Exhibit 10.3
EXECUTION COPY
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this “Security Agreement”), is entered into as of
February 11, 2011, among Impax Laboratories, Inc., a Delaware corporation (the
“Borrower”), each of the Domestic Subsidiaries of the Borrower from time to time
party hereto (individually a “Guarantor” and collectively the “Guarantors”; the
Guarantors, together with the Borrower, individually an “Obligor” and
collectively the “Obligors”) and WELLS FARGO BANK, NATIONAL ASSOCIATION, in its
capacity as Administrative Agent under the Credit Agreement referred to below
(in such capacity, the “Administrative Agent”) for the several banks and other
financial institutions as may from time to time become parties to such Credit
Agreement (individually a “Lender” and collectively the “Lenders”).
RECITALS
WHEREAS, pursuant to that certain Credit Agreement dated as of the date hereof
(as amended, modified, extended, restated, replaced, or supplemented from time
to time, the “Credit Agreement”), among the Borrower, the Guarantors, the
Lenders party thereto and the Administrative Agent, the Lenders have agreed to
make Loans and to issue and/or acquire participation interests in Letters of
Credit upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue and/or acquire participation interests in Letters of Credit under the
Credit Agreement that the Obligors shall have executed and delivered this
Security Agreement to the Administrative Agent for the ratable benefit of the
Lenders and the other Secured Parties.
NOW, THEREFORE, in consideration of these premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, capitalized terms used herein shall have
the meanings ascribed to such terms in the Credit Agreement, and the following
terms which are defined in the Uniform Commercial Code from time to time in
effect in the State of New York (the “UCC”) are used herein as so defined:
Accession, Account, As-Extracted Collateral, Chattel Paper, Commercial Tort
Claim, Consumer Good, Deposit Account, Document, Electronic Chattel Paper,
Equipment, Farm Product, Fixture, General Intangible, Good, Instrument,
Inventory, Investment Property, Letter-of-Credit Right, Manufactured Home,
Payment Intangible, Proceeds, Securities Account, Securities Intermediary,
Software, Supporting Obligation and Tangible Chattel Paper.

 

 

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(b) In addition, the following term shall have the following meaning:
“Excluded Property” means (i) Equity Interests of any Foreign Subsidiary owned
directly by any Credit Party in excess of sixty-five percent (65%) of such
Equity Interests and one hundred percent (100%) of the Equity Interests of any
Foreign Subsidiary not owned directly by any Obligor to the extent the inclusion
of such Equity Interests would cause any amount to be includable in the taxable
income of any Obligor under Section 951 of the Internal Revenue Code, (ii) all
real property interests, (iii) any property to the extent that such grant of a
security interest is prohibited by any Requirements of Law of a Governmental
Authority, requires a consent not obtained of any Governmental Authority
pursuant to such Requirement of Law, except to the extent that such Requirement
of Law providing for such prohibition, breach, default or termination or
requiring such consent is ineffective under applicable law (including, without
limitation, Sections 9-406, 9- 407, 9-408 or 9-409 of the UCC (or any successor
provision or provisions) of any relevant jurisdiction or any other applicable
law or principles of equity); provided, that for purposes of the foregoing, it
is understood and agreed that, to the extent reasonably requested by the
Administrative Agent, the applicable Obligor will use its commercially
reasonable efforts to obtain a consent if permissible by the applicable
Requirement of Law, (iv) any lease, license or other agreement to the extent the
grant of a security interest therein would result in an invalidation thereof or
constitute a breach or violation of such agreement (other than any
non-assignment of payment intangibles provisions that is unenforceable under the
UCC) or to the extent that such security interests would result in adverse tax
or accounting consequences, as reasonably determined by the Borrower; provided,
that for purposes of the foregoing, it is understood and agreed that, to the
extent reasonably requested by the Administrative Agent, the applicable Obligor
will use its reasonable efforts to obtain any necessary consents to permit the
grant of a security interest hereunder if permissible by the applicable lease,
license or other agreement, (v) any property subject to a Permitted Lien (other
than Liens in favor of the Administrative Agent) to the extent that the grant of
a Lien to the Administrative Agent hereunder on such asset (A) would result in a
breach or violation of, or constitute a default under, the agreement or
instrument governing such Permitted Lien, (B) would result in the loss of use of
such asset, (C) would permit the holder of such Permitted Lien to terminate such
Obligor’s use of such asset or (D) would otherwise result in a loss of rights of
such Obligor in such asset, provided however that the Collateral shall include
and such security interest shall attach immediately at such time as the
condition causing such breach, violation, loss of use, termination or loss of
rights shall be remedied and to the extent severable, shall attach immediately
to any portion of such asset that does not result in any of the consequences
specified in (A), (B), (C) or (D) above, (vi) Accounts, Instruments, Chattel
Paper or other obligation or property of any kind due from, owed by, or
belonging to, a Sanctioned Person or Sanctioned Entity, or (vii) any lease in
which the lessee is a Sanctioned Person or Sanctioned Entity shall be
Collateral.

 

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2. Grant of Security Interest in the Collateral.
(a) To secure the prompt payment and performance in full when due, whether by
lapse of time, acceleration, mandatory prepayment or otherwise, of the Credit
Party Obligations, each Obligor hereby grants to the Administrative Agent, for
the ratable benefit of the Secured Parties, a continuing security interest in,
and a right to set off against, any and all right, title and interest of such
Obligor in and to the following, whether now owned or existing or owned,
acquired, or arising hereafter (collectively, the “Collateral”):
(i) all Accounts;
(ii) all cash and Cash Equivalents;
(iii) all Chattel Paper (including Electronic Chattel Paper);
(iv) all Commercial Tort Claims as set forth on Schedule 3.16(d) to the Credit
Agreement (as updated from time to time in accordance with the Credit
Agreement);
(v) all Copyright Licenses;
(vi) all Copyrights;
(vii) all Deposit Accounts;
(viii) all Documents;
(ix) all Equipment;
(x) all Fixtures;
(xi) all General Intangibles;
(xii) all Goods;
(xiii) all Instruments;
(xiv) all Inventory;
(xv) all Investment Property;
(xvi) all Letter-of-Credit Rights;
(xvii) all Material Contracts and all such other agreements, contracts, leases,
licenses, tax sharing agreements or hedging arrangements now or hereafter
entered into by an Obligor, as such agreements may be amended or otherwise
modified from time to time (collectively, the “Assigned Agreements”), including
without limitation, (A) all rights of an Obligor to receive moneys due and to
become due under or pursuant to the Assigned Agreements, (B) all rights of an
Obligor to receive proceeds of any insurance, indemnity, warranty or guaranty
with respect to the Assigned Agreements, (C) claims of an Obligor for damages
arising out of or for breach of or default under the Assigned Agreements and
(D) the right of an Obligor to terminate the Assigned Agreements, to perform
thereunder and to compel performance and otherwise exercise all remedies
thereunder;

 

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(xviii) all Patent Licenses;
(xix) all Patents;
(xx) all Payment Intangibles;
(xxi) all Securities Accounts;
(xxii) all Software;
(xxiii) all Supporting Obligations;
(xxiv) all Trademark Licenses;
(xxv) all Trademarks;
(xxvi) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks, and related data processing software (owned by such
Obligor or in which it has an interest) that at any time evidence or contain
information relating to any Collateral or are otherwise necessary or helpful in
the collection thereof or realization thereupon;
(xxvii) all other personal property of any kind or type whatsoever owned by such
Obligor; and
(xxviii) to the extent not otherwise included, all Accessions, Proceeds and
products of any and all of the foregoing.
Notwithstanding the foregoing, the Collateral shall not include the Excluded
Property.
(b) The Obligors and the Administrative Agent, on behalf of the Secured Parties,
hereby acknowledge and agree that the security interest created hereby in the
Collateral (i) constitutes continuing collateral security for all of the Credit
Party Obligations, whether now existing or hereafter arising and (ii) is not to
be construed as a present assignment of any Intellectual Property.
(c) The term “Collateral” shall include any Bank Products and any rights of the
Obligors thereunder only for purposes of this Section 2.

