Exhibit
10.1
TERM LOAN AGREEMENT
Dated as of October 11, 2007
This Term Loan Agreement (this "Agreement") is
entered into between Viropro International Inc., a corporation
organized under the federal laws of Canada Inc. (the "Borrower"),
Westward Expansion Co., a corporation organized under the federal
laws of Canada (the "Lender"), and Viropro Inc. a corporation
organized under the laws of the state of Nevada (the
“Guarantor”). Capitalized terms used herein shall
have the meanings ascribed to such terms in Section 1 of this
Agreement.
RECITALS
A.
The Borrower is the wholly-owned subsidiary of
the Guarantor.
B.
The Borrower and Guarantor have requested that
the Lender make available to Borrower a term loan in the
principal amount of USD$1,500,000 for the purpose of providing
bridge financing to the Borrower.
C.
The Lender is willing to make the Term loan
available to the Borrower on the terms and subject to the
conditions set out in this Agreement.
THEREFORE , in consideration of the
mutual covenants and undertakings contained herein, and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and
the Lender hereby agree as follows:
1 - INTERPRETATION
1.1
Definitions
In this Agreement, unless the context otherwise
requires, the following terms have the respective meanings set
out below (and all such terms that are defined in the singular
have the corresponding meaning in the plural and vice
versa ):
“Affiliate” means, with
respect to a Person, any other Person that directly or
indirectly Controls, or is Controlled by, or is under common
Control with, that Person;
“Business Day” means a day on
which banks are open for business in Montreal, excluding
Saturday and Sunday;
“Business Milestone” has the
meaning set forth in SCHEDULE “B”.
“Control” (including any
correlative term) means the possession, directly or indirectly,
of the power to direct or cause the direction of management or
policies of a Person (whether through ownership of securities or
partnership or trust interests, by contract or otherwise);
without limiting the generality of the foregoing (i) a
Person is deemed to Control a corporation if such Person
(or such Person and its Affiliates)
holds outstanding shares of the corporation
carrying votes in sufficient number to elect a majority of the
board of directors of the corporation, (ii) a Person is
deemed to Control a partnership if such Person (or such Person
and its Affiliates) holds more than 50% in value of the equity
of the partnership, (iii) a Person is deemed to Control a
trust if such Person (or such Person and its Affiliates) holds
more than 50% in value of the beneficial interests in the trust,
and (iv) a Person that Controls another Person is deemed to
Control any Person Controlled by that other Person;
“Corporate Milestone” has the
meaning set forth in SCHEDULE “B”.
“Credit Documents” means this
Agreement, the Security Documents, the Convertible Note issued
pursuant to Section 2.2 and any other present and future
document relating to any of the foregoing, in each case, as
amended, supplemented or restated;
“Credit Party” means each of
the Borrower and the Guarantor.
“Convertible Note” shall have
the meaning set forth in Section 2.2.
“Default” means any event or
circumstance which constitutes an Event of Default or which,
with the lapse of time, the giving of a notice or both, would
constitute an Event of Default;
“Distribution” means any
payment in cash or in kind that provides an income (including
interest or dividend) or a return on, or constitutes a
distribution or redemption or other retirement of, the equity or
capital of a Person (other than a dividend paid by way of the
issuance of new equity interests);
“ERISA” means the Employee
Retirement Income Security Act of 1974 of the United States,
as amended “ from time to time;
“ERISA Affiliate”
means any corporation or trade or business which is a member of
the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower or is under common
control (within the meaning of Section 414(c) of the Code) with
the Borrower.
“Financial Statements” means
the annual financial statement of the Borrower and the Guarantor
dated November 30, 2006 and the quarterly financial statement
dated August 30, 2007.
