Document:

Exhibit 10.2

 

SECURITY
AGREEMENT

 

This SECURITY AGREEMENT, dated as of the 18th day of June, 2003, made
by Photogen Technologies, Inc., a Nevada corporation (the “Grantor”), in favor
of Xmark Fund, L.P., a Delaware limited partnership, and Xmark Fund, Ltd., a
Cayman Islands corporation (the “Secured Parties”).

 

WITNESSETH

 

WHEREAS, the Grantor and the Secured Parties have entered into a Going
Forward Agreement, dated as of May 2, 2003 (the “Going Forward Agreement”).

 

WHEREAS, the Grantor and Alliance Pharmaceutical Corp., a New York
corporation (“Alliance”), are entering into an Asset Purchase Agreement, dated
as of June 10, 2003 (the “Asset Purchase Agreement”), pursuant to which, as of
the date of the closing of the transactions contemplated therein (the “Closing
Date”), Alliance shall sell, transfer and assign its property and assets
relating to the Product (as defined below).

 

WHEREAS, the Grantor has agreed to grant to the Secured Parties a
security interest in certain of its property and assets relating to the Product
as of the Closing Date to secure the performance of the obligations of the
Grantor under the Going Forward Agreement; and

 

WHEREAS, the Grantor is contemporaneously entering into a Patent and
Trademark Security Agreement with the Secured Parties.

 

NOW, THEREFORE, in consideration of the premises set forth above the
Grantor hereby agrees with the Secured Parties as follows:

 

TERMS

 

1.                                       Defined
Terms.  The terms set forth below
have the following meanings:

 

“Accounts” shall have the meaning assigned to such term under
the Code.

 

“Chattel Paper” shall have the meaning assigned to such term
under the Code.

 

“Code” means the Uniform Commercial Code as from time to time in
effect in the State of New York.

 

“Documents” shall have the meaning assigned to such term under
the Code.

 

“Event of Default” means:

 

1.                                       the failure by
the Grantor to perform in any material respect any obligation of the Grantor
under this Security Agreement as and when required by this Security Agreement;
or

 

2.                                       any representation
or warranty made by the Grantor pursuant to this Security Agreement is untrue
in any material respect when made; or

 

 

3.                                       the failure by
the Grantor to perform in any material respect any obligation of the Grantor
under the Patent and Trademark Security Agreement as and when required by the
Patent and Trademark Security Agreement; or

 

4.                                       any
representation or warranty made by the Grantor pursuant to the Patent and
Trademark Security Agreement is untrue in any material respect when made; or

 

5.                                       the security
interests granted herein and pursuant to the Patent and Trademark Security
Agreement do not constitute for any reason a first priority perfected security
interest in the Collateral covered thereby (other than as a result of a failure
to make the filings specified in Schedule II of this Security Agreement and
Exhibits C, D and E of the Patent and Trademark Security Agreement); or

 

6.                                       the Grantor
shall file a petition under bankruptcy, insolvency or debtor’s relief law or
make an assignment for the benefit of its creditors; or

 

7.                                       a court of
competent jurisdiction enters an order or decree under any federal or state
bankruptcy law that (X) is for relief against the Grantor in an involuntary
case brought with respect to the Grantor in such court, (Y) appoints a
custodian, receiver or other similar official for all or substantially all the
Grantor’s property or (Z) orders the liquidation of the Grantor, and the order
or decree remains unstayed and in effect for 60 days; or

 

8.                                       any
representation or warranty made by the Grantor pursuant to the Going Forward
Agreement is untrue in any material respect when made;

 

9.                                       failure of the
Grantor to pay any Obligation when due or to perform in any material respect
any other obligation of the Grantor under the Going Forward Agreement as and
when required by the Going Forward Agreement; or

 

10.                                 the loss or suspension
of the Food and Drug Administration approval relating to the Product;

 

11.                                 the Grantor shall fail
to pay when due (after the expiration of any cure period provided by agreements
governing the obligation) any principal of, premium or interest on or any
amount payable in respect of any borrowed money indebtedness or

 

12.                                 the failure by the
Grantor to perform in any material respect any obligation of the Grantor under
those certain secured promissory notes made by the Grantor in favor of the
Secured Parties of even date herewith (the “Notes”).

 

“General Intangibles” shall have the meaning assigned to such
term under the Code.

 

“Instrument” shall have the meaning assigned to such term under
the Code.

 

“Inventory” shall have the meaning assigned to such term under
the Code, and in any event, including all inventory, merchandise, goods and
other personal property that are held by or on behalf of a person for sale or lease
or to be furnished under a contract of service or which give rise to any
Account, including returned goods.

 

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“Investment Property” shall have the meaning assigned to such
term under the Code.

 

“Lease” shall mean the lease, between Equity Office Properties
Trust, as successor in interest to WHAMC Real Estate Limited Partnership, and
Alliance, dated November 7, 1997, for the property located at 6175 Lusk
Boulevard, San Diego, California 92121, as assigned to, and assumed by, the
Grantor as of the Closing Date.

 

“License Agreement” shall mean the amended and restated License
Agreement, dated February 22, 2002, between Schering Aktiengesellschaft
(“Schering”) and Alliance, as amended and assigned to, and assumed by, the
Grantor pursuant to the terms and conditions of the Amendment and Assumption
Agreement, dated of June 2003 by and among 
Schering, Grantor, Alliance and Bracco International B.V.

 

“Lien” shall mean any lien, mortgage, security interest, chattel
mortgage, pledge or other encumbrance (statutory or otherwise) of any kind
securing satisfaction or performance of an obligation, including any agreement
to give any of the foregoing, any conditional sales or other title retention
agreement, any lease in the nature thereof, and the filing of or the agreement
to give any financing statement under the Code of any jurisdiction or similar
evidence of any encumbrance, whether within or outside the United States.

 

“Marketing Agreement” shall mean the Marketing Services
Agreement, dated March 7, 2003 between Alliance and Gerbig, Snell/Weisheimer
Advertising, LLC (“GSW”), as amended and assigned to and assumed by, the
Grantor pursuant to the terms and conditions of the Amendment and Assumption
Agreement, dated of June 2003 (the “GSW Agreement”) by and among GSW, Grantor
and Alliance.  The capitalized terms
“Advertising Plans”, “Financing Transaction” and “Payment Shares” used herein
shall have the respective meanings given such terms in the GSW Agreement.

 

“Obligations” shall mean:

 

1.                                       all obligations
and liabilities to the Secured Parties, whether now existing or hereafter
arising, under the Going Forward Agreement (including, without limitation, the
payment obligations under Section 2(b)(i) of the Going Forward Agreement and
pursuant to the Put Right (as defined in the Going Forward Agreement)), this
Security Agreement, the Patent and Trademark Security Agreement, the Notes
and/or any document or agreement related to any of the foregoing and the due
performance and compliance with the terms of the Going Forward Agreement, this
Security Agreement, the Patent and Trademark Security Agreement, the Notes
and/or any document or agreement related to any of the foregoing;

 

2.                                       any and all sums
advanced by the Secured Parties in order to preserve the Collateral or to
preserve the Secured Parties’ security interest in the Collateral; and

 

3.                                       in the event of
any proceeding for the collection or enforcement of any obligations or
liabilities of the Grantor referred to in the immediately preceding clauses (1)
through (2) in accordance with the terms of the Going Forward Agreement, this
Security Agreement, the Patent and Trademark Security Agreement, the Notes
and/or any document or agreement related to the foregoing, the expenses of
re-taking, holding, preparing for sale,

 

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selling or otherwise disposing of or realizing on the Collateral, or of
any other exercise by the Secured Parties of their rights hereunder, together
with reasonable attorneys’ fees and court costs.

 

“Patent and Trademark Security Agreement” shall mean that
certain Patent and Trademark Security Agreement dated as of the date hereof
between the Grantor and the Secured Parties.

 

“Proceeds” shall have the meaning assigned to such term under
the Code.

 

“Product” means Imagent® a sterile, non-pyrogenic white
powder with a diluted perflexane headspace that, after reconstitution into a
suspension of microspheres, is used for contrast enhancement during the
indicated ultrasound imaging procedures and is indicated for use in patients
with suboptimal echocardiograms to opacify the left ventricular chamber and to
improve the delineation of the left ventricular endocardial border.

 

“Proprietary Information” means information generally
unavailable to the public that has been created, discovered, developed or
otherwise become known to the Grantor or in which property rights have been
assigned or otherwise conveyed to the Grantor, which information has economic
value or potential economic value to the marketing, sale and distribution of
the Product.  Proprietary Information
shall include, but not be limited to, trade secrets, processes, formulas,
writings data, know-how, negative know-how, improvements, discoveries,
developments, designs, inventions, techniques, technical data, customer and
supplier lists, financial information, business plans or projections and
modifications or enhancements to any of the above.  Proprietary Information shall include all information existing on
the date hereof and all information developed or acquired hereafter.

 

“Security Agreement” means this Security Agreement, as amended,
supplemented or otherwise modified from time to time.

 

“Territory” shall mean the United States of America, its
territories and possessions.

 

“Vendor Agreement” means the Vendor Agreement, dated February
28, 2002, between RedKey, Inc., an Ohio corporation doing business as Cardinal
Health Sales and Marketing Services, and the Grantor, as amended in accordance
with the terms of this Security Agreement.

