Exhibit 10.2
AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN
AND SECURITY AGREEMENT (this “ Agreement ”) dated as
of May 28, 2009 (the “ Effective Date ”)
among OXFORD FINANCE CORPORATION , a Delaware corporation
with an office located at 133 N. Fairfax Street, Alexandria, VA
22314 ( “ Lender ” ) and
METABASIS THERAPEUTICS, INC. a Delaware corporation with an
office located at 11119 North Torrey Pines Road, La Jolla, CA 92037
and ARAMED, INC. a Delaware corporation with an office
located at 11119 North Torrey Pines Road, La Jolla, CA 92037
(jointly and severally, individually and collectively, the “
Borrower ”), provides the terms on which Lender shall
lend to Borrower and Borrower shall repay Lender. The parties agree
as follows:
WHEREAS, Borrower has prepaid
outstanding principal of Three Million Nine Hundred Forty Thousand
Three Hundred Fifteen Dollars and twenty three cents and all
interest accrued through May 26, 2009 in the amount of Twenty
Six Thousand Eight Hundred Ninety Eight Dollars and twelve cents
($26,898.12) pursuant to that certain Loan and Security Agreement
among Oxford Finance Corporation, Metabasis Therapeutics, Inc., and
Aramed, Inc., dated as of March 14, 2008 (“Original
Loan”); in connection therewith, Lender has waived any
Prepayment Fee;
WHEREAS, Borrower has satisfied or
otherwise paid in full all other Obligations under the Original
Loan, with the exception of the sum of $200,000 which remains
unpaid under the Original Loan;
WHEREAS, the parties wish to amend
the terms of the Original Loan and to provide for the repayment of
the remaining $200,000 which remains outstanding;
The Parties hereby agree to the
following amended and restated terms:
1 ACCOUNTING AND OTHER
TERMS
Accounting terms not defined in this
Agreement shall be construed following GAAP. Calculations and
determinations must be made following GAAP (except for
non-compliance with FAS 123R in monthly reporting). Capitalized
terms not otherwise defined in this Agreement shall have the
meanings set forth in Section 13. All other terms contained in
this Agreement, unless otherwise indicated, shall have the meaning
provided by the Code to the extent such terms are defined
therein.
2 LOAN AND TERMS OF
PAYMENT
2.1 Promise to Pay
. Borrower hereby unconditionally
promises to pay Lender the outstanding principal amount of all
Credit Extensions and accrued and unpaid interest thereon as and
when due in accordance with this Agreement.
2.1.1 Term Loan
.
(a) Existing Term Loan .
Subject to the terms and conditions of this Agreement, Lender has
made , and Borrower acknowledges receipt of the proceeds from one
(1) Term Loan (the “ Term Loan ”) made
available to Borrower in an amount of Two Hundred Thousand Dollars
($200,000.00). After repayment, the Term Loan may not be
re-borrowed.
(b) Repayment . On the Term
Loan Maturity date, Borrower shall make one (1) payment of
principal in the amount of the Term Loan, plus payment of all
accrued and unpaid interest at the effective rate of interest as
set forth in Section 2.2(a). All unpaid principal and accrued
interest with respect to the Term Loan is due and payable in full
on the Term Loan Maturity Date with respect to such Term Loan.
Payments received after 12:00 noon Eastern time are considered
received at the opening of business on the next Business Day. A
Term Loan may only be prepaid in accordance with
Section 2.1.1(d).
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(c) Mandatory Prepayment Upon an
Acceleration . If a Term Loan is accelerated following the
occurrence of an Event of Default, Borrower shall immediately pay
to Lender an amount equal to the sum of: (i) all outstanding
principal plus accrued and unpaid interest, and (ii) all other
sums, that shall have become due and payable, including interest at
the Default Rate with respect to any past due amounts.
(d) Permitted Prepayment of
Loans . Borrower shall have the option to prepay all or any
portion of the Term Loan advanced by Lender under this Agreement
without penalty or premium, provided Borrower provides written
notice to Lender of its election to prepay the Term Loan at least
two (2) days prior to such prepayment Borrower may terminate
this Agreement upon no less than two (2) days’ prior
written notice to Lenders and indefeasible payment in full of all
Obligations (other than inchoate indemnity obligations), and
Lenders’ obligations to lend hereunder shall terminate upon
receipt of such payment.
2.2 Payment of Interest on the
Credit Extensions .
