EXHIBIT 10.9
SECURITY AGREEMENT, dated as of January 28, 1997, between GENTA
INCORPORATED, a Delaware corporation (the "Company" or "Debtor"), with an
address at 3550 General Atomics Court, Building 9, 2nd floor, Xxx Xxxxx, XX
00000 and PARAMOUNT CAPITAL, INC., a New York corporation with an address at 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Secured Party"), solely as agent
for the holders (the "Holders") of the Company's Senior Secured Convertible
Bridge Notes (the "Notes") and not in its individual capacity.
WHEREAS: The Holders have each extended credit or will extend credit to
the Company represented by separate Notes in an aggregate principal amount of up
to $3,000,000.
The Holders have entered into Note and Warrant Purchase Agreements
pursuant to which, among other things, the Secured Party has been appointed to
act as agent under this Agreement for the benefit of all Holders to secure the
obligations of the Debtor to the Holders under their respective Notes.
In consideration of the extension of credit to the Company under the
Notes, the Debtor wishes to grant a security interest in certain collateral to
the Secured Party for the benefit of all Holders.
NOW, THEREFORE, the parties hereto, intending legally to be bound, do
hereby agree as follows (terms used and not defined herein shall have the
meanings as defined in the Uniform Commercial Code as in effect in the State of
California (the "UCC")):
1. Grant of a Security Interest. Debtor hereby grants to the Secured
Party a security interest in the Collateral (as defined in Section 2).
2. Collateral. The collateral covered by this Agreement consists of all
property of the following types, wherever located and whether now owned or
hereafter owned or acquired by Debtor, whether or not affixed to realty, in all
Proceeds and Products thereof in any form, in all parts, accessories,
attachments, special tools, additions, replacements, substitutions and
accessions thereto or therefor, and in all increases or profits received
therefrom, including, without limitation, all property described in any schedule
from time to time delivered by Debtor to the Secured Party: Equipment, Fixtures,
Inventory, Investment Property, Rights to Proceeds to Written Letters of Credit,
Accounts, Chattel Paper, Documents, Patents, Patents Pending, Patent
Applications (and other similar rights whether perfected or not), Instruments,
Goods, Money and General Intangibles (except the real property leases to which
the Debtor is, or will be, a party) (all of the foregoing, including such
proceeds, being collectively referred to as the "Collateral"). Notwithstanding
the foregoing,
the Collateral shall not include the Company's equity interest in its Genta-Jago
Joint Venture and JBL Scientific, Inc.
3. Debtor's Obligations Secured Hereby. Debtor's obligations (the
"Obligations") to the Secured Party secured hereby for the benefit of the
Holders are the payment of the principal sum and interest evidenced by the
Notes, and performance and discharge of each and every obligation of Debtor
under this Agreement and the Notes.
4. Debtor's Representations and Warranties. Debtor represents and
warrants and, so long as this Security Agreement is in effect, shall be deemed
continuously to represent and warrant, that:
(a) Debtor owns the Collateral free and clear of any Liens (as defined
in the Note), except for Liens permitted by Section 6(b) of the Note.
(b) Debtor has all necessary corporate power and authority and has
taken all corporate action necessary to execute, deliver and perform this
Agreement and the Notes and to encumber and grant a security interest in the
Collateral.
(c) There is no effective financing statement or other instrument
similar in effect covering all or any part of the Collateral on file in any
recording office except as (i) may have been filed in favor of the Secured
Party, (ii) as may have been filed by any landlords of real property leased by
the Debtor, or (iii) as set forth on Schedule I hereto.
(d) This Agreement creates a valid security interest of the Secured
Party in the Collateral securing payment of the Obligations. Upon the filing of
the financing statements and the other instruments similar in effect under
Section 5(b) or the taking of any other action necessary to perfect, the Secured
Party will have valid and perfected first priority liens on and security
interests in the Collateral (except that such liens and security interests may
not be first priority to the extent preceded by any Liens permitted by Section
6(b) of the Note existing prior to the date hereof).
(e) No consent, authorization, approval or other action by, and no
notice to or filing with, any governmental authority, regulatory body, lessor,
franchise or other person or entity is required for the grant by Debtor of the
security interest granted hereby or for the execution, delivery or performance
of this Agreement by Debtor or for the perfection or exercise by the Secured
Party of its rights and remedies hereunder, except filings of financing
documents or as otherwise set forth on Schedule I hereto.
