EXHIBIT 5
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Security Agreement") is made and dated as of
the 31st day of March, 2003 by and between XOMA LTD, a Bermuda company (the
"Company"), and GENENTECH, INC., a Delaware corporation (the "Lender").
RECITALS
A. In accordance with that certain Common Stock and Convertible Note
Purchase Agreement, dated as of April 22, 1996, between the Company (then a
Delaware corporation known as XOMA Corporation) and the Lender, as amended on
April 14, 1999 (collectively, the "Purchase Agreement") and that certain
Collaboration Agreement dated as of April 22, 1996 between the Company and the
Lender, as amended on April 14, 1999 and as further amended and restated as of
March 31, 2003 (collectively, the "Collaboration Agreement"), the Lender has
agreed to make loans to the Company;
B. Those loans are evidenced by an Amended and Restated Convertible Secured
Note Agreement-Development Loan, dated as of the date hereof, in a maximum
principal amount of $80,000,000 and a Secured Note Agreement-Commercial Launch
Loan, dated as of the date hereof, in a maximum principal amount of $15,000,000
(as amended, modified or waived from time to time, collectively, the "Notes,"
and individually, a "Note"). All capitalized terms not otherwise defined herein
shall have the meanings given such terms in the Notes. All other terms not
otherwise defined herein shall have the meanings attributed to such terms in the
California Uniform Commercial Code as in effect from time to time.
C. As a condition precedent to the Lender's obligation to extend credit
under the Notes and as security for the payment and performance of the
Obligations (as defined in Section 3 below), the Company is required to execute
and deliver this Security Agreement, and to grant to the Lender and to create a
security interest in certain property of the Company, as hereinafter provided.
NOW, THEREFORE, in consideration of the above Recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. Grant of Security Interest; Term of Effectiveness. The Company hereby
pledges, assigns and grants to the Lender a security interest in the property
described in Section 2 below (collectively and severally, the "Collateral") to
secure payment and performance of the Obligations. Upon the earlier of (i) the
date on which the Lender is required to return both of the Notes in accordance
with Section 3(c) thereof or (ii) any date on which no Event of Default (as
defined in each Note) shall have occurred under any Note and the Lender,
nevertheless, fails to make a loan to the Company in accordance with Section 8.1
of the Collaboration Agreement (unless (A) such failure is due to force majeure
or operational failure beyond the reasonable control of the Lender, and either
such failure is cured within ten days after the force majeure or operational
failure ceases to exist or such force majeure or operational failure has
continued for less than 180 days, or (B) such failure is a consequence of a
dispute between the Company and the Lender that
has arisen under the Collaboration Agreement, the provisions of Article 18 of
the Collaboration Agreement have been properly invoked and are being adhered to
and such dispute has not been resolved in the favor of the Lender under Article
18 thereunder), the Company may, or may cause the Lender to, file or authorize
the filing of a termination statement for any financing statement filed to
perfect the security interest granted hereby and record or cause to be recorded
a reconveyance substantially in the form of Exhibit A to this Security Agreement
of any security agreement filed with the United States Patent and Trademark
Office (the "PTO") pursuant to the terms hereof. The Lender hereby grants to the
Company an exclusive, irrevocable power of attorney, with full power and
authority in the place and stead of the Lender to take all such action permitted
under this Section 1.
2. Collateral. The Collateral shall consist of all right, title and
interest of the Company in and to the following, whether now existing or
hereafter acquired:
(a) the Company's share of profits from the sale of Licensed Products as
defined in the Collaboration Agreement, payable to the Company pursuant to
Section 8.2 of the Collaboration Agreement; and
(b) all proceeds of the foregoing Collateral.
3. Obligations. The obligations (the "Obligations") secured by this
Security Agreement shall consist of all obligations of the Company under the
Notes, this Security Agreement, and any other documents entered into connection
with the transactions contemplated hereunder and thereafter (collectively, the
"Note Documents") including, without limitation, the obligation to repay
principal and interest and, in each case whether now existing or hereafter
arising, voluntary or involuntary, whether or not jointly owed with others,
direct or indirect, absolute or contingent, liquidated or unliquidated, and
whether or not from time to time decreased or extinguished and later increased,
created or incurred. For the avoidance of doubt (and without limiting the
provisions of the Note Agreement), it is understood that in no event shall
outstanding Series B Preference Shares represent Obligations, and once any
Series B Preference Shares are issued, the Obligations under the Notes that were
converted into such Series B Preference Shares shall cease to exist.