(a) Interest Rate . Subject
to Section 2.2(b), the principal amount outstanding under the
Term Loan shall accrue interest at a fixed per annum rate equal to
fourteen and eighty-three one-hundredths percent (14.83%), which
interest shall be payable in accordance with
Section 2.2(d).
(b) Default Rate .
Immediately upon the occurrence and during the continuance of an
Event of Default, Obligations shall bear interest at a rate per
annum which is equal to 19.83% (the “ Default Rate
”). Payment or acceptance of the increased interest rate
provided in this Section 2.2(b) is not a permitted alternative
to timely payment and shall not constitute a waiver of any Event of
Default or otherwise prejudice or limit any rights or remedies of
Lender.
(c) 360-Day Year . Interest
shall be computed on the basis of a 360-day year comprising twelve
(12) months consisting of thirty (30) days.
(d) Payments . Payments of
principal and/or interest received after 12:00 noon Eastern time
are considered received at the opening of business on the next
Business Day. When a payment is due on a day that is not a Business
Day, the payment is due the next Business Day and additional fees
or interest, as applicable, shall continue to accrue.
2.3 Secured Promissory
Note . The Term Loan
shall be evidenced by a Secured Promissory Note in the form
attached as Exhibit D hereto (each a “
Secured Promissory Note ”), and shall be repayable as
set forth herein. The Borrower acknowledges that Lender has
previously made the Term Loan. The outstanding amount of the Term
Loan set forth on Lender’s Secured Promissory Note Record
shall be prima facie evidence of the principal amount thereof owing
and unpaid to Lender, but the failure to record, or any error in so
recording, any such amount on Lender’s Secured Promissory
Note Record shall not limit or otherwise affect the obligations of
the Borrower hereunder or under the Secured Promissory Note to make
payments of principal of or interest on the Secured Promissory Note
when due. Upon receipt of an affidavit of an officer of a Lender as
to the loss, theft, destruction, or mutilation of the Secured
Promissory Note, the Borrower shall issue, in lieu thereof, a
replacement Secured Promissory Note in the same principal amount
thereof and of like tenor.
2.4 [INTENTIONALLY LEFT
BLANK]
2.5 Additional
Costs . If any new
law or regulation increases Lender’s cost of capital or
reduces its income for any loan, Borrower shall pay the increase in
cost or reduction in income or additional expense; provided,
however, that Borrower shall not be liable for any amount
attributable to any period before 180 days prior to the date Lender
notifies Borrower of such increased costs. Lender shall allocate
any increased costs among its customers similarly affected in good
faith and in a manner consistent with Lender’s customary
practice.
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3 CONDITIONS OF
LOANS
3.1 Conditions Precedent to
Restructured Credit Extension . Lender’s obligation to make the
restructured Credit Extension is subject to the condition precedent
that Lender shall have received, in form and substance satisfactory
to Lender, such documents, and completion of such other matters, as
Lender may reasonably deem necessary or appropriate, including,
without limitation:
(a) duly executed original
signatures to the Loan Documents to which Borrower is a
party;
(b) duly executed original Secured
Promissory Notes in favor of Lender in an amount not to exceed the
Term Loan;
3.2 [INTENTIONALLY LEFT
BLANK]
3.3 Covenant to
Deliver . Borrower agrees
to deliver to Lender each item required to be delivered to Lender
under this Agreement as a condition to any Credit Extension.
Borrower expressly agrees that the extension of a Credit Extension
prior to the receipt by Lender of any such item shall not
constitute a waiver by Lender of Borrower’s obligation to
deliver such item, and any such extension in the absence of a
required item shall be in Lender’s sole
discretion.
4 CREATION OF SECURITY
INTEREST
4.1 Grant of Security
Interest . Borrower
hereby grants Lender, to secure the payment and performance in full
of all of the Obligations, a continuing security interest in, and
pledges to Lender, the Collateral, wherever located, whether now
owned or hereafter acquired or arising, and all proceeds and
products thereof. Borrower represents, warrants, and covenants that
the security interest granted herein is and shall at all times
continue to be a first priority perfected security interest in the
Collateral (subject only to Permitted Liens that may have superior
priority under this Agreement). If Borrower shall acquire a
commercial tort claim (as defined in the Code), Borrower shall
promptly notify Lender in a writing signed by Borrower of the
general details thereof (and further details as may be required by
Lender) and grant to Lender, in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this
Agreement, with such writing to be in form and substance reasonably
satisfactory to Lender.
