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Exhibit 10.4
GUARANTORS GENERAL SECURITY AGREEMENT
THIS GUARANTORS GENERAL SECURITY AGREEMENT ("Guarantors Security
Agreement") is made and entered into as of March 10, 1998, among CENCI POWDER
PRODUCTS, INC., a Delaware corporation, with its principal place of business at
1420 E. Street, Fresno, California, HALSEY PHARMACEUTICAL, INC., a Delaware
corporation, with its principal place of business at 245 Old Hook Road,
Westwood, New Jersey, HOUBA INC., an Indiana corporation, with its principal
place of business at 16235 State Road 17, Culver, Indiana, H.R. CENCI
LABORATORIES, INC., a California corporation, with its principal place of
business at 152 No. Broadway, Fresno, California and INDIANA FINE CHEMICALS,
INC., a Delaware corporation, with its principal place of business at 16235
State Road 17, Culver, Indiana (each of which is hereinafter referred to as a
"Guarantor" and all of which are collectively referred to as the "Guarantors"),
and GALEN PARTNERS III, L.P., a Delaware limited partnership, with its principal
place of business at 610 Fifth Avenue, Suite 5th Floor, New York, New York
10020, acting in its capacity as agent for the Purchasers (in such capacity, the
"Agent").
W I T N E S S E T H
WHEREAS, Galen, certain other purchasers (together with Galen,
the "Purchasers") and Halsey Drug Co., Inc. (the "Company") have entered into a
Debenture and Warrant Purchase Agreement dated as of the date hereof (as the
same may be amended, modified, supplemented or restated from time to time, the
"Purchase Agreement"; terms which are capitalized herein and not otherwise
defined shall have the meanings ascribed to them in the Purchase Agreement);
WHEREAS, each of the Guarantors has executed and delivered to the
Purchasers a Continuing Unconditional Secured Guaranty dated the date hereof
(each a "Guaranty") of the Company's obligations under the Purchase Agreement
(collectively, the "Obligations"); and
WHEREAS, the Purchasers have required, as a condition precedent
to the effectiveness of the Purchase Agreement, that each Guarantor (i) grant to
the Agent, for the ratable benefit of the Purchasers, a security interest in and
to the Collateral (as defined in Section II below) and (ii) execute and deliver
this Guarantors Security Agreement in order to secure the payment and
performance by such Guarantor of the Guaranty.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Purchasers to enter into and perform the Purchase Agreement, each
Guarantor hereby agrees as follows:
SECTION I. CREATION OF SECURITY INTEREST.
Each Guarantor hereby pledges, assigns and grants to the Agent a
continuing perfected lien on and security interest in all of such Guarantor's
right, title and interest in and
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to the Collateral (as defined in Section II below) in order to secure the
payment and performance of all Obligations owing by such Guarantor.
SECTION II. COLLATERAL.
For purposes of this Guarantors Security Agreement, the term
"Collateral" shall mean, with respect to each Guarantor, all of the kinds and
types of property described in subsections A. through E. hereof, whether now
owned or hereafter at any time arising, acquired or created by such Guarantor
and wherever located, and includes all replacements, additions, accessions,
substitutions, repairs, proceeds and products relating thereto or therefrom, and
all documents, ledger sheets and files of such Guarantor relating thereto.