 

2.                                       Grant
of Security Interest.  As collateral
security for the prompt and complete payment and performance when due of the
Obligations, the Grantor hereby grants to the Secured Parties a continuing
first priority security interest in all of the Grantor’s right, title and
interest in and to the following property now owned or at any time hereafter
acquired by the Grantor or in which the Grantor now has or at any time in the
future may acquire right, title or interest (collectively, the “Collateral”):

 

(i)                                     the
Vendor Agreement, to the extent and only to the extent that the Vendor
Agreement authorizes the marketing and sale of the Product in the Territory;

 

(ii)                                  the
License Agreement;

 

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(iii)                               the
Lease;

 

(iv)                              the
Marketing Agreement, subject to the provisions of Section 6 of the GSW
Agreement which provide for the continuing ownership of GSW in the Advertising
Plans unless and until the Financing Transaction has been successfully completed
and the Payment Shares have been issued (the “GSW Ownership Rights”);

 

(v)                                 all
Proprietary Information, whether existing on the date hereof or developed or
acquired hereafter;

 

(vi)                              contracts,
Documents and General Intangibles developed or acquired by the Grantor, whether
now existing or hereafter arising, to the extent and only to the extent related
to the use, sale, manufacture, marketing or distribution of the Product and all
amendments, modifications and supplements thereto;

 

(vii)                           the
manufacturing facility described on Schedule I hereto and all of the equipment
located therein used in connection with the manufacture and distribution of the
Product;  provided
that in the event that Grantor, in the ordinary course of its business, leases
or obtains purchase money financing from non-affiliated third parties for any
new equipment that constitutes Collateral, the Secured Parties agree that the
lessor or equipment financier shall have a first priority security interest in
such new equipment and the Secured Parties shall have a second priority
security interest in such equipment (and shall execute such documents necessary
to effect such subordination, including UCC-3 filings) on the condition that
the lessor or equipment financier collaterally assigns any such equipment or
equipment lease to the Secured Parties on terms and conditions reasonably
satisfactory to the Secured Parties;

 

(viii)                        the
approved new drug application NDA #21-191 for the Product, and all amendments,
modifications and supplements thereto;

 

(ix)                                all
books, records, ledgercards, files, correspondence, computer programs, tapes,
disks and related data processing software (owned by the Grantor or in which it
has an interest) which at any time evidence or contain information relating to
any or all of (i), (ii), (iii), (iv), (v), (vi), (vii) and (viii) above or are
otherwise necessary or helpful in the collection thereof or realization
thereupon;

 

(x)                                   documents
of title, policies and certificates of insurance, securities, Chattel Paper,
other documents or instruments evidencing or pertaining to any or all of (i),
(ii), (iii), (iv), (v), (vi), (vii) and (viii) above;

 

(xi)                                all
Supporting Obligations (as defined in the Code) and guaranties, including
letters of credit and guarantees issued in support of Accounts and Chattel
Paper, General Intangibles and Investment Property (as defined in the Code),
Liens on real or personal property, leases, and other agreements and property
which in any way secure or relate to any or all of (i), (ii), (iii), (iv), (v),
(vi), (vii), (viii), (ix)  and (x)
above, or are acquired for the purpose of securing and enforcing any item
thereof;

 

(xii)                             (A)
all cash held as cash collateral to the extent not otherwise constituting
Collateral, all other cash or property at any time on deposit with or held by
the 

 

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Secured Parties for the account
of the Grantor (whether for safekeeping, custody, pledge, transmission or
otherwise), (B) all Payment Intangibles (as defined in the Code), (C) all
letter of credit obligations, (D) all investments and reinvestments (however
evidenced) of amounts from time to time credited to such accounts, and (E) all
interest, dividends, distributions and other proceeds payable on or with
respect to (1) such investments and reinvestments and (2) such accounts, and
(3) all Investment Property; and

 

(xiii)                          all
products and proceeds of (i), (ii), (iii), (iv), (v), (vi), (vii), (viii),
(ix), (x), (xi) and (xii) above (including, but not limited to, all claims to
items referred to in  (i), (ii), (iii),
(iv), (v), (vi), (vii), (viii), (ix), (x), (xi) and (xii) above) and all claims
of the Grantor against third parties for (a) loss of, damage to, or destruction
of, and payments due or to become due under leases, rentals and hires of any or
all of, (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi) and
(xii) above and (b) proceeds payable under, or unearned premiums with respect
to policies of insurance in whatever form; and

 

(xiv)                         all
inventory, equipment (including without limitation equipment located at the
manufacturing facility described on Schedule I), accounts, Chattel Paper,
letter of credit rights, Instruments, commercial tort claims, and investment
property  to the extent it is related to
the Product or necessary for the manufacture and sale of the Product; provided
that in the event that Grantor, in the ordinary course of its business, leases
or obtains purchase money financing from non-affiliated third parties for any
new equipment that constitutes Collateral, the Secured Parties agree that the
lessor or equipment financier shall have a first priority security interest in
such new equipment and the Secured Parties shall have a second priority
security interest in such equipment (and shall execute such documents necessary
to effect such subordination, including UCC-3 filings) on the condition that
the lessor or equipment financier collaterally assigns any such equipment or
equipment lease to the Secured Parties on terms and conditions reasonably
satisfactory to the Secured Parties;.

 

3.                                       Rights
of the Secured Parties; Limitations on the Secured Parties’ Obligations.

 

(a)                                  Grantor
Remains Liable under Accounts and Contracts.  Anything herein to the contrary notwithstanding, the Grantor
shall remain liable under each of the Accounts and contracts that constitute
part of the Collateral to observe and perform all 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 and in
accordance with and pursuant to the terms and provisions of each such
contract.  The Secured Parties shall not
have any obligation or liability under any Account that constitutes part of the
Collateral (or any agreement giving rise thereto) or under any contract that
constitutes part of the Collateral by reason of or arising out of this Security
Agreement or the receipt by the Secured Parties of any payment relating to such
Account or contract pursuant hereto, nor shall the Secured Parties be obligated
in any manner to perform any of the obligations of the Grantor under or
pursuant to any such Account (or any agreement giving rise thereto) or under or
pursuant to any such contract, 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 such Account (or any
agreement giving rise thereto) or under any such contract, 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.

 

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(b)                                 Verification
and Analysis of Accounts.  If an
Event of Default has occurred and is continuing, the Secured Parties shall have
the right to communicate with account debtors on the Accounts that constitute
part of the Collateral and parties to the contracts that constitute part of the
Collateral to verify with them to its satisfaction the existence, amount and
terms of any such Accounts or contracts and to make test verifications of such
Accounts in any manner and through any medium that it reasonably considers
advisable, and the Grantor shall furnish all such assistance and information as
the Secured Parties may require in connection therewith.  At any time and from time to time, but not
more than twice within any 180-day period, upon the Secured Parties’ reasonable
request and at the expense of the Grantor, the Grantor shall cause independent
public accountants or others satisfactory to the Secured Parties to furnish to
the Secured Parties reports showing reconciliations, aging and test
verifications of, and trial balances for, such Accounts.

 

4.                                       Representations
and Warranties.  The Grantor hereby
represents and warrants that:

 

(a)                                  Title;
No Other Liens.  Except for the Lien
granted to the Secured Parties pursuant to this Security Agreement, the Lien
granted to the Secured Parties pursuant to the terms of the Patent and
Trademark Security Agreement and the GSW Ownership Rights, the Grantor owns
each item of the Collateral free and clear of any and all Liens or claims of
others.  No security agreement,
financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any public office, except such as may
have been filed in favor of the Secured Parties pursuant to this Security
Agreement and the Patent and Trademark Security Agreement.

 

(b)                                 Perfected
First Priority Liens.  The Liens
granted pursuant to this Security Agreement will constitute upon the completion
of all the filings or notices listed in Schedule II hereto, perfected Liens on all
Collateral, which are prior to all other Liens on such Collateral and which are
enforceable as such against all creditors of the Grantor.

 

(c)                                  Accounts.  To the Grantor’s knowledge, no amount
payable to the Grantor under or in connection with any Account that constitutes
part of the Collateral is evidenced by any Instrument (other than checks in the
ordinary course of business) or Chattel Paper which has not been delivered to
the Secured Parties.  The place where
the Grantor keeps its records concerning the Accounts that constitute part of
the Collateral is set forth on Schedule III hereto.

 

(d)                                 Consents.  No consent (other than the consent of Equity
Office Properties Trust, to be obtained after the consummation of the
transaction contemplated by the Asset Purchase Agreement) of any party (other
than the Grantor) to any contract that constitutes part of the Collateral is
required, or purports to be required, in connection with the execution,
delivery and performance of this Security Agreement.

 

(e)                                  Inventory.  The Inventory that constitutes part of the
Collateral is, as of the date hereof, kept at the locations listed on Schedule IV
hereto.

 

(f)                                    Chief
Executive Office.  The Grantor’s
chief executive office and chief place of business is located at 140 Union
Square Drive, New Hope, PA 18938.

 

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(g)                                 Power
and Authority.  The Grantor has full
power, authority and legal right to enter into this Security Agreement and to
grant the Secured Parties the Lien on the Collateral pursuant to this Security
Agreement.

 

(h)                                 Binding
Obligation.  This Security Agreement
has been duly executed and delivered by the Grantor and constitutes a legal,
valid and binding obligation of the Grantor enforceable in accordance with its
terms, subject to bankruptcy, insolvency and other similar laws generally
affecting or relating to the enforceability of creditors’ rights.

 

(i)                                     Non
Violation.  The execution, delivery
and performance of this Security Agreement will not violate any provision of
any applicable law or regulation or of any order, judgment, writ, award or
decree of any court, arbitrator or governmental authority, domestic or foreign,
or of any securities issued by the Grantor, or of any mortgage, indenture,
lease, contract or other agreement (upon receipt of the consent set forth in
Section 4(d) above), instrument or undertaking to which the Grantor is a party
or which purports to be binding upon the Grantor or upon any of its assets and
will not result in the creation or imposition of any Lien on any of the assets
of the Grantor except as contemplated by this Security Agreement and the Patent
and Trademark Security Agreement.

 

(j)                                     Consents.  To Grantor’s knowledge, no consent, filing,
approval, registration, recording, or other action is required (x) for the
grant by the Grantor of the Lien on the Collateral pursuant to this Security
Agreement or for the execution, delivery or performance of this Security
Agreement by the Grantor, or (y) to perfect the Lien purported to be created by
this Security Agreement, in each case except as set forth in Section 4(d)
above.

 

(k)                                  Validity
of Collateral.  To the knowledge of
the Grantor, all of the Collateral is subsisting and is valid, with the
exception of the Vendor Agreement which has not yet been assigned to the
Grantor.  Promptly upon assignment of
the Vendor Agreement to the Grantor, but in any event within five (5) days
thereafter, Grantor will provide a collateral assignment, in substantially the
form previously provided by Vendor to the Secured Parties, of such Vendor
Agreement to the Secured Parties.

 

(l)                                     Organization.  The Grantor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada and
duly qualified and in good standing in every other state or jurisdiction in
which the nature of the Grantor’s business or the ownership of its assets
requires such qualification except where the failure to so qualify would not
have a material adverse effect on the Grantor or the Collateral.

 

5.                                       FDA
Representations, Warranties and Covenants.

 

(a)                                  Compliance with FDC Act.  The Grantor represents and warrants that,
with respect to the Product, Grantor has, and to Grantor’s knowledge based on
its due diligence investigation in connection with the Asset Purchase
Agreement, Alliance has at all times prior to the date hereof complied with
and, so long as any Obligations are outstanding, will continue to comply with
all provisions of the Federal Food, Drug, and Cosmetic Act and its implementing
regulations, and all other federal and state regulatory requirements, governing
the manufacturing, holding, processing, sale, and marketing of the Product,
including, but not limited to:

 

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(i)                                     the
terms and specifications set forth in the approved new drug application NDA
#21-191 (the “NDA”) for the Product, and any supplements and amendments
relating thereto;

 

(ii)                                  postapproval
commitments and/or requirements outlined in the Food and Drug Administration’s
(the “FDA”) NDA approval letters for the Product, copies of which are attached
hereto as Exhibit
A;

 

(iii)                               FDA’s
good manufacturing practices regulations that apply to drugs;

 

(iv)                              
adverse event reporting;

 

(v)                                 establishment
registration and drug listing;

 

(vi)                              submission
of all required NDA supplements for changes to the terms and specifications set
forth in the NDA;

 

(vii)                           promotional
requirements and restrictions, including but not limited to applicable
advertising laws and requirements;

 

(viii)                        label and
labeling requirements; and

 

(ix)                                not
making any misrepresentation of fact to the FDA with regard to the NDA and/or
the Product.

