LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this “ Agreement ”)
dated as of February 20, 2008 (the " Effective Date ")
between SILICON
VALLEY BANK , a California corporation and with a loan
production office located at One Newton Executive Park, Suite 200,
2221 Washington Street, Newton, Massachusetts 02462 (
"SVB" ), as
collateral agent (the " Collateral Agent "),
and the Lenders listed on Schedule 1.1 thereof and party hereto,
including without limitation, SVB and OXFORD FINANCE
CORPORATION (" OXFORD ") and
DYNOGEN
PHARMACEUTICALS, INC. a Delaware corporation (“
Borrower
”), provides the terms on which Lenders shall lend to
Borrower and Borrower shall repay Lenders. The parties
agree as follows:
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. 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 Lenders 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)
Availability
. Subject to the terms and conditions of this
Agreement, during the First Draw Period, Lenders agree,
severally and not jointly, to make one (1) Term Loan (the "
First Term
Loan ") available to Borrower in an amount up to Five
Million Dollars ($5,000,000.00), according to each Lender's
pro-rata share of the Term Loan based upon the respective
Commitment Percentage of each Lender. During the
Second Draw Period, Lenders agree, severally and not jointly,
to make one (1) Term Loan (the " Second Term Loan
") available to Borrower in an amount up to Five Million
Dollars ($5,000,000.00), according to each Lender’s pro
rata share of the Term Loan based upon the respective
Commitment Percentage of each Lender. The First
Term Loan and Second Term Loan are hereinafter referred to,
singly or collectively, “ Term Loan .”
After repayment, no Term Loan may be re-borrowed.
(b)
Interest
Payments . Commencing on the first
Payment Date of the month following the month in which the
Funding Date occurs, Borrower shall make monthly payments of
interest, in arrears, at the rate set forth in Section
2.2(a).
(c)
Repayment
. Commencing on the Amortization Date and
continuing on the Payment Date of each month thereafter, for
each Term Loan, Borrower shall make (1) consecutive equal
monthly payments of principal, calculated by the Collateral
Agent based upon: (a) the amount of the Term Loan multiplied
by each Lender's Commitment Percentage, and (b) a repayment
schedule equal to thirty (30) months (less the number of
months for which a principal payment is required under Section
2.1.1(d)), plus (2) monthly payments of 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 each 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 Sections 2.1.1(e) and
2.1.1(f).
(d)
Principal
Repayment. In the event that the
Acquisition Event does not occur on or prior to September 30,
2008, then in addition to the scheduled payments of principal
and interest, as set forth in Section 2.1.1(c) hereof,
Borrower shall pay to each Lender, on the Amortization Date,
as an additional principal payment toward each Term Loan, in
an amount equal to the principal payments that would have been
collected based on an amortization schedule of thirty (30)
months, assuming a principal payment would have been made on
each Payment Date following the Funding Date through the
Amortization Date (7 months for the First Term
Loan).
(e)
Mandatory
Prepayment Upon an Acceleration . If a Term
Loan is accelerated following the occurrence of an Event of
Default, Borrower shall immediately pay to Lenders an amount
equal to the sum of: (i) all outstanding principal plus
accrued and unpaid interest, (ii) the Prepayment Fee, (iii)
the Final Payment, plus (iv) all other sums, that shall have
become due and payable, including interest at the Default Rate
with respect to any past due amounts.
(f)
Permitted
Prepayment of Loans . Borrower may not
make any prepayments of principal hereunder at any time prior
to the date which is six (6) months after the Effective Date
(" Prepayment
Date "). After the Prepayment Date,
Borrower shall have the option to prepay all, but not less
than all, of the Term Loans advanced by Lenders under this
Agreement, provided Borrower (i) provides written notice
to Collateral Agent of its election to prepay the Term Loans
at least ten (10) days prior to such prepayment, and
(ii) pays, on the date of such prepayment (A) all
outstanding principal plus accrued and unpaid
interest, (B) the Prepayment Fee, (C) the Final Payment, plus
(D) all other sums, that shall have become due and payable,
including interest at the Default Rate with respect to any
past due amounts.