"Proceeds" hereunder include (i) whatever is now or hereafter received by such
Guarantor upon the sale, exchange, collection or other disposition of any item
of Collateral, whether such proceeds constitute inventory, accounts, accounts
receivable, general intangibles, instruments, securities (including, without
limitation, United States of America Treasury Bills), credits, claims, demands,
documents, letters of credit and letter of credit proceeds, chattel paper,
documents of title, certificates of title, certificates of deposit, warehouse
receipts, bills of lading, leases, deposit accounts, money, tax refund claims,
contract rights, goods or equipment and (ii) any such items which are now or
hereafter acquired by such Guarantor with any proceeds of Collateral hereunder:
A. Accounts. All of such Guarantor's accounts, whether now
existing or existing in the future, including without limitation (i) all
accounts receivable (whether or not specifically listed on schedules furnished
to the Agent), including, without limitation, all accounts created by or arising
from all of such Guarantor's sales of goods or rendition of services made under
any of such Guarantor's trade names, or through any of its divisions, (ii) all
unpaid seller's rights (including rescission, replevin, reclamation and stoppage
in transit) relating to the foregoing or arising therefrom, (iii) all rights to
any goods represented by any of the foregoing, including returned or repossessed
goods, (iv) all reserves and credit balances held by such Guarantor with respect
to any such accounts receivable or account debtors and (v) all guarantees or
collateral for any of the foregoing (all of the foregoing property and similar
property being hereinafter referred to as "Accounts");
B. Inventory. All of such Guarantor's inventory, including
without limitation (i) all raw materials, work in process, parts, components,
assemblies, supplies and materials used or consumed in such Guarantor's
businesses, wherever located and whether in the possession of such Guarantor or
any other Person (for the purposes of this Company Security Agreement, the term
"Person" means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, institution,
entity, party or government, including any division, agency or department
thereof); (ii) all goods, wares and merchandise, finished or unfinished, held
for sale or lease or leased or furnished or to be furnished under contracts of
service, wherever located and whether in the possession of such Guarantor or any
other person or entity; and (iii) all goods returned to or repossessed by such
Guarantor (all of the foregoing property being hereinafter referred to as
"Inventory");
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C. Equipment. All of the equipment owned or leased by such
Guarantor, including, without limitation, machinery, equipment, office equipment
and supplies, computers and related equipment, furniture, furnishings, tools,
tooling, jigs, dies, fixtures, manufacturing implements, fork lifts, trucks,
trailers, motor vehicles, and other equipment (all of the foregoing property
being hereinafter referred to as "Equipment");
D. Intangibles. All of such Guarantor's general intangibles,
instruments, securities (including without limitation United States of America
Treasury Bills), credits, claims, demands, documents, letters of credit and
letter of credit proceeds, chattel paper, documents of title, certificates of
title, certificates of deposit, warehouse receipts, bills of lading, leases
which are permitted to be assigned or pledged, deposit accounts, money, tax
refund claims, contract rights which are permitted to be assigned or pledged
(all of the foregoing property being hereinafter referred to as "Intangibles");
and
E. Intellectual Property. All of each Guarantor's intellectual
property, including, without limitation, New Drug Applications, Investigatory
New Drug Applications, Abbreviated New Drug Applications, Alternative New Drug
Applications, registrations and quotas as issued by the Drug Enforcement
Administration and/or the Attorney General of the United States pursuant to the
Controlled Substances Act, certifications, permits and approvals of federal and
state governmental agencies, patents, patent applications, trademarks, trademark
applications, service marks, service mark applications, trade names, technical
knowledge and processes, formal or informal licensing arrangements which are
permitted to be assigned or pledged, blueprints, technical specifications,
computer software, copyrights, copyright applications and other trade secrets,
and all embodiments thereof, and rights thereto, including, without limitation,
all of such Guarantor' rights to use the patents, trademarks, copyrights,
service marks, or other property of the aforesaid nature of other Persons now or
hereafter licensed to such Guarantor, together with the goodwill of the business
symbolized by or connected with such Guarantor's trademarks, copyrights, service
marks, licenses and the other rights included in this section II(E).
SECTION III. THE GUARANTORS' REPRESENTATIONS AND WARRANTIES.
Each Guarantor severally represents and warrants as follows:
A. Places of Business. Such Guarantor has no places of business,
or warehouses in which it leases space, other than those set forth on Section
IIIA of Schedule A, a copy of which is attached hereto and made a part hereof
("Schedule A").
B. Location of Collateral. Except for the movement of Collateral
from time to time from one place of business or warehouse listed on Section IIIA
of Schedule A to another place of business or warehouse listed on Section IIIA.
of such Schedule A, the Collateral is located at such Guarantor's chief
executive offices or other places of business or warehouses listed on such
Section IIIA of Schedule A, and not at any other location.
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C. Restrictions on Collateral Disposition. None of the Collateral
is subject to contractual obligations that may restrict or inhibit the Agent's
rights or ability to sell or dispose of the Collateral or any part thereof after
the occurrence of an Event of Default.
D. Status of Accounts. Each Account is based on an actual and
bona fide rendition of services to customers, made by such Guarantor in the
ordinary course of its business; the Accounts created are its exclusive property
and are not and shall not be subject to any lien, consignment arrangement,
encumbrance, security interest or financing statement whatsoever, except as
otherwise provided in Section IIID of Schedule A, and to the best knowledge of
such Guarantor, such Guarantor's customers have accepted the services, and owe
and are obligated to pay the full amounts stated in the invoices according to
their terms, without any dispute, offset, defense or counterclaim.
SECTION IV. COVENANTS OF THE GUARANTORS.