 

(b)                                 Transfer
of Documentation.  Within
5 days following written notice by the Secured Parties, the Grantor shall
provide the Secured Parties with a copy of all documentation necessary for the
Grantor and/or the Secured Parties to be in and remain in full compliance with
the NDA, pursuant to section 314.72 of Title 21 of the Code of Federal
Regulations, including, but not limited to: the NDA and any amendments and
supplements thereto; all correspondence concerning the NDA between the FDA and
Grantor whether written before or after the NDA was approved; all contracts
with suppliers of ingredients and raw materials for the  Product; all batch records regarding the
Product; all validation studies; all stability reports; all standard operating
procedures; all postmarket surveillance files, including adverse event reports;
and postmarket studies.  At that same
time, Grantor shall also provide the Secured Parties with a copy of the
following additional documentation:

 

(i)                                     a
list of the names, addresses, and job descriptions of all employees involved in
the manufacturing, sale and distribution of the Product;

 

(ii)                                  a
list of the names, addresses and job descriptions of all employees involved in
purchasing ingredients or raw materials for the Product;

 

(iii)                               a
list of the names, addresses and job descriptions of all employees involved in
quality control and quality assurance for the Product;

 

9

 

(iv)                              all
employment and consulting agreements for any person or entity involved in the
manufacturing, sale and/or distribution of the Product;

 

(v)                                 all
audit and consulting reports done by any person or entity concerning Grantor’s
compliance with, or potential failure to comply with, obligations relating to
the Federal Food, Drug, and Cosmetic Act and/or all other applicable federal
and state regulatory requirements; and

 

(vi)                              a
list of the names and addresses of all customers for, and suppliers of, the
Product or any of its ingredients.

 

(c)                                  Recalls
etc.  The Grantor agrees to handle
the administration of, and be responsible for all costs and expenses relating
to, all court actions, claims, governmental investigations or inquiries,
recalls, stock recoveries or market withdrawals of the Product, including but
not limited  to, making all necessary
and appropriate contacts with federal and state authorities, notifications to
third parties, and Product disposition. 
The Grantor shall indemnify and hold the Secured Parties harmless from all
claims, actions, losses, liabilities, damages and expenses arising from such
matters, regardless of whether such claims, actions, losses, liabilities,
damages and expenses relate to the period prior to or after the occurrence of
an Event of Default.

 

(d)                                 Withdrawal
of Product.  Grantor represents that
there exists no set of facts which could furnish a basis for the withdrawal,
suspension or termination of the NDA or any threatened or potential request for
the recall or cessation of sales of the Product covered by that NDA by the FDA
or any other governmental authority.

 

6.                                       Covenants.

 

(a)                                  The
Grantor covenants and agrees with the Secured Parties that from and after the
date of this Security Agreement until the payment or performance in full by the
Grantor of all of its Obligations:

 

(i)                                     Further
Documentation; Pledge of Instruments and Chattel Paper.  At any time and from time to time, upon the
written request of the Secured Parties, and at the sole expense of the Grantor,
the Grantor will promptly and duly execute and deliver such further instruments
and documents and take such further action as the Secured Parties may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Security Agreement and of the rights and powers herein granted,
including, without limitation, (i) the filing of any financing or continuation
statements under the Code in effect in any such jurisdiction with respect to
the Liens created hereby.  The Grantor
also hereby authorizes the Secured Parties to file any such financing or
continuation statement without the signature of the Grantor to the extent
permitted by applicable law.  A carbon,
photographic or other reproduction of this Security Agreement shall be sufficient
as a financing statement for filing in any jurisdiction.  If any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any Instrument or
Chattel Paper, such Instrument or Chattel Paper shall be immediately delivered
to the Secured Parties, duly endorsed in a manner satisfactory to the Secured
Parties, to be held as Collateral pursuant to this Security Agreement.

 

10

 

(ii)                                  Indemnification.  The Grantor agrees to pay, and to save the
Secured Parties harmless from, any and all liabilities, costs and expenses
(including, without limitation, legal fees and expenses) (i) with respect to,
or resulting from, any delay in paying, any and all excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral, (ii) with respect to, or resulting from, any delay by the
Grantor in complying with any law or regulation applicable to any of the
Collateral, (iii) in connection with any action taken by the Secured Parties in
exercising its rights under this Security Agreement, other than actions
involving any Secured Party’s gross negligence, bad faith or violation of law,
and (iv) in connection with the preparation and enforcement of this Security
Agreement and the related documents.  In
any suit, proceeding or action brought by the Secured Parties under any Account
or contract that constitutes part of the Collateral for any sum owing
thereunder, or to enforce any provisions of any such Account or contract, the
Grantor will save, indemnify and keep the Secured Parties harmless from and
against all expense, loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction or liability whatsoever of the account
debtor or obligor thereunder, arising out of a breach by the Grantor of any
obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to or in favor of such account debtor or obligor or
its successors from the Grantor.

 

(iii)                               Maintenance
of Records.  The Grantor will keep
and maintain at its own cost and expense satisfactory and complete records of
the Collateral, including, without limitation, a record of all payments
received and all credits granted with respect to the Accounts that constitute
part of the Collateral.  The Grantor
hereby grants to the Secured Parties access to all of the Grantor’s books and
records pertaining to the Collateral, and the Grantor shall turn over any such
books and records for inspection at the office of the Grantor to the Secured
Parties or to their representatives during normal business hours at the request
of the Secured Parties.

 

(iv)                              Limitation
on Liens on Collateral.  The Grantor
(x) will not create, incur or permit to exist, will defend, at its own expense,
the Collateral against, and will take such other action as is necessary to
remove, any Lien or claim on or to the Collateral, and (y) will defend the
right, title and interest of the Secured Parties in and to any of the
Collateral against the claims and demands of all persons whomsoever.

 

(v)                                 Limitations
on Dispositions of Collateral.  The
Grantor will not sell, transfer, lease or otherwise dispose of any of the
Collateral, or attempt, offer or contract to do so except for sales of
Inventory and the collection and use of cash proceeds in the ordinary course of
its business without express, written agreement by the Secured Parties.

 

(vi)                              Limitations
on Performance of Contracts and Agreements Giving Rise to Accounts.  The Grantor will not (i) fail to exercise
promptly and diligently each and every material right or fail to perform each
material obligation which it may have under each contract that constitutes part
of the Collateral and each agreement giving rise to an Account that constitutes
part of the Collateral (other than any right of termination) except where the
Grantor determines in its reasonable business judgment that the failure to
exercise such right or perform such obligation is in the best interest of the
Grantor and consistent with the protection and preservation of the rights and
interests of the Secured Parties in the Collateral or (ii) fail to deliver to
the Secured Parties, upon request, a copy of each material demand, notice or
document received by it relating in any way to any contract that constitutes
part of the Collateral or any 

 

11

 

agreement giving rise to an
Account that constitutes part of the Collateral.  The Grantor will not amend or modify the terms of, or waive any
rights under, any contracts, including the Vendor Agreement, without the
express written consent of Secured Parties.

 

(vii)                           Further
Identification of Collateral.  The
Grantor will furnish to the Secured Parties from time to time, upon the request
of the Secured Parties, statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Secured Parties may reasonably request, all in reasonable
detail.

 

(viii)                        Notices.  The Grantor will advise the Secured Parties
promptly, in reasonable detail, at its address in accordance with Section 14,
(i) of any Lien (other than Liens permitted hereunder) on, or claim asserted
against, any of the Collateral and (ii) of the occurrence of any other event
which could reasonably be expected to have a material adverse effect on the
value of any material portion of the Collateral or on the Liens created
hereunder.

 

(ix)                                Change
of Name; Location of Collateral; Records; Place of Business.  The Grantor shall not make any change (a) in
its name, (b) in the location of its chief executive office, its principal
place of business, any office in which it maintains books or records relating
to Collateral owned by it or any office facility at which Collateral owned by
it is located (including the establishment of any such new office or facility)
from the locations set forth on Schedule I attached hereto, (c) in its
identity or type of organization or corporate structure (d) in its Federal
Taxpayer Identification Number or organizational identification number or (e)
in its jurisdiction or organization unless (i) the Guarantor provides the
Secured Parties at least 30 days prior written notice of such change and (ii)
all filings have been made under the Code or otherwise that are required in order
for the Secured Parties to continue at all times following such change to have
a valid, legal and perfected first priority security interest in all the
Collateral.

 

(x)                                   Subsidiaries.  This Security Agreement is entered into on
behalf of and for the benefit of the Grantor and its subsidiaries and other
entities controlled by the Grantor which have rights in the Collateral.  The security interest granted by the Grantor
hereunder is intended to include all rights of the Grantor in and to the
Collateral, including any rights of its subsidiaries and such other entities in
and to such Collateral, and the Grantor will not permit such subsidiaries and
entities to exercise any of their rights with respect to the Collateral.

 

(xi)                                Payment
of Taxes and Other Claims.  The
Grantor shall pay or discharge when due all taxes, assessments and governmental
charges or levies imposed upon it unless same are not delinquent, provided,
however, that the Grantor shall have the right to challenge in good faith by
appropriate proceedings any disputed taxes, assessments or governmental charges
or levies provided that the Grantor establishes appropriate reserves therefor
in accordance with generally accepted accounting principles; and, provided,
further, that notwithstanding any such contest, the Grantor shall pay such
disputed taxes, assessments and governmental charges or levies if nonpayment
would result in the imposition of any Lien on the Grantor’s assets or
properties.