“Funded Debt” means, with
respect to a Person, and without duplication;
(a)
indebtedness of such Person for monies borrowed
or raised, including any indebtedness represented by a note,
bond, debenture or other similar instrument of such Person;
(b)
reimbursement obligations of such Person arising
from bankers’ acceptances, letters of credit or letters of
guarantee or similar instruments;
(c)
indebtedness of such Person for the deferred
purchase price of property or services, other than for
consumable non-capital goods and services purchased in the
ordinary course of business, including arising under any
conditional sale or title retention agreement;
(d)
obligations of such Person under capital or
synthetic leases and sale and leaseback transactions;
(e)
the aggregate amount at which shares in the
capital of such Person that are redeemable at fixed dates or
intervals or at the option of the holder thereof may be
redeemed; and
(f)
Guarantees or Liens granted by such Person in
respect of Funded Debt of another Person;
“GAAP” means generally
accepted accounting principles in Canada which are in effect
from time to time;
“Guarantee” means any
obligation, contingent or not, directly or indirectly
guaranteeing any liability or indebtedness of any Person or
protecting a creditor of such Person from a loss in respect of
any such liability or indebtedness or having the same economic
effect;
“Lien” means any hypothec,
security interest, mortgage, lien, right of preference, pledge,
assignment by way of security or any other agreement or
encumbrance of any nature that secures the performance of an
obligation, and a Person is deemed to own subject to a Lien any
property or assets that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale
agreement, capital or synthetic lease or similar agreement
(other than an operating lease) relating to such property or
assets;
“Material Adverse Change”
means any change, condition, event or occurrence which, when
considered individually or together with other changes,
conditions, events or occurrences, could reasonably be expected
to have a Material Adverse Effect;
“Material Adverse Effect”
means (i) a material adverse effect on the financial
condition, business, operations, assets, liabilities or
prospects of the Borrower and Guarantor taken as a whole,
(ii) a material adverse effect on the ability of the
Borrower or Guarantor to perform its material obligations under
any Credit Document, or, (iii) a material impairment of the
rights or remedies of the Lender under any Credit Document;
“Maturity Date” shall have
the meaning set forth in Section 2.3.
“Pension Plan” means an
employee benefit or other plan established or maintained by a
Credit Party or any ERISA Affiliate (within the meaning of
ERISA) and that is covered by Title IV of ERISA;
“Permitted Liens” means:
(a)
Liens imposed or arising by operation of law
(including for greater certainty tax and construction Liens), in
each case, in respect of obligations not yet due or which have
been postponed or are being contested in good faith and by
appropriate proceedings to the extent that adequate reserves are
maintained;
(b)
pledges or deposits made in the ordinary course
of business in connection with bids or tenders or to comply with
the requirements of any legislation or regulation applicable to
the Person concerned or its business or assets;
(c)
Judgment Liens for which an appeal has been made
or in respect of which revision has been sought and a suspension
of execution has been obtained pending the appeal or the
revision but only to the extent that failure to pay such
judgments does not otherwise constitute an Event of Default;
“Person” means any natural
person, corporation, company, partnership, joint venture,
limited liability company, unincorporated organization, trust or
any other entity;
“Scientific Milestone” has
the meaning set forth in SCHEDULE “B”.
“Security” means the security
and the guarantee, undertakings and acknowledgments provided to
or for the benefit of the Lender pursuant to
Article 10;
“Security Documents” means
the Security Agreement, the Guarantee Agreement and the Deed of
Hypothec;
“Solvent” means, with respect
to any Person, that as of the date of determination, such Person
is “solvent” within the meaning given to that term
and similar terms under the Bankruptcy and Insolvency Act
(Canada), the United States Bankruptcy Code and the applicable
laws relating to fraudulent transfers or conveyances.
For purposes of this definition, the amount of
any contingent liability at any time will be computed as the
amount that, in light of all of the facts and circumstances
existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability (but
irrespective of whether such contingent liabilities meet the
criteria for accrual under GAAP);
“Subsidiary” means a Person
that is under the Control of another Person;
“Unfunded Capital
Expenditures” means cash capital expenditures which
are not financed by capital leases or other Funded Debt (other
than the Revolving Facility);
“Units” has the meaning set
forth in section 5.1.