(f) Debtor does not transact any part of its business under any
tradenames, division names, assumed names or other names, except for their names
set forth in the preamble or on Schedule I hereto; Debtor's business addresses
and chief executive offices are as set forth in the preamble hereto; and
Debtor's records concerning the Collateral are kept at such address.
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(g) Each Account, General Intangible and Chattel Paper constituting
Collateral is genuine and enforceable in accordance with its terms against the
party obligated to pay it (the "Account Debtor"), and no Account Debtor has any
defense, setoff, claim or counterclaim against Debtor which can be asserted
against the Secured Party, whether in any proceeding to enforce the Collateral
or otherwise.
(h) Debtor will promptly deliver to the Secured Party a schedule of all
Accounts, General Intangibles and Chattel Paper, and will provide updated
schedules thereof from time to time as the Secured Party may reasonably request,
but not more frequently than monthly. The amounts represented on such schedules
by Debtor to the Secured Party as owing by each Account Debtor or by all Account
Debtors are and will be the correct amounts actually and unconditionally owing
by such Account Debtor or Account Debtors individually and in the aggregate,
except for normal cash discounts where applicable.
(i) Each Instrument and each Document constituting Collateral is
genuine and in all respects what it purports to be.
(j) Any Collateral which is a Fixture is affixed to real property at
Debtor's addresses specified on Schedule II hereto.
5. Debtor's Covenants. Debtor agrees and covenants for itself, its
successors and assigns that:
(a) The Collateral will be used solely for business purposes of Debtor
and will remain in the possession or under the control of Debtor (sale or
replacement in the ordinary course excepted) and will not be used for any
unlawful purpose. The Collateral will not be misused, abused, wasted or allowed
to deteriorate (ordinary wear and tear excepted). Debtor will keep the
Collateral, as appropriate and applicable, in good condition and repair
(ordinary wear and tear excepted), and will clean, shelter, and otherwise deal
with the Collateral in all such ways as are considered good practice by owners
of like property.
(b) Debtor has executed and will promptly file with the appropriate
governmental authorities, or deliver to the Secured Party for filing, UCC-1
Financing Statements with respect to the Collateral. Debtor shall, at no cost to
the Secured Party, promptly execute, acknowledge and deliver all such other
documents as the Secured Party reasonably deems necessary to create, perfect and
continue the security interest in the Collateral contemplated hereby. Debtor
will pay all costs of title searches and filing of financing statements,
assignments and other documents in all public offices reasonably requested by
the Secured Party, and will not, without the prior written consent of the
Secured Party, file or authorize or permit to be filed in any public office any
financing statement naming Debtor as debtor and not naming the Secured Party, as
agent for the Holders, as secured party, except with respect to other secured
indebtedness permitted by the terms of the Notes.
(c) Debtor will defend the Collateral against the claims and demands of
all other parties, including, without
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limitation, defenses, setoffs, claims and counterclaims asserted by any Account
Debtor against Debtor or the Secured Party, except, as to Inventory, purchasers
and lessees in the ordinary course of Debtor's business; will keep the
Collateral free from all security interests or other encumbrances, except the
Security Interest and except as permitted by Section 6(b) of the Notes; and will
not sell, transfer, lease, assign, deliver or otherwise dispose of any
Collateral or any interest therein without the prior written consent of the
Secured Party, except that Debtor may sell or lease Inventory in the ordinary
course of Debtor's business and sell, lease or replace equipment in the ordinary
course of business.
(d) Debtor will, at the Secured Party's request, xxxx any and all books
and records to indicate the Security Interest.
(e) Debtor will deliver to the Secured Party, upon demand, all
Documents and all Chattel Paper (duly endorsed to Secured Party) constituting,
representing or relating to the Collateral or any part thereof, and any
schedules, invoices, shipping documents, delivery receipts, purchase orders,
contracts or other documents representing or relating to the Collateral or any
part thereof.
(f) Debtor will notify the Secured Party promptly in writing of any
change in Debtor's business addresses or chief executive offices, any change in
the address at which records concerning the Collateral are kept and any change
in Debtor's name, identity or corporate or other structure.