 

(xii)                             Indebtedness;
Distributions; Investments; Consolidation and Merger; Subsidiaries; Nature of
Business; Affiliate Transactions; Invoices.  The Grantor shall not (i) create, incur, assume or suffer to
exist any indebtedness (exclusive of trade debt) whether 

 

12

 

secured or unsecured other than
the Grantor’s indebtedness to the Secured Parties and any indebtedness now or
hereafter existing to Oxford Bioscience Partners IV, L.P. and MRNA Fund II,
L.P. or their respective affiliates; provided, that, any security interest in
such existing or hereafter existing indebtedness to Oxford Bioscience Partners
IV, L.P. and MRNA Fund II, L.P. or their respective affiliates is expressly
made junior in priority to the Secured Parties’ interest in the Collateral;
(ii) declare, pay or make any dividend or distribution on any shares of the
common stock or preferred stock of the Grantor or apply any of its funds,
property or assets to the purchase, redemption or other retirement of any
common or preferred stock of the Grantor; (iii) directly or indirectly, prepay
any indebtedness (other than to the Secured Parties), or repurchase, redeem,
retire or otherwise acquire any indebtedness of the Grantor; (iv) make
advances, loans or extensions of credit to any person; (v) become either directly
or contingently liable upon the obligations of any person by assumption,
endorsement or guaranty thereof or otherwise; (vi) enter into any merger,
consolidation or other reorganization with or into any other person or acquire
all or a portion of the assets or stock of any person or permit any other
person to consolidate with or merge with it; (vii) form any Subsidiary or enter
into any partnership, joint venture or similar arrangement; (viii) materially
change the nature of the business in which it is presently engaged; (ix) enter
into any transaction with any affiliate, except in ordinary course on
arms-length terms; or (xi) bill accounts under any name except the present name
of the Grantor.

 

(xiii)                          Maintain
Operations and Manufacturing. 
Following an Event of Default, the Grantor shall use commercially
reasonable efforts to continue to maintain and operate the manufacturing
facility described on Schedule I hereto and to manufacture and
distribute the Product.  In the event
that the Grantor for any reason is unable or unwilling to maintain and operate
such manufacturing facility and manufacture and distribute the Product, the
Secured Parties or their designee shall have the right to maintain and operate
such manufacturing facility and use the Collateral in order to manufacture and
distribute the Product, subject to the terms of the lease of the manufacturing
facility and any applicable Food and Drug Administration requirements and the
Grantor shall take all actions reasonably requested by the Secured Parties
(including obtaining any required consents) in connection therewith.

 

(xiv)                         Use
and Disposition of Collateral.  The
Grantor shall (i) not dispose of any of the Collateral whether by sale, lease
or otherwise except for (A) the sale of Inventory in the ordinary course of
business, and (B) the disposition or transfer of obsolete and worn-out
Equipment in the ordinary course of business and (ii) keep and maintain the
Equipment in good operating condition, except for ordinary wear and tear, and
shall make all necessary repairs and replacements thereof so that the value and
operating efficiency shall at all times be maintained and preserved.

 

(xv)                            Risk
of Loss; Insurance.  The Grantor
shall bear the full risk of loss from any loss of any nature whatsoever with respect
to the Collateral.  At it’s own cost and
expense in amounts and with carriers acceptable to the Secured Parties, it
shall (a) keep all its insurable properties and properties in which it has an
interest insured against the hazards of fire, flood, sprinkler leakage, those
hazards covered by extended coverage insurance and such other hazards, and for
such amounts, as is customary in the case of companies engaged in businesses
similar to the Grantor’s including, without limitation, public and product liability
insurance, worker’s compensation, insurance against larceny, embezzlement or
other criminal misappropriation of insured’s officers and employees and
business interruption insurance; (b) 

 

13

 

furnish the Secured Parties
with (i) copies of all policies and evidence of the maintenance of such
policies at least 30 days before any expiration date, and (ii) appropriate loss
payable endorsements in form and substance satisfactory to the Secured Parties,
naming the Secured Parties as loss payees and providing that as to the Secured
Parties the insurance coverage shall not be impaired or invalidated by any act
or neglect of the Grantor and the insurer will provide the Secured Parties with
at least 30 days notice prior to cancellation. 
Upon the occurrence and continuation of any Event of Default:  the Grantor shall instruct the insurance
carriers that in the event of any loss thereunder, the carriers shall make
payment for such loss to the Secured Parties and not to the Grantor and the
Secured Parties jointly; if any insurance losses are paid by check, draft or
other instrument payable to the Grantor and the Secured Parties jointly, the
Secured Parties may endorse the Grantor’s name thereon and do such other things
as the Secured Parties may deem advisable to reduce the same to cash; the
Secured Parties are hereby authorized to adjust and compromise claims; all loss
recoveries received by the Secured Parties upon any such insurance shall be
applied to the Obligations, in such order as the Secured Parties in their sole
discretion shall determine.  In that
event, any surplus shall be paid by the Secured Parties to the Grantor or
applied as may be otherwise required by law, and any deficiency thereon shall
be paid by the Grantor to the Secured Parties, on demand.

 

(xvi)                         Notice
of Certain Events.  The Grantor
shall promptly inform the Secured Parties in writing of: (a) the commencement
of all proceedings and investigations by or before and/or the receipt of any
notices from, any governmental or nongovernmental body and all actions and
proceedings in any court or before any arbitrator against or in any way
concerning any of the Grantor’s properties, assets or business, which might
singly or in the aggregate, have a materially adverse effect on the Grantor;
(b) any amendment of the Grantor’s certificate of incorporation or by-laws; (c)
any change in the Grantor’s business, assets, liabilities, condition (financial
or otherwise), results of operations or business prospects which has had or
might have a materially adverse effect on the Grantor; (d) any Event of Default
or Default; (e) any default or any event which with the passage of time or
giving of notice or both would constitute a default under any agreement for the
payment of money to which the Grantor is a party or by which the Grantor or any
of the Grantor’s properties may be bound which would have a material adverse
effect on the Grantor’s business, operations, property or condition (financial
or otherwise) or the Collateral; (f) any change in the location of the
Grantor’s executive offices; (g) any change in the location of the Grantor’s
Inventory or Equipment from the locations listed on Schedule I attached hereto,
(h) any material delay in the Grantor’s performance of any of its obligations
to any Customer and of any assertion of any material claims, offsets or
counterclaims by any Customer and of any allowances, credits and/or other
monies granted by it to any Customer; (i) and furnish to the Secured Parties
all material adverse information relating to the financial condition of any
Customer; and (k) any material return of goods.

 

(xvii)                      Attorney-in-fact.  The Grantor hereby irrevocably appoints the
Secured Parties or any other person whom the Secured Parties may designate as
the Grantor’s attorney-in-fact, with full power and authority in place and
stead of the Grantor and in the name of the Grantor or in its own name to take
any of the following actions upon the occurrence and continuation of an Event
of Default:  (i) endorse the Grantor’s
name on any checks, notes, acceptances, money orders, drafts or other forms of
payment or security that may come into the Secured Parties’ possession; (ii)
sign the Grantor’s name on any invoice or bill of lading relating to any Accounts,
drafts against customers, schedules and assignments of Accounts, notices of

 

14

 

assignment, financing
statements and other public records, verifications of account and notices to or
from Customers; (iii) verify the validity, amount or any other matter relating
to any Receivable by mail, telephone, telegraph or otherwise with Customers;
(iv) execute customs declarations and such other documents as may be required
to clear Inventory through United States Customs; (v) do all things necessary
to carry out this Agreement and all other Loan Documents; (vi) continue any
insurance existing pursuant to the terms of this Agreement and pay all or any
part of the premium therefor and the cost thereof; and (vii) notify the post
office authorities to change the address for delivery of the Grantor’s mail to
an address designated by the Secured Parties, and to receive, open and dispose
of all mail addressed to the Grantor. 
The Grantor hereby ratifies and approves all acts of the attorney.  The powers conferred on the Secured Parties
hereunder are solely to protect their interests in the Collateral and shall not
impose any duty upon them to exercise any such powers.  Neither the Secured Parties nor the attorney
will be liable for any acts or omissions. 
This power, being coupled with an interest, is irrevocable so long as an
account which is assigned to the Secured Parties or in which the Secured
Parties have a security interest remains unpaid and until the Obligations have
been fully satisfied.

 

(b)                                 Consent
to License Agreement.  The Secured
Parties covenant and agree with the Grantor that in the event that the Secured
Parties exercise their rights hereunder and the Collateral is sold to a third
party, the Secured Parties shall use commercially reasonable efforts to (i)
ensure that such third party purchaser of any of the Collateral licensed under
the License Agreement agrees to be bound by the terms and conditions thereof,
until the expiration or termination thereof, and (ii) ensure that such
third-party purchaser shall agree to use commercially reasonable efforts to
ensure that all subsequent transferees of any of the Collateral licensed under
the License Agreement shall agree to be bound by the terms and conditions of
the License Agreement, until the expiration or termination thereof.

 

(c)                                  Food
and Drug Administration.  The
Grantor shall comply in all material respects with all Food and Drug
Administration requirements necessary for the Secured Parties to exercise their
rights hereunder and to realize on the Collateral.

 

(d)                                 Collateral
Assignment of the Lease.  Within
five (5) business days following the Closing Date, the Grantor shall deliver to
the Secured Parties the consent of the Equity Office Properties Trust to the
grant of the Security Interest and a valid collateral assignment of the Lease
in favor of the Secured Parties, which collateral assignment of the Lease shall
be in recordable form, to the Secured Parties’ satisfaction, necessary to give
the Secured Parties a duly perfected first priority assignment of the Lease.

 

(e)                                  Exclusive
Licenses.  The Grantor shall not
grant an exclusive license to a third party to manufacture, use, sell or
develop the Product or enter into any exclusive license arrangement with a
third party providing for the manufacture, use, sale or development of the
Product without the consent of the Secured Parties, which consent shall not be
unreasonably withheld.

 

7.                                       Performance
by Secured Parties of Grantor’s Obligations.  If the Grantor fails to perform or comply with any of its
agreements contained herein and the Secured Parties, as provided for by the
terms of this Security Agreement and following reasonable written notice to 

 

15

 

the Grantor, shall itself
perform or comply, or otherwise cause performance or compliance, with such
agreements, the expenses of the Secured Parties incurred in connection with
such performance or compliance shall be payable by the Grantor to the Secured
Parties on demand and shall constitute Obligations secured hereby.

 

8.                                       Remedies.  If an Event of Default (i) has occurred and
has continued for a period of 30 consecutive days without cure by the Grantor
with respect to items 1, 2, 3, and 4 set forth in the definition of Event of
Default (expect, with respect to paragraph 4(k) and 6(d) above, such period
shall be reduced to five (5) consecutive days), or (ii) has occurred and is
continuing with respect to all other items in the definition of Event of
Default, the Secured Parties may exercise, in addition to all other rights and
remedies granted to it in this Security Agreement and in any other instrument
or agreement securing, evidencing or relating to the Obligations, all rights
and remedies of a secured party under the Code.  Without limiting the generality of the foregoing, the Secured
Parties, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below or expressly provided for) to or upon the Grantor or any other person
(all and each of which demands, defenses, advertisements and notices are, to
the extent permitted by applicable law, hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, license, assign,
give option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), at
public or private sale or sales, at any exchange, broker’s board or office of
the Secured Parties or elsewhere upon such terms and conditions as they may
deem advisable and at such prices as they may deem best, for cash or on credit
or for future delivery without assumption of any credit risk.  The Secured Parties shall have the right
upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in the Grantor,
which right or equity is hereby waived, to the extent permitted by applicable
law, or released.