 

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3. Provisions Relating to Accounts, Contracts and Agreements.
(a) Anything herein to the contrary notwithstanding, each of the Obligors shall
remain liable under each of its Accounts, contracts and agreements to observe
and perform all of the conditions and obligations to be observed and performed
by it thereunder, all in accordance with the terms of any agreement giving rise
to each such Account or the terms of such contract or agreement. Neither the
Administrative Agent nor any Secured Party shall have any obligation or
liability under any Account (or any agreement giving rise thereto), contract or
agreement by reason of or arising out of this Security Agreement or the receipt
by the Administrative Agent or any Secured Party of any payment relating to such
Account, contract or agreement pursuant hereto, nor shall the Administrative
Agent or any Secured Party be obligated in any manner to perform any of the
obligations of an Obligor under or pursuant to any Account (or any agreement
giving rise thereto), contract or agreement, to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by it or as
to the sufficiency of any performance by any party under any Account (or any
agreement giving rise thereto), contract or agreement, to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to it or to which it may be entitled
at any time or times.
(b) The Administrative Agent hereby authorizes the Obligors to collect the
Accounts; provided, that the Administrative Agent may curtail or terminate such
authority at any time after the occurrence and during the continuance of an
Event of Default. If required by the Administrative Agent at any time after the
occurrence and during the continuation of an Event of Default, any payments of
Accounts, when collected by the Obligors (i) shall be forthwith (and in any
event within two (2) Business Days) deposited by the Obligors in a collateral
account maintained under the sole dominion and control of the Administrative
Agent, subject to withdrawal by the Administrative Agent for the account of the
Secured Parties only as provided in Section 12 hereof, and (ii) until so turned
over, shall be held by the Obligors in trust for the Administrative Agent and
the Secured Parties, segregated from other funds of the Obligors.
(c) At any time and from time to time, the Administrative Agent shall have the
right, but not the obligation, to make test verifications of the Accounts in any
manner and through any medium that it reasonably considers advisable, and the
Obligors shall use commercially reasonable efforts to furnish all such
assistance and information as the Administrative Agent may reasonably require in
connection with such test verifications. Upon the Administrative Agent’s
reasonable request and at the expense of the Obligors, the Obligors shall cause
independent public accountants or others satisfactory to the Administrative
Agent to furnish to the Administrative Agent reports showing reconciliations,
aging and test verifications of, and trial balances for, the Accounts. The
Administrative Agent in its own name or in the name of others may communicate
with account debtors on the Accounts to verify with them to the Administrative
Agent’s satisfaction the existence, amount and terms of any Accounts.

 

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4. Representations and Warranties. Each Obligor hereby represents and warrants
to the Administrative Agent, for the benefit of the Secured Parties, that so
long as any of the Credit Party Obligations (other than contingent indemnity
obligations that survive termination of the Credit Documents pursuant to the
stated terms thereof) remain outstanding or any Credit Document is in effect,
and until all of the Commitments shall have been terminated:
(a) Chief Executive Office; Books & Records; Legal Name; State of Formation. No
Obligor has in the four (4) months preceding the Closing Date changed its name,
been party to a merger, consolidation or other change in structure or used any
tradename not disclosed on Schedule 4(a) attached hereto (as updated from time
to time).
(b) Location of Tangible Collateral. As of the Closing Date, the location of all
tangible Collateral owned by each Obligor is as shown on Schedule 3.16(f)(i) to
the Credit Agreement.
(c) Ownership. Each Obligor is the legal and beneficial owner of its Collateral
and, subject to Section 2(e), has the right to pledge, sell, assign or transfer
the same.
(d) Security Interest/Priority. This Security Agreement creates a valid security
interest in favor of the Administrative Agent, for the benefit of the Secured
Parties, in the Collateral of such Obligor and, when properly perfected by
filing, obtaining possession, the granting of control to the Administrative
Agent or otherwise, shall constitute a valid first priority, perfected security
interest in such Collateral, to the extent such security interest can be
perfected by (i) filing, obtaining possession, the granting of control or
otherwise under the UCC, (ii) by filing an appropriate notice with the United
States Patent and Trademark Office or the United States Copyright Office, or
(iii) such other action as may be required pursuant to any applicable
jurisdictions’ certificate of title statute, free and clear of all Liens except
for Permitted Liens.
(e) Consents. Except for (i) the filing or recording of UCC financing
statements, (ii) the filing of appropriate notices with the United States Patent
and Trademark Office, the United States Copyright Office and the Canadian
Intellectual Property Office, (iii) obtaining control to perfect the Liens
created by this Security Agreement, (iv) compliance with the Federal Assignment
of Claims Act or comparable state law, and/or (v) the filing, registration or
other action required pursuant to any applicable certificate of title statute,
no consent or authorization of, filing with, or other act by or in respect of,
any arbitrator or Governmental Authority and no consent of any stockholder,
member or creditor of such Obligor is required (A) for the grant by such Obligor
of the security interest in the Collateral granted hereby or for the execution,
delivery or performance of this Security Agreement by such Obligor or (B) for
the perfection of such security interest or the exercise by the Administrative
Agent of the rights and remedies provided for in this Security Agreement.

 

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(f) Types of Collateral. None of the Collateral consists of, or is the Proceeds
of, As-Extracted Collateral, Consumer Goods, Farm Products, Manufactured Homes
or standing timber (as such term is used in the UCC).
(g) Accounts. With respect to the Accounts of the Obligors: (i) the goods sold
and/or services furnished giving rise to each Account are not subject to any
security interest or Lien except the first priority, perfected security interest
granted to the Administrative Agent herein and except for Permitted Liens;
(ii) each Account and the papers and documents of the applicable Obligor
relating thereto are genuine and in all material respects what they purport to
be; (iii) each Account arises out of a bona fide transaction for goods sold and
delivered (or in the process of being delivered) by an Obligor or for services
actually rendered by an Obligor, which transaction was conducted in the ordinary
course of the Obligor’s business and was completed in accordance with the terms
of any documents pertaining thereto; (iv) no Account of an Obligor is evidenced
by any Instrument or Chattel Paper unless such Instrument or Chattel Paper has
been theretofore endorsed over and delivered to, or submitted to the control of,
the Administrative Agent; (v) the amount of each Account as shown on the
applicable Obligor’s books and records, and on all invoices and statements which
may be delivered to the Administrative Agent with respect thereto, is due and
payable to the applicable Obligor and is not in any way contingent; (vi) to each
of the Obligor’s knowledge, the account debtor with respect to each Account has
the capacity to contract; (vii) no surety bond was required or given in
connection with any Account of an Obligor or the contracts or purchase orders
out of which they arose; (viii) no Account is evidenced by a judgment, there are
no set-offs, counterclaims or disputes existing or asserted with respect to any
material Account, and no Obligor has made any agreement with any account debtor
for any deduction from any Account except for deductions made in the ordinary
course of its business; (ix) there are no facts, events or occurrences which in
any material respect impair the validity or enforcement of any Account or tend
to materially reduce the amount payable thereunder as shown on the applicable
Obligor’s books and records; and (x) the right to receive payment under each
Account is assignable except where the account debtor with respect to such
Account is a Governmental Authority, to the extent assignment of any such right
to payment is prohibited or limited by applicable law, regulations,
administrative guidelines or contract.
(h) Inventory. No Inventory of an Obligor is held by a third party (other than
an Obligor) pursuant to consignment, sale or return, sale on approval or similar
arrangement.
(i) Intellectual Property.
(i) Each of the Obligors and its Subsidiaries owns, or has the legal right to
use, all Intellectual Property, tradenames, technology, know-how and processes
necessary for each of them to conduct its business as currently conducted.