(g) Debtor will prevent the Collateral or any part thereof from being
or becoming an accession to other goods not covered by this Security Agreement.
(h) Debtor shall pay all out-of-pocket expenses, including reasonable
attorneys' fees and costs, reasonably incurred by the Secured Party after or in
reasonable anticipation of the occurrence of an Event of Default in the
preservation, realization, enforcement or exercise of any of the Secured Party's
rights under this Agreement.
(i) Any and all Collateral described or referred to in the granting
clauses hereof which is hereafter acquired shall, and without any further
conveyance, assignment or act on the part of Debtor or the Secured Party, become
and be subject to the security interests herein granted as fully and completely
as though specifically described herein, but nothing in this Section 5(i) shall
be deemed to modify or change the obligations of Debtor under Section 5(b)
hereof.
(j) Upon request of the Secured Party, forthwith execute and deliver or
cause to be executed and delivered to the Secured Party, in due form for filing
or recording (and pay the cost of filing or recording the same in all public
offices deemed necessary by the Secured Party), such assignments, security
agreements, pledge agreements, consents, waivers, financing statements, stock or
bond powers, and other documents, and do such other acts and things, all as the
Secured Party may from time to
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time request, to establish and maintain to the satisfaction of the Secured Party
valid perfected Liens in all Collateral (free of all other Liens, claims, and
rights of third parties whatsoever, except for Liens, claims, and rights
permitted by this Security Agreement or as set forth on the Schedules hereto).
6. Certain Provisions Concerning Collateral.
(a) After the occurrence of an Event of Default (as defined below), the
Secured Party may notify all or any Account Debtors of the security interest
created hereby and may also direct such Account Debtors to make all payments on
Collateral to the Secured Party. All payments on and from Collateral received by
the Secured Party directly or from Debtor shall be applied to the Obligations in
accordance with Section 9. The Secured Party may demand of Debtor in writing,
before or after notification to Account Debtors and without waiving in any
manner the security interest created hereby, that any payments on and from the
Collateral received by Debtor: (i) shall be held by Debtor in trust for the
Secured Party in the same medium in which received; (ii) shall not be commingled
with any assets of Debtor; and (iii) shall be delivered to Secured Party in the
form received, properly endorsed to permit collection, not later than the next
business day following the day of their receipt; and Debtor shall comply with
such demand. Debtor shall also promptly notify the Secured Party of the return
to or repossession by Debtor of Goods underlying any Collateral, other than
returns or repossession in the ordinary course of Debtor's business, and shall
hold the same in trust for the Secured Party and shall dispose of the same as
Secured Party directs.
(b) If any Collateral consists of investment securities, other than
instruments purchased with the proceeds of the Offering (as defined in the
Note), Debtor has delivered and will continue to deliver such securities to the
Secured Party to be held as Collateral and, after an Event of Default,
authorizes the Secured Party to transfer the same or any part thereof into its
own name or that of its nominee so that the Secured Party or its nominee may
appear of record as the sole owner thereof. Upon demand, Debtor shall deliver
promptly to the Secured Party copies of all notices, statements or other
communications received by them or their nominees as owner of such securities.
(c) Until the occurrence of an Event of Default, Debtor reserves the
right to receive all income from or interest on the Collateral. Upon the
occurrence of an Event of Default, Debtor will not demand or receive any income
from or interest on such Collateral and, if Debtor receives any such income or
interest without any demand by it, the same shall be held by Debtor in trust for
the Secured Party in the same medium in which received, shall not be commingled
with any assets of Debtor and shall be delivered to the Secured Party in the
form received, properly endorsed to permit collection, not later than the next
business day following the day of its receipt. The Secured Party may apply the
net cash receipts from such income or interest to payment of the Obligations,
provided that the Secured Party shall account for and pay over to Debtor any
such income or interest remaining after payment in full of the Obligations.
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(d) Whether or not an Event of Default has occurred, Debtor authorizes
the Secured Party to (i) receive any increase in or profits on the Collateral
(other than Inventory, in the case where no Event of Default has occurred)
(including, without limitation, any stock issued as a result of any stock split
or dividend, any capital distributions and the like), and to hold the same as
part of the Collateral, (ii) receive any payment or distribution on the
Collateral upon redemption by, or dissolution and liquidation of, the issuer
thereof, (iii) surrender such Collateral or any part thereof in exchange
therefor, and (iv) hold the net cash receipts from any such payment or
distribution described in clause (ii) hereof as part of the Collateral. If
Debtor receives any such increase, profits, payments or distributions, Debtor
will receive and deliver same promptly to the Secured Party on the same terms
and conditions set forth in Section 6(b) hereof respecting income or interest,
to be held by the Secured Party as part of the Collateral.