Each Guarantor agrees (which agreements shall be several as to
each Guarantor except as otherwise provided) as follows:
A. Defend Against Claims. Such Guarantor will defend the
Collateral against all claims and demands of all persons at any time claiming
the same or any interest therein unless both the Agent and such Guarantor
determine that the claim or demand is not material and that, consequently, such
defense would not be consistent with good business judgment. Such Guarantor will
permit any lien notices with respect to the Collateral or any portion thereof to
exist or be on file in any public office except for those in favor of the Agent
and those permitted under the terms of the Purchase Agreement.
B. Change in Collateral Location. Such Guarantor will not (i)
change its corporate name, (ii) change the location of its chief executive
office or establish any place of business other than those specified in Section
IIIA of Schedule A, or (iii) move or permit movement of the Collateral from the
locations specified thereon except from one such location to another such
location, unless in each case such Guarantor shall have given the Agent at least
thirty (30) days prior written notice thereof, and shall have, in advance,
executed and caused to be filed and/or delivered to the Agent any financing
statements or other documents required by the Agent to perfect the security
interest of the Agent in the Collateral in accordance with Section IVC hereof,
all in form and substance satisfactory to the Agent.
C. Additional Financing Statements. Promptly upon the reasonable
request of the Agent, such Guarantor will execute and deliver or use its
reasonable efforts to procure any document, give any notices, execute and file
any financing statements, mortgages or other documents, all in form and
substance satisfactory to the Agent, mark any chattel paper, deliver any chattel
paper or instruments to the Agent and take any other actions that are necessary
or, in the opinion of the Agent, desirable to perfect or continue the perfection
and the first priority of the Agent's security interest in the Collateral, to
protect the Collateral against the rights, claims, or interests of third
persons, or to effect the purposes of this Guarantors Security Agreement. Such
Guarantor will pay the costs incurred in connection with any of the foregoing.
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D. Additional Liens; Transfers. Without the prior written consent
of the Agent, such Guarantor will not, in any way, hypothecate or create or
permit to exist any lien, security interest, charge or encumbrance on or other
interest in the Collateral, other than those permitted under the terms of the
Purchase Agreement, and such Guarantor will not sell, transfer, assign, pledge,
collaterally assign, exchange or otherwise dispose of the Collateral, other than
the sale of Inventory in the ordinary course of business and the sale of
obsolete or worn out Equipment. Notwithstanding the foregoing, if the proceeds
of any such sale consist of notes, instruments, documents of title, letters of
credit or chattel paper, such proceeds shall be promptly delivered to the Agent
to be held as Collateral hereunder. If the Collateral, or any part thereof, is
sold, transferred, assigned, exchanged, or otherwise disposed of in violation of
these provisions, the security interest of the Agent shall continue in such
Collateral or part thereof notwithstanding such sale, transfer, assignment,
exchange or other disposition, and such Guarantor will hold the proceeds thereof
for the benefit of the Agent, and promptly transfer such proceeds to the Agent
in kind.
E. Contractual Obligations. Such Guarantor will not enter into
any contractual obligations which may restrict or inhibit the Agent's rights or
ability to sell or otherwise dispose of the Collateral or any part thereof after
the occurrence or during the continuance of an Event of Default.
F. Agent's Right to Protect Collateral. Upon the occurrence or
continuance of an Event of Default, the Agent shall have the right at any time
to make any payments and do any other acts the Agent may deem necessary to
protect the security interests of the Purchasers in the Collateral, including,
without limitation, the rights to pay, purchase, contest or compromise any
encumbrance, charge or lien which, in the reasonable judgment of the Agent,
appears to be prior to or superior to the security interests granted hereunder,
and appear in and defend any action or proceeding purporting to affect its
security interests in, and/or the value of, the Collateral. The Guarantors
hereby jointly and severally agree to reimburse the Agent for all payments made
and expenses incurred under this Guarantors Security Agreement including
reasonable fees, expenses and disbursements of attorneys and paralegals acting
for the Agent, including any of the foregoing payments under, or acts taken to
protect its security interests in, the Collateral, which amounts shall be
secured under this Guarantors Security Agreement, and agree they shall be bound
by any payment made or act taken by the Agent hereunder absent the Agent's gross
negligence or willful misconduct. The Agent shall have no obligation to make any
of the foregoing payments or perform any of the foregoing acts.