 

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(ii) Except as disclosed in Schedule 3.16(a) to the Credit Agreement, (A) each
Obligor has the right to use its owned Intellectual Property in perpetuity and
without payment of royalties, (B) all registrations with and applications to
Governmental Authorities in respect of such Intellectual Property are valid and
in full force and effect and are not subject to the payment of any taxes or
maintenance fees or the taking of any interest therein, held by any of the
Obligors to maintain their validity or effectiveness, and (C) there are no
restrictions on the direct or indirect transfer of any Contractual Obligation,
or any interest therein, held by any of the Obligors in respect of such
Intellectual Property which has not been waived or satisfied, except where the
failure to waive or satisfy could not reasonably be expected to have a Material
Adverse Effect.
(iii) None of the Obligors is in default (or with the giving of notice or lapse
of time or both, would be in default) under any license to use its Intellectual
Property; no claim has been asserted and is pending by any Person challenging or
questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, nor do the Obligors or any of
their Subsidiaries know of any such claim; and, to the knowledge of the Obligors
or any of their Subsidiaries, the use of such Intellectual Property by any of
the Obligors or any of its Subsidiaries does not infringe on the rights of any
Person.
(iv) The Obligors have recorded or deposited with and paid to the United States
Copyright Office, the Register of Copyrights, the Copyrights Royalty Tribunal or
other Governmental Authority, all notices, statements of account, royalty fees
and other documents and instruments required under the terms and conditions of
any Contractual Obligation of the Obligors and/or under Title 17 of the United
States Code and the rules and regulations issued thereunder (collectively, the
“Copyright Act”), and are not liable to any Person for copyright infringement
under the Copyright Act or any other law, rule, regulation, contract or license
as a result of their business operations.
(v) All material Intellectual Property of each Obligor is valid, subsisting,
unexpired, enforceable and has not been abandoned, and each Obligor is legally
entitled to use each of its tradenames.
(vi) Except as set forth in Schedule 3.16(a) to the Credit Agreement, none of
the material Intellectual Property of the Obligors is the subject of any
licensing or franchise agreement.
(vii) No holding, decision or judgment has been rendered by any Governmental
Authority which would limit, cancel or question the validity of any Intellectual
Property of the Obligors.
(viii) No action or proceeding is pending seeking to limit, cancel or question
the validity of any Intellectual Property of the Obligors, or which, if
adversely determined, would have a Material Adverse Effect except as otherwise
disclosed in the Credit Agreement.

 

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(ix) All applications pertaining to the material Intellectual Property of each
Obligor have been duly and properly filed, and all registrations or letters
pertaining to such Intellectual Property have been duly and properly filed and
issued, and all of such Intellectual Property is valid and enforceable.
(x) No Obligor has made any assignment or entered into any agreement in conflict
with the security interest of the Administrative Agent in the Intellectual
Property of each Obligor hereunder.
(j) Documents, Instruments and Chattel Paper. All Documents, Instruments and
Chattel Paper describing, evidencing or constituting Collateral are, to the
Obligors’ knowledge, complete, valid, and genuine.
(k) Equipment. With respect to each Obligor’s Equipment: (i) such Obligor has
good and marketable title thereto and (ii) all such Equipment is in normal
operating condition and repair, ordinary wear and tear alone excepted (subject
to casualty events), and is suitable for the uses to which it is customarily put
in the conduct of such Obligor’s business.
(l) Restrictions on Security Interest. None of the Obligors is party to any
material lease that contains legally enforceable restrictions on the granting of
a security interest therein other than those which have been waived or
satisfied.
Notwithstanding anything to the contrary contained herein, no representation or
warranty is provided with respect to the Liens purported to be created with
respect to any Equity Interests of a Foreign Subsidiary as it pertains to the
laws and regulations of jurisdictions outside of the United States of America.
5. Covenants. Each Obligor covenants that, so long as any of the Credit Party
Obligations (other than contingent indemnity obligations that survive
termination of the Credit Documents pursuant to the stated terms thereof) remain
outstanding or any Credit Document is in effect, and until all of the
Commitments shall have been terminated, such Obligor shall:
(a) Perfection of Security Interest by Filing, Etc. Execute and deliver to the
Administrative Agent and/or file such agreements, assignments or instruments
(including affidavits, notices, reaffirmations, amendments and restatements of
existing documents, and any document as may be necessary if the law of any
jurisdiction other than New York becomes or is applicable to the Collateral or
any portion thereof, in each case, as the Administrative Agent may reasonably
request) and do all such other things as the Administrative Agent may reasonably
deem necessary or appropriate (i) to assure to the Administrative Agent its
security interests hereunder are perfected, including (A) such financing
statements (including continuation statements) or

 

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amendments thereof or supplements thereto or other instruments as the
Administrative Agent may from time to time reasonably request in order to
perfect and maintain the security interests granted hereunder in accordance with
the UCC and any other personal property security legislation in the appropriate
state(s) or province(s), (B) with regard to Copyrights, a Notice of Grant of
Security Interest in Copyrights for filing with the United States Copyright
Office and the Canadian Intellectual Property Office, as applicable in the form
of Exhibit A attached hereto, (C) with regard to Patents, a Notice of Grant of
Security Interest in Patents for filing with the United States Patent and
Trademark Office and the Canadian Intellectual Property Office, as applicable in
the form of Exhibit B attached hereto and (D) with regard to Trademarks, a
Notice of Grant of Security Interest in Trademarks for filing with the United
States Patent and Trademark Office and the Canadian Intellectual Property
Office, as applicable in the form of Exhibit C attached hereto, (ii) to
consummate the transactions contemplated hereby and (iii) to otherwise protect
and assure the Administrative Agent of its rights and interests hereunder. Each
Obligor hereby authorizes the Administrative Agent to prepare and file such
financing statements (including continuation statements) or amendments thereof
or supplements thereto or other instruments as the Administrative Agent may from
time to time deem necessary or appropriate in order to perfect and maintain the
security interests granted hereunder in accordance with the UCC, including,
without limitation, any financing statement that describes the Collateral as
“all personal property” or “all assets” of such Obligor or that describes the
Collateral in some other manner as the Administrative Agent deems necessary or
advisable. Each Obligor agrees to mark its books and records to reflect the
security interest of the Administrative Agent in the Collateral.
(b) Perfection of Security Interest by Possession. If (i) any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any Document, Instrument, Tangible Chattel Paper or Supporting Obligation or
(ii) any Collateral shall be stored or shipped subject to a Document or
(iii) any Collateral shall consist of Investment Property in the form of
certificated securities, promptly notify the Administrative Agent of the
existence of such Collateral and deliver such Instrument, Chattel Paper,
Supporting Obligation, Document or Investment Property to the Administrative
Agent, duly endorsed in a manner satisfactory to the Administrative Agent, to be
held as Collateral pursuant to this Security Agreement.
(c) Perfection of Security Interest Through Control. If any Collateral shall
consist of Deposit Accounts, Electronic Chattel Paper, Letter-of-Credit Rights,
Securities Accounts or uncertificated Investment Property, execute and deliver
(and, with respect to any Collateral consisting of a Securities Account or
uncertificated Investment Property, cause the Securities Intermediary or the
issuer, as applicable, with respect to such Investment Property to execute and
deliver) to the Administrative Agent all control agreements, assignments,
instruments or other documents as reasonably requested by the Administrative
Agent for the purposes of obtaining and maintaining control of such Collateral.
(d) Other Liens. Defend its interests in the Collateral against the claims and
demands of all other parties claiming an interest therein and keep the
Collateral free from all Liens, except for Permitted Liens. Neither the
Administrative Agent nor any Secured Party authorizes any Obligor to, and no
Obligor shall, sell, exchange, transfer, assign, lease or otherwise dispose of
the Collateral or any interest therein, except as permitted under the Credit
Agreement.

