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Exhibit
10.23
SECURITY
AGREEMENT
OF
BIODELIVERY SCIENCES
INTERNATIONAL, INC.
Dated: September 4,
2007
The undersigned BioDelivery
Sciences International, Inc., a Delaware corporation (the
“Debtor”), whose address appears below, and Southwest
Bank of St. Louis, a Missouri banking corporation (“Secured
Party”), hereby agree as follows:
1. As security for its
obligations under that certain Promissory Note, dated as of even
date herewith being in the original principal amount of Three
Million and no/100 Dollars ($3,000,000.00) (the
“Note”), Debtor hereby grants to Secured Party a
security interest in and lien upon, and assigns to Secured Party,
the Collateral described in Paragraph 2, to secure the
payment, performance and observance of all obligations and
liabilities of the Debtor arising pursuant to the Note (the
“Obligations”).
2. The Collateral is
described as follows and may be supplemented in the future by any
separate schedule at any time furnished by Debtor to Secured Party
(all of which are hereby deemed part of this Security Agreement).
Such Collateral includes all attachments, accessions and equipment
now or hereafter affixed to the Collateral or used in connection
therewith, all substitutions and replacements thereof, and all
items of Collateral now existing and hereafter acquired, created or
arising:
ALL OF DEBTOR’S ASSETS,
INCLUDING, BUT NOT LIMITED TO ACCOUNTS , INVENTORY AND EQUIPMENT,
NOW OWNED OR HEREAFTER ACQUIRED, AND WHEREVER LOCATED, AND ALL
PRODUCTS, PROCEEDS, RENTS AND PROFITS OF THE FOREGOING, INCLUDING,
WITHOUT LIMITATION, PROCEEDS OF INSURANCE POLICIES INSURING ANY OR
ALL OF THE FOREGOING AND ANY INDEMNITY, WARRANTY OR NOTE PAYABLE BY
REASON OF LOSS OR DAMAGE TO OR OTHERWISE WITH RESPECT TO ANY OF THE
FOREGOING, EXCLUDING, HOWEVER ANY TANGIBLE OR INTANGIBLE ASSET OF
DEBTOR, THE ENCUMBRANCE OF WHICH WOULD REQUIRE THE CONSENT OF ANY
THIRD PARTY, INCLUDING WITHOUT LIMITATION, ANY PATENTS, TRADEMARKS
OR OTHER INTELLECTUAL PROPERTY (OR APPLICATIONS OR OTHER RIGHTS
THERETO) WHICH THE DEBTOR LICENSES (DIRECTLY OR INDIRECTLY) FROM
ANY THIRD PARTY.
3. The Debtor hereby
irrevocably authorizes the Secured Party 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) indicate the Collateral and (b) provide
any other information required by part 5 of Article 9 of the UCC of
the State, or such other jurisdiction, for the sufficiency or
filing office acceptance of any financing statement or amendment,
including (i) whether the Debtor is an organization, the type
of organization and any organizational identification
number issued to the Debtor and,
(ii) in the case of a financing statement filed as a fixture
filing or indicating Collateral as as-extracted collateral or
timber to be cut, a sufficient description of real property to
which the Collateral relates. The Debtor agrees to furnish any such
information to the Secured Party promptly upon the Secured
Party’s request.
