Exhibit 10.70
LOAN AND SECURITY
AGREEMENT
LOAN AND SECURITY
AGREEMENT (this “
Agreement ”) dated as of September 30, 2008 (the
“ Effective Date ”) among (i) ANESIVA,
INC. , a Delaware corporation (“ Borrower
”), (ii) COMPASS HORIZON FUNDING COMPANY LLC ,
as a Lender (“ Horizon ”), (iii) CIT
HEALTHCARE LLC , as a Lender (“ CIT ”),
OXFORD FINANCE CORPORATION , as a Lender (“
Oxford ”) (Horizon, CIT, Oxford and each of the other
“Lenders” from time to time a party hereto are referred
to herein collectively as the “ Lenders ” and
each individually as a “ Lender ”); and
OXFORD FINANCE CORPORATION , as agent for the Lenders (in
such capacity, the “ Agent ”), and provides the
terms on which the Lenders shall lend to Borrower and Borrower
shall repay the Lenders. Borrower, the Agent and the Lenders hereby
agree as follows:
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ACCOUNTING AND OTHER TERMS
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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 14 . 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.
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LOAN AND
TERMS OF PAYMENT
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2.1 Promise to Pay . Borrower hereby
unconditionally promises to pay each Lender, the outstanding
principal amount of all Credit Extensions advanced to Borrower by
such Lender and accrued and unpaid interest thereon and any other
amounts due hereunder as and when due in accordance with
Section 2.3 of this Agreement.
2.2 Term Loans .
(a) Availability . Subject to
the terms and conditions of this Agreement, the Lenders agree,
severally and not jointly, to make certain term loans to Borrower
from time to time, according to each Lender’s Term Loan
Commitment as set forth on Schedule 1.1 hereto, as follows:
(i) during the First Draw Period, the Lenders shall make a
tranche of Term Loans (the “ First Term Loans ”)
available to Borrower in an aggregate amount up to Twenty Million
Dollars ($20,000,000.00) according to each Lender’s First
Term Loan Commitment as set forth on Schedule 1.1 hereto;
and (ii) during the Second Draw Period, and provided that the
Second Draw Conditions have been satisfied prior to March 31,
2009, the Lenders shall make an additional tranche of Term Loans
(the “ Second Term Loans ”) available to
Borrower in an aggregate amount up to Ten Million Dollars
($10,000,000.00) according to each Lender’s Second Term Loan
Commitment as set forth on Schedule 1.1 hereto. The First
Term Loans and Second Term Loans are hereinafter referred to singly
as a “ Term Loan ”, and collectively as the
“ Term Loans ”. After repayment, no Term Loan
may be re-borrowed.
(b) Repayment
. Borrower shall make monthly payments of interest only commencing
on the first (1 st ) Payment Date following
the Funding Date of each Term Loan, and continuing on the Payment
Date of each successive month thereafter through June 30,
2009. Commencing on the Amortization Date, and continuing on the
Payment Date of each month thereafter, Borrower shall make thirty
(30) equal monthly payments of principal and interest which
would fully amortize the outstanding amount of the Term Loans. All
unpaid principal and accrued interest with respect to the Term
Loans is due and payable in full on the Maturity Date. The Term
Loans may only be prepaid in accordance with Sections 2.2(c) -
2.2(e) .
(c) Mandatory Prepayments
.
(i) If the Term Loans are
accelerated following the occurrence of an Event of Default,
Borrower shall immediately pay to each Lender in respect of the
Term Loan(s) advanced to Borrower by such Lender, an amount equal
to the sum of: (1) all outstanding principal plus accrued
interest on such Term Loan(s), (2) the Final Payment in
respect of such Term Loan(s), (3) the Prepayment Fee in
respect of such Term Loan(s), plus (4) all other sums that
shall have become due and payable, including interest at the
Default Rate with respect to any past due amounts. Notwithstanding
(but without duplication with) the foregoing, Borrower shall pay to
each Lender, on the Maturity Date, the Final Payment in respect of
the Term Loan(s).