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 the greater of:
(i) ten percent (10.0%), and (ii) the LIBOR Rate plus the
LIBOR Rate Margin, determined by Collateral Agent as of the
applicable Funding Date, which interest shall be payable
monthly in accordance with Section 2.2.(e).
(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 five percentage points
above the rate effective immediately before the Event of
Default (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 Collateral
Agent.
(c)
360-Day
Year . Interest shall be computed on the
basis of a 360-day year for the actual number of days
elapsed.
(d)
Debit of
Accounts . Collateral Agent may debit any of
Borrower’s deposit accounts, including the Designated
Deposit Account, for principal and interest payments or any
other amounts Borrower owes Lenders under the Loan Documents
when due. These debits shall not constitute a
set-off.
(e)
Payments
. Unless otherwise provided, interest is payable
monthly on the Payment Date of each month. 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
Notes. Each 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 irrevocably authorizes each Lender
to make or cause to be made, on or about the Funding Date of any
Term Loan or at the time of receipt of any payment of principal on
such Lender’s Secured Promissory Note, an appropriate
notation on such Lender’s Secured Promissory Note Record
reflecting the making of such Term Loan or (as the case may be) the
receipt of such payment. The outstanding amount of each
Term Loan set forth on such Lender’s Secured Promissory Note
Record shall be prima facie evidence of the principal amount
thereof owing and unpaid to such Lender, but the failure to record,
or any error in so recording, any such amount on such
Lender’s Secured Promissory Note Record shall not limit or
otherwise affect the obligations of the Borrower hereunder or under
any Secured Promissory Note to make payments of principal of or
interest on any 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 its Secured Promissory Note,
Borrower shall issue, in lieu thereof, a replacement Secured
Promissory Note in the same principal amount thereof and of like
tenor.
2.4
Fees
. Borrower shall pay to Collateral
Agent:
(a)
Commitment
Fee . A fully earned, non-refundable
commitment fee of Fifty Thousand Dollars ($50,000) (of which
Borrower has paid Collateral Agent Twenty-Five Thousand
Dollars ($25,000) prior to the Effective Date) to be shared
between the Lenders pursuant to their respective Commitment
Percentages;
(b)
Prepayment
Fee . The Prepayment Fee, when and if due
hereunder;
(c)
Final
Payment . The Final Payment, when due
hereunder; and
(c)
Lenders'
Expenses . All Lenders' Expenses (including
reasonable attorneys’ fees and expenses, plus expenses,
for documentation and negotiation of this Agreement) incurred
through and after the Effective Date, when due.
2.5
Additional
Costs . If any new law or regulation increases
Lender’s costs 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 Collateral Agent notifies Borrower of such increased
costs. Each Lender agrees that it shall allocate any
increased costs among its customers similarly affected in good
faith and in a manner consistent with such Lender’s customary
practice.
3
CONDITIONS OF
LOANS
3.1
Conditions
Precedent to Initial Credit Extension . Each
Lender’s obligation to make the initial Credit Extension is
subject to the condition precedent that Collateral Agent shall have
received, in form and substance satisfactory to Lenders, such
documents, and completion of such other matters, as Lenders 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 signatures to the Control
Agreement[s];
(c) duly
executed original Secured Promissory Notes in favor of each
Lender according to its Commitment Percentage in amounts not
to exceed the Term Loans;
(d) Operating
Documents and a good standing certificate of Borrower
certified by the Secretary of State of the State of Delaware
as of a date no earlier than thirty (30) days prior to the
Effective Date;
(e) duly
executed original signatures to the completed Borrowing
Resolutions for Borrower;
(f)
Collateral Agent shall have received
certified copies, dated as of a recent date, of financing
statement searches, as Collateral Agent shall request,
accompanied by written evidence (including any Code
termination statements) that the Liens indicated in any such
financing statements either constitute Permitted Liens or have
been or, in connection with the initial Credit Extension, will
be terminated or released;
(g)
a legal opinion of Borrower’s counsel dated as of the
Effective Date together with the duly executed original
signatures thereto;
(h)
evidence satisfactory to Collateral Agent that the insurance
policies required by Section 6.5 hereof are in full force and
effect, together with appropriate evidence showing loss
payable and/or additional insured clauses or endorsements in
favor of Collateral Agent, for the ratable benefit of the
Lenders;
(i)
Investor Commitment
Letter; and
(j)
payment of the fees and Lenders' Expenses then due
as specified in Section 2.4 hereof.
