Confidential Information, indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission

 

defined below and each sometimes individually referred to as a “ Term Loan ” and collectively referred to as the “ Term Loans ”) to Borrower from time to time on any Business Day (as defined below) during the periods set forth below in an aggregate principal amount not to exceed such Lender’s “Term Loan A Commitment”, “Term Loan B Commitment” and “Term Loan C Commitment” as identified on Schedule A hereto (such commitment of each Lender as it may be amended to reflect assignments made in accordance with this Agreement or terminated or reduced in accordance with this Agreement, its “ Term Loan A Commitment ”, “ Term Loan B Commitment ” and “ Term Loan C Commitment ”, as applicable, and the aggregate of all such commitments, the “ Aggregate Term Loan A Commitment ”, “ Aggregate Term Loan B Commitment ” and “ Aggregate Term Loan C Commitment ”, as applicable, and each Term Loan A Commitment, Term Loan B Commitment and Term Loan C Commitment is sometimes individually referred to herein as a “ Commitment ” and collectively as the “ Commitments ”).  Notwithstanding the foregoing, the aggregate principal amount of the Term Loans made hereunder shall not exceed $15,000,000 (the “ Total Commitment ”).  Each Lender’s obligation to fund a Term Loan shall be limited to such Lender’s Pro Rata Share (as defined below) of such Term Loan.  Subject to the terms and conditions hereof, the initial Term Loan (the “ Term Loan A ”) shall be made on the Closing Date in an aggregate principal amount equal to $3,800,000.   After the Term Loan A, Borrower may request (i) a second Term Loan (the “ Term Loan B ”) to be funded, subject to the terms and conditions hereof, on or prior to August 11, 2008 (the “ Term Loan B Commitment Termination Date ”) in the aggregate principal amount of $5,600,000 and (ii) a third Term Loan (the “ Term Loan C ”) to be funded, subject to the terms and conditions hereof, on or prior to September 30, 2008 (the “ Term Loan C Commitment Termination Date ”) in the aggregate principal amount of $5,600,000.

 

(b)          Method of Borrowing .  When Borrower desires a Term Loan, Borrower will notify Agent (which notice shall be irrevocable) by facsimile (or by telephone, provided that such telephonic notice shall be promptly confirmed in writing, but in any event on or before the following Business Day) on a date that is ten (10) or more Business Days prior to the day the Term Loan is to be made (or such shorter period of time as Agent may agree). Agent and Lenders may act without liability upon the basis of such written or telephonic notice reasonably believed by Agent to be from any authorized officer of Borrower.  Agent and Lenders shall have no duty to verify the authenticity of the signature appearing on any such written notice.

 

(c)          Funding of Term Loans .  Promptly after receiving a request for a Term Loan, Agent shall notify each Lender of the contents of such request and such Lender’s Pro Rata Share of the requested Term Loan.  Upon the terms and subject to the conditions set forth herein, each Lender, severally and not jointly, shall make available to Agent its Pro Rata Share of the requested Term Loan, in lawful money of the United States of America in immediately available funds, to the Collection Account (as defined below) prior to 11:00 a.m. (New York time) on the specified date.  Agent shall, unless it shall have determined that one of the conditions set forth in Section 4.1, 4.2 or 4.3, as applicable, has not been satisfied, by 4:00 p.m. (New York time) on such day, credit the amounts received by it in like funds to Borrower by wire transfer to, unless otherwise specified in a Disbursement Letter (as defined below), the following deposit account of Borrower (or such other deposit account as specified in writing by an authorized officer of Borrower and acceptable to Agent) (the “ Designated Deposit Account ”):

 

[***]

 

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(d)          Notes .  The Term Loans of each Lender shall be evidenced by a promissory note substantially in the form of Exhibit A hereto (each a “ Note ” and, collectively, the “ Notes ”), and Borrower shall execute and deliver a Note to each Lender.  Each Note shall represent the obligation of Borrower to pay to such Lender the lesser of (a) the aggregate unpaid principal amount of all Term Loans made by such Lender to Borrower under this Agreement or (b) the amount of such Lender’s Commitment, in each case together with interest thereon as prescribed in Section 2.3(a).

 

(e)          Agent May Assume Funding .  Unless Agent shall have received notice from a Lender prior to the date of any particular Term Loan that such Lender will not make available to Agent such Lender’s Pro Rata Share of such Term Loan, Agent may assume that such Lender has made such amount available to it on the date of such Term Loan in accordance with subsection (c) of this Section 2.2, and may (but shall not be obligated to), in reliance upon such assumption, make available a corresponding amount for the account of Borrower on such date.  If and to the extent that such Lender shall not have so made such amount available to Agent, such Lender and Borrower severally agree to repay to Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the day such amount is made available to Borrower until the day such amount is repaid to Agent, at (i) in the case of Borrower, a rate per annum equal to the interest rate applicable thereto pursuant to Section 2.3(a), and (ii) in the case of such Lender, a floating rate per annum equal to, for each day from the day such amount is made available to Borrower until such amount is reimbursed to Agent, the weighted average of the rates on overnight federal funds transactions among members of the Federal Reserve System, as determined by Agent in its sole discretion (the “ Federal Funds Rate ”) for the first Business Day and thereafter, at the interest rate applicable to such Term Loan.  If such Lender shall repay such corresponding amount to Agent, the amount so repaid shall constitute such Lender’s loan included in such Term Loan for purposes of this Agreement.

 

2.3.      Interest and Repayment.

 

(a)          Interest .  Each Term Loan shall accrue interest from the date made until such Term Loan is fully repaid at a fixed per annum rate of interest equal to the sum of (i) the greater of (A) the Treasury Rate (as defined below) in effect on the day that is three (3) Business Days prior to the making of such Term Loan as determined by Agent and (B) 3.22% plus (ii) 8.37%.   All computations of interest and fees calculated on a per annum basis shall be made by Agent on the basis of a 360-day year, in each case for the actual number of days occurring in the period for which such interest and fees are payable.  Each determination of an interest rate or the amount of a fee hereunder shall be made by Agent and shall be conclusive, binding and final for all purposes, absent manifest error.  As used herein, the term “Treasury Rate” means a per annum rate of interest equal to the rate published by the Board of Governors of the Federal Reserve System in Federal Reserve Statistical Release H.15 entitled “Selected Interest Rates” under the heading “U.S. Government Securities/Treasury Constant Maturities” as the three year treasuries constant maturities rate.  In the event Release H.15 is no longer published, Agent shall select a comparable publication to determine the U.S. Treasury note yield to maturity.