 

The Grantor further agrees that, if an Event of Default has occurred
and is continuing, at the Secured Parties’ request, to assemble the Collateral
and make it available to the Secured Parties at places which the Secured
Parties shall reasonably select, whether at the Grantor’s premises or
elsewhere.  The Secured Parties shall
apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred therein or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral
or the rights of the Secured Parties hereunder, including, without limitation,
reasonable attorneys’ fees and disbursements, to the payment in whole or in
part of the Obligations, in such order as the Secured Parties may elect, and
only after such application and after the payment by the Secured Parties of any
other amount required by any provision of law, must the Secured Parties account
for the surplus, if any, to the Grantor. 
To the extent permitted by applicable law, the Grantor waives all
claims, damages and demands it may acquire against the Secured Parties arising
out of the exercise by it of any rights hereunder, provided, that nothing
contained in this Section shall relieve the Secured Parties from liability
arising solely from its gross negligence or willful misconduct.  If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition.  The Grantor shall remain liable
for any deficiency if the proceeds of any sale or other disposition of the
Collateral 

 

16

 

are insufficient to pay the Obligations and the fees and disbursements
of any attorneys employed by the Secured Parties to collect such deficiency.

 

For the purpose of enabling the Secured Parties to exercise rights and
remedies under this Section 8 at such time as the Secured Parties shall be
lawfully entitled to exercise such rights and remedies, the Grantor hereby
grants to the Secured Parties an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to the Grantor)
to use, license or sublicense any of the Collateral consisting of Intellectual
Property now owned or hereafter acquired by the Grantor or as to which the
Grantor has the right to use, and wherever the same may be located, and
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof.  The use of such license by the Secured
Parties shall be exercised, at the option of the Secured Parties, upon the
occurrence and during the continuation of an Event of Default; provided that
any license, sublicense or other transaction entered into by the Secured
Parties in accordance herewith shall be binding upon the Grantor
notwithstanding any subsequent cure of an Event of Default.

 

9.                                       Severability.  Any provision of this Security Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.

 

10.                                 Paragraph
Headings.  The paragraph headings
used in this Security Agreement are for convenience of reference only and are
not to affect the construction hereof or be taken into consideration in the
interpretation hereof.

 

11.                                 Cumulative
Remedies.  The rights and remedies
provided herein and in the Going Forward Agreement may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law or
in equity or by statute.

 

12.                                 Waivers
and Amendments; Successors and Assigns. 
None of the terms or provisions of this Security Agreement may be
waived, amended, supplemented or otherwise modified except by a written
instrument executed by the party to be charged with enforcement.  This Security Agreement shall be binding
upon the successors and permitted assigns of the Grantor and shall inure to the
benefit of the Secured Parties and their successors and assigns.  The Grantor may not assign its rights or
obligations under this Security Agreement without the prior written consent of
the Secured Parties.

 

13.                                 Termination
of Security Interest; Release of Collateral.

 

(a)                                  Upon
the payment and performance in full by the Grantor of its Obligations, the
security interest granted in the Collateral pursuant to this Agreement (the
“Security Interest”) shall terminate and all rights to the Collateral shall
revert to the Grantor.

 

(b)                                 Upon
any such termination of the Security Interest, the Secured Parties will, at the
expense of the Grantor, execute and deliver to the Grantor such documents and
take 

 

17

 

such other actions as the
Grantor shall reasonably request to evidence the termination of the Security
Interest and deliver to the Grantor all Collateral so released then in its
possession.

 

14.                                 Notices.  Any notices required or permitted to be
given under the terms of this Security Agreement shall be in writing and shall
be sent by mail, personal delivery, telephone line facsimile transmission or
courier and shall be effective 5 days after being placed in the mail, if
mailed, or upon receipt, if delivered personally, by telephone line facsimile
transmission or by courier, in each case addressed to a party at such party’s
address (or telephone line facsimile transmission number) shown below or such
other address (or telephone line facsimile transmission number) as a party
shall have provided by notice to the other party in accordance with this
provision.  In the case of any notice to
the Grantor, such notice shall be addressed to the Grantor 140 Union Square
Drive, New Hope, PA 18938, Attention: Chief Financial Officer (telephone line
facsimile number (215) 862-7139), and a copy shall also be given to: Epstein,
Becker and Green, P.C., 111 Huntington Avenue, Boston, MA 02199 Attention:
Susan E. Pravda, Esq. (telephone line facsimile transmission number (617)
342-4001), and in the case of any notice to the Secured Parties, such notice shall
be addressed to the Secured Parties at Xmark Fund, L.P. and Xmark Fund, Ltd.,
152 West 57th Street, 21st Floor, New York, New York 10019, Attention: Mitchell
D. Kaye (telephone line facsimile transmission number (212) 247-1329), and a
copy shall be given to: Lowenstein Sandler PC, 65 Livingston Avenue, Roseland,
New Jersey 07068 Attention: John D. Hogoboom, Esq. (telephone line facsimile
transmission number (973) 597-2383).

 

15.                                 Integration.  This Security Agreement represents the
agreement of the Grantor and the Secured Parties with respect to the subject
matter hereof, and there are no promises, undertakings, representations or
warranties by the Secured Parties relative to subject matter hereof not
expressly set forth or referred to herein.

 

16.                                 Governing
Law.  This Security Agreement and
the rights and obligations of the Grantor hereunder shall be governed by, and
construed and interpreted in accordance with, the law of the State of New York,
except to the extent that under the New York Uniform Commercial Code the laws
of another jurisdiction govern matters of perfection and the effect of
perfection or non-perfection of any security interest granted hereunder.

 

17.                                 Counterparts.  This Security Agreement may be executed in
counterparts and by the parties hereto on separate counterparts, each of which
shall be deemed to be an original and all of which together shall constitute
one and the same instrument.  A
telephone line facsimile transmission of this Security Agreement bearing a
signature on behalf of a party hereto shall be legal and binding on such party.

 

18.                                 Waiver
of Jury Trial.  To the extent
permitted by applicable law, each of the Grantor and the Secured Parties waives
any right to have a jury participate in resolving any dispute, whether sounding
in contract, tort, or otherwise between the parties hereto arising out of,
connected with, related to, or incidental to the relationship between any of
them in connection with this Security Agreement or the transactions
contemplated hereby.  Instead, any such
dispute resolved in court will be resolved in a bench trial without a jury,
submitted to jurisdiction in the Southern District of New York and New York
State Courts located in the County of New York.

 

18

 

IN WITNESS WHEREOF, the Grantor has caused this Security Agreement to
be duly executed and delivered as of the date first above written.

 

	
   

  	
  PHOTOGEN TECHNOLOGIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 
  Brooks Boveroux

  	
   

  
	
   

  	
   

  	
  Name: Brooks Boveroux

  
	
   

  	
   

  	
  Title: Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  ACKNOWLEDGED AND AGREED:

  	
   

  
	
   

  	
   

  
	
  XMARK FUND, L.P.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ 
  Mitchell D. Kaye

  	
   

  	
   

  
	
   

  	
  Name:  Mitchell D. Kaye

  	
   

  	
   

  
	
   

  	
  Title:  Chief Investment
  Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ACKNOWLEDGED AND AGREED:

  	
   

  
	
   

  	
   

  
	
  XMARK FUND, LTD.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ 
  Mitchell D. Kaye

  	
   

  	
   

  
	
   

  	
  Name:  Mitchell D. Kaye 

  	
   

  	
   

  
	
   

  	
  Title:  Chief Investment
  Officer

  	
   

  	
   

  
							

 

19Exhibit
10.3

 

PATENT
AND TRADEMARK SECURITY AGREEMENT

 

This PATENT AND TRADEMARK SECURITY AGREEMENT dated as of the 18th day
of June 2003, made by Photogen Technologies, Inc., a Nevada corporation, (the
“Grantor”) in favor of Xmark Fund, L.P., a Delaware limited partnership and
Xmark Fund, Ltd., a Cayman Islands corporation (collectively, the “Secured
Parties”).

 

WITNESSETH

 

WHEREAS, the Grantor and the Secured Parties have entered into a Going
Forward Agreement, dated as of May 2, 2003 (the “Going Forward Agreement”).

 

WHEREAS, the Grantor and Alliance Pharmaceutical Corp., a New York
corporation (“Alliance”), are entering into an Asset Purchase Agreement, dated
as of June 10, 2003, pursuant to which, as of the date of the closing of the
transactions contemplated therein (the “Closing Date”), Alliance shall sell,
transfer and assign its property and assets relating to the Product (as defined
below).

 

WHEREAS, the Grantor has agreed to grant to the Secured Parties a
security interest in certain of its property and assets relating to the Product
as of the Closing Date to secure the performance of the obligations of the
Grantor under the Going Forward Agreement; and

 

WHEREAS, the Grantor is contemporaneously entering into a Security
Agreement with the Secured Parties.

 

NOW, THEREFORE, in consideration of the premises set forth above the
Grantor hereby agrees with the Secured Parties as follows:

 

TERMS

 

1.                                       Defined
Terms.  The terms set forth below
have the following meanings:

 

“Code” means the Uniform Commercial Code as from time to time in
effect in the State of New York.

 

“Collateral” shall have the meaning assigned to it in Section 2
of this Patent and Trademark Security Agreement.

 

“Event of Default” means:

 

1.                                       the failure by
the Grantor to perform in any material respect any obligation of the Grantor
under this Patent and Trademark Security Agreement as and when required by this
Patent and Trademark Security Agreement; or

 

2.                                       any
representation or warranty made by the Grantor pursuant to this Patent and
Trademark Security Agreement is untrue in any material respect when made; or

 

3.                                       the failure by
the Grantor to perform in any material respect any obligation of the Grantor
under the Security Agreement as and when required by the Security Agreement; or

 

4.                                       any representation
or warranty made by the Grantor pursuant to the Security Agreement is untrue in
any material respect when made; or

 

 

5.                                       the security
interests granted herein and pursuant to the Security Agreement do not
constitute for any reason a first priority perfected security interest in the
Collateral covered thereby (other than as a result of a failure to make the
filings specified in Exhibit C, D and E of this Patent and Trademark Security
Agreement); or

 

6.                                       the Grantor
shall file a petition under bankruptcy, insolvency or debtor’s relief law or
make an assignment for the benefit of its creditors; or

 

7.                                       a court of
competent jurisdiction enters an order or decree under any federal or state
bankruptcy law that (X) is for relief against the Grantor in an involuntary
case brought with respect to the Grantor in such court, (Y) appoints a
custodian, receiver or other similar official for all or substantially all the
Grantor’s property or (Z) orders the liquidation of the Grantor, and the order
or decree remains unstayed and in effect for 60 days; or

 

8.                                       any
representation or warranty made by the Grantor pursuant to the Going Forward
Agreement is untrue in any material respect when made; or

 

9.                                       failure of the
Grantor to pay any Obligation when due or to perform in any material respect
any other obligation of the Grantor under the Going Forward Agreement as and
when required by the Going Forward Agreement; or

 

10.                                 the loss or suspension
of the Food and Drug Administration approval relating to the Product; or

 

11.                                 the Grantor shall fail
to pay when due (after the expiration of any cure period provided by agreements
governing the obligation) any principal of, premium or interest on or any
amount payable in respect of any borrowed money indebtedness; or

 

12.                                 the failure by the
Grantor to perform in any material respect any obligation of the Grantor under
those certain Notes made by the Grantor in favor of the Secured Parties of even
date herewith (the “Notes”).