If this Agreement is terminated,
Lender’s Lien in the Collateral shall continue until the
Obligations (other than inchoate indemnity obligations) are repaid
in full in cash. Upon payment in full in cash of the Obligations
(other than inchoate indemnity obligations) and at such time as the
Lender’s obligation to make Credit Extensions has terminated,
the Lender shall, at Borrower’s sole cost and expense,
release its Liens in the Collateral and all rights therein shall
revert to Borrower.
4.2 Authorization to File
Financing Statements .
Borrower hereby authorizes Lender to file financing statements,
without notice to Borrower, with all appropriate jurisdictions to
perfect or protect Lender’s interest or rights hereunder,
including a notice that any disposition of the Collateral other
than as permitted under this Agreement, by either Borrower or any
other Person, shall be deemed to violate the rights of the Lender
under the Code.
5 REPRESENTATIONS AND
WARRANTIES
Borrower represents and warrants as
follows:
5.1 Due Organization,
Authorization: Power and Authority . Borrower and each of its Subsidiaries, if any,
are duly existing and in good standing, as Registered Organizations
in their respective jurisdictions of formation and are qualified
and licensed to do business and are in good standing in any
jurisdiction in which the conduct of their business or their
ownership of property requires that they be qualified except where
the failure to do so could not reasonably be expected to have a
material adverse effect on Borrower’s business.
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The execution, delivery and
performance by Borrower of the Loan Documents to which it is a
party have been duly authorized, and do not (i) conflict with
any of Borrower’s organizational documents,
(ii) contravene, conflict with, constitute a default under or
violate any material Requirement of Law, (iii) contravene,
conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental
Authority by which Borrower or any of its Subsidiaries or any of
their property or assets may be bound or affected,
(iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental
Authority (except such Governmental Approvals which have already
been obtained and are in full force and effect) or are being
obtained pursuant to Section 6.1(b), or (v) constitute an
event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which it
is a party or by which it is bound in which the default could
reasonably be expected to have a material adverse effect on
Borrower’s business.
5.2 Collateral
. Borrower has good title to, has
rights in, and the power to transfer each item of the Collateral
upon which it purports to grant a Lien hereunder, free and clear of
any and all Liens except Permitted Liens.
All Inventory is in all material
respects of good and marketable quality, free from material
defects.
Borrower is not a party to, nor is
bound by, any material license or other agreement with respect to
which Borrower is a licensee that (a) prohibits or otherwise
restricts Borrower from granting a security interest in
Borrower’s interest in such license or agreement or any other
property, or (b) for which a default under or termination of
could interfere with Lender’s right to sell any Collateral.
Borrower shall provide written notice to Lender within ten
(10) days of entering or becoming bound by any such license or
agreement which is reasonably likely to have a material impact on
Borrower’s business or financial condition (other than
over-the-counter software that is commercially available to the
public). Borrower shall take such steps as Lender requests to
obtain the consent of, or waiver by, any person whose consent or
waiver is necessary for (x) all such licenses or agreements to
be deemed “Collateral” and for Lender and each Lender
to have a security interest in it that might otherwise be
restricted or prohibited by law or by the terms of any such license
or, whether now existing or entered into in the future, and
(y) Lender shall have the ability in the event of a
liquidation of any Collateral to dispose of such Collateral in
accordance with Lender’s rights and remedies under this
Agreement and the other Loan Documents.
5.3 Litigation
. There are no actions or
proceedings pending or, to the knowledge of the Responsible
Officers, threatened in writing by or against Borrower or any of
its Subsidiaries involving more than Two Hundred Fifty Thousand
Dollars ($250,000.00).
5.4 No Material Deviation in
Financial Statements .
All consolidated financial statements for Borrower and any of its
Subsidiaries delivered to Lender fairly present, in conformity with
GAAP, in all material respects Borrower’s consolidated
financial condition and Borrower’s consolidated results of
operations. There has not been any material deterioration in
Borrower’s consolidated financial condition since the date of
the most recent financial statements submitted to
Lender.
5.5 Regulatory
Compliance . Borrower is
not an “investment company” or a company
“controlled” by an “investment company” or
a “subsidiary” of an “investment company”
under the Investment Company Act of 1940. Borrower is not engaged
in extending credit for margin stock (under Regulations T and U of
the Federal Reserve Board of Governors). Borrower has complied in
all material respects with the Federal Fair Labor Standards Act.