G. Further Obligations With Respect to Accounts. In furtherance
of the continuing assignment and security interest in the Accounts of such
Guarantor granted pursuant to this Guarantors Security Agreement, upon the
creation of Accounts, upon the Agent's request, such Guarantor will execute and
deliver to the Agent in such form and manner as the Agent may require, solely
for its convenience in maintaining records of Collateral, such confirmatory
schedules of Accounts, and other appropriate reports designating, identifying
and describing the Accounts as the Agent may reasonably require. In addition,
upon the Agent's request, such Guarantor shall provide the Agent with copies of
agreements with, or purchase orders from, the customers of such Guarantor and
copies of invoices to customers, proof of shipment or delivery and such other
documentation and information relating to said Accounts and other Collateral as
the Agent may reasonably require. Furthermore, upon the Agent's request, such
Guarantor shall
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deliver to the Agent any documents or certificates of title issued with respect
to any property included in the Collateral, and any promissory notes, letters of
credit or instruments related to or otherwise in connection with any property
included in the Collateral, which in any such case came into the possession of
such Guarantor, or shall cause the issuer thereof to deliver any of the same
directly to the Agent, in each case with any necessary endorsements in favor of
the Agent. Failure to provide the Agent with any of the foregoing shall in no
way affect, diminish, modify or otherwise limit the security interests granted
herein. Each Guarantor hereby authorizes the Agent to regard such Guarantor's
printed name or rubber stamp signature on assignment schedules or invoices as
the equivalent of a manual signature by such Guarantor's authorized officers or
agents.
H. Insurance. Such Guarantor agrees to maintain public liability
insurance, third party property damage insurance and replacement value insurance
on the Collateral under such policies of insurance, with such insurance
companies, in such amounts and covering such risks as are at all times
satisfactory to the Agent in its commercially reasonable judgment. All policies
covering the Collateral are to name the Agent as an additional insured and the
loss payee in case of loss, and are to contain such other provisions as the
Agent may reasonably require to fully protect the Agent's interest in the
Collateral and to any payments to be made under such policies.
I. Taxes. Such Guarantor agrees to pay, when due, all taxes
lawfully levied or assessed against such Guarantor or any of the Collateral
before any penalty or interest accrues thereon; provided, however, that, unless
such taxes have become a Federal tax or Employment Retirement Security Income
Act lien on any of the assets of such Guarantor, no such tax need be paid if the
same is being contested, in good faith, by appropriate proceedings promptly
instituted and diligently conducted and if an adequate reserve or other
appropriate provision shall have been made therefor as required in order to be
in conformity with generally accepted accounting principles and procedures in
effect in the United States of America.
J. Compliance with Laws. Such Guarantor agrees to comply in all
material respects with all requirements of law applicable to the Collateral or
any part thereof, or to the operation of its business or its assets generally,
unless such Guarantor contests any such requirements of law in a reasonable
manner and in good faith. Such Guarantor agrees to maintain in full force and
effect, its respective licenses and permits granted by any governmental
authority as may be necessary or advisable for such Guarantor to conduct its
business in all material respects.
K. Maintenance of Property. Such Guarantor agrees to keep all
property useful and necessary to its business in good working order and
condition (ordinary wear and tear excepted) and not to commit or suffer any
waste with respect to any of their properties.
L. Environmental and Other Matters. Such Guarantor will conduct
its business so as to comply in all material respects with all environmental,
land use, occupational, safety or health laws, regulations, directions,
ordinances, criteria and guidelines in all jurisdictions in which it is or may
at any time be doing business, except to the extent that such Guarantor is
contesting, in good faith by appropriate legal, administrative or other
proceedings, any such law, regulation, direction, ordinance, criteria,
guideline, or interpretation thereof or application
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thereof; provided, further, that such Guarantor shall comply with the order of
any court or other governmental authority relating to such laws unless such
Guarantor shall currently be prosecuting an appeal, proceedings for review or
administrative proceedings and shall have secured a stay of enforcement or
execution or other arrangement postponing enforcement or execution pending such
appeal, proceedings for review or administrative proceedings.
M. Further Assurances. Such Guarantor shall take all such further
actions and execute all such further documents and instruments (including, but
not limited to, collateral assignments of Intellectual Property and Intangibles
or any portion thereof) as the Agent may at any time reasonably determine in its
sole discretion to be necessary or desirable to further carry out and consummate
the transactions contemplated by the Purchase Agreement and the documentation
relating thereto, including this Guarantors Security Agreement, and to perfect
or protect the liens (and the priority status thereof) of the Agent in the
Collateral.
SECTION V. REMEDIES.