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(d) In the event that Borrower fails
to achieve both of the following conditions, Borrower shall be
required to prepay the Term Loans in an aggregate amount necessary
to reduce the outstanding principal balance of all Term Loans to an
amount equal to Borrower’s revenue for the trailing twelve
month period ending on June 30, 2009 (rounded to the nearest
multiple of $1,000,000), together with (1) accrued interest on
the Term Loans being prepaid, (2) the Final Payment in respect
of such Term Loan(s), (3) the Prepayment Fee in respect of
such Term Loan(s), plus (4) all other sums that shall have
become due and payable, including interest at the Default Rate with
respect to any past due amounts: (i) Borrower shall have
received, by no later than June 30, 2009, Net Proceeds of at
least Fifty Million Dollars ($50,000,000) from the issuance and
sale by Borrower of Borrower’s capital stock after the
Effective Date, and (ii) Borrower’s product sales
revenue (excluding licensing revenue) for the trailing twelve month
period ending on June 30, 2009 shall be equal to or greater
than Twenty Million Dollars ($20,000,000). All principal amounts
required to be paid pursuant to this Section 2.2
(c)(ii) shall be applied to the Term Loans among the Lenders on
a Pro Rata basis and in the inverse order of maturity to the
remaining payments thereof.
(e) Permitted Prepayment .
Borrower shall have the option to prepay all, but not less than
all, of the Term Loans advanced by the Lenders under this
Agreement, provided Borrower, (i) provides written notice to
the Agent, with a copy to each Lender, of its election to prepay
the Term Loans at least thirty (30) days prior to such
prepayment, and (ii) pays to each Lender, on the date of such
prepayment, in respect of the Term Loan(s) advanced to Borrower by
such Lender, an amount equal to the sum of: (1) all
outstanding principal plus accrued interest on such Term Loan(s),
(2) the Final Payment in respect of such Term Loan(s),
(3) the Prepayment Fee in respect of such Term Loan(s), plus
(4) all other sums that shall have become due and payable,
including Lenders’ Expenses, if any, and interest at the
Default Rate with respect to any past due amounts.
2.3 Payment of Interest on the Credit
Extensions .
(a) Interest . Subject to
Section 2.3(b) , the principal amount outstanding under
the Term Loans shall accrue interest at a fixed per annum rate
equal to the Basic Rate, determined by the Lenders as of the
applicable Funding Date of any Term Loan, which interest shall be
payable monthly in accordance with Section 2.3(e) .
Pursuant to the terms hereof, interest on the Term Loans shall be
paid in arrears on the first day of each month. Interest shall also
be paid on the date of any prepayment of the Term Loans pursuant to
this Agreement for the portion of the Term Loans so prepaid and
upon payment (including prepayment) in full thereof. All accrued
but unpaid interest on the Term Loans shall be due and payable on
the Maturity Date. Interest shall accrue on each Credit Extension
for the day on which the Credit Extension is made, and shall accrue
on a Credit Extension, or any portion thereof, for the day on which
the Credit Extension or such portion is paid.
(b) Default Interest .
Immediately upon the occurrence and during the continuance of an
Event of Default, the Obligations shall bear interest at a rate per
annum which is the rate that is otherwise applicable thereto, plus
five percent (5.00%) (the “ Default Rate
”). Payment or acceptance of the increased interest rate
provided in this Section 2.3(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 any Lender.
(c) 360-Day Year . Interest
shall be computed on the basis of a 360-day year of twelve 30-day
months.
(d) Debit of Accounts . The
Agent may debit any of Borrower’s deposit accounts with
Silicon Valley Bank, through automatic debit of such accounts,
Automated Clearinghouse (“ ACH ”) or other
transfers, for principal and interest payments or any other amounts
Borrower owes the Agent (or, upon the request of any Lender, such
Lender) when due. No such debit shall constitute a
set-off.
