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Exhibit
10.2
THIRD PARTY
SECURITY
AGREEMENT
This Third Party Security
Agreement (this “Agreement”) is made and entered into
as of June 11, 2008 by and between the undersigned (“
Grantor ”), and COMERICA BANK (the “ Bank
”).
RECITALS
Bank proposes to enter into a
transaction with TPTX, INC. (“Borrower”), which is an
affiliate of Grantor, pursuant to a Loan and Security Agreement
dated as of June 11, 2008, as amended from time to time (the
“ Loan Agreement ”). Grantor expects to derive
economic benefit from Bank’s doing so and dealing with
Borrower in accordance with the Loan Agreement, and has entered
into an Unconditional Guaranty of even date herewith with respect
to the present and future obligations of Borrower to Bank (as
amended from time to time, the “ Guaranty ”).
Grantor wishes to secure performance and payment of all obligations
to Bank under the Guaranty (the “ Guarantor
Obligations ”) with substantially all of its assets. All
terms used without definition in this Agreement shall have the
meaning assigned to them in the Loan Agreement. All terms used
without definition in this Agreement or in the Loan Agreement shall
have the meaning assigned to them in the Uniform Commercial
Code.
NOW, THEREFORE,
Grantor and the Bank agree as follows:
1. Grant of Security
Interest . To secure all of the Guarantor Obligations, Grantor
grants to the Bank a security interest in the property described in
Exhibit A (the “Collateral”).
2. Grantor’s
Representations and Warranties . Grantor represents and
warrants as follows:
(a) Authorization .
Grantor has authority and has obtained all approvals and consents
necessary to enter into this Agreement, and Grantor’s
execution, delivery and performance of this Agreement will not
violate or conflict with the terms of Grantor’s Certificate
of Incorporation, Bylaws or other charter document, or any law,
agreement, or other instrument or writing to which Grantor is party
or by which is it bound.
(b) Title . The
Collateral is owned by Grantor and is free of all liens,
encumbrances and other security interests, except for Permitted
Liens.
(c) Solvency, Payment of
Debts . Grantor, on a consolidated basis with its Subsidiaries,
is able to pay its debts (including trade debts) as they mature;
the fair saleable value of Grantor’s and its
Subsidiaries’ consolidated assets (including goodwill minus
disposition costs) exceeds the fair value of their liabilities; and
Grantor, on a consolidated basis with its Subsidiaries, is not left
with unreasonably small capital after the transactions contemplated
by this Agreement.
(d) Further
Representations . Grantor further represents, warrants, and
covenants that (i) neither Grantor nor any Subsidiary is in
default under any material agreement under which Grantor or such
Subsidiary owes any money, or any agreement, the violation or
termination of which could reasonably be expected to have a
material adverse effect on Grantor on a consolidated or
consolidating basis; (ii) the information provided to Bank on
or prior to the date of this Agreement is true and correct in all
material respects; (iii) all financial statements and other
information provided to Bank fairly present Grantor’s
financial condition, and there has not been a material adverse
change in the financial condition of Grantor since the date of the
most recent of the financial statements submitted to Bank;
(iv) Grantor and each Subsidiary is in compliance with all
laws and orders applicable to it, except where the failure to
comply is not reasonably likely to have a Material Adverse Effect;
(v) except as disclosed in the Schedule to the Loan Agreement,
neither Grantor nor any Subsidiary is a party to any litigation or
is the subject of any government investigation, and neither Grantor
nor any Subsidiary has any knowledge of any pending litigation or
investigation or the existence of circumstances that reasonably
could be expected to give rise to such litigation or investigation
in which a likely adverse decision could reasonably be expected to
have a Material Adverse Effect; (vi) Grantor’s principal
place of business is located at the address specified in
Section 11; and (vii) no representation or other
statement made by Grantor to Bank contains any untrue statement of
a material fact or omits to state a material fact necessary to make
any statements made to Bank not misleading.
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3. Covenants
.
(a) Encumbrances .
Except with respect to Permitted Liens, Grantor shall not grant a
security interest in any of the Collateral other than to Bank or
execute any financing statements covering any of the Collateral in
favor of any person other than Bank.