A. Obtaining the Collateral Upon Default. If any Event of Default
shall have occurred and be continuing, then and in every such case, subject to
any mandatory requirements of applicable law then in effect, the Agent, in
addition to any rights now or hereafter existing under applicable law, shall
have all rights as a secured creditor under the Uniform Commercial Code in all
relevant jurisdictions and may:
(a) personally, or by agents or attorneys, immediately
retake possession of the Collateral or any part thereof, from any
Guarantor or any other Person who then has possession of any part
thereof, with or without notice or process of law, and for that
purpose may enter upon such Guarantor's premises where any of the
Collateral is located and remove the same and use in connection
with such removal any and all services, supplies, aids and other
facilities of such Guarantor;
(b) instruct the obligor or obligors on any agreement,
instrument or other obligation (including, without limitation,
the Accounts) constituting the Collateral to make any payment
required by the terms of such instrument or agreement directly to
the Agent;
(c) withdraw all monies, securities and instruments held
pursuant to any pledge arrangement for application to the
Obligations;
(d) sell, assign or otherwise liquidate, or direct any
Guarantor to sell, assign or otherwise liquidate, any or all of
the Collateral or any part thereof, and take possession of the
proceeds of any such sale or liquidation;
(e) take possession of the Collateral or any part
thereof, by directing any Guarantor in writing to deliver the
same to the Agent at any place or places designated by the Agent,
in which event such Guarantor shall at its own expense:
a. forthwith cause the same to be moved to the
place or places so designated by the Agent and there
delivered to the Agent,
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b. store and keep any Collateral so delivered to
the Agent at such place or places pending further action
by the Agent as provided in Section VB, and
c. while the Collateral shall be so stored and
kept, provide such guards and maintenance services as
shall be necessary to protect the same and to preserve
and maintain the Collateral in good condition;
it being understood that any Guarantor's obligation to so deliver
the Collateral is of the essence of this Guarantors Security
Agreement and that, accordingly, upon application to a court of
equity having jurisdiction, the Agent shall be entitled to a
decree requiring specific performance by such Guarantor of said
obligation.
B. Disposition of the Collateral. Any collateral repossessed by
the Agent under or pursuant to Section VA and any other Collateral whether or
not so repossessed by the Agent, may be sold, assigned, leased or otherwise
disposed of under one or more contracts or as an entirety, and without the
necessity of gathering at the place of sale the property to be sold, and in
general in such manner, at such time or times, at such place or places and on
such terms as the Agent may, in compliance with any mandatory requirements of
applicable law, determine to be commercially reasonable. Any of the Collateral
may be sold, leased or otherwise disposed of, in the condition in which the same
existed when taken by the Agent or after any overhaul or repair which the Agent
shall determine to be commercially reasonable. Any such disposition which shall
be a private sale or other private proceedings permitted by such requirements
shall be made upon not less than ten (10) days' written notice to such Guarantor
specifying the time at which such disposition is to be made and the intended
sale price or other consideration therefor, and shall be subject, for the ten
(10) days after the giving of such notice, to the right of such Guarantor or any
nominee of such Guarantor to acquire the Collateral involved at a price or for
such other consideration at least equal to the intended sale price or other
consideration so specified. Any such disposition which shall be a public sale
permitted by such requirements shall be made upon not less than ten (10) days'
written notice to such Guarantor specifying the time and place of such sale and,
in the absence of applicable requirements of law, shall be by public auction
(which may, at the option of the Agent, be subject to reserve), after
publication of notice of such auction not less than ten (10) days prior thereto
in two (2) newspapers in general circulation in the City of New York, as the
Agent may determine. To the extent permitted by any such requirement of law, the
Agent may bid for and become the purchaser of the Collateral or any item
thereof, offered for sale in accordance with this Section without accountability
to such Guarantor (except to the extent of surplus money received). If, under
mandatory requirements of applicable law, the Agent shall be required to make
disposition of the Collateral within a period of time which does not permit the
giving of notice to such Guarantor as hereinabove specified, the Agent need give
such Guarantor only such notice of disposition as shall be reasonably
practicable in view of such mandatory requirements of applicable law.
C. Power of Attorney. Each Guarantor hereby irrevocably
authorizes and appoints the Agent, or any Person or agent the Agent may
designate, as such Guarantor's attorney-in-fact, at such Guarantor's cost and
expense, to exercise all of the following powers upon and at any time after the
occurrence and during the continuance of an Event of Default,
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which powers, being coupled with an interest, shall be irrevocable until all of
the Obligations owing by such Guarantor shall have been paid and satisfied in
full:
(a) accelerate or extend the time of payment, compromise,
issue credits, bring suit or administer and otherwise collect
Accounts or proceeds of any Collateral;
(b) receive, open and dispose of all mail addressed to
such Guarantor and notify postal authorities to change the
address for delivery thereof to such address as the Agent may
designate;
(c) give customers indebted on Accounts notice of the
Agent's interest therein, and/or to instruct such customers to
make payment directly to the Agent for such Guarantor's account;
(d) convey any item of Collateral to any purchaser
thereof;
(e) give any notices or record any liens under Section
IVC hereof; and
(f) make any payments or take any acts under Section IVF
hereof.