(e) Payments .
(i) Unless otherwise provided,
interest is payable monthly on each Payment Date. All payments by
Borrower hereunder received by the recipient thereof after 4:00
p.m. New York 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.
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(ii) All payments to be made by
Borrower of principal, interest, fees and other Obligations shall
be absolute and unconditional and shall be made without condition
or deduction for any counterclaim, defense, recoupment, set-off or
rescission. Except as otherwise expressly provided herein, all
payments by Borrower hereunder shall be made to the respective
Lenders to which such payment is owed, at the Lender’s Office
in Dollars and in immediately available funds not later than 4:00
p.m. New York time on the date specified herein.
(f) Sharing of Payments . If,
other than as expressly provided elsewhere herein, any Lender shall
obtain on account of the Term Loans, any payment (whether
voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its Pro Rata share (or other
share contemplated hereunder) thereof, such Lender shall
immediately (a) notify the Agent and each other Lender of such
fact, and (b) purchase from the other Lenders such
participations in the Term Loans made by them as shall be necessary
to cause such purchasing Lender to share the excess payment in
respect of such Term Loans or such participations, as the case may
be, Pro Rata with each of them; provided , however ,
that if all or any portion of such excess payment is thereafter
recovered from the purchasing Lender under any of the circumstances
described in Section 12.12 (including pursuant to any
settlement entered into by the purchasing Lender in its
discretion), such purchase shall to that extent be rescinded and
each other Lender shall repay to the purchasing Lender the purchase
price paid therefor, together with an amount equal to such paying
Lender’s ratable share (according to the proportion of
(i) the amount of such paying Lender’s required
repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable
by the purchasing Lender in respect of the total amount so
recovered, without further interest thereon. Borrower agrees that
any Lender so purchasing a participation from another Lender may,
to the fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off, but subject to
Section 9.5 ) with respect to such participation as
fully as if such Lender were the direct creditor of Borrower in the
amount of such participation. The Agent will keep records (which
shall be conclusive and binding in the absence of manifest error)
of participations purchased under this Section and will in each
case notify the Lenders following any such purchases or repayments.
Each Lender that purchases a participation pursuant to this Section
shall from and after such purchase have the right to give all
notices, requests, demands, directions and other communications
under this Agreement with respect to the portion of the Obligations
purchased to the same extent as though the purchasing Lender were
the original owner of the Obligations purchased.
(g) Evidence of Debt . The
Credit Extensions made by each Lender shall be evidenced by Notes
in the form of Exhibit D and/or other records maintained by
such Lender and by the Agent in the ordinary course of business.
The accounts or records maintained by the Agent and each Lender
shall be conclusive absent manifest error of the amount of the
Credit Extensions made by the Lenders to Borrower and the interest
and payments thereon. Any failure to so record or any error in
doing so shall not, however, limit or otherwise affect the
obligation of Borrower hereunder to pay any amount owing with
respect to the Obligations.
2.4 Fees . Borrower shall pay to the
Lenders:
(a) Loan Fee . A fully
earned, non refundable loan fee of Three Hundred Thousand Dollars
($300,000) (to be shared among Oxford ($150,000), CIT ($100,000)
and Horizon ($50,000)), on or before the Effective Date;
(b) Final Payment . The Final
Payment when due on the Maturity Date or pursuant to the terms of
Section 2.2 ;
(c) Prepayment Fee . The
Prepayment Fee, if any, when due hereunder; and
(d) Lenders’ Expenses .
All Lenders’ Expenses (including reasonable attorneys’
fees and expenses incurred in connection with the documentation and
negotiation of this Agreement) incurred through and after the
Effective Date, when due.
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2.4.2 Taxes.