4. Representations and Warranties. In addition to all representations and
warranties of the Company set forth in the Notes and the other Note Documents,
which are incorporated herein by this reference, the Company hereby represents
and warrants that:
(a) The Company is and will be the sole owner of, and has good and valid
title to, the Collateral and has not transferred, licensed, leased, or
encumbered any of the Collateral except to or in favor of the Lender;
(b) The Company is a company organized under the laws of Bermuda; it has
more than one place of business, and its chief executive office from which it
manages the main part of its business operations and other affairs is located in
Berkeley, California.
5. Covenants and Agreements of the Company. In addition to all covenants
and agreements of the Company set forth in the Notes and the other Note
Documents, which are in-
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corporated herein by this reference, the Company hereby agrees, at no cost or
expense to the Lender:
(a) To assist Lender in delivering to the Assignment Division of the PTO a
PTO Security Agreement substantially in the form of Exhibit B to this Security
Agreement with respect to U.S. Patent Application Nos. 09/819,912 and 09/936,603
and any subsequent continuations or divisionals thereof; provided, that the
PTO's failure or refusal to accept such filing shall not be deemed a breach of
this Security Agreement.
(b) To do all acts (other than acts which are required to be done by the
Lender) within its control that are reasonably necessary to maintain, preserve
and protect the Collateral and the first priority, perfected security interest
of the Lender therein; and
(c) To not transfer, license, lease or encumber any Collateral except to or
in favor of the Lender or as otherwise permitted by the Notes and the Note
Documents.
(d) To notify the Lender if it changes its legal name, jurisdiction of
organization or chief executive office.
6. Authorized Action by Lender. After the occurrence of an Event of Default
or if the Company is in breach of Section 5(b) hereof, the Company hereby agrees
that, at any time, without presentment, notice or demand, and without affecting
or impairing in any way the rights of the Lender with respect to the Collateral,
the obligations of the Company hereunder or the Obligations, the Lender may, but
shall not be obligated to and shall incur no liability to the Company or any
third party for failure to, take any action which the Company is obligated by
this Security Agreement to do. The Company hereby grants to the Lender an
exclusive, irrevocable power of attorney, with full power and authority in the
place and stead of the Company to take all such action permitted under this
Section 6.
7. Remedies. Upon the occurrence of an Event of Default under any Note or
if any Obligations are not paid when due, the Lender may, without notice to or
demand on the Company, take any proceeds of the Collateral, when and as received
or payable and apply such proceeds to the Obligations in accordance with Section
9607 of the California Uniform Commercial Code ("CUCC") or, if any Extenuating
Event (as defined below) shall have occurred and be continuing for a period of
five (5) business days after notice to the Company of such Extenuating Event,
exercise any other rights and remedies of a secured party, at law, in equity or
otherwise, and recover from the Company all costs and expenses, including,
without limitation, reasonable attorneys' fees, incurred or paid by the Lender
in exercising any such right, power or remedy. Any deficiency with respect to
the Obligations which exists after the disposition or liquidation of the
Collateral shall be a continuing liability of the Company to the Lender and
shall be immediately paid by the Company to the Lender. As used in this Section
7, each of the following events shall constitute an "Extenuating Event":
(a) If taking any proceeds of the Collateral or application thereof to the
Obligations shall be construed as acceptance of collateral in full or partial
satisfaction of the Obligations, after the occurrence of the relevant Event of
Default or failure to pay when due, or the
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Company shall have failed to consent thereto in accordance with Section 9620(c)
of the CUCC; or
(b) The Lender shall receive an objection to retention by the Lender of
proceeds of Collateral in satisfaction of Obligations from any person entitled
to object thereto pursuant to Section 9620 of the CUCC; or
(c) The Lender is prohibited from taking proceeds of the Collateral and/or
applying the same to the Obligations by any statute, rule, regulation, judicial
process or any interpretation thereof binding on the Lender or the Company; or
(d) The Lender is required by any statute, rule, regulation, judicial
process or interpretation thereof binding on the Lender or the Company to
exercise remedies against the Collateral other than taking proceeds and applying
the same to the obligations.
8. Application of Cash and Non-Cash Proceeds. After the occurrence of an
Event of Default, cash proceeds received by the Lender from the Collateral,
whether upon disposition pursuant to this Security Agreement or otherwise, may
be applied by the Lender against the Obligations in such order as the Lender may
determine in its discretion. Notwithstanding anything else contained in this
Security Agreement, if any non-cash proceeds are received in connection with any
sale or disposition of any Collateral, the Lender shall not apply such non-cash
proceeds to the Obligations unless and until such proceeds are converted to
cash; provided, however, that if such non-cash proceeds are not expected on the
date of receipt thereof to be converted to cash within one year after such date,
the Lender shall use commercially reasonable efforts to convert such non-cash
proceeds to cash within such one year period.
