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Exhibit 10.4
Execution Version
CONSENT AND AMENDMENT NO. 3
TO
AMENDED AND RESTATED MASTER SECURITY
AGREEMENT
THIS CONSENT AND AMENDMENT NO. 3 TO AMENDED AND RESTATED
MASTER SECURITY AGREEMENT (this " Amendment ") dated as of
the 22 nd day of
December, 2008, by and between GTC BIOTHERAPEUTICS, INC. ("
Debtor ") and GENERAL ELECTRIC CAPITAL CORPORATION
(together with its successors and assigns, if any, " Secured
Party ").
RECITALS:
WHEREAS , Debtor and Secured Party have entered into that
certain Amended and Restated Master Security Agreement dated as of
the 29th day of December, 2006 (as amended, restated, supplemented
or otherwise modified from time to time, the " Security
Agreement "); and
WHEREAS , in connection therewith, Debtor delivered to
Secured Party a Perfection Certificate dated as of the 29th day of
December, 2006 (as amended, restated, supplemented or otherwise
modified from time to time, the " Perfection Certificate
");
WHEREAS , in connection therewith, Debtor delivered to
Secured Party an Amended and Restated Mortgage, Security Agreement
and Fixture Filing dated as of the 29th day of December, 2006 (as
amended, restated, supplemented or otherwise modified from time to
time, the " Mortgage "); and
WHEREAS , Debtor has requested that Secured Party consent
to (a) its incurrence of secured Debt under that certain
$15,000,000 Secured Convertible Note (the " Secured Subordinated
Note ") dated as of December 22, 2008 in favor of LFB
Biotechnologies, S.A.S.U., a société par actions
simplifiée unipersonnelle established under the laws of
France (" LFB ") (the " Secured Subordinated Debt "),
and (b) its grant of a first priority security interest in
intellectual property and a second priority security interest in
all other assets of the Debtor to LFB, pursuant to the terms and
conditions of the LFB Second Mortgage (as defined below) and that
certain Security Agreement dated as of December 22, 2008 by
and between Debtor and LFB (the " Subordinated Debt Security
Agreement "; the Secured Subordinated Note, the Subordinated
Debt Security Agreement, that certain Note Purchase Agreement dated
as of October 31, 2008 by and between Debtor and LFB (the "
Note Purchase Agreement "), that certain Common Stock
Purchase Warrant dated as of December 22, 2008 by Debtor in
favor of LFB, that certain Second Mortgage, Security Agreement and
Fixture Filing dated as of December 22, 2008 by Debtor in
favor of LFB (the " LFB Second Mortgage "), which is by its
terms expressly subordinated to the Indebtedness (as defined in the
Security Agreement), and any and all instruments, agreements or
documents executed and/or delivered in connection therewith are
collectively referred to herein as the " Secured Subordinated
Debt Documents "), and Secured Party is willing to do so on the
terms and conditions set forth herein.
NOW, THEREFORE , in consideration of the mutual covenants
and undertakings herein contained, Debtor and Secured Party agree
as follows:
1. Definitions . All capitalized terms not otherwise
defined herein shall have the meanings given to them in the
Security Agreement.
2. Amendments to Security Agreement
.
(a) Section 2(k) of the Security Agreement shall be
amended by adding the following new subpart (iv) immediately
after the phrase "in accordance with GAAP," in subpart
(iii) thereof:
"(iv) liens in favor of LFB Biotechnologies, S.A.S.U., a
société par actions simplifiée unipersonnelle
established under the laws of France (" LFB "), provided
that LFB has entered into a subordination agreement, in form and
substance acceptable to Secured Party,"
(b) Section 2(k) of the Security Agreement shall be
amended by replacing the reference "and (iv)" therein with the
reference "and (v)".
(c) Section 2(o) of the Security Agreement shall be
amended by replacing the phrase "(the " Subordinated Note
")" in subpart (iii) thereof with the phrase "(the "
Unsecured Subordinated Note ")".
(d) Section 2(o) of the Security Agreement shall be
amended by replacing the phrase "(the " Subordinated Debt
")" in subpart (iii) thereof with the phrase "(the "
Unsecured Subordinated Debt ")".