(a) Any and all payments by Borrower
to or for the account of the Agent or any Lender under any Loan
Document shall be made free and clear of and without deduction for
any and all present or future taxes, duties, levies, imposts,
deductions, assessments, fees, withholdings or similar charges, and
all liabilities with respect thereto, excluding, in the case of the
Agent and each Lender, taxes imposed on or measured by its overall
net income, and franchise taxes imposed on it (in lieu of net
income taxes), in each of the foregoing cases by the jurisdiction
(or any political subdivision thereof) under the Laws of which the
Agent or such Lender, as the case may be, is organized or maintains
its Lender’s Office (all such non-excluded taxes, duties,
levies, imposts, deductions, assessments, fees, withholdings or
similar charges, and liabilities being hereinafter referred to as
“ Taxes ”). If Borrower shall be required by any
Laws to deduct any Taxes from or in respect of any sum payable
under any Loan Document to the Agent or any Lender, (i) the
sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to
additional sums payable under this Section), each of the Agent and
such Lender receives an amount equal to the sum it would have
received had no such deductions been made, (ii) Borrower shall
make such deductions, (iii) Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable Laws, and (iv) within thirty
(30) days after the date of such payment, Borrower shall
furnish to the Agent (which shall forward the same to such Lender)
the original or a certified copy of a receipt evidencing payment
thereof or if no receipt is available, other evidence of such
payment reasonably satisfactory to the Agent or the
Lenders.
(b) In addition, Borrower agrees to
pay any and all present or future stamp, court or documentary taxes
and any other excise or property taxes or charges or similar levies
which arise from any payment made under any Loan Document or from
the execution, delivery, performance, enforcement or registration
of, or otherwise with respect to, any Loan Document (hereinafter
referred to as “ Other Taxes ”).
(c) If Borrower shall be required to
deduct or pay any Taxes or Other Taxes from or in respect of any
sum payable under any Loan Document to the Agent or any Lender,
Borrower shall also pay to the Agent or to such Lender, as the case
may be, at the time interest is paid, such additional amount that
the Agent or such Lender specifies is necessary to preserve the
after-tax yield (after factoring in all taxes, including taxes
imposed on or measured by net income) that the Agent or such Lender
would have received if such Taxes or Other Taxes had not been
imposed.
(d) Borrower agrees to indemnify the
Agent and each Lender for (i) the full amount of Taxes and
Other Taxes (including any Taxes or Other Taxes imposed or asserted
by any jurisdiction on amounts payable under this
Section 2.4.2 ) paid by the Agent and such Lender,
(ii) amounts payable under Section 2.4.2(c) and
(iii) any liability (including additions to tax, penalties,
interest and expenses) arising therefrom or with respect thereto,
in each case whether or not such Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant
Governmental Authority, so long as such amounts have accrued on or
after the day which is two hundred seventy (270) days prior to
the date on which such Lender or the Agent first made demand
therefor. Payment under this subsection (d) shall be made
within thirty (30) days after the date the applicable Lender
or the Agent makes a demand therefor.
(e) If any Governmental Authority
asserts that the Agent did not properly withhold or backup
withhold, as the case may be, any tax or other amount from payments
made to or for the account of any Lender, such Lender shall
indemnify the Agent therefor, including all penalties and interest,
any taxes imposed by any jurisdiction on the amounts payable to the
Agent under this Section 2.4.2 , and costs and expenses
(including Lenders’ Expenses) of the Agent. The obligation of
the Lenders under this Section shall survive the termination of all
Term Loan Commitments to make Credit Extensions, repayment of all
Obligations and the resignation of the Agent.
2.4.3 Increased Cost and Reduced Return; Capital
Adequacy .