 

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(e) Preservation of Collateral. Keep the Collateral in good order, condition and
repair in all material respects, ordinary wear and tear excepted; not use the
Collateral in violation of the provisions of this Security Agreement or any
other agreement relating to the Collateral or any policy insuring the Collateral
or any applicable Requirement of Law; not permit any Collateral to be or become
a fixture to real property or an accession to other personal property unless the
Administrative Agent has a valid, perfected and first priority security interest
for the benefit of the Secured Parties in such real or personal property; and
not, without the prior written consent of the Administrative Agent, alter or
remove any identifying symbol or number on its Equipment.
(f) [Reserved.]
(g) [Reserved.]
(h) Collateral Held by Warehouseman, Bailee, etc. If any Collateral with a value
in excess of $1,000,000 is at any time in the possession or control of a
warehouseman, bailee or any agent or processor of such Obligor, (i) notify the
Administrative Agent of such possession, (ii) upon the request of the
Administrative Agent, notify such Person of the Administrative Agent’s security
interest for the benefit of the Secured Parties in such Collateral, (iii) upon
the request of the Administrative Agent, instruct such Person to hold all such
Collateral for the Administrative Agent’s account subject to the Administrative
Agent’s instructions and (iv) upon the request of the Administrative Agent,
obtain an acknowledgment from such Person that it is holding such Collateral for
the benefit of the Administrative Agent.
(i) Treatment of Accounts. (i) Not grant or extend the time for payment of any
Account, or compromise or settle any Account for less than the full amount
thereof, or release any person or property, in whole or in part, from payment
thereof, or allow any credit or discount thereon, other than as normal and
customary in the ordinary course of an Obligor’s business and (ii) maintain at
its principal place of business a record of Accounts consistent with customary
business practices.
(j) Covenants Relating to Inventory.
(i) Maintain, keep and preserve its Inventory in good salable condition at its
own cost and expense.
(ii) [Reserved.]
(iii) If any of the Inventory is at any time evidenced by a document of title,
promptly notify the Administrative Agent thereof and, upon the request of the
Administrative Agent, deliver such document of title to the Administrative
Agent.

 

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(k) Covenants Relating to Copyrights.
(i) Employ the Copyright for each material Work with such notice of copyright as
may be required by law to secure copyright protection.
(ii) Not do any act or knowingly omit to do any act whereby any Copyright may
become invalidated unless such Obligor determines that such Copyright is no
longer useful or necessary in its business and (A) not do any act, or knowingly
omit to do any act, whereby any material Copyright may become injected into the
public domain; (B) notify the Administrative Agent immediately if it knows, or
has reason to know, that any material Copyright could reasonably be expected to
become injected into the public domain or of any adverse determination or
development (including, without limitation, the institution of, or any such
determination or development in, any proceeding in any court or tribunal in the
United States, Canada or any other country) regarding an Obligor’s ownership of
any such Copyright or its validity; (C) take all necessary steps as it shall
deem appropriate under the circumstances to maintain and pursue each material
application (and to obtain the relevant registration) and to maintain each
registration of each material Copyright owned by an Obligor including, without
limitation, filing of applications for renewal where necessary; and (D) promptly
notify the Administrative Agent of any material infringement of any material
Copyright of an Obligor of which it becomes aware and take such actions as it
shall reasonably deem appropriate under the circumstances to protect such
Copyright, including, where appropriate, the bringing of suit for infringement,
seeking injunctive relief and seeking to recover any and all damages for such
infringement.
(iii) Not make any assignment or agreement in conflict with the security
interest in the Copyrights of each Obligor hereunder.
(l) Covenants Relating to Patents and Trademarks.
(i) (A) Continue to use each material Trademark in order to maintain such
Trademark in full force free from any claim of abandonment for non-use,
(B) maintain as in the past the quality of products and services offered under
such Trademark, (C) employ such Trademark with the appropriate notice of
registration and (D) not (and not permit any licensee or sublicensee thereof to)
do any act or knowingly omit to do any act whereby any material Trademark may
become invalidated unless such Obligor determines that such Trademark is no
longer useful or necessary in its business.

 

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(ii) Not do any act, or omit to do any act, whereby any material Patent may
become abandoned or dedicated unless such Obligor determines that such Patent is
no longer useful or necessary in its business.
(iii) Promptly notify the Administrative Agent if it knows, or has reason to
know, that any application or registration relating to any material Patent or
material Trademark may become abandoned or dedicated, or of any adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any proceeding in the United States
Patent and Trademark Office, the Canadian Intellectual Property Office or any
court or tribunal in any country) regarding an Obligor’s ownership of any such
Patent or Trademark or its right to register the same or to keep, maintain and
use the same.
(iv) Take all reasonable and necessary steps, including, without limitation, in
any proceeding before the United States Patent and Trademark Office, or any
similar office or agency in any other country or any political subdivision
thereof, to maintain and pursue each material application, to obtain the
relevant registration and to maintain each registration of the material Patents
and material Trademarks, including, without limitation, filing of applications
for renewal, affidavits of use and affidavits of incontestability.
(v) Promptly notify the Administrative Agent after it learns that any material
Patent or material Trademark included in the Collateral is infringed,
misappropriated or diluted by a third party and take such actions as it shall
reasonably deem appropriate under the circumstances to protect such Patent or
Trademark in a material manner.
(vi) Not make any assignment or agreement in conflict with the security interest
in the Patents or Trademarks of any Obligor hereunder.
(m) [Reserved].
(n) Intellectual Property Generally. Upon request of the Administrative Agent,
execute and deliver any and all agreements, instruments, documents, and papers
as the Administrative Agent may reasonably request to evidence the
Administrative Agent’s security interest in the Intellectual Property and the
general intangibles relating thereto including, without limitation, the goodwill
of the Obligors and their Subsidiaries relating thereto or represented thereby
(or such other Intellectual Property or the general intangibles relating thereto
or represented thereby as the Administrative Agent may reasonably request).
(o) Commercial Tort Claims; Notice of Litigation. Promptly (i) forward to the
Administrative Agent written notification of any and all Commercial Tort Claims
of the Obligors in excess of $1,000,000, including, but not limited to, any and
all actions, suits, and proceedings before any court or Governmental Authority
by or affecting such Obligor or any of its Subsidiaries and (ii) execute and
deliver such statements, documents and notices and do and cause to be done all
such things as may be reasonably required by the Administrative Agent, or
required by law, including all things which may from time to time be necessary
under the UCC to fully create, preserve, perfect and protect the priority of the
Administrative Agent’s security interest in any Commercial Tort Claims.