(e) Section 2(o) of the Security Agreement shall be
amended by adding a new subpart (iv) immediately after the
phrase "Debtor to LFB Biotechnologies (" Unsecured Subordinated
Debt ")" in subpart (iii) thereof:
"(iv) secured Debt incurred under and pursuant to that
certain $15,000,000 Secured Convertible Note (the " Secured
Subordinated Note "; the Secured Subordinated Note and the
Unsecured Subordinated Note shall be individually and collectively
referred to herein as the " Subordinated Note ") dated as of
December 22, 2008 from Debtor to LFB (" Secured
Subordinated Debt "; the Secured Subordinated Debt and the
Unsecured Subordinated Debt shall be collectively referred to
herein as the " Subordinated Debt ")."
(f) Section 2(o) of the Security Agreement shall be
amended by replacing the reference "and (iv)" therein with the
reference "and (v)".
(g) Section 2(p) of the Security Agreement shall be
amended by replacing the phrase "except in accordance with that
certain Subordination Agreement dated as of the date hereof between
Secured Party and LFB Biotechnologies S.A.S.U." therein with the
phrase "except in accordance with (x) that certain
Subordination Agreement dated as of the date hereof between Secured
Party and LFB Biotechnologies S.A.S.U. and (y) that certain
Subordination Agreement dated as of December 22, 2008 between
Secured Party and LFB (collectively, the " Subordination
Agreements ")".
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(h) A new Section 2(t) is added to
the Security Agreement immediately following
Section 2(s) thereof:
"(t) Beginning on December 22, 2008 (the " Third
Amendment Effective Date ") and at all times thereafter as
required in this Section 2(t) , Debtor shall maintain
in account nos. 3300345727, 3300346051 and 3300346066 held at
Silicon Valley Bank (or other bank acceptable to Secured Party)
(the " Cash Burn Account ") and subject to a control
agreement in form and substance satisfactory to Secured Party,
unrestricted cash and cash equivalents as shown on the consolidated
balance sheet of Debtor in an amount equal to or greater than
(a) if the Cash Burn Amount (as defined below) is negative,
two (2) times the positive value of the Cash Burn Amount or
(b) if the Cash Burn Amount is positive, $0. If at any time
the amount on deposit in the Cash Burn Account fails to satisfy the
requirement under this Section 2(t) for a period of
five (5) consecutive days, Debtor shall, within ten
(10) days after the end of such five (5) consecutive day
period, deposit such additional sums in the Cash Burn Account to
satisfy such requirement. If on or before the end of such ten
(10) day period, the Debtor fails to deposit the required
additional sums in the Cash Burn Account, such failure shall not be
an Event of Default but shall constitute a cash burn event under
this Agreement (a " Cash Burn Event "), and Secured Party
shall, at Secured Party’s option, exercise its rights with
respect to the Cash Collateral as set forth in
Section 3(k) of this Agreement. Notwithstanding the
foregoing, if Secured Party exercises its rights as set forth in
Section 3(k) of this Agreement after the occurrence of
a Cash Burn Event and applies one hundred percent (100%) of
the Cash Collateral against the Indebtedness, the requirement under
this Section 2(t) shall no longer be applicable. As
used herein, the term " Cash Burn Amount " means, with
respect to Debtor, as of the most recent month end and based on the
financial statements most recently delivered to Secured Party in
accordance with this Agreement: (a) the quotient of
(i) the sum of, without duplication, (A) net income
(loss), plus (B) depreciation and amortization,
plus (C) non-refundable milestone payments
received in cash that have been approved by Secured Party to the
extent not included in net income (the " Milestone Payments
") minus (D) non-financed capital expenditures,
minus (E) the amortized portion of any Milestone
Payment described in (C) above, in each case of clauses (A),
(B), (C), (D) and (E), for the immediately preceding six
(6) month period on a trailing basis, divided by
(ii) six (6), minus (b) the quotient of
(i) the current portion of interest bearing liabilities due
and payable in the immediately succeeding six (6) months
divided by (ii) six (6)."