(a) If any change in Law
shall:
(i) impose, modify or deem
applicable any reserve, special deposit, compulsory loan, insurance
charge or similar requirement against assets of, deposits with or
for the account of, or credit extended or participated in by, any
Lender;
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(ii) subject any Lender to any tax
of any kind whatsoever with respect to this Agreement, or change
the basis of taxation of payments to such Lender in respect thereof
(except for Taxes or Other Taxes covered by
Section 2.4.2 and the imposition of, or any change in
the rate of, any tax excluded from the definition of Taxes in
Section 2.4.2(a) payable by such Lender); or
(iii) impose on any Lender any other
condition, cost or expense affecting this Agreement made by such
Lender;
(b) and the result of any of the
foregoing shall be to reduce the amount of any sum received or
receivable by such Lender (whether of principal, interest or any
other amount) then, upon request of such Lender, Borrower will pay
to such Lender such additional amount or amounts as will compensate
such Lender for such additional costs incurred or reduction
suffered, so long as such costs have accrued on or after the day
which is two hundred seventy (270) days prior to the date on
which such Lender first made demand therefor.
(c) Without duplication of amounts
payable pursuant to paragraph (a) above, if any Lender
determines that any change in Law affecting such Lender or any
lending officer of such Lender or Lender’s holding company,
if any, regarding capital requirements has or would have the effect
of reducing the rate of return on such Lender’s capital or on
the capital of such Lender’s holding company, if any, as a
consequence of this Agreement, the Term Loan Commitment of such
Lender or the Credit Extensions made by such Lender to a level
below that which such Lender or such Lender’s holding company
could have achieved but for such change in Law (taking into
consideration such Lender’s policies and the policies of such
Lender’s holding company with respect to capital adequacy),
then from time to time Borrower will pay to such Lender such
additional amount or amounts as will compensate such Lender or such
Lender’s holding company for any such reduction
suffered.
2.4.4 Matters Applicable to all Requests for
Compensation . A certificate of the Agent or any Lender
claiming compensation under this Article 2 and setting forth
the additional amount or amounts to be paid to it hereunder shall
be conclusive in the absence of manifest error. In determining such
amount, the Agent or such Lender may use any reasonable averaging
and attribution methods.
3.1 Conditions Precedent to Initial Credit
Extension . The Lenders’ obligation to make the initial
Credit Extension is subject to the condition precedent that the
Agent shall have received, with a copy to each Lender, in form and
substance satisfactory to the Agent, such documents, and completion
of such other matters, as the Agent or any Lender may reasonably
deem necessary or appropriate, including, without
limitation:
(a) duly executed original
signatures to the Loan Documents to which Borrower is a
party;
(b) duly executed original
signatures to the Warrants in favor of each Lender;
(c) duly executed original
signatures to the Control Agreements with respect to each of
Borrower’s Deposit Accounts, Securities Accounts, Commodity
Accounts or other investment accounts, including Borrower’s
accounts at Silicon Valley Bank, UBS Securities and
CSFirstBoston;
(d) Operating Documents and a good
standing certificate of each of Borrower and AlgoRx
Pharmaceuticals, Inc., in each case 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) Certificates of foreign
qualification for each of Borrower and AlgoRx Pharmaceuticals,
Inc., in each case certified by the Secretary of State (or similar
Governmental Authority) of any jurisdiction in which such Person is
qualified to conduct business, as of a date no earlier than thirty
(30) days prior to the Effective Date;
(f) duly executed original
signatures to the completed Authorizing Resolutions for each of
Borrower and AlgoRx Pharmaceuticals, Inc.;
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(g) certified copies, dated as of a
recent date, of financing statement searches, as the Agent or any
Lender shall request, accompanied by written evidence (including
any UCC termination statements) that the Liens indicated in any
such financing statements referenced in such searches either
constitute Permitted Liens or have been or, in connection with the
initial Credit Extension, will be, terminated or
released;
(h) the fully completed Perfection