3.2
Conditions
Precedent to all Credit Extensions . The
obligation of each Lender to make each Credit Extension, including
the initial Credit Extension, is subject to the
following:
(a) except
as otherwise provided in Section 3.4, timely receipt of an
executed Payment/Advance Form;
(b) the
representations and warranties in Section 5 shall be true,
accurate and complete in all material respects on the date of
the Payment/Advance Form and on the Funding Date of each
Credit Extension; provided, however, that such materiality
qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that
those representations and warranties expressly referring to a
specific date shall be true, accurate and complete in all
material respects as of such date, and no Default or Event of
Default shall have occurred and be continuing or result from
the Credit Extension. Each Credit Extension is
Borrower’s representation and warranty on that date that
the representations and warranties in Section 5 remain true in
all material respects; provided, however, that such
materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided,
further that those representations and warranties expressly
referring to a specific date shall be true, accurate and
complete in all material respects as of such date;
and
(c) in
such Lender’s reasonable discretion, there has not been
any material impairment in the general affairs, management,
results of operation, financial condition or the prospect of
repayment of the Obligations, nor has there been any material
adverse deviation by Borrower from the most recent business
plan of Borrower presented to and accepted by Collateral
Agent.
3.3
Covenant to
Deliver . Borrower agrees to deliver to Collateral Agent
each item required to be delivered to Collateral Agent 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 Collateral Agent of
any such item shall not constitute a waiver by Lenders of
Borrower’s obligation to deliver such item, and any such
extension in the absence of a required item shall be in Collateral
Agent’s sole discretion.
3.4
Procedures for
Borrowing . Subject to the prior satisfaction of
all other applicable conditions to the making of a Term Loan set
forth in this Agreement, to obtain a Term Loan, Borrower shall
notify Collateral Agent (which notice shall be irrevocable) by
electronic mail, facsimile, or telephone by 12:00 noon Eastern time
at least one (1) Business Day prior to the initial Funding Date and
at least five (5) Business Days prior any additional Funding Dates.
Together with any such electronic or facsimile notification,
Borrower shall deliver to Collateral Agent by electronic mail or
facsimile a completed Payment/Advance Form executed by a
Responsible Officer or his or her designee. Upon receipt
of a Payment/Advance Form, Collateral Agent shall promptly provide
a copy of the same to each Lender. Collateral Agent may
rely on any telephone notice given by a person whom Collateral
Agent believes is a Responsible Officer or designee. On
the Funding Date, each Lender shall credit and/or transfer (as
applicable) to Borrower's Designated Deposit Account, an amount
equal to its Commitment Percentage multiplied by the amount of the
Term Loan.
4
CREATION
OF SECURITY INTEREST
4.1
Grant of Security
Interest . Borrower hereby grants Collateral
Agent, for the ratable benefit of the Lenders, and to each Lender,
to secure the payment and performance in full of all of the
Obligations, a continuing security interest in, and pledges to
Collateral Agent, for the ratable benefit of the Lenders, and to
each 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 Collateral Agent in a writing signed by
Borrower of the general details thereof (and further
details as may be required by Collateral Agent) and grant to
Collateral Agent, for the ratable benefit of the Lenders, and to
each 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 Collateral Agent.