(b) Use of Collateral
. The Collateral will not be used for any unlawful purpose or in
any way that will void any insurance required to be carried in
connection therewith. Grantor will keep the Collateral free and
clear of liens and adverse claims (other than Permitted Liens) and,
as appropriate and applicable, will keep it in good condition and
repair, normal wear and tear excepted, and will clean, shelter, and
otherwise care for the Collateral in all such ways as are
considered good practice by owners of like property.
(c) Indemnification .
Grantor shall indemnify Bank against all losses, claims, demands
and liabilities of any kind caused by the Collateral, except to the
extent such losses, claims, demands and liabilities are caused by
Bank’s gross negligence or willful misconduct.
(d) Perfection of Security
Interest . Grantor shall execute and deliver such documents as
Bank reasonably deems necessary to create, perfect and continue the
security interest in the Collateral contemplated hereby. Grantor
shall deliver to Bank the share certificate(s) evidencing all of
the shares of capital stock of Borrower, together with a stock
power in a form acceptable to Bank.
(e) Insurance of
Collateral .
(i) Grantor, at its expense,
shall keep the Collateral insured against loss or damage by fire,
theft, explosion, sprinklers, and all other hazards and risks, and
in such amounts, as ordinarily insured against by other owners in
similar businesses conducted in the locations where Grantor’s
business is conducted on the date hereof. Grantor shall also
maintain insurance relating to Grantor’s ownership and use of
the Collateral in amounts and of a type that are customary to
businesses similar to Grantor’s.
(ii) All such policies of
insurance shall be in such form, with such companies, and in such
amounts as reasonably satisfactory to Bank. All such policies of
property insurance shall contain a Bank’s loss payable
endorsement, in a form reasonably satisfactory to Bank, showing
Bank as an additional loss payee thereof and all liability
insurance policies shall show Bank as an additional insured, and
shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any
reason. Upon Bank’s request, Grantor shall deliver to Bank
certificates of such policies of insurance and evidence of the
payments of all premiums therefor. All proceeds payable under any
such policy shall, at the option of Bank, be payable to Bank to be
applied on account of the Guarantor Obligations.
(f) Inventory and
Equipment .
(i) Except for mobile
personal property, including laptop computers, having an aggregate
book value of not more than One Hundred Thousand Dollars
($100,000), Grantor shall not store its Inventory or the Equipment
with a bailee, warehouseman, or other third party unless the third
party has been notified of Bank’s security interest and Bank
(a) has received an acknowledgment from the third party that
it is holding or will hold the Inventory or Equipment for
Bank’s benefit or (b) is in pledge possession of the
warehouse receipt, where negotiable, covering such Inventory or
Equipment. Except for the mobile personal property described in the
preceding sentence, Grantor shall not store or maintain any
Equipment or Inventory at a location other than the location set
forth in Section 11 of this Agreement.
(ii) Grantor shall maintain
the Collateral in good and saleable condition, repair it if
necessary and otherwise deal with the Collateral in all such ways
as are considered good practice by owners of like property, use it
lawfully and only as permitted by insurance policies, and permit
Bank to inspect the Collateral at any reasonable time.
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(iii) Not sell, contract to
sell, lease, encumber or transfer the Collateral (other than
Permitted Transfers or Permitted Liens) until the Obligations and
the Guarantor Obligations have been paid or performed in full, even
though Bank has a security interest in the proceeds of such
Collateral.
(g) Binding Agreement
. Anything herein to the contrary notwithstanding, (a) Grantor
shall remain liable under the contracts and agreements included in
the Collateral to the extent set forth therein to perform all of
its duties and obligations thereunder to the same extent as if this
Agreement had not been executed; (b) the exercise by Bank of
any of the rights granted hereunder shall not release Grantor from
any of its duties or obligations under the contracts and agreements
included in the Collateral; and (c) Bank shall not have any
obligation or liability under the contracts and agreements included
in the Collateral by reason of this Agreement, nor shall Bank be
obligated to perform any of the obligations or duties of Grantor
thereunder or to take any action to collect or enforce any claim
for payment assigned hereunder.
(h) Instruments .