The Agent's authority under this Section VC shall include, without limitation,
the authority to execute and give receipt for any certificate of ownership or
any document, transfer title to any item of Collateral, sign such Guarantor's
name on all financing statements or any other documents deemed necessary or
appropriate to preserve, protect or perfect the security interest in the
Collateral and to file the same, prepare, file and sign such Guarantor's name on
any notice of lien, assignment or satisfaction of lien or similar document in
connection with any Account and prepare, file and sign such Guarantor's name on
a proof of claim in bankruptcy or similar document against any customer of such
Guarantor, and to take any other actions arising from or incident to the rights,
powers and remedies granted to the Agent in this Guarantors Security Agreement.
This power of attorney is coupled with an interest and is irrevocable by such
Guarantor.
D. Waiver of Claims. Except as otherwise provided in this
Guarantors Security Agreement, EACH GUARANTOR HEREBY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE
AGENT'S TAKING POSSESSION OF OR DISPOSING OF ANY OF THE COLLATERAL, INCLUDING,
WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT
REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH ANY GUARANTOR WOULD OTHERWISE HAVE
UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and
each Guarantor hereby further waives, to the extent permitted by law:
(a) all damages occasioned by such taking of possession
except any damages which are the direct result of the Agent's
gross negligence or willful misconduct;
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(b) all other requirements as to the time, place and
terms of sale or other requirements with respect to the
enforcement of the Agent's rights hereunder, except as expressly
provided herein; and
(c) all rights of redemption, appraisement, valuation,
stay, extension or moratorium now or hereafter in force under any
applicable law in order to prevent or delay the enforcement of
this Guarantors Security Agreement or the absolute sale of the
Collateral or any portion thereof, and such Guarantor, for itself
and all who may claim under it, insofar as it or they now or
hereafter lawfully may, hereby waives the benefit of all such
laws.
Any sale of, or the grant of options to purchase, or any other realization upon
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of such Guarantor therein and thereto, and
shall be a perpetual bar both at law and in equity against such Guarantor and
against any and all persons claiming or attempting to claim the Collateral so
sold, optioned or realized upon, or any part thereof, from, through and under
such Guarantor.
E. Remedies Cumulative. Each and every right, power and remedy
hereby specifically given to the Agent shall be in addition to every other
right, power and remedy specifically given under this Guarantors Security
Agreement, under the Purchase Agreement or under other documentation relating
thereto or now or hereafter existing at law or in equity, or by statute, and
each and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time or simultaneously and as
often and in such order as may be deemed expedient by the Agent. All such
rights, powers and remedies shall be cumulative and the exercise or the
beginning of exercise of one shall not be deemed a waiver of the right to
exercise of any other or others. No delay or omission of the Agent in the
exercise of any such right, power or remedy and no renewal or extension of any
of the Obligations shall impair any such right, power or remedy or shall be
construed to be a waiver of any Default or Event of Default or any acquiescence
therein.
SECTION VI. MISCELLANEOUS PROVISIONS.
A. Notices. All notices, approvals, consents or other
communications required or desired to be given hereunder shall be delivered in
person, by facsimile transmission followed promptly by first class mail or by
overnight mail, and delivered if to any Guarantor, then to the attention of Mr.
Michael Reicher, c/o Halsey Drug. Co., Inc., 1827 Pacific Street, Brooklyn, New
York 11233, fax no. (718) 467-4261, with a copy to John P. Reilly, Esq., c/o St.
John & Wayne, 2 Penn Plaza East, Newark, New Jersey 07105, fax no. (973)
491-3407, and if to the Agent, then to the attention of Mr. Srini Conjeevaram,
c/o Galen Associates, Rockefeller Center, 610 Fifth Avenue, 5th Floor, New York,
New York 10020, fax no. (212) 218-4999, with a copy to George N. Abrahams, Esq.,
c/o Wolf, Block, Schorr and Solis-Cohen LLP, 250 Park Avenue, New York, New York
10177, fax no. (212) 986-0604.
B. Headings. The headings in this Guarantors Security Agreement
are for purposes of reference only and shall not affect the meaning or
construction of any provision of this Guarantors Security Agreement.
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C. Severability. The provisions of this Guarantors Security
Agreement are severable, and if any clause or provision shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect, in that jurisdiction only, such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Guarantors Security Agreement in any jurisdiction.