7. Events of Default. The occurrence of any "Events of Default" under
the Notes shall constitute an "Event of Default" under this Security Agreement.
8. Remedies on Default. (a) Upon the occurrence of an Event of Default
the Secured Party may, by notice to Debtor, (or automatically in the case of an
Event of Default pursuant to Section 7 of the Note not requiring notice),
declare the aggregate unpaid principal balance of all the Notes, together with
all unpaid accrued interest thereon, to be immediately due and payable and
thereupon all such amounts shall be and become immediately due and payable to
the Secured Party for the benefit of the Holders. Upon such acceleration, the
Secured Party, for the benefit of the Holders, shall have all rights,
privileges, powers and remedies provided a secured party under the UCC and any
other applicable law. Upon the existence or occurrence of an Event of Default,
the Secured Party may require Debtor to assemble the Collateral and make it
available to the Secured Party at a place or places designated by the Secured
Party, and the Secured Party may use and operate the Collateral.
(b) Without in any way requiring notice to be given in the following
time and manner, Debtor agrees that any notice by the Secured Party of sale,
disposition or other intended action hereunder or in connection herewith,
whether required by the UCC or otherwise, shall constitute reasonable notice to
Debtor if such notice is mailed by regular or certified mail postage prepaid, at
least seven business days prior to such action, to Debtor's address specified
above or to any other address which Debtor has specified in writing to the
Secured Party as the address to which notices hereunder shall be given to
Debtor.
(c) After an Event of Default, the Secured Party may demand, collect
and xxx on any of the Accounts, Chattel Paper, Instruments and General
Intangibles (in either Debtor's or the Secured Party's name at the latter's
option); may enforce, compromise, settle or discharge such Collateral without
discharging the Obligations or any part thereof; and may indorse Debtor's name
on any and all checks, commercial paper, and any other Instruments pertaining to
or constituting Collateral.
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9. Payments After an Event of Default. All payments received and
amounts realized by the Secured Party pursuant to Section 8, including all such
payments and amounts received after the entire unpaid principal and interest
amount of the Notes has been declared due and payable, as well as all payments
or amounts then held or thereafter received by the Secured Party as part of the
Collateral while an Event of Default shall be continuing, shall be promptly
applied and distributed by the Secured Party in the following order of priority:
(a) first, to the payment of all costs and expenses, including
reasonable legal expenses and attorneys' fees, incurred or made hereunder by the
Secured Party, and/or by any other Holder or Holders, including any such costs
and expenses of foreclosure or suit, if any, and of any sale or the exercise of
any other remedy under Section 8, and of all taxes, assessments or liens
superior to the lien granted under this Security Agreement, except any taxes,
assessments or other superior lien subject to which any said sale under Section
8 hereof may have been made; and
(b) second, to the payment to each Holder of the amount then owing or
unpaid on such Holder's Note, and in case the payments received and amounts
realized by the Secured Party shall be insufficient to pay in full the whole
amount so due, owing or unpaid upon all the Notes, then ratably, in the
proportion that the unpaid principal amount of each Note bears to the aggregate
unpaid principal amount of all Notes, and in the proportion that the amount of
interest accrued under each Note bears to the aggregate amount of interest
accrued under all the Notes, with application on each Note to be made first to
the unpaid interest thereon, and second, to the unpaid principal thereof, such
application to be made upon presentation of the Notes and the notation thereon
of the payment, if partially paid, or the surrender and cancellation thereof, if
fully paid; and
(c) third, to the payment of the balance or surplus, if any, to Debtor,
its successors and assigns, or to whomsoever may be lawfully entitled to receive
the same.
10. Power of Attorney. Debtor hereby appoints the Secured Party the
attorney-in-fact of Debtor to prepare, sign and file or record, for Debtor in
Debtor's name, any financing statement and to take any other action reasonably
deemed by the Secured Party necessary or desirable to perfect and continue the
perfection of the security interest of the Secured Party hereunder, and to
perform any obligations of Debtor hereunder, at Debtor's expense, but without
obligation to do so. Such power of attorney is coupled with an interest and is
irrevocable so long as this Agreement is in effect.