Grantor will deliver and pledge to Bank all Instruments that are
part of the Collateral duly endorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and
substance reasonably satisfactory to Bank.
(i) Records . Grantor
shall prepare and keep, in accordance with generally accepted
accounting principles consistently applied, complete and accurate
records regarding the Collateral and, if and when requested by
Bank, shall prepare and deliver a complete and accurate schedule of
all the Collateral in such detail as Bank may reasonably
require.
(j) Inspection of
Grantor’s Books . Grantor shall permit Bank or its
designee at reasonable times during Grantor’s usual business
hours but no more than once a year (unless an Event of Default has
occurred and is continuing) and from time to time to inspect
Grantor’s books, records and properties and to audit and to
make copies of extracts from such books and records.
(k) Fees and Costs .
Grantor shall pay all expenses, including reasonable
attorneys’ fees, incurred by Bank in the preservation,
realization, enforcement or exercise of any Bank’s rights
under this Agreement.
(l) Accounts . Grantor
shall maintain its primary depository, operating, and investment
accounts with Bank and/or Comerica Securities, Inc.
(m) Corporate
Existence . Grantor will maintain its corporate existence and
good standing in its jurisdiction of formation and will maintain in
force all material licenses and agreements, the loss of which could
reasonably be expected to have a material adverse effect on
Grantor’s business. Grantor will pay all material taxes on or
before the date such taxes are due, and will comply with all laws
and orders applicable to it, provided that Grantor need not make
any payment if the amount or validity of such payment is contested
in good faith by appropriate proceedings and is reserved against
(to the extent required by GAAP) by Grantor.
(n) Negative Covenants
. Grantor will not (i) make any investments in, or loans or
advances to, any person other than in the ordinary course of
business as currently conducted other than Permitted Investments or
as permitted under Section 7.7 of the Loan Agreement,
(ii) acquire any assets other than in the ordinary course of
business as currently conducted or as permitted under
Section 7.3 of the Loan Agreement, (iii) make any
distributions or pay any dividends to any person on account of
Grantor’s shares, except that Grantor may (a) pay
dividends in capital stock, (b) repurchase the stock of
employees, officers or directors pursuant to stock repurchase
agreements or stock purchase plans as long as an Event of Default
does not exist prior to such repurchase or would not exist after
giving effect to such repurchase, (c) repurchase the stock of
employees, officers or directors pursuant to stock repurchase
agreements or stock purchase plans by the cancellation of
indebtedness owed by such former employees to Grantor regardless of
whether an Event of Default exists, (d) convert any of its
convertible securities (including warrants) into other securities
pursuant to the terms of such convertible securities and
(e) distribute securities to employees, officers or directors
on the exercise of their options, (iv) create, incur, assume
or be or remain liable with respect to any Indebtedness other than
Permitted Indebtedness, (v) move, dispose of or encumber any
portion of its assets, other than Permitted Transfers,
(vi) merge or consolidate with or into any person or entity
(other than mergers or consolidations of a Subsidiary into another
Subsidiary or into Borrower, and other than Permitted Investments
or as permitted under Section 7.3 of
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the Loan Agreement),
(vii) create, incur, assume or suffer to exist any lien with
respect to any of its property other than Permitted Liens, or
assign or otherwise convey any right to receive income, including
the sale of any of Grantor’s accounts, (viii) keep
Inventory or Equipment at a location other than the address
specified in Section 11 hereof except as set forth in
Section 3(f) hereof; (ix) relocate its chief executive
office or state of incorporation without thirty days prior written
notification to Bank, (x) or maintain or invest any of its
property with a Person, other than Permitted Investments, or other
than Bank unless such Person has entered into an account control
agreement with Bank in form and substance reasonably satisfactory
to Bank, or suffer or permit any Subsidiary to be a party to, or be
bound by, an agreement that restricts such Subsidiary from paying
dividends or otherwise distributing property to Grantor, or
(xi) permit the inclusion in any contract to which it becomes
a party of any provisions that restricts or invalidates the
creation of a security interest in any of Grantor’s
property.