Certificate, together with the duly executed original signature of
Borrower thereto;
(i) duly executed Landlord Waivers
and/or Bailee Letters for each property at which Collateral having
a value of Two Hundred Fifty Thousand Dollars ($250,000) or greater
is located;
(j) duly executed original
signatures of AlgoRx Pharmaceuticals, Inc. to a Guaranty and to a
Guarantor Security Agreement;
(k) a legal opinion of
Borrower’s counsel, addressed to the Agent and the Lenders,
dated as of the Effective Date, together with the duly executed
original signature thereto;
(l) a copy of Borrower’s
executed Investors’ Rights Agreement and any amendments
thereto;
(m) evidence satisfactory to the
Agent that the insurance policies required by
Section 6.5 hereof are in full force and effect,
together with appropriate evidence showing lender loss payable
and/or additional insured clauses or endorsements in favor of the
Agent;
(n) a payoff letter from General
Electric Capital Corporation (“ GE
”);
(o) evidence that (i) the Liens
securing the Indebtedness owed by Borrower to GE will be terminated
and (ii) the documents and/or filings evidencing the
perfection of such Liens, including without limitation any
financing statements and/or control agreements, have or will,
concurrently with the initial Credit Extension, be
terminated;
(p) a duly executed Right to Invest
Letter; and
(q) payment of the fees and
Lenders’ Expenses then due as specified in
Section 2.4 hereof;
(r) each document (including any
UCC-1 financing statements) required by the Loan Documents or under
Law or reasonably requested by the Agent or any Lender to be filed,
registered or recorded in order to create in favor of the Agent,
for its benefit and the benefit of the Lenders, a perfected Lien on
the Collateral described therein, prior and superior in right to
any other Lien, which shall be in proper form for filing,
registration or recordation;
(s) There exists no material pending
or threatened Proceeding against Borrower or any of its Affiliates
or their respective assets in any court or administrative forum;
and
(t) A certificate from the Chief
Financial Officer of Borrower attesting that Borrower is solvent
before and after giving effect to the initial funding of the Credit
Extensions (and the application of proceeds thereof).
3.2 Conditions Precedent to all Credit
Extensions . The Lenders’ obligations to make each Credit
Extension, including the initial Credit Extension, are subject to
the following:
(a) timely receipt by each Lender,
with a copy to the Agent, of an executed Loan Request
Form;
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(b) receipt by each Lender, with
copies to the Agent, of a duly executed original Note made payable
by Borrower to the order of such Lender, evidencing the Credit
Extension made by such Lender on the applicable Funding
Date;
(c) the representations and
warranties in Section 5 shall be true, accurate and
complete in all material respects on the date of the Loan Request
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;
(d) after giving effect to such
Credit Extension, the total outstanding Term Loans shall not exceed
the Term Loan Commitments.
(e) Each Lender has determined in
such Lender’s sole discretion, that there has not been a
Material Adverse Change.
3.3 Additional Conditions Precedent to Term
Loans. In addition to the conditions set forth in Sections
3.1 and 3.2 above, the Lenders’ obligations to make the
First Term Loans are subject to the condition precedent that
Borrower shall have had an average Market Capitalization of not
less than Fifty Million Dollars ($50,000,000) for the ten
(10) Business Days prior to the Funding Date of the First Term
Loans. In addition to the conditions set forth in Sections 3.1
and 3.2 above, the Lenders’ obligations to make the
Second Term Loans are subject to the conditions precedent that
Borrower shall have (i) had an average Market Capitalization
of not less than Seventy Five Million Dollars ($75,000,000) for the
ten (10) Business Days prior to the Funding Date of the Second
Term Loans and (ii) achieved the Second Draw
Conditions.
3.4 Covenant to Deliver . Borrower agrees to
deliver to the Agent, with a copy to each Lender, each item
required to be delivered to the Agent under this Agreement as a
condition to any Credit Extension. Borrower expressly agrees that
the making of a Credit Extension prior to the receipt by the Agent
and each Lender of any such item shall not constitute a waiver by
the Agent or any Lender of Borrower’s obligation to deliver
such item, and any such Credit Extension in the absence of a
required item shall be made in Agent’s sole
discretion.