 

“General Intangibles” shall have the meaning ascribed such term
under the Code.

 

“License Rights” shall mean any Grantor rights that were
obtained through the grant, by the Grantor, of rights to a third party under
the Product Patents or Product Trademarks.

 

“Lien” shall mean any lien, mortgage, security interest, chattel
mortgage, pledge or other encumbrance (statutory or otherwise) of any kind
securing satisfaction or performance of an obligation, including any agreement
to give any of the foregoing, any conditional sales or other title retention
agreement, any lease in the nature thereof, and the filing of or the agreement
to give any financing statement under the Code of any jurisdiction or similar
evidence of any encumbrance, whether within or outside the United States.

 

“Obligations” shall mean:

 

(1)                                  all obligations and
liabilities to the Secured Parties, whether now existing or hereafter arising,
under the Going Forward Agreement (including, without limitation, the payment
obligations under Section 2(b)(i) of the Going Forward Agreement and pursuant
to the Put Right (as defined in the Going Forward Agreement)), the Security
Agreement, this 

 

2

 

 

Patent and Trademark Security Agreement, the Notes and/or any document
or agreement related to any of the foregoing and the due performance and
compliance with the terms of the Going Forward Agreement, the Security
Agreement, this Patent and Trademark Security Agreement, the Notes and/or any
document or agreement related to any of the foregoing;

 

(2)                                  any and all sums
advanced by the Secured Parties in order to preserve the Collateral or to
preserve the Secured Parties’ security interest in the Collateral; and

 

(3)                                  in the event of any
proceeding for the collection or enforcement of any obligations or liabilities
of the Grantor referred to in the immediately preceding clauses (1) through (2)
in accordance with the terms of the Going Forward Agreement, this Security
Agreement, the Patent and Trademark Security Agreement, the Notes and/or any
document or agreement related to the foregoing, the expenses of re-taking,
holding, preparing for sale, selling or otherwise disposing of or realizing on
the Collateral, or of any other exercise by the Secured Parties of their rights
hereunder, together with reasonable attorneys’ fees and court costs.

 

“Patent and Trademark Security Agreement” means this Patent and
Trademark Security Agreement, including all amendments, supplements or
modifications that are agreed to in writing by the parties.

 

“Proceeds” shall have the meaning assigned to such term under
the Code.

 

“Product” means Imagent®, a sterile, non-pyrogenic
white powder with a diluted perflexane headspace that, after reconstitution
into a suspension of microspheres, is used for contrast enhancement during the
indicated ultrasound imaging procedures and is indicated for use in patients
with suboptimal echocardiograms to opacify the left ventricular chamber and to
improve the delineation of the left ventricular endocardial border.

 

“Product Patent(s)” means all letters patent of the United
States and foreign jurisdictions, including any and all extensions, reissues,
re-examinations and renewals thereof, that are now owned by the Grantor or are
acquired by the Grantor during the term of this Patent and Trademark Security
Agreement, and are necessary or beneficial for the use, development,
manufacture, marketing, sale or distribution of the Product, and all letters
patent of the United States or foreign jurisdictions that issue from Product
Patent Applications, including, but not limited to:

 

(1)                                  all
letters patent of the United States or any foreign jurisdiction listed in Exhibit A
hereto or added thereto by written agreement of the parties during the term of
this Patent and Trademark Security Agreement; and

 

(2)                                  all
letters patent of the United States or any foreign jurisdiction that claim
know-how that is now owned by the Grantor or that is acquired by the Grantor
during the term of this Patent and Trademark Security Agreement (“Grantor
Know-How”) and are necessary or beneficial for the use, development,
manufacture, marketing, sale or distribution of the Product.

 

Provided, that the term Product Patent does
not include claims under the Product Patents that do not relate to the Product,
are not necessary for the use, development, manufacture, marketing, sale or
distribution of the Product, and are, as a condition to the consummation of the

 

3

 

transactions contemplated by the Asset Purchase Agreement, licensed by
Photogen to Alliance pursuant to a license agreement of even date herewith.

 

“Product Patent Application(s)” means all applications for
letters patent of the United States or foreign jurisdictions, including any and
all provisionals, continuations, continuations-in-part and divisionals that
claim inventions, discoveries or technology that is now owned by the Grantor or
is acquired by the Grantor during the term of this Patent and Trademark Service
Agreement, and are necessary or beneficial for the use, development, manufacture,
marketing, sale or distribution of the Product, including, but not limited to:

 

(1)                                  all
applications for letters patent of the United States or any foreign
jurisdiction listed in Exhibit A hereto or added thereto by
written agreement of the parties during the term of this Patent and Trademark
Agreement; and

 

(2)                                  all
applications for letters patent of the United States or any foreign
jurisdiction that claim Grantor Know-How and are necessary or beneficial for
the use, development, manufacture, marketing, sale or distribution of the
Product.

 

“Product Trademarks” means all United States and foreign
jurisdiction trademarks, trade names, corporate names, company names, business
names, fictitious business names, trade styles, service marks, logos and other
source or business identifiers of the Grantor that are now owned by the Grantor
or are acquired by the Grantor during the term of this Patent and Trademark
Security Agreement, whether currently in use or not, and are adopted solely for
use in conjunction with the sale of the Product, including, without limitation,
those listed on Exhibit B and the goodwill associated therewith, all
registrations and recordings thereof.

 

“Product Trademark Applications” means all applications for
registration of all United States and foreign jurisdiction trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos and other source or business
identifiers of the Grantor that are now owned by the Grantor or are acquired by
the Grantor during the term of this Patent and Trademark Security Agreement,
whether currently in use or not and which will, upon registration thereof, be
adopted solely for use in conjunction with the sale of the Product, including,
without limitation, those listed on Exhibit B.

 

“Security Agreement” means that certain Security Agreement,
dated as of the date hereof, between the Grantor and the Secured Parties.

 

2.                                       Grant
of Security Interest.  As collateral
security for the prompt and complete payment and performance when due of the
Obligations, the Grantor hereby grants to the Secured Parties a continuing
first priority security interest in all of the following property now or
hereafter owned by the Grantor, and/or in which the Grantor has or acquires, at
any time during the term of this Patent and Trademark Security Agreement, an
unrestricted right, title or interest:

 

All Product Patents and Product Patent Applications; all Product
Trademarks together with any good will of the business associated with the use
of such Product Trademarks; all License Rights and all Accounts (as defined in
the Code), contract rights and General Intangibles arising under or relating to
said License Rights and to the extent not otherwise included, all products and
proceeds of any and all of the foregoing (collectively, the “Collateral”).

 

3.                                       Representations
and Warranties.  The Grantor hereby
represents and warrants that:

 

4

 

(a)                                  Title;
No Other Liens.  Except for the Lien
granted to the Secured Parties pursuant to this Patent and Trademark Security
Agreement and the Lien granted to the Secured Parties pursuant to the terms of
the Security Agreement and the GSW Ownership Rights (as defined in the Security
Agreement), the Grantor solely owns each item of the Collateral free and clear
of any and all Liens or claims of others. 
No security agreement, financing statement or other public notice with
respect to all or any part of the Collateral is on file or of record in any
public office, except such as may have been filed in favor of the Secured
Parties pursuant to this Patent and Trademark Security Agreement or the
Security Agreement.

 

(b)                                 Perfected
First Priority Liens.  The Liens
granted pursuant to this Patent and Trademark Security Agreement will
constitute upon the completion of all the filings or notices listed in Exhibit C
hereto, which Exhibit includes all UCC-1 financing statements to be filed
pursuant to the terms of the Security Agreement, and all requisite filings to
be made with the U.S. Patent and Trademark Office in the form substantially
similar to that of Exhibit D and Exhibit E, perfected Liens on
all Collateral, which are prior to all other Liens on such Collateral and which
are enforceable as such against all creditors of the Grantor.

 

(c)                                  Chief
Executive Office.  The Grantor’s
chief executive office and chief place of business is located at 140 Union
Square Drive, New Hope, PA 18938.

 

(d)                                 Authority.  The Grantor has full power, authority and
legal right to enter into this Patent and Trademark Security Agreement and to
grant the Secured Parties the Lien on the Collateral pursuant to this Patent
and Trademark Security Agreement.

 

(e)                                  Due
Execution and Delivery.  This Patent
and Trademark Security Agreement has been duly executed and delivered by the
Grantor and constitutes a legal, valid and binding obligation of the Grantor
enforceable in accordance with its terms.

 

(f)                                    No
Violation.  The execution, delivery
and performance of this Patent and Trademark Security Agreement will not
violate any provision of any applicable law or regulation or of any order,
judgment, writ, award or decree of any court, arbitrator or governmental
authority, domestic or foreign, or of any securities issued by the Grantor, or
of any mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which the Grantor is a party or which purports to be binding
upon the Grantor or upon any of its assets and will not result in the creation
or imposition of any Lien on any of the assets of the Grantor except as
contemplated by this Patent and Trademark Security Agreement and the Security
Agreement.

 

(g)                                 No
Consent or Approval.  No consent,
filing, approval, registration, recording, or other action is required (x) for
the grant by the Grantor of the Lien on the Collateral pursuant to this Patent
and Trademark Security Agreement or for the execution, delivery or performance
of this Patent and Trademark Security Agreement by the Grantor, or (y) to
perfect the Lien purported to be created by this Patent and Trademark Security
Agreement.

 

(h)                                 Validity
of Collateral.  To the knowledge of
the Grantor, all of the Collateral is subsisting and is valid.

 

(i)                                     Organization.  The Grantor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada and
duly qualified and in good standing in 

 

5

 

every other state or
jurisdiction in which the nature of the Grantor’s business or the ownership of
its assets requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the Grantor or the
Collateral.