9. Waiver of Hearing. The Company expressly waives to the extent permitted
under applicable law any constitutional or other right to a judicial hearing
prior to the time the Lender takes possession or disposes of the Collateral upon
the occurrence of an Event of Default.
10. Cumulative Rights. The rights, powers and remedies of the Lender under
this Security Agreement shall be in addition to all rights, powers and remedies
given to the Lender by virtue of any statute or rule of law, the Notes or any
other agreement, all of which rights, powers and remedies shall be cumulative
and may be exercised successively or concurrently without impairing the Lender's
security interest in the Collateral.
11. Waiver. Any forbearance or failure or delay by the Lender in exercising
any right, power or remedy shall not preclude the further exercise thereof, and
every right, power or remedy of the Lender shall continue in full force and
effect until such right, power or remedy is specifically waived in a writing
executed by the Lender. The Company waives any right to require the Lender to
proceed against any person or to exhaust any Collateral or to pursue any remedy
in the Lender's power.
12. Setoff. The Company agrees that the Lender may exercise its rights of
setoff with respect to the Obligations in the same manner as if the Obligations
were unsecured.
13. Financing Statements. The Company hereby consents to and instructs the
Lender to file financing statements in all locations deemed appropriate by the
Lender from time to time.
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In connection with the filing of such financing statements, the Company
acknowledges and agrees that the Lender may utilize a general description of the
Collateral.
14. Cumulative Rights; No Waiver. The rights, powers and remedies of the
Lender hereunder and under the other Loan Documents are cumulative and in
addition to all rights, power and remedies provided under any and all agreements
between the Lender and the Company relating hereto, at law, in equity or
otherwise. Any delay or failure by the Lender to exercise any right, power or
remedy shall not constitute a waiver thereof by the Lender, and no single or
partial exercise by the Lender of any right, power or remedy shall preclude
other or further exercise thereof or any exercise of any other rights, powers or
remedies.
15. Entire Agreement. This Security Agreement, the Notes and the other Note
Documents embody the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings relating to the
subject matter hereof and thereof.
16. Survival. All representations, warranties, covenants and agreements of
the Company contained herein, in the Notes and the other Note Documents shall
survive the termination of this Agreement and shall be effective until the
Obligations are paid and performed in full or longer as expressly provided
herein.
17. Notices. All notices shall be given in accordance with the Notes.
18. Governing Law. This Security Agreement shall be governed by and
construed in accordance with the laws of the State of California without giving
effect to its choice of law rules.
19. Counterparts. This Security Agreement may be executed in any number of
counterparts, all of which together shall constitute one agreement.
20. Severability. The illegality or unenforceability of any provision of
this Security Agreement or any instrument or agreement required hereunder or
thereunder shall not in any way affect or impair the legality or enforceability
of the remaining provisions hereof or thereof.
(Signature page follows)
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IN WITNESS WHEREOF, this Security Agreement has been executed and delivered
on the date first above written by duly authorized representatives of the
Company and the Lender.
XOMA LTD., the Company
By:
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Name: Xxxxxxxx X. Xxxxxx
Title: Senior Vice President and
Chief Operating Officer
GENENTECH, INC., the Lender
By:
----------------------------------------
Name: Xxxxx X. Xxxxxxx, Xx.
Title: Executive Vice President and
Chief Financial Officer
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EXHIBIT A
RECONVEYANCE OF PTO SECURITY AGREEMENT
THIS RECONVEYANCE OF PTO SECURITY AGREEMENT (the "Reconveyance") is made
and dated this __ day of _________, 200_ by Genentech, Inc., a Delaware
corporation (the "Lender"), with reference to the PTO Security Agreement dated
as of March __, 2003 (the "PTO Security Agreement") between Xoma Ltd., a Bermuda
company (the "Company") and the Lender recorded in the records of the United
States Patent and Trademark Office on __________, 2003 at __________________
with respect to the following patents:
____________________________________________.
For value received, effective as of the date of this Reconveyance, the
Lender hereby releases, terminates, and re-transfers to the Company all right,
title and interest conveyed to the Lender by the PTO Security Agreement.
GENENTECH, INC.
By:
-------------------------------------
Name: __________________________
Title: __________________________
EXHIBIT B
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Form PTO-1595 RECORDATION FORM COVER SHEET U.S. DEPARTMENT OF COMMERCE
(Rev. 10/02) PATENTS ONLY U.S. Patent and Trademark Office
OMB No. 0651-0027 (exp. 6/30/2005)
Tab settings
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To the Honorable Commissioner of Patents and Trademarks: Please record the
attached original documents or copy thereof.