3.5 Procedures for Borrowing .
(a) Subject to the prior
satisfaction of all other applicable conditions to the making of
the Term Loans set forth in this Agreement, to obtain a Term Loan,
Borrower shall notify each Lender with a copy to the Agent (which
notice shall be irrevocable) by electronic mail, facsimile, or
telephone by 12:00 noon Eastern time at least ten
(10) Business Days prior to the date the Term Loan is
requested to be made. Together with any such electronic or
facsimile notification, Borrower shall deliver to each Lender with
a copy to the Agent by electronic mail or facsimile a completed
Loan Request Form executed by a Responsible Officer or his or her
designee. Each Lender and the Agent may rely on any telephone
notice given by a person whom such Lender or the Agent believes is
a Responsible Officer or designee.
(b) Upon compliance with the
borrowing procedures set forth in clause (a) above, the
proceeds of any Term Loan will be made available to Borrower on the
applicable Funding Date by each Lender by transfer to such account
as Borrower may instruct in the Loan Request Form.
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CREATION
OF SECURITY INTEREST
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4.1 Grant of Security Interest . Borrower
hereby grants to the Agent, for the benefit of the Lenders, to
secure the payment and performance in full of all of the
Obligations, a continuing security interest in, and pledges to the
Agent, for the benefit of the Lenders, 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 to the Agent’s Lien to
the extent permitted under this Agreement). If Borrower shall
acquire a commercial tort claim, Borrower shall promptly notify the
Agent, with a copy to each Lender, in a writing signed by Borrower
of the general details thereof and grant to the Agent, for the
benefit of the Lenders, 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 the Agent or the Lenders. If this Agreement is
terminated, the Agent’s Lien in the Collateral shall continue
until the Obligations (other than inchoate indemnity obligations)
are repaid in full in cash. Upon payment in full in cash of the
Obligations (other than inchoate indemnity obligations) and at such
time as the Lenders’ obligations to make Credit Extensions
has terminated, the Agent shall, at Borrower’s sole cost and
expense, release its Liens in the Collateral granted hereunder and
all rights therein shall revert to Borrower.
4.2 Authorization to File Financing
Statements . Borrower hereby authorizes (and ratifies and
confirms any prior authorization) the Agent, on behalf of the
Lenders, to file financing statements, without notice to Borrower,
with all appropriate jurisdictions to perfect or protect the
Lenders’ 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 Lenders
under the Code. Such financing statements may indicate the
Collateral as “all assets of the Debtor” or words of
similar effect, or as being of an equal or lesser scope, or with
greater detail, all in Agent’s discretion or at the
Lenders’ direction.
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5
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REPRESENTATIONS AND
WARRANTIES
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Borrower represents and warrants as
follows:
5.1 Due Organization; Authorization; Power and
Authority . Borrower and each of its Subsidiaries are duly
existing and in good standing 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 the Agent, with a copy to each Lender, a completed certificate
in the form provided by the Agent signed by Borrower, entitled
“ Perfection Certificate .” Borrower represents
and warrants to the Lenders 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 (it being understood and agreed that Borrower
may from time to time update certain information in the Perfection
Certificate after the Effective Date to the extent permitted by one
or more specific provisions in this Agreement). If Borrower is not
now a Registered Organization but later becomes one, Borrower shall
promptly notify the Agent, with a copy to each Lender, of such
occurrence and provide the Agent, with a copy to each Lender, with
Borrower’s organizational identification number.
The execution, delivery and
performance by Borrower of the Loan Documents to which it is a
party have been duly authorized, and do not (i) conflict with
any of Borrower’s organizational documents,
(ii) contravene, conflict with, constitute a default under or
violate any material Requirement of Law, (iii) contravene,
conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental
Authority by which Borrower or any of its Subsidiaries or any of
their property or assets may be bound or affected,
8
(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 (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 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, Securities Account, Commodity Account or other
investment account other than the accounts described in the
Perfection Certificate delivered to the Agent, with a copy to each
Lender, in connection herewith, or of which Borrower has given the
Agent, with a copy to each Lender, notice and taken such actions as
are necessary to give the Agent, for the benefit of the Lenders, 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 are maintained at locations other than
as provided in the Perfection Certificate or as Borrower has given
the Agent, with a copy to each Lender, 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 the Agent or the Lenders and such bailee must
execute and deliver a bailee agreement, in form and substance
satisfactory to the Agent, or the Lenders, in their sole
discretion.