(o) Further Assurances
. At any time and from time to time, upon the written request of
Bank, and at the sole expense of Grantor, Grantor shall promptly
and duly execute and deliver any and all such further instruments
and documents and take such further action as Bank may reasonably
deem desirable to obtain the full benefits of this Agreement and of
the rights and powers herein granted, including, without
limitation, (a) to secure all consents and approvals necessary
or appropriate for the grant of a security interest to Bank in any
Collateral held by Grantor or in which Grantor has any rights not
heretofore assigned, (b) filing any financing or continuation
statements under the UCC with respect to the security interests
granted hereby, (c) transferring Collateral to Bank’s
possession (if a security interest in such Collateral can be
perfected by possession), (d) placing the interest of Bank as
lienholder on the certificate of title (or other evidence of
ownership) of any vehicle owned by Grantor or in or with respect to
which Grantor holds a beneficial interest and (e) using its
best efforts to obtain waivers of liens from landlords and
mortgagees. Grantor also hereby authorizes Bank to file any such
financing or continuation statement without the signature of
Grantor. If any amount payable under or in connection with any of
the Collateral is or shall become evidenced by any Instrument, such
Instrument, other than checks and notes received in the ordinary
course of business, shall be duly endorsed in a manner satisfactory
to Bank and delivered to Bank promptly upon Grantor’s receipt
thereof.
4. Events of Default .
The occurrence of any Event of Default under the Loan Agreement, or
the failure by Grantor to perform any obligations under the
Guaranty, or the breach of any representation under this Agreement,
or the failure to perform any obligation under Section 3 of
this Agreement, shall constitute an “ Event of Default
” under this Agreement.
5. Remedies on Default
. Upon the occurrence of an Event of Default, Bank shall have all
rights, privileges, powers and remedies provided by law, including,
but not limited to, exercise of any or all of the following
remedies.
(a) Bank may declare all
amounts outstanding under the Loan Agreement and the Guaranty to be
immediately due and payable, and thereupon all such amounts shall
be and become immediately due and payable to the Bank.
(b) Bank may dispose of the
Collateral in accordance with applicable law.
(c) Bank may use, operate,
consume and sell the Collateral in its possession as appropriate
for the purpose of performing Grantor’s obligations with
respect thereto to the extent necessary to satisfy the obligations
of Grantor.
(d) All payments received and
amounts realized by Bank shall be promptly applied and distributed
by the Bank in the following order of priority:
(i) first, to the payment of
all costs and expenses, including reasonable legal expenses and
attorneys fees, incurred or made hereunder by Bank, including any
such costs and expenses of foreclosure or suit, if any, and of any
sale or the exercise of any other remedy under this Section 5,
and of all taxes, assessments or liens superior to the lien granted
under this Agreement; and
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(ii) second, to the payment
to Bank of the amount then owing under the Loan
Agreement.
6. Power of Attorney .
Grantor hereby appoints Bank, its attorney-in-fact to prepare, sign
and file or record, for Grantor in Grantor’s name, any
financing statements, applications for registration and like papers
and to take any other action deemed by Bank necessary or desirable
in order to perfect the security interest of the Bank hereunder, to
dispose of any Collateral, and to perform any obligations of
Grantor hereunder, at Grantor’s expense, but without
obligation to do so.
7. Remedies Cumulative
. Bank’s rights and remedies under this Agreement, the Loan
Documents, and all other agreements shall be cumulative. Bank shall
have all other rights and remedies not inconsistent herewith as
provided under the California Uniform Commercial Code (the
“UCC”), by law, or in equity. No exercise by Bank of
one right or remedy shall be deemed an election, and no waiver by
Bank of any Event of Default on Borrower’s or Grantor’s
part shall be deemed a continuing waiver. No delay by Bank shall
constitute a waiver, election, or acquiescence by it. No waiver by
Bank shall be effective unless made in a written document signed on
behalf of Bank and then shall be effective only in the specific
instance and for the specific purpose for which it was
given.
8. Amendment of Loan
Documents . Grantor authorizes Bank, without notice or demand
and without affecting its liability hereunder, from time to time to
(a) renew, extend, or otherwise change the terms of any Loan
Document, or any part thereof; (b) take and hold security for
the payment of any Loan Document, and exchange, enforce,
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