 

4.                                       Covenants.  The Grantor covenants and agrees with the
Secured Parties that from and after the date of this Patent and Trademark
Security Agreement until the payment or performance in full by the Grantor of
all of its Obligations:

 

(a)                                  Further
Documentation.  At any time and from
time to time, upon the written request of the Secured Parties, and at the sole
expense of the Grantor, the Grantor will promptly and duly execute and deliver
such further instruments and documents and take such further action as the
Secured Parties may request for the purpose of obtaining or preserving the full
benefits of this Patent and Trademark Security Agreement and of the rights and
powers herein granted, including, without limitation, the filing of any
financing or continuation statements under the Code in effect in any such
jurisdiction with respect to the Liens created hereby.  The Grantor also hereby authorizes the
Secured Parties to file any such financing or continuation statement without
the signature of the Grantor to the extent permitted by applicable law. A
carbon, photographic or other reproduction of this Patent and Trademark
Security Agreement shall be sufficient as a financing statement for filing in
any jurisdiction.

 

(b)                                 Indemnification.  The Grantor agrees to pay, and to save the
Secured Parties and each Secured Party harmless from, any and all liabilities,
costs and expenses (including, without limitation, legal fees and expenses) (i)
with respect to, or resulting from, any delay in paying, any and all excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral, (ii) with respect to, or resulting from, any
delay by the Grantor in complying with any law or regulation applicable to any
of the Collateral or (iii) in connection with any action taken by the Secured
Parties in exercising its rights under this Patent and Trademark Security
Agreement.

 

(c)                                  Maintenance
of Records.  The Grantor will keep
and maintain at its own cost and expense satisfactory and complete records of
the Collateral.  The Grantor hereby
grants to the Secured Parties access to all of the Grantor’s books and records
pertaining to the Collateral, and the Grantor shall turn over any such books
and records for inspection at the office of the Grantor to the Secured Parties
or to their representatives during normal business hours at the request of the
Secured Parties.

 

(d)                                 Limitation
on Liens on Collateral.  Except as
provided in paragraph (f) below, the Grantor will not create, incur or permit
to exist, will defend at its own expense the Collateral against, and will take
such other action as is necessary to remove, any Lien or claim on or to the
Collateral, and will defend the right, title and interest of the Secured
Parties in and to any of the Collateral against the claims and demands of all
persons whomsoever.

 

(e)                                  Limitations
on Dispositions of Collateral.  The
Grantor will not sell, transfer, or assign any of the Collateral, or attempt,
offer or contract to do so without express, written agreement by the Secured
Parties, such consent not to be unreasonably withheld.

 

6

 

(f)                                    Limitations
on Licensing of the Collateral. 
Grantor may execute non-exclusive, revocable licenses to Product Patents
and Product Trademarks, and may disclose the contents of Product Patent
Applications under fully executed confidentiality agreements, only upon prior
written notice to Secured Parties and only when the execution of such license
is reasonably unlikely to (i) diminish the value of the Collateral, (ii) have a
material impact on the rights of the Secured Parties and (iii) otherwise
reasonably be considered to have a material adverse effect on the security
interest granted to the Secured Parties in the Collateral in Section 2 of this
Patent and Trademark Security Agreement (the “Security Interest”).  Any and all such licenses shall contain
provisions that enable the Secured Parties, at their discretion, to revoke such
Product Patent and/or Product Trademark licenses when the Secured Parties have
a reasonable belief that their rights are being adversely effected.

 

(g)                                 Further
Identification of Collateral.  The
Grantor will furnish to the Secured Parties from time to time, upon the request
of the Secured Parties, statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Secured Parties may reasonably request, all in reasonable
detail.

 

(h)                                 Notices.  The Grantor will advise the Secured Parties
promptly, in reasonable detail, at its address set forth in accordance with
Section 13 hereof, (i) of any Lien on, or claim asserted against, any of the
Collateral, other than as created hereby or as permitted hereby, and (ii) of
the occurrence of any other event which could reasonably be expected to have a
material adverse effect on the Collateral or on the Liens created hereunder.

 

(i)                                     Patents.

 

(i)                                     The
Grantor will, at Grantor’s expense, take commercially reasonable steps to
monitor and manage its portfolio of Product Patents and Product Patent
Applications, and will notify the Secured Parties immediately if it knows that
any application relating to any Product Patent or Product Patent Application
may become abandoned 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 or any
court or tribunal in any country) regarding the patentability of any Product
Patent Application, the validity or enforceability of any Product Patent or
Grantor’s ownership of any Product Patent or Product Patent Application.

 

(ii)                                  The
Grantor will, at Grantor’s expense, with respect to any Product Patent that the
Grantor obtains after the date hereof, promptly (i) take all actions necessary
so that the Secured Parties shall obtain a perfected Security Interest in such
Product Patent and (ii) provide to the Secured Parties updated versions of Exhibit A,
listing all Product Patents and all License Rights in which Grantor has an
interest.  With respect to this
paragraph 4(i)(ii), an Event of Default is “continuing” if, after a period of
30 days following issuance of any Product Patent, the Grantor has not provided
notice thereof to the Secured Parties.

 

(iii)                               The
Grantor will, at Grantor’s expense, with respect to any Product Patent
Application that the Grantor obtains after the date hereof, promptly (i) take
all actions 

 

7

 

necessary so
that the Secured Parties shall obtain a perfected Security Interest in such
Product Patent and (ii) provide to the Secured Parties updated versions of
Exhibit A listing all such Product Patent Applications.  With respect to this paragraph 4(i)(iii), an
Event of Default is continuing if after a period of 30 days following receipt
of a filing receipt that identifies the serial number thereof, Grantor has not
provided notice thereof to the Secured Parties.

 

(iv)                              Upon
request of the Secured Parties, the Grantor shall execute and deliver any and
all agreements, instruments, documents, and papers as the Secured Parties may
request to evidence the Secured Parties’ Security Interest in any or all
Product Patents or Product Patent Applications.

 

(v)                                 The
Grantor will, at its own expense, take all commercially reasonable steps,
including, without limitation, those required in any proceeding before the
United States Patent and Trademark Office, to reasonably maintain and pursue
each Product Patent and Product Patent Application including, without
limitation, payment of maintenance and other fees.

 

(vi)                              In
the event that the Grantor believes that any Product Patent included in the
Collateral has been infringed by a third party, the Grantor shall, within 20
days of forming a belief that the Collateral is being infringed by a third
party, obtain a legal opinion from outside counsel and notify the Secured
Parties of such infringement and shall, if appropriate in the Grantor’s sole
discretion, at its own expense, sue for infringement, seeking injunctive relief
where appropriate and to recover any and all damages for such infringement, or
take such other actions as the Grantor shall reasonably, in its sole
discretion, deem appropriate under the circumstances to protect such
Patent.  In the event Grantor declines
to pursue infringement claims, the Secured Parties shall have the right to
pursue such claims pursuant to the powers granted in Section 6 hereof.

 

(j)                                     Trademarks.

 

(i)                                     The
Grantor will, with respect to each Product Trademark identified in Exhibit B
hereto as it may be amended, supplemented or otherwise modified from time to
time, take reasonable steps to monitor its portfolio of trademarks, and for
each Product Trademark set forth on Exhibit B, the Grantor will (i) continue to
use or have used such Product Trademark to the extent necessary to maintain
such Product Trademark in full force free from any claim of abandonment for
non-use, (ii) maintain as in the past the quality of products and services
offered under such Product Trademark to the extent appropriate, (iii) employ
such Product Trademark with the appropriate notice of registration, (iv) not
adopt or use any mark which is confusingly similar or a colorable imitation of
such Product Trademark unless the Secured Parties shall obtain a first priority
perfected Security Interest in the Company’s interest in such mark pursuant to
this Patent and Trademark Security Agreement, and (v) not do any act or
knowingly omit to do any act whereby any such Product Trademark may become
invalidated, abandoned, rendered unenforceable or otherwise diminish Grantor’s
rights therein.

 

8

 

(ii)                                  The
Grantor will promptly notify the Secured Parties if any application or
registration relating to any Product Trademark may become opposed, abandoned,
canceled or dedicated to the public, 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 or any court or tribunal in any country) regarding the
validity, enforceability or Grantor’s ownership interest in such Product
Trademark; or its right to register the same or to keep and maintain the same.

 

(iii)                               The
Grantor will, at Grantor’s expense, with respect to any Product Trademark or
Product Trademark Application that is registered or for which an application
for registration is filed after the date hereof, promptly (i) take all actions
necessary so that the Secured Parties shall obtain a perfected Security
Interest in such Product Trademark or Product Trademark Application and (ii)
provide to the Secured Parties an updated version of Exhibit B listing all
registered Product Trademarks and Product Trademark Applications in which the
Grantor has an interest.  With respect
to this paragraph 4(j)(iii), an Event of Default is continuing if after a
period of 30 days following the mailing of the Certificate of Registration or
30 days following receipt of a filing receipt that identifies the serial number
thereof, Grantor has not provided notice thereof to the Secured Parties.

 

(iv)                              Upon
request of the Secured Parties, the Grantor shall execute and deliver any and
all agreements, instruments, documents, and papers as the Secured Parties may
request to evidence the Secured Parties’ Security Interest in any Product
Trademark set forth on Exhibit B and the goodwill and general
intangibles of the Grantor relating thereto or represented thereby, and the
Grantor hereby constitutes the Secured Parties their attorney-in-fact to
execute and file all such writings for the foregoing purposes, all acts of such
attorney being hereby ratified and confirmed; such power being coupled with an
interest is irrevocable until the Grantor shall have paid and performed in full
all of its obligations under the Going Forward Agreement.

 

(v)                                 The
Grantor will, at Grantor’s expense, take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States
Patent and Trademark Office to maintain and pursue each Product Trademark
Application (and to obtain the relevant registration) and to maintain the
registration of the Product Trademarks, including, without limitation, filing
of applications for renewal, affidavits of use and affidavits of
incontestability.

 

(vi)                              In
the event that Grantor believes that any Product Trademark included in the
Collateral has been infringed, misappropriated or diluted by a third party, the
Grant shall, within 10 days of forming such belief, send a written notice to
such third party demanding that they cease such infringement, misappropriation
or dilution, and the Grantor shall notify the Secured Parties and, if
appropriate in Grantor’s sole discretion, at its own expense, sue for
infringement, misappropriation or dilution, seeking injunctive relief where
appropriate and to recover any and all damages for such infringement,
misappropriation or dilution, or take such other action as the Grantor
reasonably, in its sole discretion, deems appropriate under the circumstances
to protect such Trademark.

 

9

 

With respect
to this paragraph, an Event of Default is continuing if a copy of any written
notice of infringement, misappropriation or dilution is not been provided to
the Secured Parties within 20 days following the date such communication was
supposed to have been provided to the infringing party.  In the event Grantor declines to pursue
infringement claims, the Secured Parties shall have the right to pursue such
claims pursuant to the powers granted in Section 6 hereof.