1.2
Currency
Conversions
Where any amount expressed in any currency has
to be converted or expressed in another currency, or where its
equivalent in another currency has to be determined (or
vice versa ), the calculation is made at the spot
rate announced or quoted by the Bank of Canada in accordance
with its normal practices at or around noon on the relevant date
for the relevant currency against the other currency (or
vice versa ).
1.3
Accounting
Terms and Calculations
Unless otherwise provided, (i) terms and
expressions of an accounting or financial nature have the
respective meanings given to such terms and expressions under
GAAP; and (ii) calculations must be made in accordance with
GAAP insofar as applicable.
1.4
Time
Except where otherwise indicated in this
Agreement, any reference to time means local time in
Montreal.
1.5
Headings and
Table of Contents
The headings and the Table of Contents are
inserted for convenience of reference only and do not affect the
construction or interpretation of this Agreement.
1.6
Governing
Law
This Agreement is governed by and construed in
accordance with laws of the Province of Quebec and the laws of
Canada applicable therein.
1.7
Previous
Agreements
This Agreement supersedes any previous agreement
in connection with the financing.
1.8
Inconsistency
In the event of inconsistency between this
Agreement and any other Credit Document, the provisions of this
Agreement must be accorded precedence.
2 - THE TERM LOAN
2.1
Term
Loan
Subject to the terms and conditions of this Agreement and
provided no Default then exists under the Credit Documents, the
Lender agrees to loan to the Borrower, and the Borrower agrees to
borrow from the Lender, the principal amount of One Million Five
Hundred Thousand United States Dollars (USD $1,500,000) (the
“Principal”), which shall be disbursed by the Lender to
the Borrower within the time periods and the disbursement amounts
set forth in Schedule “A” (the Principal, the "Term
Loan", and together with interest that may hereafter accrue and any
amounts which may hereafter become owing to the Lender under
Section 12.8, the "Obligations").
2.2
Convertible
Note
Any disbursement under the Term Loan shall be evidenced
by a convertible promissory note (the "Convertible Note"),
substantially in the form of Exhibit 2.2, with appropriate
insertions, dated the date hereof, payable to the order of the
Lender.
2.3
Repayment
The
Principal amount of the Term Loan will be due and payable in one
payment, along with any outstanding Obligations, on October 11,
2010 (the "Maturity Date").
3 – INTEREST AND FEES
3.1
Interest
a)
The Term Loan and all outstanding Obligations
shall bear interest from the date such Loans are made or such
other Obligations become due to the date paid (both before and
after an Event of Default or judgment) at the rate per annum
equal to 6 percent (6%). Such interest is payable monthly, in
arrears, on the first Business Day of each calendar month,
beginning on November 1 st , 2009.
b)
Any amount which is not paid when due will bear
interest until paid, at a rate per annum equal to fifteen
percent (15%). Any interest which is not paid when due will bear
interest at the rate that has been used to calculate such unpaid
interest. Interest on arrears is compounded monthly and is
payable on demand.
3.2
Basis of
Computation
Interest shall be computed for the actual number of
days elapsed on the basis of a year consisting of 365 days,
including the date the Term Loan is made and excluding the date the
Term Loan or any portion thereof is paid or prepaid.
4 – PAYMENTS AND
PREPAYMENTS
4.1
Payments
a)
Place of Payment. All payments of
Principal, interest, fees and other amounts payable hereunder,
shall be made without setoff or counterclaim to Lender to such
office or accounts as Lender may notify Borrower in writing from
time to time, free and clear of and without deduction for any
fees or other charges of any nature whatsoever.
b)
Form of Payment. All payments of Principal
and interest shall be made by wire transfer to the Lender in
immediately available funds.