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1. Name of conveying party(ies): 2. Name and address of receiving party(ies)
Name:______________________________________
Additional name(s) of conveying party(ies) attached? Internal Address:__________________________
Yes |_| No |_| ___________________________________________
___________________________________________
____________________________________________________
3. Nature of conveyance:
|_| Assignment |_| Merger
|X| Security Agreement |_| Change of Name Street Address:____________________________
|_| Other _____________________________________
Execution Date:_____________________________________ City:__________ State:__________ Zip:______
Additional name(s) & address(es) attached?
|_| Yes |_| No
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4. Application number(s) or patent number(s):
If this document is being filed together with a new application, the execution date of the application is: __
A. Patent Application No.(s): 09/819,921; B. Patent No.(s)______________________________
09/936,603 ___________________________________________
Additional numbers attached? |_| Yes |_| No
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5. Name and address of party to whom correspondence 6. Total number of applications and patents
concerning document should be mailed: involved: |_|
Name:___________________________________________ 7. Total fee (37 CFR 3.41)..........$
Internal Address:_______________________________ |_| Enclosed
________________________________________________ |_| Authorized to be charged to deposit account
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________________________________________________ 8. Deposit account number:
Street Address:_________________________________ ________________________________________________
________________________________________________
City:__________ State: __________ Zip: _______
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DO NOT USE THIS SPACE
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9. Signature.
---------------------------- --------------------- --------------
Name of Person Signing Signature Date
Total number of pages including cover sheet, attachments, and documents: |_|
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Mail documents to be recorded with required cover sheet information to:
Commissioner of Patents & Trademarks, Box assignments
Xxxxxxxxxx, X.X. 00000
PTO SECURITY AGREEMENT
THIS PTO SECURITY AGREEMENT (the "PTO Security Agreement") is made and
dated this 31st day of March, 2003 by and between Xoma Ltd., a Bermuda company
(the "Company"), and Genentech, Inc., a Delaware corporation (the "Lender").
RECITALS
A. The Lender has made or agreed to make loans to the Company pursuant to
the terms of an Amended and Restated Convertible Secured Note
Agreement-Development Loan dated as of March 31, 2003 and a Secured Note
Agreement-Commercial Launch Loan dated as of March 31, 2003 (as amended,
modified or waived from time to time, collectively, the "Notes" and,
individually, a "Note"). All capitalized terms not otherwise defined herein used
with the meanings given such terms in the Notes. All other terms not otherwise
defined herein shall have the meanings attributed to such terms in the
California Uniform Commercial Code as in effect from time to time.
B. In connection with the Notes, the Company agreed, among other things, to
execute and deliver this PTO Security Agreement in favor of the Lender.
NOW, THEREFORE, in consideration of the above Recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. Grant of Security Interest. As collateral security for the Obligations
(as defined in that certain Security Agreement dated as of March 31, 2003
between the Company and the Lender (the "Security Agreement")), the Company
hereby mortgages, assigns, grants and conveys to the Lender a security interest,
pledge, assignment and mortgage in all of the Company's right, title and
interest in the following (the "PTO Collateral"):
(a) the Company's share of profits from the sale of Licensed Products (as
defined in the Collaboration Agreement referred to below) payable to the Company
pursuant to Section 8.2 of the Collaboration Agreement dated as of April 22,
1996 between the Company and the Lender, as amended on April 14, 1999 and as
further amended and restated as of March 31, 2003; and
(b) all proceeds of any of the foregoing.
2. No Present Assignment. Neither this PTO Security Agreement, the Security
Agreement, the Notes nor any other Note Document (as defined in the Security
Agreement) creates or is intended to create a present assignment of the PTO
Collateral. Subject to the rights of Lender, it is the intention of the parties
hereto that the Company continue to own the PTO Collateral.
3. Relationship to Other Documents. The PTO Collateral shall constitute
Collateral for all purposes of the Security Agreement, the Notes and the other
Note Documents, and Lender
shall have all rights, powers and remedies with respect to the PTO Collateral to
the same extent as it has with respect to other collateral.
4. Miscellaneous.
(a) All covenants and other agreements contained in this PTO Security
Agreement by or on behalf of any of the parties hereto bind and inure to the
benefit of their respective successors and assigns.
(b) Any provision of this PTO Security Agreement that 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 (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
(c) Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any person,
or which such person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such person.
(d) This PTO Security Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.
(e) This PTO Security Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
the State of California excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
(Signature page follows)
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IN WITNESS WHEREOF, the parties hereto have caused this PTO Security
Agreement to be executed on and as of the day and year first above written.
XOMA LTD., the Company
By:
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Name: Xxxxxxxx X. Xxxxxx
Title: Senior Vice President and
Chief Operating Officer
GENENTECH, INC., the Lender
By:
---------------------------------------
Name: Xxxxx X. Xxxxxxx, Xx.
Title: Executive Vice President and
Chief Financial Officer
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