4. Debtor warrants,
represents and covenants with respect to the Collateral as
follows:
(a) the chief place of
business of Debtor, the books and records relating to the
Collateral, and the Collateral, are all located at the address(es)
set forth below and Debtor will not change any of the same or its
name or state where Debtor is located without prior written notice
to and consent of Secured Party;
(b) the Collateral is now and
will at all times hereafter be owned by Debtor free and clear of
all liens, security interests, encumbrances and rights of others
except for the security interest granted hereby and granted
pursuant to a prior security agreement, if any;
(c) Debtor will not assign,
sell, mortgage, lease, transfer, pledge, grant a security interest
in, encumber, or otherwise dispose of or abandon any part or all of
the Collateral without prior written consent of the Secured Party,
which consent shall not be unreasonably withheld, conditioned or
delayed, and the inclusion of “proceeds” of the
Collateral under the security interest granted herein shall not be
deemed a consent by the Secured Party to any sale or other
disposition of any part or all of the Collateral, other than for
sales of Inventory in the ordinary course of business, except that
Debtor may replace obsolete or worn machinery or equipment in the
ordinary course of business;
(d) Secured Party shall
during normal business hours and upon reasonable advance notice to
Debtor have free access to and right of inspection of the
Collateral and any records pertaining thereto (and the right to
make extracts from and to receive from Debtor originals or true
copies of such records and any papers and instruments relating to
any or all of the Collateral upon request therefor) and Debtor
hereby grants to Secured Party a security interest in all such
records, papers and instruments to secure payment, performance and
observance of the Obligations;
(e) Debtor will use the
Collateral with all reasonable care and caution and in conformity
with all applicable laws, ordinances and regulations;
(f) Debtor will keep the
Collateral in working order, repair, running and marketable
condition at Debtor’s own cost and expense;
(g) Debtor assumes all
responsibility and liability arising from the use of the
Collateral;
(h) Debtor will, at its
expense, perform all reasonable acts and execute all documents in a
form reasonably acceptable to Debtor requested by Secured Party at
any time to evidence, perfect, maintain and enforce Secured
Party’s security interest in the Collateral and upon request
of Secured Party, at any time and from time to time, shall deliver
to Secured Party any instrument, document or chattel paper
constituting part of the Collateral, duly endorsed or
assigned,
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Debtor hereby authorizes Secured Party
and grants Secured Party its power of attorney to file any
financing statements or continuation statements pursuant to the UCC
of the State or such other jurisdiction as is deemed necessary or
appropriate by Second Party to perfect its security interest
hereunder, which power of attorney shall be deemed to be coupled
with an interest and is irrevocable, and shall execute and deliver
any other papers, documents or instruments requested by Secured
Party in connection with this Security Agreement;
(i) the Collateral is now and
shall remain personal property, and Debtor will not permit any of
the Collateral to become a part of or affixed to real property
without prior notice to Secured Party and without first making all
arrangements, and delivering, or causing to be delivered, to
Secured Party all instruments and documents, including, without
limitation, waivers and subordination agreements by any landlords
or mortgagees, requested by and satisfactory to Secured Party, to
protect the security interest granted herein against all
persons;
(j) Debtor, at its own
expense, will insure the Collateral in the name of and with loss or
damage payable to Secured Party with reputable insurance carriers
in amounts and type as is customarily carried for property similar
to the Collateral, and will notify Secured Party of any material
loss or damage to any of the Collateral, whether or not
insured;
(k) Debtor assumes all
responsibility and liability arising from the use of the
Collateral;
(l) Secured Party may, in its
sole discretion, release any of the Collateral without notice to or
consent by Debtor and without discharging or otherwise affecting
the Obligations or the security interest granted herein;
(m) Secured Party may in its
discretion, for the account and at the expense of Debtor, pay any
amount or do any act required of Debtor hereunder or requested by
Secured Party to preserve, protect, maintain or enforce the
Obligations or the security interest granted herein and which
Debtor fails to do or pay, and any such payment shall be deemed an
advance by Secured Party to Debtor, shall be payable on demand and
shall be secured hereby;
(n) Debtor will promptly pay
Secured Party any and all sums, costs, and expenses which Secured
Party may pay or incur pursuant to the provisions of this Security
Agreement or in defending, protecting or enforcing the security
interest granted herein or in enforcing payment of the Obligations
or otherwise in connection with the provisions hereof, including
but not limited to all court costs, collection charges, travel
expenses, and reasonable attorney’s fees, all of which,
together with interest at a rate equal to the highest rate then
payable on the Obligations, shall be part of the
Obligations;
5. (a) The term
“Accounts Receivable” means and includes all accounts
receivable owing to Debtor and arising from sales of merchandise
and/or services by the Debtor in the ordinary course of business,
all proceeds thereof and all of Debtor’s rights to any
merchandise which is represented thereby, and for purposes of this
paragraph 5 shall include documents, instruments and chattel paper.