Neither Borrower nor any of its Subsidiaries is a “holding
company” or an “affiliate” of a “holding
company” or a “subsidiary company” of a
“holding company” as each term is defined and used in
the Public Utility Holding Company Act of 2005. Borrower has not
violated any laws, ordinances or rules, the violation of which
could reasonably be expected to have a material adverse effect on
its business. None of Borrower’s or any of its
Subsidiaries’ properties or assets has been used by Borrower
or any Subsidiary or, to the best of Borrower’s knowledge, by
previous Persons, in disposing, producing, storing, treating, or
transporting any hazardous substance other than legally. Borrower
and each of its Subsidiaries have obtained all consents, approvals
and authorizations of, made all declarations or filings with, and
given all notices to, all Governmental Authorities that are
necessary to continue their respective businesses as currently
conducted.
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5.6 Subsidiaries;
Investments . Borrower
does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.7 Tax Returns and Payments;
Pension Contributions .
Borrower has timely filed all required tax returns and reports
(including those relating to employee tax withholding, social
security and unemployment taxes), and Borrower and its Subsidiaries
have timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower. Borrower
may defer payment of any contested taxes, provided that Borrower
(a) in good faith contests its obligation to pay the taxes by
appropriate proceedings promptly and diligently instituted and
conducted, (b) notifies Lender in writing of the commencement
of, and any material development in, the proceedings,
(c) posts bonds or takes any other steps required to prevent
the governmental authority levying such contested taxes from
obtaining a Lien upon any of the Collateral that is other than a
“Permitted Lien”. Borrower is unaware of any claims or
adjustments proposed for any of Borrower’s prior tax years
which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid all amounts necessary to fund all
present pension, profit sharing and deferred compensation plans in
accordance with their terms, and Borrower has not withdrawn from
participation in, and has not permitted partial or complete
termination of, or permitted the occurrence of any other event with
respect to, any such plan which could reasonably be expected to
result in any liability of Borrower, including any liability to the
Pension Benefit Guaranty Corporation or its successors or any other
governmental agency.
5.8 Use of Proceeds
. Borrower shall use the proceeds of
the Credit Extensions solely as working capital and to fund its
general business requirements and not for personal, family,
household or agricultural purposes.
5.9 Full Disclosure
. No written representation,
warranty or other statement of Borrower in any certificate or
written statement given to Lender, as of the date such
representation, warranty, or other statement was made, taken
together with all such written certificates and written statements
given to Lender, contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements
contained in the certificates or statements not misleading (it
being recognized that the projections and forecasts provided by
Borrower in good faith and based upon reasonable assumptions are
not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from
the projected or forecasted results).
6 AFFIRMATIVE
COVENANTS
Borrower shall do all of the
following:
6.1 Government
Compliance .
(a) Maintain its and all its
Subsidiaries’ legal existence and good standing in their
respective jurisdictions of formation and maintain qualification in
each jurisdiction in which the failure to so qualify would
reasonably be expected to have a material adverse effect on
Borrower’s business or operations. Borrower shall comply, and
have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, the noncompliance with which
could reasonably be expected to have a material adverse effect on
Borrower’s business.
(b) Obtain all of the Governmental
Approvals necessary for the performance by Borrower of its
obligations under the Loan Documents to which it is a party and the
grant of a security interest to Lender in all of the Collateral.
Borrower shall promptly provide copies of any such obtained
Governmental Approvals to Lender.
6.2 Financial Statements,
Reports, Certificates .
(a) Deliver to Lender:
(i) within five (5) days of delivery, copies of all
statements, reports and notices made available to all of
Borrower’s security holders or to any holders of Subordinated
Debt; and (ii) within five (5) days of filing, all
reports on Form 10-K, 10-Q and 8-K filed with the Securities and
Exchange Commission or a link thereto on Borrower’s or
another website on the Internet; (iii) a prompt report of any
legal actions pending or threatened against Borrower or any of its
Subsidiaries that could result in damages or costs to Borrower or
any of its Subsidiaries of Two Hundred Fifty Thousand Dollars
($250,000) or more; and (iv) other financial
information reasonably requested by Lender.
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(b) Within forty-five (45) days
after the last day of each calendar quarter, deliver to Lender, a
duly completed Compliance Certificate signed by a Responsible
Officer.