 

(b)          Payments of Principal and Interest .  Borrower shall pay to the Agent, for the ratable benefit of the Lenders, (i) with respect to each Term Loan, one payment of interest only (payable in arrears) for the period from the date of funding of such Term Loan to and including the last day of the month in which such Term Loan was funded at the rate of interest determined in accordance with Section 2.3(a), to be paid on the first day of the calendar month occurring after

 

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the month in which such Term Loan was funded, (ii) with respect to the Term Loan A, (A) six (6) consecutive payments of interest only (payable in arrears) at the rate of interest determined in accordance with Section 2.3(a) on the first day of each calendar month (a “ Scheduled Payment Date ”) commencing on the first day of the second calendar month occurring after the month during which the Term Loan A was funded and (B) thirty (30) equal consecutive payments of principal and interest (payable in arrears) at the rate of interest determined in accordance with Section 2.3(a) on each Scheduled Payment Date commencing on the first day of the eighth calendar month occurring after the month during which the Term Loan A was funded, (iii) with respect to the Term Loan B, (A) monthly payments of interest only (payable in arrears) at the rate of interest determined in accordance with Section 2.3(a) on each Scheduled Payment Date commencing on the first day of the second calendar month occurring after the month during which the Term Loan B was funded and (B) commencing on the earlier of (x) the first day of the eighth calendar month occurring after the month during which the Term Loan B was funded and (b) January 1, 2009, thirty (30) equal consecutive payments of principal and interest (payable in arrears) at the rate of interest determined in accordance with Section 2.3(a) on each Scheduled Payment Date and (iv) with respect to the Term Loan C, (A) three (3) consecutive payments of interest only (payable in arrears) at the rate of interest determined in accordance with Section 2.3(a) on each Scheduled Payment Date commencing on the first day of the second calendar month occurring after the month during which the Term Loan C was funded and (B) thirty-three (33) equal consecutive payments of principal and interest (payable in arrears) at the rate of interest determined in accordance with Section 2.3(a) on each Scheduled Payment Date commencing on the first day of the fifth calendar month occurring after the month during which the Term Loan C was funded.  The amount of each payment of principal and interest under this Section 2.3(b) shall be calculated by the Agent and shall be sufficient to fully amortize the principal and interest due with respect to the applicable Term Loan over such repayment period.  Each scheduled payment of interest only or interest and principal hereunder is referred to herein as a “ Scheduled Payment .”  Notwithstanding the foregoing, all unpaid principal and accrued interest with respect to a Term Loan is due and payable in full to Agent, for the ratable benefit of Lenders, on the earlier of (A) the first day of the thirty-seventh month following the date such Term Loan was made or (B) the date that such Term Loan otherwise becomes due and payable hereunder, whether by acceleration of the Obligations pursuant to Section 8.2 or otherwise (the earlier of (A) or (B), the “ Applicable Term Loan Maturity Date ”). Each Scheduled Payment, when paid, shall be applied first to the payment of accrued and unpaid interest on the applicable Term Loan and then to unpaid principal balance of such Term Loan.  Without limiting the foregoing, all Obligations shall be due and payable on the Applicable Term Loan Maturity Date for the last Term Loan made.

 

(c)          No Reborrowing .  Once a Term Loan is repaid or prepaid, it cannot be reborrowed.

 

(d)          Payments .  All payments (including prepayments) to be made by any Loan Party under any Debt Document shall be made in immediately available funds in U.S. dollars, without setoff or counterclaim to the Collection Account (as defined below) before 11:00 a.m. (New York time) on the date when due.  All payments received by Agent after 11:00 a.m. (New York time) on any Business Day or at any time on a day that is not a Business Day shall be deemed to be received on the next Business Day.  Whenever any payment required under this Agreement would otherwise be due on a date that is not a Business Day, such payment shall instead be due on the next Business Day, and additional fees or interest, as the case may be, shall accrue and be payable for the period of such extension.  The payment of any Scheduled Payment prior to its due date shall be deemed to have been received on such due date for purposes of calculating interest hereunder.  All Scheduled Payments due to Agent and Lenders under Section 2.3(b) shall be effected by automatic debit of the appropriate funds from Borrower’s operating account specified

 

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Confidential Information, indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission

 

on the EPS Setup Form (as defined below). As used herein, the term “ Collection Account ” means the following account of Agent (or such other account as Agent shall identify to Borrower in writing):

 

[***]

 

(e)          Withholdings and Increased Costs .  All payments shall be made free and clear of any taxes, withholdings, duties, impositions or other charges (other than taxes on the overall net income of any Lender and comparable taxes), such that Agent and Lenders will receive the entire amount of any Obligations (as defined below), regardless of source of payment.  If Agent or any Lender shall have reasonably determined that the introduction of or any change in, after the date hereof, any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order reduces the rate of return on Agent or such Lender’s capital as a consequence of its obligations hereunder or increases the cost to Agent or such Lender of agreeing to make or making, funding or maintaining any Term Loan, then Borrower shall from time to time upon demand by Agent or such Lender (with a copy of such demand to Agent) promptly pay to Agent for its own account or for the account of such Lender, as the case may be, additional amounts sufficient to compensate Agent or such Lender for such reduction or for such increased cost.  A certificate as to the amount of such reduction or such increased cost determined and submitted by Agent or such Lender (with a copy to Agent) in good faith to Borrower shall be conclusive and binding on Borrower, absent manifest error, provided that, neither Agent nor any Lender shall be entitled to payment of any amounts under this Section 2.3(e) unless it has delivered such certificate to Borrower within 180 days after the occurrence of the changes or events giving rise to the increased costs to, or reduction in the amounts received by, Agent or such Lender.  This provision shall survive the termination of this Agreement.

 

(f)           Loan Records .  Each Lender shall maintain in accordance with its usual practice accounts evidencing the Obligations of Borrower to such Lender resulting from such Lender’s Pro Rata Share of each Term Loan, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.  Agent shall maintain in accordance with its usual practice a loan account (the “ Loan Account ”) on its books to record the Term Loans and any other extensions of credit made by Lenders hereunder, and all payments thereon made by Borrower.  The entries made in such accounts shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the Obligations recorded therein; provided , however , that no error in such account and no failure of any Lender or Agent to maintain any such account shall affect the obligations of Borrower to repay the Obligations in accordance with their terms.

 

(g)          Payment of Expenses .  Agent is authorized to, and at its sole election may, debit funds from Borrower’s operating account specified on the EPS Setup Form (as defined below) to pay all fees, expenses, costs and interest owing by Borrower under this Agreement or any of the other Debt Documents if and to the extent Borrower fails to promptly pay any such amounts as

 

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Confidential Information, indicated by [***], has been omitted from this filing and filed separately with the Securities Exchange Commission

 

and when due; provided, however, that unless a Default or Event of Default has occurred and is continuing, Agent may only exercise its rights under this Section 2.3(g) with respect to fees, expenses and costs (1) five days after Agent has delivered notice of such fees, expenses and costs to Borrower and (2) [***].