D. Amendments, Waivers and Consents. Any amendment or waiver of
any provision of this Guarantors Security Agreement and any consent to any
departure by any Guarantor from any provision of this Guarantors Security
Agreement shall be effective only if made or given in writing signed by the
Agent.
E. Interpretation of Agreement. Time is of the essence in each
provision of this Guarantors Security Agreement of which time is an element. All
terms not defined herein shall have the meaning set forth in the applicable
Uniform Commercial Code. Acceptance of or acquiescence in a course of
performance rendered under this Guarantors Security Agreement shall not be
relevant in determining the meaning of this Guarantors Security Agreement even
though the accepting or acquiescing party had knowledge of the nature of the
performance and opportunity for objection.
F. Continuing Security Interest. This Company Security Agreement
shall create a continuing security interest in the Collateral and shall (i)
remain in full force and effect until indefeasible payment in full of the
Obligations owing by the Guarantors, (ii) be binding upon each Guarantor, and
its successors and assigns and (iii) inure to the benefit of the Agent and its
successors and assigns.
G. Reinstatement. To the extent permitted by law, this Guarantors
Security Agreement shall continue to be effective or be reinstated if at any
time any amount received by the Agent in respect of the Obligations owing by the
Guarantors is rescinded or must otherwise be restored or returned by the Agent
upon the occurrence or during the pendency of any Event of Default, all as
though such payments had not been made.
H. Survival of Provisions. All representations, warranties and
covenants of the Guarantors contained herein shall survive the execution and
delivery of this Guarantors Security Agreement, and shall terminate only upon
the full and final indefeasible payment and performance by the Guarantors of the
Obligations secured hereby.
I. Setoff. The Agent shall have all rights of setoff available at
law or in equity.
J. Power of Attorney. In addition to the powers granted to the
Agent under Section VC, each Guarantor hereby irrevocably authorizes and
appoints the Agent, or any Person or agent the Agent may designate, as such
Guarantor's attorney-in-fact, at such Guarantor's cost and expense, to exercise
all of the following powers, which being coupled with an interest, shall be
irrevocable until all of the Obligations shall have been indefeasibly paid and
satisfied in full:
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(a) after the occurrence of an Event of Default, to
receive, take, endorse, sign, assign and deliver, all in the name
of the Agent or such Guarantor, any and all checks, notes,
drafts, and other documents or instruments relating to the
Collateral; and
(b) to request, at any time from customers indebted on
Accounts, verification of information concerning the Accounts and
the amounts owing thereon.
K. Indemnification; Authority of the Agent. Neither the Agent nor
any director, officer, employee, attorney or agent of the Agent shall be liable
to any Guarantor for any action taken or omitted to be taken by it or them
hereunder, except for its or their own gross negligence or willful misconduct,
nor shall the Agent be responsible for the validity, effectiveness or
sufficiency of this Guarantors Security Agreement or of any document or security
furnished pursuant hereto. The Agent and its directors, officers, employees,
attorneys and agents shall be entitled to rely on any communication, instrument
or document reasonably believed by it or them to be genuine and correct and to
have been signed or sent by the proper person or persons. Each Guarantor agrees
to indemnify and hold harmless the Agent and any other person from and against
any and all costs, expenses (including reasonable fees, expenses and
disbursements of attorneys and paralegals (including, without duplication,
reasonable charges of inside counsel)), claims or liability incurred by the
Agent or such person hereunder, unless such claim or liability shall be due to
willful misconduct or gross negligence on the part of the Agent or such person.
L. Release; Termination of Agreement. Subject to the provisions
of Section VIG hereof, this Guarantors Security Agreement shall terminate upon
full and final indefeasible payment and performance of all the Obligations owing
by each Guarantor. At such time, the Agent shall, at the request of any
Guarantor, reassign and redeliver to such Guarantor all of the Collateral
hereunder which has not been sold, disposed of, retained or applied by the Agent
in accordance with the terms hereof. Such reassignment and redelivery shall be
without warranty by or recourse to the Agent, except as to the absence of any
prior assignments by the Agent of its interest in the Collateral, and shall be
at the expense of such Guarantor.
M. Counterparts. This Guarantors Security Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
but all of which shall together constitute one and the same agreement.
N. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS GUARANTORS SECURITY AGREEMENT AND ANY DISPUTE ARISING OUT OF OR IN
CONNECTION WITH THIS GUARANTORS SECURITY AGREEMENT, WHETHER SOUNDING IN
CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS) AND DECISIONS OF THE STATE OF NEW
YORK.