 

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(p) Status of Collateral as Personal Property. At all times maintain the
Collateral as personal property and not affix any of the Collateral to any real
property in a manner which would change its nature from personal property to
real property or a Fixture, unless the Administrative Agent has a first
priority, perfected Lien on such real property or Fixture.
(q) Regulatory Approvals. Promptly, and at its expense, execute and deliver, or
cause to be executed and delivered, all applications, certificates, instruments,
registration statements, and all other documents and papers the Administrative
Agent may reasonably request and as may be required by law to acquire the
consent, approval, registration, qualification or authorization of any
Governmental Authority deemed necessary or appropriate for the effective
exercise of any of the rights under this Security Agreement (each a
“Governmental Approval”). Without limiting the generality of the foregoing, if
an Event of Default shall have occurred and be continuing, each Obligor shall
take any action which the Administrative Agent may reasonably request in order
to transfer and assign to the Administrative Agent, or to such one or more third
parties as the Administrative Agent may designate, or to a combination of the
foregoing, each Governmental Approval of such Obligor. To enforce the provisions
of this subsection, upon the occurrence and during the continuance of an Event
of Default, the Administrative Agent is empowered to request the appointment of
a receiver from any court of competent jurisdiction. Such receiver shall be
instructed to seek from the Governmental Authority an involuntary transfer of
control of each such Governmental Approval for the purpose of seeking a bona
fide purchaser to whom control will ultimately be transferred. Each Obligor
hereby agrees to authorize such an involuntary transfer of control upon the
request of the receiver so appointed, and, if such Obligor shall refuse to
authorize the transfer, its approval may be required by the court. Upon the
occurrence and continuance of an Event of Default, such Obligor shall further
use its reasonable best efforts to assist in obtaining Governmental Approvals,
if required, for any action or transaction contemplated by this Security
Agreement, including, without limitation, the preparation, execution and filing
with the Governmental Authority of such Obligor’s portion of any necessary or
appropriate application for the approval of the transfer or assignment of any
portion of the assets (including any Governmental Approval) of such Obligor.
Because each Obligor agrees that the Administrative Agent’s remedy at law for
failure of such Obligor to comply with the provisions of this subsection would
be inadequate and that such failure would not be adequately compensable in
damages, such Obligor agrees that the covenants contained in this subsection may
be specifically enforced, and such Obligor hereby waives and agrees not to
assert any defenses against an action for specific performance of such
covenants.

 

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(r) Insurance. All proceeds derived from insurance on the Collateral shall be
subject to the security interest of the Administrative Agent hereunder.
(s) Covenants Relating to the Assigned Agreements.
(i) [Reserved].
(ii) Unless the applicable Obligor believes it is necessary in the prudent
conduct of its business, no Obligor shall (A) cancel or terminate any Assigned
Agreement of such Obligor or consent to or accept any cancellation or
termination thereof; (B) amend or otherwise modify any Assigned Agreement of
such Obligor or give any consent, waiver or approval thereunder; (C) waive any
default under or breach of any Assigned Agreement of such Obligor; or (D) take
any other action in connection with any Assigned Agreement of such Obligor which
would impair the value of the interest or rights of such Obligor thereunder or
which would impair the interests or rights of the Administrative Agent.
(t) Material Contracts. Upon the request of the Administrative Agent, with
respect to any Material Contract, each Obligor will (i) execute and deliver (or
cause to be executed and delivered) to the Administrative Agent a collateral
assignment of such Material Contract and a consent to such collateral
assignment, in each case in a form acceptable to the Administrative Agent,
(ii) use commercially reasonable efforts to cause the other parties to such
Material Contract to execute such consent and (iii) do any act or execute any
additional documents required by the Administrative Agent to ensure to the
Administrative Agent the effectiveness and first priority of its security
interest in such Material Contract.
6. License of Intellectual Property. The Obligors hereby assign, transfer and
convey to the Administrative Agent, effective upon the occurrence and during the
continuance of any Event of Default, the nonexclusive right and license to use
all Intellectual Property owned or used by any Obligor that relate to the
Collateral and any other collateral granted by the Obligors as security for the
Credit Party Obligations, together with any goodwill associated therewith, all
to the extent necessary to enable the Administrative Agent to use, possess and
realize on the Collateral and to enable any successor or assign to enjoy the
benefits of the Collateral. This right and license shall inure to the benefit of
all successors, assigns and transferees of the Administrative Agent and its
successors, assigns and transferees, whether by voluntary conveyance, operation
of law, assignment, transfer, foreclosure, deed in lieu of foreclosure or
otherwise. Such right and license is granted free of charge, without requirement
that any monetary payment whatsoever be made to the Obligors.
7. Special Provisions Regarding Inventory. Notwithstanding anything to the
contrary contained in this Security Agreement, each Obligor may, unless and
until an Event of Default occurs and is continuing and the Administrative Agent
instructs such Obligor otherwise, without further consent or approval of the
Administrative Agent, use, consume, sell, lease and exchange its Inventory in
the ordinary course of its business as presently conducted, whereupon, in the
case of such a sale or exchange, the security interest created hereby in the
Inventory so sold or exchanged (but not in any Proceeds arising from such sale
or exchange) shall cease immediately without any further action on the part of
the Administrative Agent.

 

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8. Performance of Obligations; Advances by Administrative Agent. On failure of
any Obligor to perform any of the covenants and agreements contained herein, the
Administrative Agent may, at its sole option and in its sole discretion, perform
or cause to be performed the same and in so doing may expend such sums as the
Administrative Agent may reasonably deem advisable in the performance thereof,
including, without limitation, the payment of any insurance premiums, the
payment of any taxes, a payment to obtain a release of a Lien or potential Lien,
expenditures made in defending against any adverse claim and all other
expenditures which the Administrative Agent may make for the protection of the
security interest hereof or may be compelled to make by operation of law. All
such sums and amounts so expended shall be repayable by the Obligors on a joint
and several basis promptly upon timely notice thereof and demand therefor, shall
constitute additional Credit Party Obligations and shall bear interest from the
date said amounts are expended at the Default Rate. No such performance of any
covenant or agreement by the Administrative Agent on behalf of any Obligor, and
no such advance or expenditure therefor, shall relieve the Obligors of any
default under the terms of this Security Agreement or the other Credit
Documents. The Administrative Agent may make any payment hereby authorized in
accordance with any bill, statement or estimate procured from the appropriate
public office or holder of the claim to be discharged without inquiry into the
accuracy of such bill, statement or estimate or into the validity of any tax
assessment, sale, forfeiture, tax lien, title or claim except to the extent such
payment is being contested in good faith by an Obligor in appropriate
proceedings and against which adequate reserves are being maintained in
accordance with GAAP.
9. Events of Default.
The occurrence of an event which under the Credit Agreement would constitute an
Event of Default shall be an event of default hereunder (an “Event of Default”).
10. Remedies.
(a) General Remedies. Upon the occurrence of an Event of Default and during
continuation thereof, the Administrative Agent and the Secured Parties shall
have, in addition to the rights and remedies provided herein, in the Credit
Documents or by law (including, but not limited to, levy of attachment,
garnishment and the rights and remedies set forth in the UCC of the jurisdiction
applicable to the affected Collateral), the rights and remedies of a secured
party under the UCC (regardless of whether the UCC is the law of the
jurisdiction where the rights and remedies are asserted and regardless of
whether the UCC applies to the affected Collateral), and further, the
Administrative Agent may, with or without judicial process or the aid and
assistance of others, (i) enter on any premises on which any of the Collateral
may be located and, without resistance or interference by the Obligors, take
possession of the Collateral, (ii) dispose of any Collateral on any such
premises, (iii) require the Obligors to assemble and make available to the
Administrative Agent at the expense of the Obligors any Collateral at any

 