If
this Agreement is terminated, Collateral Agent’s and
each Lender's Lien in the Collateral shall continue until the
Obligations are repaid in full in cash. Upon
payment in full in cash of the Obligations and at such time as
the Lenders' obligation to make Credit Extensions has
terminated, the Collateral Agent, and if appropriate,
each
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 Collateral Agent to file financing statements, without
notice to Borrower, with all appropriate jurisdictions to perfect
or protect Collateral Agent’s and each Lender's
interest or rights hereunder, including a notice that any
disposition of the Collateral, by either Borrower or any other
Person, shall be deemed to violate the rights of the Collateral
Agent and the Lenders 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 (as of the Effective Date, Borrower has no
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. In connection with this Agreement, Borrower
has delivered to Collateral Agent a completed perfection
certificate signed by
Borrower (the “ Perfection Certificate
”). Borrower represents and warrants that (a)
Borrower’s exact legal name is that indicated on the
Perfection Certificate and on the signature page hereof;
(b) Borrower is an organization of the type and is organized
in the jurisdiction set forth in the Perfection Certificate; (c)
the Perfection Certificate accurately sets forth Borrower’s
organizational identification number or accurately states that
Borrower has none; (d) the Perfection Certificate accurately sets
forth Borrower’s place of business, or, if more than one, its
chief executive office as well as Borrower’s mailing address
(if different than its chief executive office); (e) Borrower
(and each of its predecessors) has not, in the past five (5) years,
changed its jurisdiction of formation, organizational structure or
type, or any organizational number assigned by its jurisdiction;
and (f) all other information set forth on the Perfection
Certificate pertaining to Borrower and each of its Subsidiaries is
accurate and complete. If Borrower is not now a
Registered Organization but later becomes one, Borrower shall
promptly notify Collateral Agent of such occurrence and provide
Collateral Agent with Borrower’s organizational
identification number.
Except
for the required approvals under Borrower’s
organizational documents for authorization of shares of
capital stock to be issued upon exercise of the Warrants, if
the same become exercisable for Borrower’s capital
stock, 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 is bound, (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. Borrower has no deposit
accounts other than the deposit accounts with Collateral Agent, the
deposit accounts, if any, described in the Perfection Certificate,
or of which Borrower has given Collateral Agent notice and taken
such actions as are necessary to give Collateral Agent a perfected
security interest therein.
The Collateral is not in
the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection
Certificate. None of the components of the
Collateral shall be maintained at locations other than as
provided in the Perfection Certificate or as Borrower has
given Collateral Agent notice pursuant to Section
7.2. In the event that Borrower, after the date
hereof, intends to store or otherwise deliver any portion of
the Collateral to a bailee, then Borrower will first receive
the written consent of Collateral Agent and such bailee must
execute and deliver a bailee agreement in form and substance
satisfactory to Collateral Agent.
All Inventory is in all
material respects of good and marketable quality, free from
material defects.
Except as
noted on the Perfection Certificate, 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 the Collateral, or (b) for which a
default under or termination of could interfere with
Collateral Agent's right to sell any
Collateral. Borrower shall provide written notice
to Collateral Agent 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
Collateral Agent 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 Collateral Agent 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) Collateral Agent shall have the ability in
the event of a liquidation of any Collateral to dispose of
such Collateral in accordance with Collateral Agent'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 One
Hundred Thousand Dollars ($100,000.00).
5.4
No Material
Deviation in Financial Statements . All
consolidated financial statements for Borrower and any of its
Subsidiaries delivered to Collateral Agent fairly present, in
conformity with GAAP (except for interim financial statements
subject to normal year-end adjustments and footnotes), 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
Collateral Agent.
5.5
Solvency
. The fair salable value of Borrower’s assets
(including goodwill minus disposition costs) exceeds the fair value
of its liabilities and Borrower is able to pay its debts (including
trade debts) as they mature.