4.2
Time of
Payments
All payments must be made on the date on which
payment is due and must be received by Lender by 1:00 p.m.
(Montreal time) on the day of payment, it being expressly agreed
and understood that if a payment is received after 1:00 p.m.
(Montreal time) by Lender, such payment will be considered to
have been made by Borrower on the next succeeding Business Day
and interest thereon shall be payable by Borrower at the then
applicable rate during such extension. Any payment that is due
on a day that is not a Business Day may be made on the next
Business Day but will bear interest until received in full.
4.3
Currency
Unless otherwise provided all amounts owing
under the Term Loan are payable in US Dollars.
4.4
Judgment
Currency
If a judgment is rendered against the Borrower
for an amount owed hereunder and if the judgment is rendered in
a currency (“other currency”) other than that in
which such amount is owed under this Agreement (“currency
of the Agreement”), the Borrower will pay, if applicable,
at the date of payment of the judgment, an additional amount
equal to the excess (i) of the said amount owed under this
Agreement, expressed into the other currency as at the date of
payment of the judgment, over (ii) the amount of the
judgment. For the purposes of obtaining the judgment and making
the calculation referred to in (i), the exchange rate will
be the spot rate at which the Lender, on the relevant date, may
in Montreal, sell the currency of the Agreement to obtain the
other currency. Any additional amount owed under this Section
will constitute a cause of action distinct from the cause of
action which gave rise to the judgment, and said judgment shall
not constitute res judicata in that respect.
4.5
Payment Net
of Taxes
If the Borrower or the Lender is compelled by
law to make any withholding or deduction due to any tax or if
the Lender is liable to pay tax in respect of any payment due or
made by the Borrower, the Borrower must pay to the Lender such
additional amount as may be necessary in order that the payment
actually received by the Lender be equal to the payment which
otherwise would have been received in the absence of such
withholding or deduction or tax (including in the absence of any
additional withholding or deduction or tax in respect of any
additional amount payable pursuant to this Section). However,
this Section 4.6 will not apply in respect of a tax on the
overall net income or capital of a Lender.
4.6
Prepayment;
Forced Conversion
The Borrower may, from the date hereof until
April 11, 2009, provided no Default then exists under the Credit
Documents, initiate the forced conversion procedure described in
this section 4.6. Upon receipt of a 30-day written notice by the
Borrower (the “ Forced Conversion Notice ”),
the Lender shall make an election among the following two (2)
mutually exclusive alternatives: (i) convert pursuant to Article
5 all of the outstanding Obligations into Units of the
Guarantor; or (ii) accept as prepayment by the Borrower of all
outstanding Obligations a sum equal to the Principal, plus such
amount as would be required to achieve a twenty percent (20%)
annual return on an hypothetical investment of the Principal
during the effective duration of the Term Loan, plus the costs,
if any, described in section 12.8. The Lender shall make the
election by written notice (the “ Election Notice
”) within 30 days of the reception of the Forced
Conversion Notice. The failure by the Lender to deliver the
Election Notice shall be deemed to constitute a Lender’s
election to convert. The parties hereto agree and undertake to
do all things and sign all documents necessary to give full
force and effect to their undertakings under this section.
5 – CONVERSION RIGHTS
5.1
Lender’s Conversion
Rights
The Lender may, at any time while the
Convertible Note is outstanding prior to or on the Maturity
Date, convert some or all of the outstanding Obligations into a
number of Units of the Guarantor (the "Units") equal to the
amount of the Conversion Amount divided by a price equal to six
cents (USD $0.06) per Unit. Each unit will consist of one (1)
fully paid and nonassessable common share of the capital stock
of the Guarantor and one (1) common share purchase warrant of
the Guarantor (the "Warrant"). Each Warrant will entitle its
holder to purchase one (1) fully paid and nonassessable share of
Common Stock of the Guarantor at a price of twelve cents (USD
$0.12) per share of Common Stock (the “Conversion
Share”). “Conversion Amount” means the portion
of the Principal and accrued Interest to be converted, redeemed
or otherwise with respect to which this determination is being
made.