 

(h)          Application of Payments .  All payments and prepayments applied to a particular Term Loan in accordance with this Agreement shall be applied ratably to the portion thereof held by each Lender as determined by its Pro Rata Share of such Term Loan.  As to all payments made when an Event of Default has occurred and is continuing, Borrower hereby irrevocably waives the right to direct the application of any and all payments received from or on behalf of Borrower, and Borrower hereby irrevocably agrees that Agent shall have the continuing exclusive right (in accordance with Section 8.4) to apply any and all such payments against the Obligations as Agent may deem advisable notwithstanding any previous entry by Agent in the Loan Account or any other books and records.

 

2.4.      Prepayments.   Borrower can voluntarily prepay, upon five (5) Business Days’ prior written notice to Agent, any Term Loan in full, but not in part.  Upon the date of (a) any voluntary prepayment of a Term Loan in accordance with the immediately preceding sentence or (b) any mandatory prepayment of a Term Loan required under this Agreement (whether by acceleration of the Obligations pursuant to Section 8.2 or otherwise), Borrower shall pay to Agent, for the ratable benefit of the Lenders based on their respective Pro Rata Shares, a sum equal to (i) all outstanding principal plus accrued interest with respect to such Term Loan, and (ii) a prepayment premium (as yield maintenance for the loss of a bargain and not as a penalty) equal to: (A) 5% on such prepayment amount, if such prepayment is made before the first day of the 15 th  calendar month occurring after the month during which such Term Loan was funded, (B) 4% on such prepayment amount, if such prepayment is made on or after the first day of the 15 th  calendar month occurring after the month during which such Term Loan was funded, but before the first day of the 30 th  calendar month occurring after the month during which such Term Loan was funded, and (C) 3% on such prepayment amount, if such prepayment is made on or after the first day of the 30 th  calendar month occurring after the month during which such Term Loan was funded.

 

2.5.      Late Fees.   If Agent does not receive any Scheduled Payment or other payment under any Debt Document from any Loan Party within 3 days after its due date, then, at Agent’s election, such Loan Party agrees to pay to Agent for the ratable benefit of all Lenders, a late fee equal to (a) [***]% of the amount of such unpaid payment or (b) such lesser amount that, if paid, would not cause the interest and fees paid by such Loan Party under this Agreement to exceed the Maximum Lawful Rate (as defined below) (the “ Late Fee ”).

 

2.6.      Default Rate.   All Term Loans and other Obligations shall bear interest, at the option of Agent or upon the request of the Requisite Lenders (as defined below), from and after the occurrence and during the continuation of an Event of Default (as defined below), at a rate equal to the lesser of (a) [***]% above the rate of interest applicable to such Obligations as set forth in Section 2.3(a) immediately prior to the occurrence of the Event of Default and (b) the Maximum Lawful Rate (the “ Default Rate ”).  The application of the Default Rate shall not be interpreted or deemed to extend any cure period or waive any Default or Event of Default or otherwise limit the Agent’s or any Lender’s right or remedies hereunder.  All interest payable at the Default Rate shall be payable on demand.

 

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Confidential Information, indicated by [***], has been omitted from this filing and filed separately with the Securities Exchange Commission

 

2.7.      Lender Fees.

 

(a)          Closing Fee .  Prior to the advance of the Term Loan A, Borrower has (i) paid to GECC, and GECC hereby acknowledges receipt of, a payment in the amount of $[***], (A) $[***] of which payment shall be retained by GECC in its capacity as Lender as a closing fee that shall be non-refundable and fully earned by GECC on the Closing Date (regardless of whether the Term Loan B or Term Loan C is requested by Borrower or authorized by Borrower’s board of directors after the Closing Date) and (B) $[***] of which payment shall be applied to any fees, costs and expenses (including reasonable counsel fees) incurred by GECC in its capacity as Agent on or prior to the Closing Date in connection with the transactions contemplated hereunder (and to the extent that such fees, costs and expenses are less than $[***], such excess shall be returned to Borrower within five Business Days after the Closing Date), and (ii) paid to Oxford, and Oxford hereby acknowledges receipt of, a payment in the amount of $[***] which payment shall be retained by Oxford in its capacity as Lender as a closing fee that shall be non-refundable and fully earned by Oxford on the Closing Date (regardless of whether the Term Loan B or Term Loan C is requested by Borrower or authorized by Borrower’s board of directors after the Closing Date).

 

(b)          Unused Line Fee .   On the Term Loan C Commitment Termination Date, Borrower shall pay to Agent, for the ratable benefit of Lenders holding a Commitment in accordance with their Pro Rata Shares of the Total Commitment, a non-refundable unused line fee (the “ Unused Line Fee ”) equal to 2% of the undrawn amount of the Total Commitment as of such date, which fee shall be fully earned on the Term Loan C Commitment Termination Date (regardless of whether the Borrower’s board of directors elects to authorize the borrowing of the Term Loan B or Term Loan C by Borrower).  Notwithstanding the foregoing, a Lender shall not be entitled to receive (and Borrower shall not be obligated to pay) such Lender’s Pro Rata Share of the Unused Line Fee to the extent (i) Borrower satisfied all conditions set forth in Section 4.2 and Section 4.3, as applicable, with respect to a requested Term Loan and (ii) such Lender failed to advance its Pro Rata Share of such Term Loan.

 

2.8.      Maximum Lawful Rate.   Anything herein, any Note or any other Debt Document (as defined below) to the contrary notwithstanding, the obligations of Loan Parties hereunder and thereunder shall be subject to the limitation that payments of interest shall not be required, for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by Agent and Lenders would be contrary to the provisions of any law applicable to Agent and Lenders limiting the highest rate of interest which may be lawfully contracted for, charged or received by Agent and Lenders, and in such event Loan Parties shall pay Agent and Lenders interest at the highest rate permitted by applicable law (“ Maximum Lawful Rate ”); provided , however , that if at any time thereafter the rate of interest payable hereunder or thereunder is less than the Maximum Lawful Rate, Loan Parties shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by Agent and Lenders is equal to the total interest that would have been received had the interest payable hereunder been (but for the operation of this paragraph) the interest rate payable since the making of the applicable Term Loan as otherwise provided in this Agreement, any Note or any other Debt Document.