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place and time designated by the Administrative Agent which is reasonably
convenient to both parties, (iv) remove any Collateral from any such premises
for the purpose of effecting the sale or other disposition thereof, and/or
(v) without demand and without advertisement, notice, hearing or process of law,
all of which each of the Obligors hereby waives to the fullest extent permitted
by law, at any place and time or times, sell and deliver any or all Collateral
held by or for it at public or private sale, by one or more contracts, in one or
more parcels, for cash, upon credit or otherwise, at such prices and upon such
terms as the Administrative Agent deems advisable, in its sole discretion
(subject to any and all mandatory legal requirements). Neither the
Administrative Agent’s compliance with any applicable state or federal law in
the conduct of such sale, nor its disclaimer of any warranties relating to the
Collateral, shall be considered to adversely affect the commercial
reasonableness of such sale. To the extent the rights of notice cannot be
legally waived hereunder, each Obligor agrees that any requirement of reasonable
notice shall be met if such notice is personally served on or mailed, postage
prepaid, to the Borrower in accordance with the notice provisions of Section 9.2
of the Credit Agreement at least ten (10) days before the time of sale or other
event giving rise to the requirement of such notice. The Administrative Agent
and the Secured Parties shall not be obligated to make any sale or other
disposition of the Collateral regardless of notice having been given. To the
extent permitted by law, any Secured Party may be a purchaser at any such public
sale. To the extent permitted by applicable law, each of the Obligors hereby
waives all of its rights of redemption with respect to any such sale. Subject to
the provisions of applicable law, the Administrative Agent and the Secured
Parties may postpone or cause the postponement of the sale of all or any portion
of the Collateral by announcement at the time and place of such sale, and such
sale may, without further notice, to the extent permitted by law, be made at the
time and place to which the sale was postponed, or the Administrative Agent and
the Secured Parties may further postpone such sale by announcement made at such
time and place.
(b) Remedies Relating to Accounts. Upon the occurrence of an Event of Default
and during the continuation thereof, whether or not the Administrative Agent has
exercised any or all of its rights and remedies hereunder, the Administrative
Agent shall have the right to enforce any Obligor’s rights against any account
debtors and obligors on such Obligor’s Accounts. Each Obligor acknowledges and
agrees that the Proceeds of its Accounts remitted to or on behalf of the
Administrative Agent in accordance with the provisions of this Section shall be
solely for the Administrative Agent’s own convenience and that such Obligor
shall not have any right, title or interest in such Proceeds or in any such
other amounts except as expressly provided herein. After the occurrence and
during the continuance of an Event of Default, to the extent required by the
Administrative Agent, each Obligor agrees to execute any document or instrument,
and to take any action, necessary under applicable law (including the Federal
Assignment of Claims Act) in order for the Administrative Agent to exercise its
rights and remedies (or be able to exercise its rights and remedies at some
future date) with respect to any Accounts of such Obligor where the account
debtor is a Governmental Authority. The Administrative Agent and the Secured
Parties shall have no liability or responsibility to any Obligor for acceptance
of a check, draft or other order for payment of money bearing the legend
“payment in full” or words of similar import or any other restrictive legend or
endorsement or be responsible for determining the correctness of any

 

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remittance. Each Obligor hereby agrees to indemnify the Administrative Agent and
the Secured Parties and their respective officers, directors, employees,
partners, members, counsel, agents, representatives, advisors and affiliates
from and against all liabilities, damages, losses, actions, claims, judgments,
costs, expenses, charges and reasonable attorneys’ fees suffered or incurred by
the Administrative Agent or the Secured Parties (each, an “Indemnified Party”)
because of the maintenance of the foregoing arrangements except, with respect to
any Indemnified Party, as relating to or arising out of the gross negligence or
willful misconduct of such Indemnified Party or its officers, employees or
agents. In the case of any investigation, litigation or other proceeding, the
foregoing indemnity shall be effective whether or not such investigation,
litigation or proceeding is brought by an Obligor, its directors, shareholders
or creditors or an Indemnified Party or any other Person or any other
Indemnified Party is otherwise a party thereto.
(c) Access. In addition to the rights and remedies hereunder, upon the
occurrence of an Event of Default and during the continuation thereof, the
Administrative Agent shall have the right to enter and remain upon the various
premises of the Obligors without cost or charge to the Administrative Agent, and
use the same, together with materials, supplies, books and records of the
Obligors for the purpose of collecting and liquidating the Collateral, or for
preparing for sale and conducting the sale of the Collateral, whether by
foreclosure, auction or otherwise. In addition, the Administrative Agent may
remove Collateral, or any part thereof, from such premises and/or any records
with respect thereto, in order to effectively collect or liquidate such
Collateral. If the Administrative Agent exercises its right to take possession
of the Collateral, each Obligor shall also at its expense perform any and all
other steps reasonably requested by the Administrative Agent to preserve and
protect the security interest hereby granted in the Collateral, such as placing
and maintaining signs indicating the security interest of the Administrative
Agent, appointing overseers for the Collateral and maintaining inventory
records.
(d) Nonexclusive Nature of Remedies. Failure by the Administrative Agent or the
Secured Parties to exercise any right, remedy or option under this Security
Agreement, any other Credit Document or as provided by law, or any delay by the
Administrative Agent or the Secured Parties in exercising the same, shall not
operate as a waiver of any such right, remedy or option. No waiver hereunder
shall be effective unless it is in writing, signed by the party against whom
such waiver is sought to be enforced and then only to the extent specifically
stated, which in the case of the Administrative Agent or the Secured Parties
shall only be granted as provided herein. To the extent permitted by law,
neither the Administrative Agent, the Secured Parties, nor any party acting as
attorney for the Administrative Agent or the Secured Parties, shall be liable
hereunder for any acts or omissions or for any error of judgment or mistake of
fact or law other than their gross negligence or willful misconduct hereunder.
The rights and remedies of the Administrative Agent and the Secured Parties
under this Security Agreement shall be cumulative and not exclusive of any other
right or remedy which the Administrative Agent or the Secured Parties may have.

 

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(e) Retention of Collateral. In addition to the rights and remedies hereunder,
upon the occurrence of an Event of Default and during the continuation thereof,
the Administrative Agent may, after providing the notices required by
Sections 9-620 and 9-621 of the UCC (or any successor sections of the UCC) or
otherwise complying with the notice requirements of applicable law of the
relevant jurisdiction, accept or retain all or any portion of the Collateral in
satisfaction of the Credit Party Obligations. Unless and until the
Administrative Agent shall have provided such notices, however, the
Administrative Agent shall not be deemed to have retained any Collateral in
satisfaction of any Credit Party Obligations for any reason.
(f) Deficiency. In the event that the proceeds of any sale, collection or
realization are insufficient to pay all amounts to which the Administrative
Agent or the Secured Parties are legally entitled, the Obligors shall be jointly
and severally liable for the deficiency, together with interest thereon at the
Default Rate, together with the costs of collection and the reasonable fees of
any attorneys employed by the Administrative Agent to collect such deficiency.
Any surplus remaining after the full payment and satisfaction of the Credit
Party Obligations shall be returned to the Obligors or to whomsoever a court of
competent jurisdiction shall determine to be entitled thereto.
(g) Other Security. To the extent that any of the Credit Party Obligations are
now or hereafter secured by property other than the Collateral (including,
without limitation, real and other personal property and securities owned by an
Obligor), or by a guarantee, endorsement or property of any other Person, then
the Administrative Agent shall have the right to proceed against such other
property, guarantee or endorsement upon the occurrence and during the
continuation of any Event of Default, and the Administrative Agent shall have
the right, in its sole discretion, to determine which rights, security, Liens,
security interests or remedies the Administrative Agent shall at any time
pursue, relinquish, subordinate, modify or take with respect thereto, without in
any way modifying or affecting any of them or any of the Administrative Agent’s
and the Secured Parties’ rights or the Credit Party Obligations under this
Security Agreement or under any other of the Credit Documents.
11. Rights of the Administrative Agent.
(a) Power of Attorney. Each Obligor hereby designates and appoints the
Administrative Agent, on behalf of the Secured Parties, and each of its
designees or agents, as attorney-in-fact of such Obligor, irrevocably and with
power of substitution, with authority to take any or all of the following
actions upon the occurrence and during the continuation of an Event of Default:
(i) to demand, collect, settle, compromise, adjust and give discharges and
releases concerning the Collateral of such Obligor, all as the Administrative
Agent may reasonably determine in respect of such Collateral;

 