6.3 Inventory; Returns
. Keep all Inventory in good and
marketable condition, free from material defects. Returns and
allowances between Borrower and its Account Debtors shall follow
Borrower’s customary practices as they exist at the Effective
Date. Borrower must promptly notify Lender of all returns,
recoveries, disputes and claims that involve more than Two Hundred
Fifty Thousand Dollars ($250,000).
6.4 Taxes; Pensions
. Make, and cause each of its
Subsidiaries to make, timely payment of all foreign, federal,
state, and local taxes or assessments (other than taxes and
assessments which Borrower is contesting pursuant to the terms of
Section 5.8 hereof) and shall deliver to Lender, on demand,
appropriate certificates attesting to such payments, and pay all
amounts necessary to fund all present pension, profit sharing and
deferred compensation plans in accordance with their
terms.
6.5 Insurance
. Keep its business and the
Collateral insured for risks and in amounts standard for companies
in Borrower’s industry and location and as Lender may
reasonably request. Insurance policies shall be in a form, with
companies, and in amounts that are satisfactory to Lender. All
property policies shall have a lender’s loss payable
endorsement showing Lender as lender loss payee and waive
subrogation against Lender, and all liability policies shall show,
or have endorsements showing, the Lender, as an additional insured.
All policies (or the loss payable and additional insured
endorsements) shall provide that the insurer must give Lender at
least twenty (20) days notice before canceling, amending, or
declining to renew its policy. At Lender’s request, Borrower
shall deliver certified copies of policies and evidence of all
premium payments. Proceeds payable under any policy shall, at
Lender’s option, be payable to Lender on behalf of the Lender
on account of the Obligations. Notwithstanding the foregoing,
(a) so long as no Event of Default has occurred and is
continuing, Borrower shall have the option of applying the proceeds
of any casualty policy up Two Hundred Fifty Thousand Dollars
($250,000), in the aggregate for all losses under all casualty
policies in any one year, toward the replacement or repair of
destroyed or damaged property; provided that any such replaced or
repaired property (i) shall be of equal or like value as the
replaced or repaired Collateral and (ii) shall be deemed
Collateral in which Lender has been granted a first priority
security interest (subject to Permitted Liens), and (b) after
the occurrence and during the continuance of an Event of Default,
all proceeds payable under such casualty policy shall, at the
option of Lender, be payable to Lender, on account of the
Obligations. If Borrower fails to obtain insurance as required
under this Section 6.5 or to pay any amount or furnish any
required proof of payment to third persons and Lender, Lender may
make all or part of such payment or obtain such insurance policies
required in this Section 6.5, and take any action under the
policies Lender reasonably deems prudent.
6.6 Protection of Intellectual
Property Rights .
Borrower shall: (a) use commercially reasonable efforts to
protect, defend and maintain the validity and enforceability of its
intellectual property; (b) promptly advise Lenders in writing
of material infringements of its intellectual property; and
(c) not allow any intellectual property necessary for the
conduct of Borrower’s business to be abandoned, forfeited or
dedicated to the public without Lenders’ written
consent.
6.7 Litigation
Cooperation . From the
date hereof and continuing through the termination of this
Agreement, make available to Lender, without expense to Lender,
Borrower and its officers, employees and agents and
Borrower’s books and records, to the extent that Lender may
deem them reasonably necessary to prosecute or defend any
third-party suit or proceeding instituted by or against Lender with
respect to any Collateral or relating to Borrower.
6.8 Further Assurances
. Execute any further instruments
and take further action as Lender reasonably requests to perfect or
continue Lender’s Lien in the Collateral or to effect the
purposes of this Agreement. Deliver to Lender, within five
(5) days after the same are sent or received, copies of all
correspondence, reports, documents and other filings with any
Governmental Authority regarding compliance with or maintenance of
Governmental Approvals or Requirements of Law or that could
reasonably be expected to have a material effect on any of the
Governmental Approvals or otherwise on the operations of or any of
its Subsidiaries.
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6.9 Notices of Litigation and
Default . Borrower will
give prompt written notice to Lender of any litigation or
governmental proceedings pending or threatened (in writing) against
Borrower which would reasonably be expected to have a material
adverse effect with respect to Borrower. Without limiting or
contradicting any other more specific provision of this Agreement,
promptly (and in any event within three (3) Business Days)
upon Borrower becoming aware of the existence of any Event of
Default or event which, with the giving of notice or passage of
time, or both, would constitute an Event of Default, Borrower shall
give written notice to Lender of such occurrence, which such notice
shall include a reasonably detailed description of such Event of
Default or event which, with the giving of notice or passage of
time, or both, would constitute an Event of Default.