 

3.               CREATION OF SECURITY INTEREST.

 

3.1.      Grant of Security Interest.   As security for the prompt payment and performance, whether at the stated maturity, by acceleration or otherwise, of all Term Loans and other debt, obligations and liabilities of any kind whatsoever of Borrower to Agent and Lenders under the Debt Documents (whether

 

7

 

for principal, interest, fees, expenses, prepayment premiums, indemnities, reimbursements or other sums, and whether or not such amounts accrue after the filing of any petition in bankruptcy or after the commencement of any insolvency, reorganization or similar proceeding, and whether or not allowed in such case or proceeding), absolute or contingent, now existing or arising in the future, including but not limited to the payment and performance of any outstanding Notes, and any renewals, extensions and modifications of such Term Loans (such indebtedness under the Notes, Term Loans and other debt, obligations and liabilities in connection with the Debt Documents are collectively called the “ Obligations ”), and as security for the prompt payment and performance by each Guarantor of its obligations under any guaranty delivered in connection with this Agreement, each Loan Party does hereby grant to Agent, for the benefit of Agent and Lenders, a security interest in the property listed below (all hereinafter collectively called the “ Collateral ”):

 

All of such Loan Party’s personal property of every kind and nature (except for Intellectual Property, as defined in, and to the extent excluded pursuant to, Section 3.3) whether now owned or hereafter acquired by, or arising in favor of, such Loan Party, and regardless of where located, including, without limitation, all accounts, chattel paper (whether tangible or electronic), commercial tort claims, deposit accounts, documents, equipment, financial assets, fixtures, goods, instruments, investment property (including, without limitation, all securities accounts), inventory, letter-of-credit or similar rights, letters of credit, securities, supporting obligations, cash, cash equivalents, any other contractual rights (including, without limitation, rights under any license agreements), or rights to the payment of money, and general intangibles, and all books and records of such Loan Party relating thereto, and in and against all additions, attachments, accessories and accessions to such property, all substitutions, replacements or exchanges therefor, all proceeds, insurance claims, products, profits and other rights to payments not otherwise included in the foregoing (with each of the foregoing terms that are defined in the UCC having the meaning set forth in the UCC).

 

Each Loan Party hereby represents and covenants that such security interest constitutes a valid, first priority security interest in the presently existing Collateral, and will constitute a valid, first priority security interest in Collateral acquired after the date hereof.  Each Loan Party hereby covenants that it shall give written notice to Agent promptly upon the acquisition by such Loan Party or creation in favor of such Loan Party of any commercial tort claim after the Closing Date.

 

3.2.      Financing Statements.   Each Loan Party hereby authorizes Agent to file UCC financing statements with all appropriate jurisdictions to perfect Agent’s security interest (for the benefit of itself and the Lenders) granted hereby.

 

3.3.      Grant of Security Interest in Proceeds of Intellectual Property.  Except as expressly provided in this Section 3.3, the Collateral shall not include any Intellectual Property (as defined below) of any Loan Party or any claims for damages by way of any past, present or future infringement of any Intellectual Property; provided however , that the Collateral shall include all cash, royalty fees, other proceeds, accounts and general intangibles (including, without limitation, contract rights) that consist of rights of payment to or on behalf of a Loan Party or proceeds from the sale, licensing or other disposition of all or any part of, or rights in, the Intellectual Property by or on behalf of a Loan Party (“ Rights to Payment ”).  Notwithstanding the foregoing, to the extent it is necessary under applicable law in any bankruptcy or insolvency proceeding involving a Loan Party for Agent (on behalf of itself and Lenders) to have a security interest in the underlying Intellectual Property in order for Agent to have (i) a security interest in the Rights to Payment and (ii) a security interest in any payments with respect to Rights to Payment that are received after the commencement of such bankruptcy or insolvency proceeding, then the Collateral shall automatically, and effective as of the date hereof, include the Intellectual Property to the extent necessary to permit attachment and perfection of Agent’s security interest (on behalf of itself and

 

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Lenders) in the Rights to Payment and any payments in respect thereof that are received after the commencement of any bankruptcy or insolvency proceeding.  Agent hereby agrees on behalf of itself and the Lenders that, if Agent obtains a security interest in the Intellectual Property pursuant to the immediately preceding sentence, Agent will not exercise any remedies (under the UCC or otherwise) with respect to the Intellectual Property (other than remedies with respect to Rights to Payment or any other proceeds of the Intellectual Property).  For purposes of this Agreement, “Intellectual Property” shall mean (I) any and all copyrights, trademarks, servicemarks, patents, design rights, software, trade secrets, know-how, operating manuals, rights to unpatented inventions and intangible rights of a Loan Party, and the goodwill of the business of a Loan Party connected with and symbolized by any of the foregoing, (II) any license by a Loan Party of any and all copyrights, trademarks, servicemarks, patents, design rights, software, trade secrets and intangible rights of a third party, (III) any clinical and clinical trial data or records, correspondence or similar documentation directly related thereto, and (IV) any applications, registrations, claims, products, awards, judgments, amendments, renewals, extensions, reissues, continuations-in-part of the same, improvements and insurance claims related thereto now owned, licensed or hereafter acquired.

 

3.4.      Termination of Security Interest.   Subject to Section 10.9, Agent’s lien on and security interests in the Collateral (on behalf of itself and Lenders) shall continue until all of the Obligations are indefeasibly repaid in full in cash, all of the Commitments hereunder are terminated, and this Agreement shall have been terminated (the “ Termination Date ”).  Upon the Termination Date, Agent shall, at Loan Parties’ sole cost and expense and without any recourse, representation or warranty, release its liens in the Collateral and promptly file all documentation necessary to terminate any financing statements related thereto or otherwise evidence such release of liens (including, without limitation, the termination of any Account Control Agreements, as defined below), and all rights remaining therein, if any, shall revert to Loan Parties.

 

4.               CONDITIONS OF CREDIT EXTENSIONS

 

4.1.      Conditions Precedent to Term Loan A.   No Lender shall be obligated to make the Term Loan A, or to take, fulfill, or perform any other action hereunder, until the following have been delivered to the Agent (the date on which the Lenders make the Term Loan A after all such conditions shall have been satisfied in a manner satisfactory to Agent and Lenders or waived in accordance with this Agreement, the “ Closing Date ”):

 

(a)          a counterpart of this Agreement duly executed by each Loan Party;

 

(b)          a certificate executed by the Secretary of each Loan Party, the form of which is attached hereto as Exhibit B (the “ Secretary’s Certificate ”), providing verification of incumbency and attaching (i) such Loan Party’s board resolutions approving the transactions contemplated by this Agreement and the other Debt Documents and (ii) such Loan Party’s governing documents;

 

(c)          Notes duly executed by Borrower in favor of each applicable Lender in the appropriate amounts pursuant to this Agreement;

 

(d)          filed copies of UCC financing statements, collateral assignments, and terminations statements, with respect to the Collateral, as Agent shall request;

 

(e)          certificates of insurance evidencing the insurance coverage, and satisfactory additional insured and lender loss payable endorsements, in each case as required pursuant to Section 6.4 herein;

 

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(f)           current UCC lien, judgment, bankruptcy and tax lien search results demonstrating that there are no other security interests or liens on the Collateral, other than Permitted Liens (as defined below);

 