11. Secured Party's Right to Cure; Reimbursement. In the event Debtor
should fail to do any act as herein provided, the Secured Party may, but without
obligation to do so, with notice to Debtor, and without releasing Debtor from
any obligation hereof, make or do the same in such manner and to such extent as
the Secured Party may deem necessary to protect the Collateral, including,
without limitation, the defense of any action purporting to affect the
Collateral or the rights or powers of the Secured
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Party hereunder, at Debtor's expense. Debtor shall reimburse the Secured Party
for expenses reasonably incurred under this Section 11.
12. Miscellaneous. (a) This Agreement, together with the covenants and
warranties contained in it, shall inure to the benefit of the Secured Party, the
Holders and their respective successors, assigns, heirs and personal
representatives, and shall be binding upon Debtor, its successors and assigns.
(b) Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or by Federal Express, Express Mail or similar overnight
delivery or courier service or delivered against receipt to the party to whom it
is to be given (i) if to Debtor, at its address set forth in the preamble to
this Agreement to the attention of its President or (ii) if to the Secured
Party, at its address set forth in the preamble of this Agreement, to the
attention of its Chairman. Any notice or other communication given by certified
mail shall be deemed given at the time of certification thereof, except for a
notice changing a party's address which shall be deemed given at the time of
receipt thereof. Any notice given by other means permitted by this Section 12(b)
shall be deemed given at the time of receipt thereof.
(c) This Agreement shall terminate on the satisfaction in full of all
of the Obligations and, on such termination, the Secured Party shall release to
Debtor the security interest granted in the Collateral hereunder; provided, that
if, after receipt of any payment of all or any part of the Obligations, the
Secured Party is for any reason compelled to surrender such payment to any
person or entity, because such payment is determined to be void or voidable as a
preference, impermissible setoff, or a diversion of trust funds, or for any
other reason, this Agreement shall continue in full force notwithstanding any
contrary action which may have been taken by the Secured Party in reliance upon
such payment, and any such contrary action so taken shall be without prejudice
to the Secured Party's rights under this Agreement and shall be deemed to have
been conditioned upon such payment having become final and irrevocable.
(d) If any provision of this Agreement is invalid, illegal, or
unenforceable, the balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
(e) The headings in this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
(f) This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(g) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
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(h) No course of dealing and no delay or omission on the part of the
Secured Party in exercising any right or remedy shall operate as a waiver
thereof or otherwise prejudice the Secured Party's rights, powers or remedies.
No right, power or remedy conferred by this Agreement upon the Secured Party
shall be exclusive of any other right, power or remedy referred to herein or now
or hereafter available at law, in equity, by statute or otherwise, and all such
remedies may be exercised singly or concurrently.
(i) This Agreement sets forth the entire understanding of the parties
with respect to the subject matter hereof, supersedes all existing agreements
among them concerning such subject matter, and may be modified only by a written
instrument duly executed by each party.
(j) Debtor irrevocably consents to the jurisdiction of the courts of
the State of New York and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this
Agreement, any document or instrument delivered pursuant to, in connection with
or simultaneously with this Agreement, or a breach of this Agreement or any such
document or instrument. In any such action or proceeding, Debtor waives personal
service of any summons, complaint or other process and agrees that service
thereof may be made in accordance with Section 12(b). Within 30 days after such
service, or such other time as may be mutually agreed upon in writing by the
attorneys for the parties to such action or proceeding, Debtor shall appear or
answer such summons, complaint, or other process.
(k) This Agreement may be amended, or any of its provisions waived only
by a written instrument executed by the Company and the Secured Party.
IN WITNESS WHEREOF, the parties have executed this Security Agreement
on the date set forth above.
GENTA INCORPORATED
By: /s/Xxxxxx X. Xxxxx
----------------------
Name: Xx. Xxxxxx X. Xxxxx
Title: President and
Chief Executive Officer
PARAMOUNT CAPITAL, INC.
By: /s/Xxxxxxx X. Xxxxxxxxx
---------------------------
Name: Xxxxxxx X. Xxxxxxxxx, M.D
Title: President
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