6.10 Creation/Acquisition of
Subsidiaries . In
the event Borrower or any Subsidiary creates or acquires any
Subsidiary, Borrower and such Subsidiary shall promptly notify
Lender of the creation or acquisition of such new Subsidiary and
take all such action as may be reasonably required by Lender to
cause each such domestic Subsidiary to guarantee the Obligations of
Borrower under the Loan Documents and grant a continuing pledge and
security interest in and to the assets of such domestic Subsidiary
(substantially as described on Exhibit A hereto); and Borrower
shall grant and pledge to Lender a perfected security interest in
the stock, units or other evidence of ownership of each Subsidiary
(in the case of a foreign Subsidiary, such pledge shall not exceed
65% of such stock units or other evidence of ownership).
7 NEGATIVE
COVENANTS
Borrower shall not do any of the
following without Lender’s prior written consent:
7.1 Dispositions
. Convey, sell, lease, transfer,
assign, or otherwise dispose of (collectively, “
Transfer ”), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, except for
Transfers (a) of Inventory in the ordinary course of business;
(b) of worn-out or obsolete Equipment; and (c) in
connection with Permitted Liens and Permitted Investments; and
(d) of non-exclusive and exclusive licenses, partnerships or
joint ventures for the use of the property, of Borrower or its
Subsidiaries in the ordinary course of business and approved by
Borrower’s Board. Notwithstanding the foregoing, Borrower may
effect any Transfer not permitted by this section 7.1(a) –
(d), provided that Borrower immediately remits the lesser of
either: (a) all proceeds received from any such Transfer, and
(b) proceeds received from any such Transfer sufficient to
repay all outstanding principal, plus all accrued and unpaid
interest, on the Term Loan. For the avoidance of doubt, Lenders
acknowledge and agree that Borrower shall be permitted to license
its intellectual property to third parties (on an exclusive basis)
consistent with Borrower’s current business model and
existing practice in the biotech industry.
7.2 Changes in Business,
Management, Ownership, or Business Locations
. (a) Engage in or permit any
of its Subsidiaries to engage in any business other than the
businesses currently engaged in by Borrower and such Subsidiary, as
applicable, or reasonably related thereto; (b) liquidate or
dissolve; or (c) (i) replace its chief executive officer,
chief financial officer, or chief scientific officer unless
Borrower promptly notifies Lender after the replacement of such
officer. or (ii) enter into any transaction or series of
related transactions in which the stockholders of Borrower
immediately prior to the first such transaction own less than 60%
of the voting stock of Borrower immediately after giving effect to
such transaction or related series of such transactions (other than
by the sale of Borrower’s equity securities in a public
offering or to venture capital investors). Borrower shall not,
without at least fifteen (15) days prior written notice to
Lender: (1) add any new offices or business locations,
including warehouses (unless such new offices or business locations
contain less than Twenty-Five Thousand Dollars ($25,000) in
Borrower’s assets or property), (2) change its
jurisdiction of organization, (3) change its organizational
structure or type, (4) change its legal name, or
(5) change any organizational number (if any) assigned by its
jurisdiction of organization.
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7.3 Mergers or
Acquisitions . Merge or
consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of
its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person except where Borrower
immediately remits proceeds received from any such transaction
sufficient to repay all outstanding principal, plus all accrued and
unpaid interest, on the Term Loan.
7.4 Indebtedness
. Create, incur, assume, or be
liable for any Indebtedness, or permit any Subsidiary to do so,
other than Permitted Indebtedness.
7.5 Encumbrance
. Create, incur, allow, or suffer
any Lien on any of its property, or assign or convey any right to
receive income, including the sale of any Accounts, or permit any
of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security
interest granted herein (subject to Permitted Liens), or enter into
any agreement, document, instrument or other arrangement (except
with or in favor of Lender) with any Person which directly or
indirectly prohibits or has the effect of prohibiting Borrower or
any Subsidiary from assigning, mortgaging, pledging, granting a
security interest in or upon, or encumbering any of
Borrower’s or any Subsidiary’s intellectual property,
except as is otherwise permitted in Section 7.1 hereof and the
definition of “Permitted Liens” herein.
7.6 Distributions;
Investments .