5.6
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.
5.7
Subsidiaries;
Investments . Borrower does not own any stock,
partnership interest or other equity securities except for
Permitted Investments.
5.8
Tax Returns and
Payments; Pension Contributions . Borrower has
timely filed all required tax returns and reports, 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 Collateral Agent
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.
5.9
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.
5.10
Full
Disclosure . No written representation, warranty
or other statement of Borrower in any certificate or written
statement given to Collateral Agent or any 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 Collateral Agent or any 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
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 Collateral Agent for the ratable benefit of the
Lenders, in all of its property. Borrower shall
promptly provide copies of any such obtained Governmental
Approvals to Collateral Agent.
6.2
Financial
Statements, Reports, Certificates .
(a) Deliver
to Collateral Agent: (i) as soon as available, but no later
than forty-five (45) days after the last day of each month, a
company prepared consolidated balance sheet and income
statement covering Borrower’s consolidated operations
for such month certified by a Responsible Officer and in a
form acceptable to Collateral Agent; (ii) as soon as
available, but no later than ninety (90) days after the last
day of Borrower’s fiscal year, audited consolidated
financial statements prepared under GAAP, consistently
applied, together with an unqualified opinion on the
financial statements from an independent certified public
accounting firm acceptable to Collateral Agent in its
reasonable discretion; (iii) 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; (iv) in the event that
Borrower becomes subject to the reporting requirements under
the Securities Exchange Act of 1934, as amended, 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; (v) 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 One Hundred Thousand Dollars ($100,000) or
more; and (vi) other
financial information reasonably requested by Collateral
Agent.
(b) Within
forty-five (45) days after the last day of each month,
deliver to Collateral Agent with the monthly financial
statements, 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 Collateral Agent of all returns, recoveries,
disputes and claims that involve more than One Hundred Thousand
Dollars ($100,000).
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 Collateral Agent, 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 Collateral Agent may reasonably
request. Insurance policies shall be in a form, with
companies, and in amounts that are satisfactory to Collateral
Agent. All property policies shall have a lender’s
loss payable endorsement showing Collateral Agent as lender loss
payee and waive subrogation against Collateral Agent, and all
liability policies shall show, or have endorsements showing, the
Collateral Agent, as an additional insured. All policies
(or the loss payable and additional insured endorsements) shall
provide that the insurer must give Collateral Agent at least twenty
(20) days notice before canceling, amending, or declining to renew
its policy, except in the event of non-payment of premium whereby
ten (10) days advance notice will be provided. At Collateral
Agent’s request, Borrower shall deliver certified copies of
policies and evidence of all premium payments. Proceeds
payable under any policy shall, at Collateral Agent’s option,
be payable to Collateral Agent on behalf of the Lenders
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 to $100,000 with respect to any loss, but
not exceeding $200,000, 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 Collateral Agent and Lenders have been granted
a first priority security interest, 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
Collateral Agent, be payable to Collateral Agent, for the ratable
benefit of the Lenders, 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
Collateral Agent, Collateral Agent 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 Collateral Agent deems
prudent.
6.6
Operating
Accounts .
(a) Maintain
operating accounts with Collateral Agent. In
addition, a portion of its cash or securities in excess of
that amount used for Borrower’s operations shall be
maintained with Collateral Agent or an Affiliate of Collateral
Agent, which account shall be in amount equal to at least the
aggregate outstanding Obligations of Borrower to Lenders
(provided that Borrower has sufficient cash or securities to
satisfy this requirement).
(b) Provide
Collateral Agent five (5) days prior written notice before
establishing any Collateral Account at or with any bank or
financial institution other than Collateral Agent or its
Affiliates. In addition, for each Collateral
Account that Borrower at any time maintains, Borrower shall
cause the applicable bank or financial institution (other than
Collateral Agent) at or with which any Collateral Account is
maintained to execute and deliver a Control Agreement or other
appropriate instrument with respect to such Collateral Account
to perfect Collateral Agent's Lien in such Collateral Account
in accordance with the terms hereunder, which Control
Agreement may not be terminated without prior written consent
of Collateral Agent. The provisions of the previous
sentence shall not apply to deposit accounts exclusively used
for payroll, payroll taxes and other employee wage and benefit
payments to or for the benefit of Borrower’s employees
and identified to Collateral Agent by Borrower as
such.
