO THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH
DOCUMENTS. VYTERIS AND FERRING ACKNOWLEDGE THAT THE
FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
24.
Survival . The representations and warranties of
Parent made or deemed made herein and Sections 11 and 13 hereof
shall survive the execution and delivery of this
Agreement.
25.
Termination; Release. This Agreement shall
terminate ninety-one (91) days following satisfaction of both of
the following (the “ Product Delivery
”):
(a) the
receipt by Ferring from Vyteris of the materials and supplies
specified on Schedule 2 attached hereto (with respect to
which the design scope (the " Design ") and budget have
been
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