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(ii) to commence and prosecute any actions at any court for the purposes of
collecting any Collateral and enforcing any other right in respect thereof;
(iii) to defend, settle, adjust or compromise any action, suit or proceeding
brought with respect to the Collateral and, in connection therewith, give such
discharge or release as the Administrative Agent may deem reasonably
appropriate;
(iv) to receive, open and dispose of mail addressed to an Obligor and endorse
checks, notes, drafts, acceptances, money orders, bills of lading, warehouse
receipts or other instruments or documents evidencing payment, shipment or
storage of the goods giving rise to the Collateral of such Obligor, or securing
or relating to such Collateral, on behalf of and in the name of such Obligor;
(v) to sell, assign, transfer, make any agreement in respect of, or otherwise
deal with or exercise rights in respect of, any Collateral or the goods or
services which have given rise thereto, as fully and completely as though the
Administrative Agent were the absolute owner thereof for all purposes;
(vi) to adjust and settle claims under any insurance policy relating to the
Collateral;
(vii) to execute and deliver and/or file all assignments, conveyances,
statements, financing statements, continuation financing statements, security
agreements, affidavits, notices and other agreements, instruments and documents
that the Administrative Agent may determine necessary in order to perfect and
maintain the security interests and Liens granted in this Security Agreement and
in order to fully consummate all of the transactions contemplated herein;
(viii) to institute any foreclosure proceedings that the Administrative Agent
may deem appropriate;
(ix) to execute any document or instrument, and to take any action, necessary
under applicable law (including the Federal Assignment of Claims Act) in order
for the Administrative Agent to exercise its rights and remedies (or to be able
to exercise its rights and remedies at some future date) with respect to any
Account of an Obligor where the account debtor is a Governmental Authority; and
(x) to do and perform all such other acts and things as the Administrative Agent
may reasonably deem to be necessary, proper or convenient in connection with the
Collateral.

 

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This power of attorney is a power coupled with an interest and shall be
irrevocable for so long as any of the Credit Party Obligations (other than
contingent indemnity obligations that survive termination of the Credit
Documents pursuant to the stated terms thereof) remain outstanding or any Credit
Document is in effect, and until all of the Commitments shall have been
terminated. The Administrative Agent shall be under no duty to exercise or
withhold the exercise of any of the rights, powers, privileges and options
expressly or implicitly granted to the Administrative Agent in this Security
Agreement, and shall not be liable for any failure to do so or any delay in
doing so. The Administrative Agent shall not be liable for any act or omission
or for any error of judgment or any mistake of fact or law in its individual
capacity or its capacity as attorney-in-fact except acts or omissions resulting
from its gross negligence or willful misconduct. This power of attorney is
conferred on the Administrative Agent solely to perfect, protect, preserve and
realize upon its security interest in the Collateral.
(b) Assignment by the Administrative Agent. Subject to the terms and conditions
of the Credit Agreement, the Administrative Agent may from time to time assign
the Credit Party Obligations or any portion thereof and/or the Collateral or any
portion thereof to a successor Administrative Agent, and the assignee shall be
entitled to all of the rights and remedies of the Administrative Agent under
this Security Agreement in relation thereto.
(c) The Administrative Agent’s Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Collateral while being held by
the Administrative Agent hereunder, the Administrative Agent shall have no duty
or liability to preserve rights pertaining thereto, it being understood and
agreed that the Obligors shall be responsible for preservation of all rights in
the Collateral, and the Administrative Agent shall be relieved of all
responsibility for the Collateral upon surrendering it or tendering the
surrender of it to the Obligors. The Administrative Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Collateral
in its possession if the Collateral is accorded treatment substantially equal to
that which the Administrative Agent accords its own property, which shall be no
less than the treatment employed by a reasonable and prudent agent in the
industry, it being understood that the Administrative Agent shall not have
responsibility for taking any necessary steps to preserve rights against any
parties with respect to any of the Collateral. In the event of a public or
private sale of Collateral pursuant to Section 10 hereof, the Administrative
Agent shall have no obligation to clean-up, repair or otherwise prepare the
Collateral for sale.
12. [Reserved].
13. [Reserved].

 

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14. Continuing Agreement.
(a) This Security Agreement shall be a continuing agreement in every respect and
shall remain in full force and effect so long as any of the Credit Party
Obligations (other than contingent indemnity obligations that survive
termination of the Credit Documents pursuant to the stated terms thereof) remain
outstanding or any Credit Document is in effect, and until all of the
Commitments shall have been terminated. Upon such payment and termination, this
Security Agreement shall be automatically terminated and the Administrative
Agent and the Secured Parties shall, upon the request and at the expense of the
Obligors, forthwith release all of the Liens and security interests granted
hereunder and shall execute and/or deliver all UCC termination statements and/or
other documents reasonably requested by the Obligors evidencing such
termination. Notwithstanding the foregoing all releases and indemnities provided
hereunder shall survive termination of this Security Agreement.
(b) This Security Agreement shall continue to be effective or be automatically
reinstated, as the case may be, if at any time payment, in whole or in part, of
any of the Credit Party Obligations is rescinded or must otherwise be restored
or returned by the Administrative Agent or any Secured Party as a preference,
fraudulent conveyance or otherwise under any bankruptcy, insolvency or similar
law, all as though such payment had not been made; provided that in the event
that payment of all or any part of the Credit Party Obligations is rescinded or
must be restored or returned, all reasonable costs and expenses (including
without limitation any reasonable legal fees and disbursements) incurred by the
Administrative Agent or any Secured Party in defending and enforcing such
reinstatement shall be deemed to be included as a part of the Credit Party
Obligations.
15. Amendments; Waivers; Modifications. This Security Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in Section 9.1 of the Credit Agreement.
16. Successors in Interest. This Security Agreement shall create a continuing
security interest in the Collateral and shall be binding upon each Obligor, its
successors and assigns and shall inure, together with the rights and remedies of
the Administrative Agent and the Secured Parties hereunder, to the benefit of
the Administrative Agent and the Secured Parties and their successors and
permitted assigns; provided, however, that none of the Obligors may assign its
rights or delegate its duties hereunder except as permitted by the Credit
Agreement. To the fullest extent permitted by law, each Obligor hereby releases
the Administrative Agent and each Secured Party, each of their respective
officers, employees and agents and each of their respective successors and
assigns, from any liability for any act or omission relating to this Security
Agreement or the Collateral, except for any liability arising from the gross
negligence or willful misconduct of the Administrative Agent or such Secured
Party or their respective officers, employees and agents, in each case as
determined by a court of competent jurisdiction pursuant to a final
non-appealable judgment.
17. Notices. All notices required or permitted to be given under this Security
Agreement shall be in conformance with Section 9.2 of the Credit Agreement.

 

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18. Counterparts. This Security Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart. Delivery of executed counterparts of
the Security Agreement by telecopy or other electronic means shall be effective
as an original and shall constitute a representation that an original shall be
delivered upon the request of the Administrative Agent.
19. Headings. The headings of the sections and subsections hereof are provided
for convenience only and shall not in any way affect the meaning, construction
or interpretation of any provision of this Security Agreement.
20. Governing Law; Submission to Jurisdiction and Service of Process; Waiver of
Jury Trial; Venue. THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK. The terms of Sections 9.13 and 9.16 of
the Credit Agreement are incorporated herein by reference, mutatis mutandis, and
the parties hereto agree to such terms.
21. Severability. If any provision of this Security Agreement is determined to
be illegal, invalid or unenforceable, such provision shall be fully severable
and the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
22. Entirety. This Security Agreement and the other Credit Documents represent
the entire agreement of the parties hereto and thereto, and supersede all prior
agreements and understandings, oral or written, if any, including any commitment
letters or correspondence relating to this Security Agreement, the other Credit
Documents or the transactions contemplated herein and therein.
23. Survival. All representations and warranties of the Obligors hereunder shall
survive the execution and delivery of this Security Agreement and the other
Credit Documents, the delivery of the Notes and the making of the Loans and the
issuance of the Letters of Credit under the Credit Agreement.
24. Joint and Several Obligations of Obligors.
(a) Each of the Obligors is accepting joint and several liability hereunder in
consideration of the financial accommodations to be provided by the Lenders
under the Credit Agreement, for the mutual benefit, directly and indirectly, of
each of the Obligors and in consideration of the undertakings of each of the
Obligors to accept joint and several liability for the obligations of each of
them.