(g)          a certificate of good standing of each Loan Party from the jurisdiction of such Loan Party’s organization and a certificate of foreign qualification from each jurisdiction where such Loan Party’s failure to be so qualified could reasonably be expected to have a Material Adverse Effect (as defined below), in each case as of a recent date acceptable to Agent;

 

(h)          a landlord consent and/or bailee letter in favor of Agent executed by the landlord or bailee, as applicable, for any third party location where (a) any Loan Party’s principal place of business, (b) any Loan Party’s books or records or (c) Collateral with an aggregate value in excess of $50,000 is located, a form of which is attached hereto as Exhibit C-1 and Exhibit C-2 , as applicable (each an “ Access Agreement ”);

 

(i)           a legal opinion of Loan Parties’ counsel, in form and substance satisfactory to Agent;

 

(j)           a completed EPS set-up form, a form of which is attached hereto as Exhibit E (the “ EPS Setup Form ”);

 

(k)          a completed perfection certificate, duly executed by each Loan Party (the “ Perfection Certificate ”), a form of which Agent previously delivered to Borrower;

 

(l)           one or more Account Control Agreements (as defined below), in form and substance reasonably acceptable to Agent, duly executed by the applicable Loan Parties and the applicable depository or financial institution, for each deposit and securities account listed on the Perfection Certificate;

 

(m)         a disbursement instruction letter, in form and substance satisfactory to Agent, executed by each Loan Party, Agent and each Lender (the “ Disbursement Letter ”);

 

(n)          all other documents and instruments as Agent and Lenders may reasonably deem necessary to effectuate the intent and purpose of this Agreement (together with the Agreement, Note, the Perfection Certificate, the Secretary’s Certificate and the Disbursement Letter, any guaranty agreement from time to time delivered in connection with this Agreement, and all other agreements, instruments, documents and certificates executed and/or delivered by a Loan Party to or in favor of Agent from time to time in connection with this Agreement or the transactions contemplated hereby, the “ Debt Documents ”); and

 

(o)          Agent and Lenders shall have received the fees required to be paid by Borrower, if any, in the respective amounts specified in Section 2.7, and Borrower shall have reimbursed Agent and Lenders for all fees, costs and expenses of closing presented as of the date of this Agreement.

 

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Confidential Information, indicated by [***], has been omitted from this filing and filed separately with the Securities Exchange Commission

 

4.2.      Conditions Precedent to All Term Loans.   No Lender shall be obligated to make any Term Loan, including the Term Loan A, unless the following additional conditions have been satisfied:

 

(a)          (i) all representations and warranties in Section 5 below shall be true as of the date of such Term Loan, except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct on and as of such earlier date; (ii) no Event of Default or any other event, which with the giving of notice or the passage of time, or both, would constitute an Event of Default (such event, a “ Default ”) has occurred and is continuing or will result from the making of any Term Loan, and (iii) Agent shall have received a certificate from an authorized officer of each Loan Party confirming each of the foregoing;

 

(b)          Agent shall have received the redelivery or supplemental delivery of the items set forth in the following sections only to the extent circumstances have changed since the funding of the Term Loan A:  Sections 4.1(b), (e), (f), (g), (h), (i), (k) and (m); and

 

(c)          with respect to all Term Loans, Agent shall have received copies of such other documents, agreements, instruments or information as Agent or any Lender shall reasonably request.

 

4.3.      Additional Conditions Precedent to Term Loan B and Term Loan C.   No Lender shall be obligated to make the Term Loan B or the Term Loan C, respectively, unless the following additional conditions have been satisfied:

 

(a)          with respect to each of the Term Loan B and the Term Loan C, (i) Agent shall have received, in form and substance satisfactory to Agent and Lenders, a legal opinion of Loan Parties’ counsel, (ii) Agent shall have received, in form and substance satisfactory to Agent and Lenders, a Secretary’s Certificate executed by the Secretary of Borrower providing verification of incumbency and attaching Borrower’s board resolutions authorizing the borrowing of the Term Loan B or the Term Loan C, as applicable, and (iii) Lenders shall have received Notes duly executed by Borrower in favor of each applicable Lender in the appropriate Term Loan B amounts or Term Loan C amounts, as applicable;

 

(b)          with respect to the Term Loan B, (i) Lenders shall have received evidence in form and substance reasonably satisfactory to Lenders that [***], and (ii) Borrower shall have, immediately before and immediately after [***], and Lenders shall have received a certificate signed by the president, chief executive officer or chief financial officer of Borrower certifying that [***], and attaching a [***], together with such other evidence as Lenders shall reasonably request; and

 

(c)          with respect to the Term Loan C, in addition to the satisfaction of the conditions set forth in [***], (i) Lenders shall have received evidence in form and substance reasonably satisfactory to Lenders that [***], (ii) Lenders shall have received evidence in form and substance reasonably satisfactory to Lenders that [***], (iii) Borrower shall have, immediately before and immediately after [***], and Lenders shall have received a certificate signed by the president, chief executive officer or chief financial officer of Borrower certifying that [***], and attaching a [***], together with such other evidence as Lenders shall reasonably request, and (iv) Lenders

 

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Confidential Information, indicated by [***], has been omitted from this filing and filed separately with the Securities Exchange Commission

 

shall have received evidence in form and substance reasonably satisfactory to Lenders that [***] under materially similar terms and conditions as in effect on the Closing Date.

 

As used herein, the term “[***]” means, with respect to [***] most recently delivered to Agent and the Lenders in accordance with this Agreement:

 

(a)                       (i) [***]

 

[***]

 

(b)                      [***].

 

As used herein, the term “[***]” means, with respect to [***] delivered to and approved by Agent and the Lenders on or prior to the Closing Date:

 

(a)                       (i) [***]

 

[***]

 

(b)                      [***].

 

5.         REPRESENTATIONS AND WARRANTIES OF LOAN PARTIES.

 

Each Loan Party, jointly and severally, represents, warrants and covenants to Agent and each Lender that:

 

5.1.      Due Organization and Authorization.   Each Loan Party’s exact legal name is as set forth in the Perfection Certificate and each Loan Party is, and will remain, duly organized, existing and in good standing under the laws of the State of its organization as specified in the Perfection Certificate, has its chief executive office at the location specified in the Perfection Certificate, and is, and will remain, duly qualified and licensed in every jurisdiction wherever necessary to carry on its business and operations, except where the failure to be so qualified and licensed could not reasonably be expected to have a Material Adverse Effect.  This Agreement and the other Debt Documents have been duly authorized, executed and delivered by each Loan Party and constitute legal, valid and binding agreements enforceable in accordance with their terms; provided , however , that the resolutions of Borrower’s board of directors adopted on or about May 31, 2008 require Borrower to obtain further authorization of the board of directors to borrow any additional Term Loan after the Closing Date.  The execution, delivery and performance by each Loan Party of each Debt Document executed or to be executed by it is in each case within such Loan Party’s powers.