 

(k)                                  Changes
in Locations, Name, Etc.  The
Grantor will not (i) change the location of its chief executive office/chief
place of business from that specified in Section 3(d) hereof or (ii) change its
name, identity or corporate structure to such an extent that any statement
filed by the Secured Parties with the Patent and Trademark Office in connection
with this Patent and Trademark Security Agreement would become misleading,
unless it shall have given the Secured Parties at least 30 days prior written
notice thereof and, prior to such action or event, shall have taken appropriate
action to preserve and protect the Secured Parties’ Security Interest under
this Patent and Trademark Security Agreement.

 

5.                                       Performance
by Secured Parties of Grantor’s Obligations.  If the Grantor fails to perform or comply with any of its
agreements contained herein and the Secured Parties, as provided for by the
terms of this Patent and Trademark Security Agreement and following reasonable
written notice to the Grantor, shall itself perform or comply, or otherwise
cause performance or compliance, with such agreements, the expenses of the
Secured Parties incurred in connection with such performance or compliance
shall be payable by the Grantor to the Secured Parties on demand and shall constitute
Obligations secured hereby.

 

6.                                       Secured
Parties’ Appointment as Attorney-in-Fact.

 

(a)   The Grantor hereby irrevocably constitutes
and appoints the Secured Parties and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the Grantor and in
the name of the Grantor or in its own name, from time to time in the Secured
Parties’ discretion, for the purposes of carrying out the terms of this Patent
and Trademark Security Agreement, to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Patent and Trademark Security
Agreement and, without limiting the generality of the foregoing, hereby gives
the Secured Parties the power and right, upon the occurrence and continuance of
an Event of Default, on behalf of the Grantor to do the following:

 

(i)  to ask, demand, collect, receive and give acquittances
and receipts for any and all moneys due and to become due under any License
Rights and, in the name of the Grantor or its own name or otherwise, to take
possession of and endorse and collect any checks, drafts, notes, acceptances or
other instruments for the payment of moneys due under any License Rights and to
file any claim or to take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Secured Parties for the purpose
of collecting any and all such moneys due under any License Rights whenever
payable;

 

(ii)   to pay or discharge taxes, liens, security
interests or other encumbrances levied or placed on or threatened against the
Collateral, to effect any repairs or 

 

10

 

any insurance called for by the
terms of this Patent and Trademark Security Agreement and to pay all or any
part of the premiums therefor and the costs thereof; and

 

(iii)  to direct any party liable for any payment
under any of the License Rights to make payment of any and all moneys due and
to become due thereunder directly to the Secured Parties or as the Secured
Parties shall direct;

 

(iv)  to receive payment of and receipt for any
and all moneys, claims and other amounts due and to become due at any time in
respect of or arising out of any Collateral;

 

(v)  to commence and prosecute any suits, actions
or proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any part thereof and to enforce any other right in
respect of any Collateral including, without limitation, infringement suits
against third parties;

 

(vi)  to defend any suit, action or proceeding
brought against the Grantor with respect to any Collateral;

 

(vii)  to settle, compromise, or adjust any suit,
action or proceeding described above and, in connection therewith, to give such
discharges or releases as the Secured Parties may deem appropriate;

 

(viii)
generally to sell, transfer, pledge, make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though the Secured
Parties were the absolute owner thereof for all purposes, and to do, at the
Secured Parties’ option all acts and things which the Secured Parties deems
necessary to protect, preserve or realize upon the Collateral and the Secured
Parties’ Security Interest therein, in order to effect the intent of this
Patent and Trademark Security Agreement, all as fully and effectively as the
Grantor might do; and

 

(ix) take such
actions and make such filings with the U.S. Patent and Trademark Office and any
foreign jurisdictions as are necessary to protect the Collateral.

 

(b)   This power of attorney is a power coupled
with an interest and shall be irrevocable. Notwithstanding the foregoing, the
Grantor further agrees to execute any additional documents which the Secured
Parties may require in order to confirm this power of attorney, or which the
Secured Parties may deem necessary to enforce any of its rights contained in
this Patent and Trademark Security Agreement.

 

(c)   The powers conferred on the Secured Parties
hereunder are solely to protect its interests in the Collateral and shall not
impose any duty upon it to exercise any such powers. The Secured Parties shall
be accountable only for amounts that it actually receives as a result of the
exercise of such powers and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Grantor for any act or failure
to act, except for its own gross (not mere) negligence or willful misconduct.

 

(d)   The Grantor also authorizes the Secured
Parties to execute, in connection 

 

11

 

with the sale provided for in
paragraph 6 of this Patent and Trademark Security Agreement, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Collateral.

 

7.                                       Remedies.  If an Event of Default (i) has occurred and
has continued for a period of 30 consecutive days without cure by the Grantor
with respect to items 1, 2, and 3 set forth in the definition of Event of
Default (expect, with respect to paragraphs 4(k) or 6(d) of the Security
Agreement, such period shall be reduced to five (5) consecutive days), or (ii)
has occurred and is continuing with respect all other items set forth in the
definition of Event of Default, the Secured Parties may exercise, in addition
to all other rights and remedies granted to it in this Security Agreement and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code.  Without limiting the generality of the
foregoing, the Secured Parties, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below or expressly provided for) to or upon the
Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are, to the extent permitted by applicable law, hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
license, assign, give option or options to purchase, or otherwise dispose of
and deliver the Collateral or any part thereof (or contract to do any of the
foregoing), at public or private sale or sales, at any exchange, broker’s board
or office of the Secured Parties or elsewhere upon such terms and conditions as
it may deem advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk.  The Secured Parties shall have the right
upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in the Grantor,
which right or equity is hereby waived, to the extent permitted by applicable
law, or released.

 

8.                                       Severability.  Any provision of this Patent and Trademark
Security Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.

 

9.                                       Paragraph
Headings.  The paragraph headings
used in this Patent and Trademark Security Agreement are for convenience of
reference only and are not to affect the construction hereof or be taken into
consideration in the interpretation hereof.

 

10.                                 Cumulative
Remedies.  The rights and remedies
provided herein and in the Going Forward Agreement may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law or
in equity or by statute.

 

11.                                 Waivers
and Amendments; Successors and Assigns. 
None of the terms or provisions of this Patent and Trademark Security
Agreement may be waived, amended, supplemented or otherwise modified except by
a written instrument executed by the party to be charged with enforcement. No
course of dealing between the Grantor and the Secured Parties nor any delay in
exercising or failure to exercise any rights, power or privilege under this
Patent and 

 

12

 

Trademark Security Agreement
shall operate as a waiver.  This Patent
and Trademark Security Agreement shall be binding upon the successors and assigns
of the Grantor and shall inure to the benefit of the Secured Parties and their
successors and assigns. The Grantor may not assign its rights or obligations
under this Patent and Trademark Security Agreement without the prior written
consent of the Secured Parties.

 

12.                                 Termination
of Security Interest; Release of Collateral.  Upon the payment and performance in full by the Grantor of its
Obligation, the Security Interest shall terminate and all rights to the
Collateral shall revert to the Grantor.

 

13.                                 Notices.  Any notices required or permitted to be
given under the terms of this Agreement shall be in writing and shall be sent
by mail, personal delivery, telephone line facsimile transmission or courier
and shall be effective five days after being placed in the mail, if mailed, or
upon receipt, if delivered personally, by telephone line facsimile transmission
or by courier, in each case addressed to a party at such party’s address (or
telephone line facsimile transmission number) shown below or such other address
(or telephone line facsimile transmission number) as a party shall have
provided by notice to the other party in accordance with this provision. In the
case of any notice to the Grantor, such notice shall be addressed to the
Grantor at 140 Union Square Drive, New Hope, PA 18938, Attention: Chief
Financial Officer (telephone line facsimile number (215) 862-7139), and a copy
shall also be given to: Epstein, Becker & Green, P.C., 111 Huntington
Avenue, Boston, MA 02199, Attention: Susan E. Pravda, Esq. (telephone line
facsimile transmission number (617) 342-4001), and in the case of any notice to
the Secured Parties, such notice shall be addressed to the Secured Parties
Xmark Fund, L.P. and Xmark Fund, Ltd., 152 West 57th Street, 21st Floor, New York,
New York  10019, Attention: Mitchell D.
Kaye (telephone line facsimile transmission number (212) 247-1329), and a copy
shall be given to: Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New
Jersey 07068 Attention: John D. Hogoboom, Esq. (telephone line facsimile
transmission number (973) 597-2383).

 

14.                                 Integration.  This Patent and Trademark Security Agreement
represents the agreement of the Grantor and the Secured Parties with respect to
the subject matter hereof, and there are no promises, undertakings,
representations or warranties by the Secured Parties relative to subject matter
hereof not expressly set forth or referred to herein.

 

15.                                 Governing
Law.  This Patent and Trademark
Security Agreement and the rights and obligations of the Grantor and the
Secured Parties under this Patent and Trademark Security Agreement shall be
governed by, and construed and interpreted in accordance with, the law of the
State of New York, except to the extent that under the New York Uniform
Commercial Code the laws of another jurisdiction govern matters of perfection
and the effect of perfection or non-perfection of any Security Interest granted
hereunder, and except to the further extent that the United States patent and
trademark laws are applicable.

 

16.                                 Counterparts.  This Patent and Trademark Security Agreement
may be executed in counterparts and by the parties hereto on separate
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.  A telephone line facsimile transmission of
this Patent and Trademark Security Agreement bearing a signature on behalf of a
party hereto shall be legal and binding on such party.

 

13

 

17.                                 Waiver
of Jury Trial.  To the extent
permitted by applicable law, each of the Grantor and the Secured Parties waives
any right to have a jury participate in resolving any dispute, whether sounding
in contract, tort, or otherwise between the parties hereto arising out of, connected
with, related to, or incidental to the relationship between any of them in
connection with this Security Agreement or the transactions contemplated
hereby.  Instead, any such dispute
resolved in court will be resolved in a bench trial without a jury, submitted
to jurisdiction in the Southern District of New York and New York State Courts
located in the County of New York.

 

14

 

IN WITNESS WHEREOF, the Grantor has caused this Patent and Trademark
Security Agreement to be duly executed and delivered as of the date first above
written.

 

	
   

  	
  PHOTOGEN TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brooks Boveroux

  	
   

  
	
   

  	
   

  	
  Name: Brooks Boveroux

  
	
   

  	
   

  	
  Title: Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  ACKNOWLEDGED AND AGREED:

  
	
   

  
	
  XMARK FUND, L.P.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Mitchell D. Kaye

  	
   

  
	
   

  	
  Name: Mitchell D. Kaye

  
	
   

  	
  Title: Chief Investment Officer

  
	
   

  	
   

  
	
   

  
	
  ACKNOWLEDGED AND AGREED:

  
	
   

  
	
  XMARK FUND, LTD.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Mitchell D. Kaye

  	
   

  
	
   

  	
  Name: Mitchell D. Kaye

  
	
   

  	
  Title: Chief Investment Officer

  
							

 

15

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