(a) Pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock provided that
(i) Borrower may convert any of its convertible securities
into other securities pursuant to the terms of such convertible
securities or otherwise in exchange thereof, (ii) Borrower may
pay dividends solely in common stock; and (iii) Borrower may
repurchase the stock of former employees or consultants pursuant to
stock repurchase agreements so long as an Event of Default does not
exist at the time of such repurchase and would not exist after
giving effect to such repurchase, provided such repurchase does not
exceed in the aggregate of One Hundred Thousand Dollars ($100,000)
per fiscal year, or (b) except as permitted in
Section 7.3, directly or indirectly make any Investment other
than Permitted Investments, or permit any of its Subsidiaries to do
so.
7.7 Transactions with
Affiliates . Directly or
indirectly enter into or permit to exist any material transaction
with any Affiliate of Borrower, except for sales of equity
securities to existing investors and transactions that are in the
ordinary course of Borrower’s business, in any case, upon
fair and reasonable terms that are no less favorable to Borrower
than would be obtained in an arm’s length transaction with a
non-affiliated Person.
7.8 Subordinated Debt
. (a) Make or permit any
payment on any Subordinated Debt, except under the terms of the
subordination, intercreditor, or other similar agreement to which
such Subordinated Debt is subject, or (b) amend any provision
in any document relating to the Subordinated Debt which would
increase the amount thereof or adversely affect the subordination
thereof to Obligations owed to the Lender.
7.9 Compliance
. Become an “investment
company” or a company controlled by an “investment
company”, under the Investment Company Act of 1940 or
undertake as one of its important activities extending credit to
purchase or carry margin stock (as defined in Regulation U of the
Board of Governors of the Federal Reserve System), or use the
proceeds of any Credit Extension for that purpose; fail to meet the
minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to
comply with the Federal Fair Labor Standards Act or violate any
other law or regulation, if the violation could reasonably be
expected to have a material adverse effect on Borrower’s
business, or permit any of its Subsidiaries to do so; withdraw or
permit any Subsidiary to withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any
other event with respect to, any present pension, profit sharing
and deferred compensation plan which could reasonably be expected
to result in any liability of Borrower, including any liability to
the Pension Benefit Guaranty Corporation or its successors or any
other governmental agency.
7.10 Paydown of Loans Resulting from Receipt of
Milestone Payments . Fail to make payment to Lender within two
(2) Business Days after receipt of any proceeds from any
future milestone payments received by Borrower, directly, or
indirectly, from Merck & Co. (“Merck”) or
Hoffmann-La Roche Inc., F. Hoffmann-La Roche LTD and Roche Palo
Alto LLC (collectively, “Roche”) as the result of
existing collaboration agreements between Borrower and Merck and
Roche, respectively, in an amount equal to the lesser of:
(a) all amounts of principal outstanding, plus accrued and
unpaid interest, on the Term Loan and (b) 3.828% of the
aggregate of such amounts received from Merck or Roche as the
result of such existing collaboration agreements, up to 3.828%
times $4,000,000 in the case of Merck and up to 3.828% times
$2,000,000 in the case of Roche.
8
8 EVENTS OF
DEFAULT
Any one of the following shall
constitute an event of default (an “ Event of Default
”) under this Agreement:
8.1 Payment Default
. Borrower fails to (a) make
any payment of principal or interest on any Credit Extension on its
due date, or (b) pay any other Obligations within three
(3) Business Days after such Obligations are due and payable
(which three (3) Business Day grace period shall not apply to
payments due on the Term Loan Maturity Date). No Event of Default
shall be deemed to have occurred and no interest at the Default
Rate shall be charged in the event that a Lender shall fail to
debit Borrower’s Designated Deposit Account while amounts
necessary to make full payment of the amounts then due hereunder
are available in such account. During the cure period, the failure
to cure the payment default is not an Event of Default (but no
Credit Extension will be made during the cure period);
8.2 Covenant Default
.
(a) Borrower fails or neglects to
perform any obligation in Sections 6.2, 6.4, 6.5, 6.6, or violates
any covenant in Section 7; or
(b) Borrower fails or neglects to
perform, keep, or observe any other term, provision, condition,
covenant or agreement contained in this Agreement or any Loan
Documents, and as to any default (other than those specified in
this Section 8) under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure the
default within ten (10) days after the occurrence thereof;
provided, however, that if the default cannot by its nature be
cured within the ten (10) day period or cannot after diligent
attempts by Borrower be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time,
then Borrower shall have an additional period (which shall not in
any case exceed thirty (30) days) to attempt to cure
such