 

5.2.      Required Consents.   No filing, registration, qualification with, or approval, consent or withholding of objections from, any governmental authority or instrumentality or any other entity or person is required with respect to the entry into, or performance by any Loan Party of, any of the Debt Documents, except any already obtained.

 

5.3.      No Conflicts.   The entry into, and performance by each Loan Party of, the Debt Documents will not (a) violate any of the organizational documents of such Loan Party, (b) violate any law, rule, regulation, order, award or judgment applicable to such Loan Party, or (c) result in any breach of or

 

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constitute a default under, or result in the creation of any lien, claim or encumbrance on any of such Loan Party’s property (except for liens in favor of Agent, on behalf of itself and Lenders) pursuant to, any indenture, mortgage, deed of trust, bank loan, credit agreement, or other Material Agreement (as defined below) to which such Loan Party is a party.  As used herein, “ Material Agreement ” means (i) any agreement or contract to which such Loan Party is a party and involving the receipt or payment of amounts in the aggregate exceeding $250,000 per year, (ii) any agreement or contract to which such Loan Party is a party the termination of which could reasonably be expected to have a Material Adverse Effect, (iii) the Azimuth Agreement and (iv) that certain Sublicense Agreement dated as of October 13, 2006 (as amended, the “ PharmaNova Agreement ”) by and between PharmaNova Inc. and Borrower.  A list of all Material Agreements as of the Closing Date is set forth on Schedule B hereto.

 

5.4.      Litigation.   There are no actions, suits, proceedings or investigations pending against or affecting any Loan Party before any court, federal, state, provincial, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, or any basis thereof, which involves the possibility of any judgment or liability that could reasonably be expected to have a Material Adverse Effect, or which questions the validity of the Debt Documents, or the other documents required thereby or any action to be taken pursuant to any of the foregoing, nor does any Loan Party have reason to believe that any such actions, suits, proceedings or investigations are threatened.  As used in this Agreement, the term “ Material Adverse Effect ” means a material adverse effect on any of (a) the operations, business, assets, properties, or condition (financial or otherwise) of Borrower, individually, or the Loan Parties, collectively, (b) the ability of a Loan Party to perform any of its obligations under any Debt Document to which it is a party, (c) the legality, validity or enforceability of any Debt Document, (d) the rights and remedies of Agent or Lenders under any Debt Document or (e) the validity, perfection or priority of any lien in favor of Agent, on behalf of itself and Lenders, on any of the Collateral.

 

5.5.      Financial Statements.   All financial statements delivered to Agent and Lenders pursuant to Section 6.3 have been prepared in accordance with GAAP (subject, in the case of unaudited financial statements, to the absence of footnotes and normal year end audit adjustments), and since the date of the most recent audited financial statement, no event has occurred which has had or could reasonably be expected to have a Material Adverse Effect.  There has been no material adverse deviation from the most recent proposed annual operating budget of Borrower delivered to Agent and Lenders in accordance with Section 6.3.

 

5.6.      Use of Proceeds.   The proceeds of the Term Loans shall be used for working capital and general corporate purposes.

 

5.7.      Collateral.   Each Loan Party is, and will remain, the sole and lawful owner, and in possession of, the Collateral, and has the sole right and lawful authority to grant the security interest described in this Agreement.  The Collateral is, and will remain, free and clear of all liens, claims and encumbrances of any kind whatsoever, except for (a) liens in favor of Agent, on behalf of itself and Lenders, to secure the Obligations, (b) liens (i) with respect to the payment of taxes, assessments or other governmental charges or (ii) of suppliers, carriers, materialmen, warehousemen, workmen or mechanics and other similar liens, in each case imposed by law and arising in the ordinary course of business, and securing amounts that are not yet due or that are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves or other appropriate provisions are maintained on the books of the applicable Loan Party in accordance with GAAP and which do not involve, in the judgment of Agent, any risk of the sale, forfeiture or loss of any of the Collateral (a “ Permitted Contest ”), (c) liens existing on the date hereof and set forth on Schedule B hereto, (d) liens securing Indebtedness (as defined in Section 7.2 below) permitted under Section 7.2(c) below, provided that (i) such liens exist prior to the acquisition of, or attach substantially simultaneous with, or within 20

 

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days after the, acquisition, repair, improvement or construction of, such property financed by such Indebtedness and (ii) such liens do not extend to any property of a Loan Party other than the property (and proceeds thereof) acquired or built, or the improvements or repairs, financed by such Indebtedness, and (e) licenses described in Section 7.3(c) and (d) below (all of such liens described in the foregoing clauses (a) through (e) are called “ Permitted Liens ”).

 

5.8.      Compliance with Laws.

 

(a)          Each Loan Party is and will remain in compliance in all material respects with all laws, statutes, ordinances, rules and regulations applicable to it.

 

(b)          Without limiting the generality of the immediately preceding clause (a), each Loan Party further agrees that it is and will remain in compliance in all material respects with all U.S. economic sanctions laws, Executive Orders and implementing regulations as promulgated by the U.S. Treasury Department’s Office of Foreign Assets Control (“ OFAC ”), and all applicable anti-money laundering and counter-terrorism financing provisions of the Bank Secrecy Act and the USA Patriot Act and all regulations issued pursuant to it.  No Loan Party nor any of its subsidiaries, affiliates or joint ventures (A) is a person or entity designated by the U.S. Government on the list of the Specially Designated Nationals and Blocked Persons (the “ SDN List ”) with which a U.S. person or entity cannot deal with or otherwise engage in business transactions, (B) is a person or entity who is otherwise the target of U.S. economic sanctions laws such that a U.S. person or entity cannot deal or otherwise engage in business transactions with such person or entity; or (C) is controlled by (including without limitation by virtue of such person being a director or owning voting shares or interests), or acts, directly or indirectly, for or on behalf of, any person or entity on the SDN List or a foreign government that is the target of U.S. economic sanctions prohibitions such that the entry into, or performance under, this Agreement or any other Debt Document would be prohibited under U.S. law.  The SDN List is maintained by OFAC and is available at: http://www.ustreas.gov/offices/enforcement/ofac/sdn/.

 

(c)          Each Loan Party has met the minimum funding requirements of the United States Employee Retirement Income Security Act of 1974 (as amended, “ ERISA ”) with respect to any employee benefit plans subject to ERISA.  No Loan Party is an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940.  No Loan Party is engaged principally, or as one of the important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations T, U and X of the Board of Governors of the Federal Reserve System (the “ Federal Reserve Board ”).