From time to time, as required by the Agreement, or on request of
Secured Party after the occurrence of any “Event of
Default” (as that term is defined in Section below), which
has not
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been cured within the applicable cure
period, Debtor shall provide Secured Party with schedules
describing all Accounts Receivable and shall execute and deliver
written assignments of such Accounts Receivable to Secured Party,
provided, however, that Debtor’s failure to execute and
deliver such schedules and/or assignments shall not affect or limit
Secured Party’s security interest or other rights in and to
Accounts Receivable. Together with each schedule, Debtor shall
furnish copies of customers’ invoices or the equivalent, and
Debtor hereby warrants the genuineness thereof. On request of
Secured Party, Debtor shall furnish to Secured Party the original
shipping or delivery receipts of all merchandise sold. Each of the
Accounts Receivable is enforceable in accordance with its terms, no
payment is past due (or any past due payment is clearly noted as
such), and no partial payment not shown on the account has been
made by anyone.
(b) Debtor shall furnish
Secured Party with an aging of Accounts Receivable in such form and
as often as is required by the Agreement.
(c) Secured Party may, at any
time and from time to time and without notice to Debtor, verify the
validity and amount or any other matter relating to any of the
Accounts Receivable by mail, telephone, or otherwise in writing, in
the name of Secured Party or Debtor.
(d) Intentionally
Omitted.
(e) At any time after the
occurrence of an Event of Default, which has not been cured within
the applicable cure period, Secured Party may, and on Secured
Party’s demand Debtor will, notify customers or account
debtors that the Accounts Receivable have been assigned to Secured
Party or of Secured Party’s security interest therein, and
collect the Accounts Receivable directly and charge the collection
costs and expenses to the Obligations but, unless and until Secured
Party does so notify or gives Debtor other instructions, Debtor
shall make collection of all Accounts Receivable for Secured Party,
receive all payments thereon as Secured Party’s trustee, and
shall immediately deliver them to Secured Party in their original
form. Debtor will deliver to Secured Party, duly endorsed or
assigned, all instruments, chattel paper, guaranties or security
agreements immediately upon receipt by Debtor as evidence of, in
payment of or as security for any of the Collateral. All checks and
other instruments received by Secured Party as proceeds of any of
the Accounts Receivable will be credited (conditional upon final
collection) against the Obligations; provided, however, that for
purposes of calculation of interest, such conditional credit will
be made after allowing five (5) calendar days for
collection.
(f) All sums credited by or
due from Secured Party to Debtor shall at all times constitute
additional security for the Obligations and may be set off against
any Obligation at any time whether or not other security held by
Secured Party is adequate and whether or not such Obligations are
then due.
(g) If any warranty is
breached as to any of the Accounts Receivable, or if any of the
Accounts Receivable is not paid by the customer or account debtor
within 90 days from its due date, or the customer or account debtor
disputes liability or makes any claim with respect thereto, or a
petition in bankruptcy or other application for relief under the
Bankruptcy Code or any other insolvency law, is filed with respect
to the customer or account debtor or the customer or account debtor
makes a general assignment for the benefit of creditors, becomes
insolvent, fails, suspends or
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goes out of business, then Secured Party
may accelerate the principal of the Obligations to the extent of
any or all of the Accounts Receivable owing by that customer or
account debtor. Any merchandise which is returned by a customer or
account debtor or otherwise recovered shall remain part of the
Collateral. Debtor shall notify Secured Party promptly of all
disputes and claims and settle or adjust them at no expense to
Secured Party but no discount, credit or allowance shall be granted
to any customer or account debtor without Secured Party’s
consent except in accordance with its announced trade terms.
Secured Party may, after the occurrence of an Event of Default,
enforce collection, settle or adjust disputes and claims directly
with customers or account debtors for amounts and upon terms which
Secured Party considers commercially reasonable, and in all cases
Secured Party will credit Debtor with only the net amounts received
by Secured Party in payment of the Accounts Receivable.
(h) Debtor shall place
notations upon its books of account to disclose the assignment of
all of the Accounts Receivable to Secured Party or Secured
Party’s security interest therein and shall perform all other
steps requested by Secured Party to create and maintain in Secured
Party’s favor a valid first security interest, assignment or
lien in, of, or on all of the Accounts Receivable and all other
security held by or for Secured Party. Secured Party may at all
times have access to, inspect, audit and make extracts from all of
Debtor’s records, files and books of account relating to the
Accounts Receivable. At Secured Party’s request, Debtor will
stamp all invoices and other documents sent to account debtors
representing any Accounts Receivable with the following notice:
“The amount shown to be due has been assigned
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