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(i) A new Section 3(k) is added to
the Security Agreement immediately following
Section 3(j) thereof:
"(k) From the proceeds of the Secured Subordinated Note, on the
Third Amendment Effective Date, Debtor shall pay to Secured Party
an initial deposit amount equal to Four Million and No/100 Dollars
($4,000,000.00) (the " Cash Collateral "). The Cash
Collateral may be commingled with the general funds of Secured
Party and no such amounts shall be deemed to be held in trust for
the benefit of Debtor, but Secured Party shall apply the Cash
Collateral in the manner required pursuant to this
Section 3(k) . Interest shall be payable on the Cash
Collateral at an amount equal to one percent (1%) per annum on
the Cash Collateral, which amount shall be added to, and deemed to
be part of, the Cash Collateral on a monthly basis. Such interest
shall be calculated on the basis of a 365-day year (or 366-day
year, as applicable). The rate of interest payable to Debtor
hereunder is not necessarily the highest rate of interest paid to
Secured Party on account of funds on deposit in the deposit account
in which the Cash Collateral is held. Debtor acknowledges and
agrees that the Cash Collateral shall be part of the Collateral and
shall stand as additional security for all of the Indebtedness.
Debtor hereby grants Secured Party a first priority lien on and
perfected security interest in the Cash Collateral, and Debtor
shall execute any other documents and take any other actions
necessary or reasonably requested by Secured Party to provide
Secured Party with such a perfected security interest in such Cash
Collateral. Upon the earlier of: (i) a Cash Burn Event,
(ii) the occurrence of an Event of Default or (iii) the
maturity of any portion of the Indebtedness, all or part of the
Cash Collateral shall, at Secured Party’s sole option, be
applied against the Indebtedness; provided however that
(A) solely with respect to the application of the Cash
Collateral following a Cash Burn Event, no premium (if any) as
described in the Notes shall apply to any such application of the
Cash Collateral by the Secured Party to the Indebtedness; and
(B) solely with respect to the application of the Cash
Collateral following the occurrence of an Event of Default, in lieu
of the obligation of the Debtor to pay any premium (if any)
relating solely to the outstanding principal balance prepaid by any
such application of the Cash Collateral by the Secured Party to the
Indebtedness, as described in the Notes, Debtor shall pay a sum as
a premium on any such application equal to the product of
(1) the amount of the Cash Collateral so applied multiplied by
(2) the following percentage: (x) if such application
occurs prior to or on the second anniversary date of the Notes,
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2.5% and (y) if such application occurs
after the second anniversary date of the Notes and prior to or on
the third anniversary date of the Notes, 2%. For the avoidance of
doubt, the Debtor shall not be required to deposit with Secured
Party any additional cash to restore any such sums applied by
Secured Party upon the occurrence of an Event of Default, a Cash
Burn Event or the maturity of any portion of the
Indebtedness."
(j) Section 5(b) of the Security Agreement shall be
amended and restated in its entirety to read as follows:
"(b) Debtor will deliver to Secured Party financial statements
as follows: (i) monthly financial statements, including a
balance sheet, statement of operations and cash flow statement
within 30 days of each month end, (ii) quarterly unaudited
financial statements within 30 days of each quarter end (or, if
Borrower is a publicly held company, within 10 days after the
statements are provided to the Securities and Exchange Commission
(" SEC ")), and (iii) complete audited annual financial
statements, certified by a recognized firm of certified public
accountants, within 120 days of fiscal year end or at such time as
Debtor’s Board of Directors receives the audit (or, if
Borrower is a publicly held company, within 10 days after the
statements are provided to the SEC). All such statements are to be
prepared using generally accepted accounting principles ("
GAAP "), except that monthly financial statements shall be
prepared on an internal accounting basis only and, if Debtor is a
publicly held company, are to be in compliance with SEC
requirements. All financial statements delivered pursuant to this
Section 5(b) shall be accompanied by a compliance
certificate, signed by the chief financial officer of Debtor, in
the form attached hereto as Exhibit B , and all
quarterly and year end financial statements shall be accompanied by
a management discussion and analysis that includes a comparison of
performance for such fiscal period to the corresponding period in
the prior year."
(k) New Sections 5(c) and (d) shall be
added to the Security Agreement immediately following
Section 5(b) thereof:
"(c) Debtor will deliver to Secured Party at least once per week
a cash report in form and substance acceptable to Secured Party,
including, without limitation, evidence of its compliance on a
daily basis with the Cash Burn Covenant as required pursuant to
Section 2(t) of this Agreement.
(d) Promptly following request therefor by Secured Party,
Debtor
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