O. SUBMISSION TO JURISDICTION. ALL DISPUTES BETWEEN ANY GUARANTOR
AND THE AGENT, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
RESOLVED ONLY BY STATE AND FEDERAL
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COURTS LOCATED IN NEW YORK, NEW YORK, AND THE COURTS TO WHICH AN APPEAL
THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT THE AGENT SHALL HAVE THE RIGHT,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST ANY GUARANTOR OR
ITS PROPERTY IN ANY LOCATION REASONABLY SELECTED BY THE AGENT IN GOOD FAITH TO
ENABLE THE AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF THE AGENT. EACH GUARANTOR AGREES THAT IT WILL NOT ASSERT
ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT
BY THE AGENT. EACH GUARANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE AGENT HAS COMMENCED A PROCEEDING, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON
CONVENIENS.
P. SERVICE OF PROCESS. EACH GUARANTOR HEREBY IRREVOCABLY AGREES
THAT SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
GUARANTORS SECURITY AGREEMENT MAY BE EFFECTED BY MAILING A COPY THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH GUARANTOR AT ITS ADDRESS
SET FORTH IN SECTION VIA HEREOF.
Q. JURY TRIAL. EACH GUARANTOR AND THE AGENT EACH HEREBY WAIVE ANY
RIGHT TO A TRIAL BY JURY.
R. LIMITATION OF LIABILITY. THE AGENT SHALL NOT HAVE ANY
LIABILITY TO ANY GUARANTOR (WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE)
FOR LOSSES SUFFERED BY ANY GUARANTOR IN CONNECTION WITH, ARISING OUT OF, OR IN
ANY WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS
GUARANTORS SECURITY AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE
JUDGMENT OR COURT ORDER BINDING ON THE AGENT, THAT THE LOSSES WERE THE RESULT OF
ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
S. Delays; Partial Exercise of Remedies. No delay or omission of
the Agent to exercise any right or remedy hereunder, whether before or after the
happening of any Event of Default, shall impair any such right or shall operate
as a waiver thereof or as a waiver of any such Event of Default. No single or
partial exercise by the Agent of any right or remedy shall preclude any other or
further exercise thereof, or preclude any other right or remedy.
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IN WITNESS WHEREOF, each Guarantor has caused this Guarantors
Security Agreement to be duly executed and delivered as of the day and year
first above written.
CENCI POWDER PRODUCTS, INC.
By: /s/ Michael Reicher
----------------------------------
Name: Michael Reicher
Title: Chief Executive Officer
HALSEY PHARMACEUTICAL, INC.
By: /s/ Michael Reicher
----------------------------------
Name: Michael Reicher
Title: Chief Executive Officer
HOUBA, INC.
By: /s/ Michael Reicher
----------------------------------
Name: Michael Reicher
Title: Chief Executive Officer
H.R. CENCI LABORATORIES, INC.
By: /s/ Michael Reicher
----------------------------------
Name: Michael Reicher
Title: Chief Executive Officer
INDIANA FINE CHEMICALS, INC.
By: /s/ Michael Reicher
----------------------------------
Name: Michael Reicher
Title: Chief Executive Officer
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By its acceptance hereof, as of the day and year first above
written, the Agent agrees to be bound by the provisions hereof applicable to it.
GALEN PARTNERS III, L.P.
By: Claudius, L.L.C., General Partner
By: /s/ Bruce F. Wesson
----------------------
Name: Bruce F. Wesson
Title: Managing Member
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SCHEDULE A
IIIA. Locations of Collateral
-----------------------
1. Cenci Powder Products, Inc. - 1420 E. Street, Fresno, CA
2. Halsey Pharmaceutical, Inc. - 245 Old Hook Road, Westwood, NJ
3. Houba, Inc. - 16235 State Road 17, Culver, IN
4. H.R. Cenci Laboratories Inc. - 152 No. Broadway, Fresno, CA
5. Indiana Fine Chemicals, Inc. - 16235 State Road 17, Culver, IN
IIID. Liens
-----
All Guarantors
1. Lien in favor of The Chase Manhattan Bank as agent for The
Chase Manhattan Bank, The Bank of New York and Israel
Discount Bank pursuant to the Credit Agreement with such
banks dated December 1, 1992, as amended.
2. Schedule 10.4 to the Schedule of Exceptions to the Purchase
Agreement is incorporated herein by reference.
3. Houba, Inc. - Mortgage lien and security interest in favor
of Par Pharmaceutical, Inc. covering property in Culver,
Indiana.
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