5.2
Conversion
Event
To effect a conversion (a "Conversion Event") the
Lender shall execute and deliver to the Guarantor a Conversion
Notice (in the form attached to the Convertible Note), and, in the
event that the entire amount outstanding under the Convertible Note
is converted, Lender shall also surrender the Convertible Note to
the Company for cancellation. Upon partial conversion of the
Convertible Note, Guarantor shall at the request of the Lender and
contemporaneously with delivery of the Conversion Shares, issue a
new note in the form of Exhibit 2.2 to Lender for the principal
balance of the Term Loan which shall not have been converted or
paid.
5.3
Remaining
Obligations
Any remaining Obligations that have not been
converted shall be paid in cash by the Borrower upon the Maturity
Date. Interest on the Term Loan shall cease to accrue with
respect to all Principal then being converted to equity in
connection with a Conversion Event (and with respect to all accrued
interest thereon) upon the Borrower's receipt of a Conversion
Notice.
5.4
Delivery of
Conversion Shares
All Conversion Shares shall be duly authorized,
validly issued, non-assessable and free and clear of all claims,
liens or encumbrances. If the Conversion Shares are
certificated, certificates representing the shares of Common Stock
issued upon conversion hereof shall be delivered to Lender.
Borrower shall deliver such certificates or make appropriate
notations to show Lender as the record and beneficial owner of the
Conversion Shares within two (2) Trading Days of (i) the date
specified in the Conversion Notice or (ii) the date Borrower
actually receives the Conversion Notice from Lender, whichever is
later. Borrower agrees that its issuance of the Convertible
Note constitutes full authority to its officers, agents, and
transfer agents who are charged with the duty of executing and
issuing stock certificates to execute and issue the necessary
certificates for the Conversion Shares.
5.5
Adjustments
to Conversion
The number of Conversion Shares and the kind of
shares or other securities to be issued upon a Conversion Event
shall be subject to adjustment from time to time upon the happening
of certain events while this conversion right remains outstanding,
as follows:
a)
Merger, Sale of Assets, etc. If Guarantor at
any time shall consolidate with or merge into or sell or convey all
or substantially all its assets to any other corporation, the
Convertible Note, as to the unpaid Principal portion thereof, shall
thereafter be deemed to evidence the right to purchase such number
and kind of shares or other securities and property as would have
been issuable or distributable on account of such consolidation,
merger, sale or conveyance, upon or with respect to the securities
subject to the conversion or purchase right immediately prior to
such consolidation, merger, sale or conveyance. The foregoing
provision shall similarly apply to successive transactions of a
similar nature by any such successor or purchaser. Without
limiting the generality of the foregoing, the anti-dilution
provisions of this Section shall apply to such securities of such
successor or purchaser after any such consolidation, merger, sale
or conveyance.
b)
Reclassification, etc. If Guarantor at any
time shall, by reclassification or otherwise, change the Common
Stock into the same or a different number of securities of any
class or classes, the Obligations, as to the unpaid portion
thereof, shall thereafter be deemed to evidence the right to
purchase an adjusted number of such securities and kind of
securities as would have been issuable as the result of such change
with respect to the Common Stock immediately prior to such
reclassification or other change.
c)
Stock Splits, Combinations and Dividends. If
the shares of Common Stock are subdivided or combined into a
greater or smaller number of shares of Common Stock, or if a
dividend is paid on the Common Stock in shares of Common Stock, the
number of Conversion Shares shall be proportionately increased in
case of subdivision of shares or stock dividend or proportionately
decreased in the case of combination of shares, in each such case
by the ratio which the total number of shares of Common Stock
outstanding immediately after such event bears to the total number
of shares of Common Stock outstanding immediately prior to such
event.