 

5.9.      Intellectual Property.   The Intellectual Property is free and clear of all liens, claims and encumbrances of any kind whatsoever, except for Permitted Liens described in clauses (b)(i) and (e) of Section 5.7.  No Loan Party has entered into any other agreement or financing arrangement in which a negative pledge in such Loan Party’s Intellectual Property is granted to any other party. As of the Closing Date and each date a Term Loan is advanced to Borrower, no Loan Party has any interest in, or title to any Intellectual Property except as disclosed in the Perfection Certificate.  Each Loan Party owns or has rights to use all Intellectual Property material to the conduct of its business as now or heretofore conducted by it or proposed to be conducted by it, without any actual or claimed infringement upon the rights of third parties.

 

5.10.    Solvency.   Both before and after giving effect to each Term Loan, the transactions contemplated herein, and the payment and accrual of all transaction costs in connection with the foregoing, each Loan Party is and will be Solvent.  As used herein, “ Solvent ” means, with respect to a

 

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Loan Party on a particular date, that on such date (a) the fair value of the property of such Loan Party is greater than the total amount of liabilities, including contingent liabilities, of such Loan Party; (b) the present fair salable value of the assets of such Loan Party is not less than the amount that will be required to pay the probable liability of such Loan Party on its debts as they become absolute and matured; (c) such Loan Party does not intend to, and does not believe that it will, incur debts or liabilities beyond such Loan Party’s ability to pay as such debts and liabilities mature; (d) such Loan Party is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such Loan Party’s property would constitute an unreasonably small capital; and (e) such Loan Party is not “insolvent” within the meaning of Section 101(32) of the United States Bankruptcy Code (11 U.S.C. § 101, et. seq), as amended from time to time.  The amount of contingent liabilities (such as litigation, guaranties and pension plan liabilities) at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, represents the amount that can be reasonably be expected to become an actual or matured liability.

 

5.11.    Taxes; Pension.   All tax returns, reports and statements, including information returns, required by any governmental authority to be filed by each Loan Party and its Subsidiaries have been filed with the appropriate governmental authority and all taxes, levies, assessments and similar charges have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof (or any such fine, penalty, interest, late charge or loss has been paid), excluding taxes, levies, assessments and similar charges or other amounts which are the subject of a Permitted Contest.  Proper and accurate amounts have been withheld by each Loan Party from its respective employees for all periods in compliance with applicable laws and such withholdings have been timely paid to the respective governmental authorities.  Each Loan Party has paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and no Loan Party has withdrawn from participation in, or has 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 a Loan Party, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental authority.

 

5.12.    Full Disclosure.   Loan Parties hereby confirm that all of the information disclosed on the Perfection Certificate is true, correct and complete as of the date of this Agreement and as of the date of each Term Loan (as updated from time to time to reflect changes thereto (a) as a result of matters expressly permitted under this Agreement or (b) consented to by the Lenders pursuant to Section 10.8).  No representation, warranty or other written statement made by or on behalf of a Loan Party pursuant to the terms of this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein not misleading, it being recognized by Agent and Lenders that the projections and forecasts provided by Loan Parties in good faith and based upon reasonable and stated assumptions are not to be viewed as facts and that actual results during the period or periods covered by any such projections and forecasts may differ from the projected or forecasted results.

 

6.         AFFIRMATIVE COVENANTS.

 

6.1.      Good Standing.   Each Loan Party shall maintain its and each of its Subsidiaries’ existence and good standing in its jurisdiction of organization and maintain qualification in each jurisdiction in which the failure to so qualify could reasonably be expected to have a Material Adverse Effect.  Each Loan Party shall maintain, and shall cause each of its Subsidiaries to maintain, in full force all licenses, approvals and agreements, the loss of which could reasonably be expected to have a Material Adverse Effect.  “ Subsidiary ” means, with respect to a Loan Party, any entity the management of which is, directly or indirectly controlled by, or of which an aggregate of more than 50% of the outstanding voting capital stock (or other voting equity interest) is, at the time, owned or controlled, directly or indirectly by, such

 

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Loan Party or one or more Subsidiaries of such Loan Party, and, unless the contest otherwise requires each reference to a Subsidiary herein shall be a reference to a Subsidiary of Borrower.

 

6.2.      Notice to Agent.   Loan Parties shall provide Agent with (a) notice of any change in the accuracy of the Perfection Certificate or any of the representations and warranties provided in Section 5 above, immediately upon the occurrence of any such change, (b) notice of the occurrence of any Default or Event of Default, promptly (but in any event within 5 days) after the date on which any officer of a Loan Party obtains knowledge of the occurrence of any such event, (c) copies of all statements, reports and notices made available generally by Borrower to its securityholders and all documents filed with the Securities and Exchange Commission (“ SEC ”) or any securities exchange or governmental authority exercising a similar function, promptly, but in any event within 3 days of delivering or receiving such information to or from such persons (provided that to the extent the same are posted by Borrower on the internet, Borrower shall only be obligated to give notice to Agent of such internet posting via electronic mail to an electronic mail address provided by Agent from time to time), (d) a report of any legal actions pending or threatened against Borrower or any Subsidiary that could result in damages or costs to Borrower or any Subsidiary of $250,000 or more promptly, but in any event within 5 days, upon receipt of notice thereof, (e) at the time that Borrower delivers each quarterly compliance certificate pursuant to Section 6.3, a summary of any new applications or registrations that Borrower has made or filed in respect of any Intellectual Property or any material adverse change in status of any outstanding application or registration within 5 days of such application, filing or adverse change in status, (f) notice of, and upon request, copies of all material statements, reports and notices delivered to or by a Loan Party in connection with any Material Agreement promptly (but in any event within 5 days) upon receipt thereof, (g) notice of the occurrence of any default or event of default under any Lease Agreement (as defined below), promptly (but in any event within 3 Business Days) after the date on which any officer of a Loan Party obtains knowledge of the occurrence of any such event and (h) upon Agent’s reasonable request, Borrower shall deliver to Agent within 5 days after such request a certification from an authorized officer of the applicable Loan Party that no default or event default exists under any Lease Agreement of such Loan Party.