6.7
Protection of
Intellectual Property Rights . Borrower
shall use commercially reasonable efforts to protect,
defend and maintain the validity and enforceability of its
intellectual property; provided, however, nothing herein shall
prohibit Borrower from abandoning, selling or transferring any
intellectual property that
becomes
obsolete or not useful to Borrower based on developments in
its evolving business strategy and/or the biotech
industry.
6.8
Litigation
Cooperation . From the date hereof and continuing
through the termination of this Agreement, make available to
Collateral Agent, without expense to Collateral Agent, Borrower and
its officers, employees and agents and Borrower's books and
records, to the extent that Collateral Agent may deem them
reasonably necessary to prosecute or defend any third-party suit or
proceeding instituted by or against Collateral Agent with respect
to any Collateral or relating to Borrower.
6.9
Further
Assurances . Execute any further instruments and
take further action as Collateral Agent reasonably requests to
perfect or continue Collateral Agent’s and Lenders' Lien in
the Collateral or to effect the purposes of this
Agreement. Deliver to Collateral Agent, 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 Borrower
or any of its Subsidiaries.
6.10
Notices of
Litigation and Default. Borrower will give
prompt written notice to Collateral Agent 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 and in any event, involving
amounts in excess of One Hundred Thousand Dollars ($100,000), in
the aggregate. Without limiting or contradicting any other more
specific provision of this Agreement, promptly (and in any event
within five (5) 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 Collateral Agent 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.
6.11
Creation/Acquisition of
Subsidiaries . In the event Borrower or any Subsidiary
creates or acquires any Subsidiary, Borrower and such Subsidiary
shall promptly notify Collateral Agent of the creation or
acquisition of such new Subsidiary and take all such action as may
be reasonably required by Collateral Agent 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 Subsidiary (substantially as
described on Exhibit A hereto); and Borrower shall grant and
pledge to Collateral Agent, for the ratable benefit of Lenders 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).
6.12
Co-Borrower
. Within thirty (30) days after the occurrence of the Acquisition
Event, Borrower shall cause Apex Bioventures Acquisition
Corporation, a Delaware corporation (“ Apex ”) to become
a co-borrower under this Agreement, pursuant to documentation
acceptable to Collateral Agent in its sole discretion. In
connection therewith, Borrower shall provide Bank with authority
documents acceptable to Collateral Agent, including, without
limitation, an authority/enforceability opinion from Apex’s
counsel, a certificate from the Delaware Secretary of State
certifying that Apex is a validly existing Delaware corporation,
and is in good standing in the State of Delaware.
7
NEGATIVE
COVENANTS
Borrower
shall not do any of the following without Collateral
Agent’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,
partnership or joint ventures for the use of the property of
Borrower or its Subsidiaries in the ordinary course of business
with any third party, which arrangements are approved by the
Board. For the avoidance of doubt, Lenders
acknowledge and agree that Borrower shall be permitted to license
its intellectual property to third parties 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) have a material change in management 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 so long as Borrower identifies to
Collateral Agent the venture capital investors prior to the closing
of the transaction). Borrower shall not, without at
least thirty (30) days prior written notice to Collateral Agent:
(1) add any new offices or business locations, including
warehouses (unless such new offices or business locations contain
less than Ten Thousand Dollars ($10,000) 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.
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 for the Acquisition Event. A Subsidiary may
merge or consolidate into another Subsidiary or into
Borrower.
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, or enter into any agreement, document,
instrument or other arrangement (except with or in favor of
Collateral Agent) 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
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