5.6
Reservation
of Shares
Guarantor shall reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for
the issuance of Common Stock upon the full conversion of the
Convertible Note.
6 – REPRESENTATIONS AND
WARRANTIES
To induce the Lender to make the Term Loan, each Credit
Party represents and warrants to the Lender that:
6.1
Corporate
Existence and Capacity
Each Credit Party
(a)
is a Person duly constituted and organized,
validly existing and in good standing under the laws of the
jurisdiction of its constitution;
(b)
has all requisite corporate or other power
necessary to own its assets and carry on its business as now
being or as proposed to be conducted; and
(c)
is qualified to do business and is in good
standing in all jurisdictions in which the nature of the
business conducted by it makes such qualification necessary and
where failure so to qualify could have a Material Adverse
Effect.
6.2
Authorization
and Validity
Each Credit Party has all necessary power,
authority and legal right to execute, deliver and perform its
obligations under the Credit Documents to which it is a party,
has duly authorized by all necessary action the execution,
delivery and performance of its obligations under such Credit
Documents and has duly and validly executed and delivered the
Credit Documents to which it is a party. The obligations of each
Credit Party under the Credit Documents to which it is a party
constitute legal, valid and binding obligations, of such Credit
Party.
6.3
No
Breach
The execution and delivery of the Credit
Documents and the performance by the Credit Parties of their
respective obligations thereunder will not conflict with, result
in a breach of or require any consent under, the constitutive
documents or by-laws of any Credit Party, or any applicable law
or regulation in any material respect, or any order or decision
of any court or governmental authority or agency, or any
material agreement to which any Credit Party is a party or by
which it or any of its property is bound.
6.4
Approvals
Except for filings or registrations required to
perfect the Security, no authorization, approval or consent of,
nor any filing or registration with, any governmental or
regulatory authority or agency, is necessary for the execution,
delivery or performance by each Credit Party of the Credit
Documents to which it is a party or to ensure the legality,
validity or enforceability thereof.
6.5
Compliance
with Laws and Permits
Each of the Credit Parties is in compliance with
all laws and regulations applicable to it and to its business
and assets (including Environmental Laws). Each of the Credit
Parties holds all material permits, licenses, approvals,
consents and other authorizations required under all such laws
and regulations to own its assets and to carry on its business
as now being or as proposed to be conducted.
6.6
Title to
Assets
The property and assets of the Credit Parties,
taken as a whole, are not subject to title defects or
restrictions which could materially and adversely impair their
value or normal use. The Credit Parties own or have rights of
use for all property and assets (including intellectual
property) necessary to carry on their businesses.
6.7
Litigation
There are no legal or arbitration proceedings at
law or in equity, or any proceedings by or before any
governmental or regulatory authority or agency, or, to the best
of its knowledge, any claim or investigation by any such
authority or agency or under Environmental Laws, or any labor
disputes, now pending or, to the best of its knowledge,
threatened against any of the Credit Parties or any of their
properties or rights.
6.8
Labor
Matters
(a)
None of the Credit Parties is a party to any
labor dispute and, on the date of this Agreement, there are no
strikes or walkouts relating to any labor contracts to which
such Person is a party or is otherwise subject.
(b)
There is no unfair labor practice complaint
pending against any of the Credit Parties or, to the best of its
knowledge, threatened against any of them, before any labor
relation board.
(c)
There is no grievance or significant arbitration
proceeding arising out of or under any collective bargaining
agreement pending against any of the Credit Parties or, to the
best of its knowledge, threatened against any of them.
(d)
No slowdown or stoppage is pending against any
of the Credit Parties or, to the best of its knowledge,
threatened against any of the Credit Parties.
(e)
There are no pending or, to the best of its
knowledge, threatened claims, complaints, notices, inquiries or
requests for information received by any of the Credit Parties
with respect to any alleged violation of, or potential liability
under, any law relating to employee health and safety (including
the Occupational Safety and Health Act , 29 U.S.C.A.
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