 

6.3.      Financial Statements.   If Borrower is a private company, it shall deliver to Agent and Lenders (a) unaudited consolidated and, if available, consolidating balance sheets, statements of operations and cash flow statements within 30 days of each month end, in a form acceptable to Agent and certified by Borrower’s president, chief executive officer or chief financial officer, and (b) its complete annual audited consolidated and, if available, consolidating financial statements prepared under GAAP and certified without qualification by an independent certified public accountant selected by Borrower and satisfactory to Agent within 120 days of the fiscal year end or, if sooner, at such time as Borrower’s Board of Directors receives the certified audit.  If Borrower is a publicly held company, Borrower shall (i) deliver to Agent and Lenders via electronic mail to electronic mail addresses provided by Agent and the Lenders from time to time notifying Agent and Lenders of the posting by Borrower on the internet of the Borrower’s quarterly unaudited consolidated and, if available, consolidating balance sheets, statements of operations and cash flow statements and (ii) deliver to Agent and Lenders copies of annual audited consolidated and, if available, consolidating balance sheets, statements of operations and cash flow statements, certified without qualification by a recognized firm of certified public accountants, within 5 days after the statements are required to be provided to the SEC and Borrower shall deliver to Agent and Lenders within 30 days after the end of each month reports of cash balances of the Loan Parties and monthly prescription numbers for Glumetza and Proquin as compared to the current budget.  All such statements (other than the prescription numbers referenced in the immediately preceding sentence) are to be prepared using GAAP (subject, in the case of unaudited financial statements, to the absence of footnotes and normal year end audit adjustments) and, if Borrower is a publicly held company, are to be in compliance with applicable SEC requirements.  All annual and quarterly financial statements delivered pursuant to this Section 6.3 shall be accompanied by a compliance certificate, signed by the chief

 

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financial officer or principal accounting officer of Borrower, in the form attached hereto as Exhibit D , and a management discussion and analysis that includes a comparison to budget for the respective fiscal period and a comparison of performance for such fiscal period to the corresponding period in the prior year.  Borrower shall deliver to Agent and Lenders (i) as soon as available and in any event not later than 60 days after the end of each fiscal year of Borrower, a proposed annual operating budget for Borrower, on a consolidated and, if available, consolidating basis, approved by the Board of Directors of Borrower, for the current fiscal year, in form satisfactory to Agent and (ii) such budgets, sales projections, or other financial information as Agent or any Lender may reasonably request from time to time generally prepared by Borrower in the ordinary course of business.

 

6.4.      Insurance.   Borrower, at its expense, shall maintain, and shall cause each Subsidiary to maintain, insurance (including, without limitation, comprehensive general liability, hazard, and business interruption insurance) with respect to all of its properties and businesses (including, the Collateral), in such amounts and covering such risks as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated and in any event with deductible amounts, insurers and policies that shall be reasonably acceptable to Agent.  Borrower shall deliver to Agent certificates of insurance evidencing such coverage, together with endorsements to such policies naming Agent as a lender loss payee or additional insured, as appropriate, in form and substance reasonably satisfactory to Agent.  Each policy shall provide that coverage may not be canceled or altered by the insurer except upon 30 days prior written notice to Agent and shall not be subject to co-insurance.  Borrower appoints Agent as its attorney-in-fact to make, settle and adjust all claims under and decisions with respect to Borrower’s policies of insurance, and to receive payment of and execute or endorse all documents, checks or drafts in connection with insurance payments. Agent shall not act as Borrower’s attorney-in-fact unless an Event of Default has occurred and is continuing.  The appointment of Agent as Borrower’s attorney in fact is a power coupled with an interest and is irrevocable until all of the Obligations are indefeasibly paid in full. Proceeds of insurance shall be applied, at the option of Agent, to repair or replace the Collateral or to reduce any of the Obligations.

 

6.5.      Taxes.   Borrower shall, and shall cause each Subsidiary to, timely file all tax reports and pay and discharge all taxes, assessments and governmental charges or levies imposed upon it, or its income or profits or upon its properties or any part thereof, before the same shall be in default and before the date on which penalties attach thereto, except to the extent such taxes, assessments and governmental charges or levies are the subject of a Permitted Contest.

 

6.6.      Agreement with Landlord/Bailee.   Unless otherwise agreed to by the Agent in writing, each Loan Party shall obtain and maintain such Access Agreement(s) with respect to any real property on which (a) a Loan Party’s principal place of business, (b) a Loan Party’s books or records or (c) Collateral with an aggregate value in excess of $50,000 is located (other than real property owned by such Loan Party) as Agent may require.  Within ten Business Days after the due date for any rental payments set forth in any lease agreement with respect to any real property described in the immediately preceding sentence (each, a “ Lease Agreement ”), the Borrower shall deliver to Agent evidence in form reasonably satisfactory to Agent that such rental payment was made.

 

6.7.      Protection of Intellectual Property.   Each Loan Party shall take all necessary actions to: (a) protect, defend and maintain the validity and enforceability of its Intellectual Property to the extent material to the conduct of its business now or heretofore conducted by it or proposed to be conducted by it, (b) promptly advise Agent in writing of material infringements of its Intellectual Property that is material to such Loan Party’s business (c) not allow any Intellectual Property material to such Loan Party’s business to be abandoned, forfeited or dedicated to the public without Agent’s written consent, and (d) notify Agent promptly, but in any event within 3 days, if it knows or has reason to know that any application or registration relating to any patent, trademark or copyright (now or hereafter existing)

 

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material to its business may become abandoned or dedicated, or if any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court) regarding such Loan Party’s ownership of any Intellectual Property material to its business, its right to register the same, or to keep and maintain the same.  Each Loan Party shall remain liable under each of its Intellectual Property licenses pursuant to which it is a licensee (“ Licenses ”) to observe and perform all of the conditions and obligations to be observed and performed by it thereunder, to the extent that any such Licenses are material to the conduct of its business.  None of Agent or any Lender shall have any obligation or liability under any such License by reason of or arising out of this Agreement, the granting of a lien, if any, in such License or the receipt by Agent (on behalf of itself and Lenders) of any payment relating to any such License.  None of Agent or any Lender shall be required or obligated in any manner to perform or fulfill any of the obligations of any Loan Party under or pursuant to any License, or to make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of any performance by any party under any License, or to present or file any claims, or to take any action to collect or enforce any performance or the payment of any amounts which may have been assigned to it or which it may be entitled at any time or times.

 

6.8.      Special Collateral Covenants.

 

(a)          Each Loan Party shall remain in possession of its respective Collateral solely at the location(s) specified on the Perfection Certificate; except that Agent, on behalf of itself and Lenders, shall have the right to possess (i) any chattel paper or instrument that constitutes a part of the Collateral, (ii) any other Collateral in which Agent’s security interest (on behalf of itself and Lenders) may be perfected only by possession and (iii) any Collateral after the occurrence of an Event of Default in accordance with this Agreement and the other Debt Documents.

 

(b)          Each Loan Party shall (i) use the Collateral only in its trade or business, (ii) maintain all of the Collateral in good operating order and repair, normal wear and tear excepted, and (iii) use and maintain the Collateral only in material compliance with manufacturers’ recommendations and all applicable laws.

 

(c)          Agent and Lenders do not authorize and each Loan Party agrees it shall not (i) part with possession of any of the Collateral (except to Agent (on behalf of itself and Lenders), for maintenance and repair or for a Permitted Disposition), or (ii) remove any of the Collateral from the continental United States.

 

(d)          Each Loan Party shall pay promptly when due all taxes, license fees, assessments and public and private charges levied or assessed on any of the Collateral, on