 

23

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(b) Each of the Obligors jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Obligors with respect to the payment and
performance of all of the Credit Party Obligations, it being the intention of
the parties hereto that all the Credit Party Obligations shall be the joint and
several obligations of each of the Obligors without preferences or distinction
among them.
(c) Notwithstanding any provision to the contrary contained herein, in any other
of the Credit Documents, to the extent the obligations of an Obligor shall be
adjudicated to be invalid or unenforceable for any reason (including, without
limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of such Obligor
hereunder shall be limited to the maximum amount that is permissible under
applicable law (whether federal or state and including, without limitation, the
Bankruptcy Code).
25. Rights of Required Lenders. All rights of the Administrative Agent
hereunder, if not exercised by the Administrative Agent, may be exercised by the
Required Lenders.
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24

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Each of the parties hereto has caused a counterpart of this Security Agreement
to be duly executed and delivered as of the date first above written.

                  BORROWER:   IMPAX LABORATORIES, INC.,
a Delaware corporation    
 
                    By:   /s/ Arthur A. Koch, Jr.                  
 
      Name:   Arthur A. Koch, Jr.    
 
      Title:   CFO    

 

 

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Accepted and agreed to as of the date first above written.

                      WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent    
 
                    By:   /s/ Samuel Thompson                  
 
      Name:   Samuel Thompson    
 
      Title:   Vice President/Relationship Manager    

 

 

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Schedule 4(a) to Credit Agreement
Tradenames in use:
Impax Pharma
Global Pharma
Impax Pharmaceuticals
Global Pharmaceuticals

 

 

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EXHIBIT A
[FORM OF]
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
COPYRIGHTS
[United States Copyright Office][Canadian Intellectual Property Office]
Ladies and Gentlemen:
Please be advised that (a) pursuant to the Security Agreement dated as of
February 11, 2011 (as amended, modified, extended, restated, replaced, or
supplemented from time to time, the “Security Agreement”), by and among the
Obligors party thereto (each an “Obligor” and collectively, the “Obligors”) and
Wells Fargo Bank, National Association, as Administrative Agent (the
“Administrative Agent”) for the secured parties referenced therein (the “Secured
Parties”), the undersigned Obligor has granted a continuing security interest in
and continuing lien upon [the copyrights, copyright licenses and copyright
applications] shown on Schedule 1 attached hereto (the “Copyrights”) to the
Administrative Agent for the ratable benefit of the Secured Parties and (b) the
undersigned hereby grants to the Administrative Agent, for the ratable benefit
of the Secured Parties, a continuing security interest in, and a right to set
off against, any and all right, title and interest of such Obligor in and to the
Copyrights.
The Obligors and the Administrative Agent, on behalf of the Secured Parties,
hereby acknowledge and agree that the security interest in the Copyrights
(i) may only be terminated in accordance with the terms of the Security
Agreement and (ii) is not to be construed as an assignment of any Copyright.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

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                      Very truly yours,

[OBLIGOR]    
 
               
 
  By:                          
 
      Name:        
 
      Title:  
 
   
 
         
 
   

Acknowledged and Accepted:
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent

             
By:
                     
 
  Name:        
 
  Title:  
 
   
 
     
 
   

 

 

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Schedule 1

 

 

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EXHIBIT B
[FORM OF]
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
PATENTS
[United States Patent and Trademark Office][Canadian Intellectual Property
Office]
Ladies and Gentlemen:
Please be advised that (a) pursuant to the Security Agreement dated as of
February 11, 2011 (as amended, modified, extended, restated, replaced, or
supplemented from time to time, the “Security Agreement”), by and among the
Obligors party thereto (each an “Obligor” and collectively, the “Obligors”) and
Wells Fargo Bank, National Association, as Administrative Agent (the
“Administrative Agent”) for the secured parties referenced therein (the “Secured
Parties”), the undersigned Obligor has granted a continuing security interest in
and continuing lien upon [the patents, patent licenses and patent applications]
shown on Schedule 1 attached hereto (the “Patents”) to the Administrative Agent
for the ratable benefit of the Secured Parties and (b) the undersigned hereby
grants to the Administrative Agent, for the ratable benefit of the Secured
Parties, a continuing security interest in, and a right to set off against, any
and all right, title and interest of such Obligor in and to the Patents.
The Obligors and the Administrative Agent, on behalf of the Secured Parties,
hereby acknowledge and agree that the security interest in the Patents (i) may
only be terminated in accordance with the terms of the Security Agreement and
(ii) is not to be construed as an assignment of any Patent.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

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                      Very truly yours,

[OBLIGOR]    
 
               
 
  By:                          
 
      Name:        
 
      Title:  
 
   
 
         
 
   

Acknowledged and Accepted:
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent

             
By:
                     
 
  Name:        
 
  Title:  
 
   
 
     
 
   

 

 

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Schedule 1

 

 

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EXHIBIT C
[FORM OF]
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
TRADEMARKS
[United States Patent and Trademark Office][Canadian Intellectual Property
Office]
Ladies and Gentlemen:
Please be advised that (a) pursuant to the Security Agreement dated as of
February 11, 2011 (as amended, modified, extended, restated, replaced, or
supplemented from time to time, the “Security Agreement”), by and among the
Obligors party thereto (each an “Obligor” and collectively, the “Obligors”) and
Wells Fargo Bank, National Association, as Administrative Agent (the
“Administrative Agent”) for the secured parties referenced therein (the “Secured
Parties”), the undersigned Obligor has granted a continuing security interest in
and continuing lien upon [the trademarks, trademark licenses and trademark
applications] shown on Schedule 1 attached hereto (the “Trademarks”) to the
Administrative Agent for the ratable benefit of the Secured Parties and (b) the
undersigned hereby grants to the Administrative Agent, for the ratable benefit
of the Secured Parties, a continuing security interest in, and a right to set
off against, any and all right, title and interest of such Obligor in and to the
Trademarks.
The Obligors and the Administrative Agent, on behalf of the Secured Parties,
hereby acknowledge and agree that the security interest in the Trademarks
(i) may only be terminated in accordance with the terms of the Security
Agreement and (ii) is not to be construed as an assignment of any Trademark.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

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                      Very truly yours,

[OBLIGOR]    
 
               
 
  By:                          
 
      Name:        
 
      Title:  
 
   
 
         
 
   

Acknowledged and Accepted:
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent

             
By:
                     
 
  Name:        
 
  Title:  
 
   
 
     
 
   

 

 

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Schedule 1

 

 

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[INDUSTRIAL DESIGN]
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
INDUSTRIAL DESIGNS
Canadian Intellectual Property Office
Ladies and Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of
February 11, 2011 (as amended, modified, extended, restated, replaced, or
supplemented from time to time, the “Security Agreement”), by and among the
Obligors party thereto (each an “Obligor” and collectively, the “Obligors”) and
Wells Fargo Bank, National Association, as Administrative Agent (the
“Administrative Agent”) for the secured parties referenced therein (the “Secured
Parties”), the undersigned Obligor has granted a continuing security interest in
and continuing lien upon the industrial designs shown on Schedule 1 attached
hereto (the “Industrial Designs”) to the Administrative Agent for the ratable
benefit of the Secured Parties.
The Obligors and the Administrative Agent, on behalf of the Secured Parties,
hereby acknowledge and agree that the security interest in the Industrial
Designs (i) may only be terminated in accordance with the terms of the Security
Agreement and (ii) is not to be construed as an assignment of any Industrial
Design.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

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                      Very truly yours,

[OBLIGOR]    
 
               
 
  By:                          
 
      Name:        
 
      Title:  
 
   
 
         
 
   

Acknowledged and Accepted:
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent

             
By:
                     
 
  Name:        
 
  Title:  
 
   
 
     
 
   

 

 

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Schedule 1