5.3 Intellectual Property . Borrower is the
licensee and sole owner of its Intellectual Property, except for
non-exclusive licenses granted by Borrower in the ordinary course
of its business. Each patent is valid and enforceable, and no part
of the Intellectual Property has been judged invalid or
unenforceable, in whole or in part, and to the best of
Borrower’s knowledge, no claim has been made that any part of
the Intellectual Property violates the rights of any third party
except to the extent such claim could not reasonably be expected to
have a material adverse effect on Borrower’s business.
Borrower has not, nor will it enter into any other agreement or
financing arrangement in which a Lien or a negative pledge in
Borrower’s Intellectual Property is granted to any other
party (except for license agreements for the licensing by Borrower
of Intellectual Property in which Borrower provides a negative
pledge to the licensor in respect of the licensed Intellectual
Property). Notwithstanding the previous sentence, the Agent will
have a first perfected security interest in all such license
agreements. Borrower does not have any other interest in, or title
to any patents, trademarks or material licenses that are registered
or the subject of other pending applications for registrations
except (i) as disclosed in the Perfection Certificate, and
(ii) patents or patent applications which have not yet been
licensed or published. Borrower owns or has rights to use all
Intellectual Property material to the conduct of its
business.
5.4 Litigation . As of the Effective Date,
there is no civil, criminal or administrative action, suit, claim,
indictment, proceeding, hearing, charge, complaint, demand, audit
inspection or investigation pending or, to the knowledge of any
Responsible Officer, threatened, by any Person or any federal,
state or local governmental agency against Borrower or any
Subsidiary or any Responsible Officer thereof, involving more than
$100,000 or which, if adversely determined, could reasonably be
expected to result in a Material Adverse Change, nor is there any
basis therefor.
5.5 No Material Deterioration in Financial
Condition; Financial Statements . All consolidated financial
statements for Borrower and any of its Subsidiaries delivered to
the Agent, with a copy to each Lender, were prepared in accordance
with GAAP consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein, fairly
present in all material respects Borrower’s consolidated
financial condition and Borrower’s consolidated results of
operations, and show all material Indebtedness and other
liabilities, direct or contingent, of Borrower and its Subsidiaries
as of the date thereof, including liabilities for taxes, the Term
Loan Commitments and Indebtedness. No event, change, condition or
state of facts has occurred that has resulted in, or is reasonably
likely to result in, individually or in the aggregate, a Material
Adverse Change since the date of the most recent financial
statements delivered by Borrower to the Agent and the
Lenders.
5.6 No Disposition . From the date of the
most recent audited financial statements delivered to the Agent,
with a copy to the Lenders, to and including the date hereof, there
has been no Transfer by Borrower and its Subsidiaries, or any
Involuntary Disposition, of any material part of the business or
Property of Borrower and its
9
Subsidiaries, taken as a whole, and no purchase
or other acquisition by any of them of any business or property
(including any Capital Stock of any other Person) material in
relation to the consolidated financial condition of Borrower and
its Subsidiaries, taken as a whole, in each case, which is not
reflected in the foregoing financial statements or in the notes
thereto and has not otherwise been disclosed in writing to the
Lenders on or prior to the date hereof.
5.7 Solvency . The fair salable value of
Borrower’s assets (including goodwill minus disposition
costs) exceeds the fair value of its liabilities; Borrower is not
left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade
debts) as they mature.
5.8 Regulatory Compliance . Borrower is not
an “investment company” or a company
“controlled” by an “investment company”
under the Investment Company Act of 1940, as amended. Borrower is
not engaged as one of its important activities in extending credit
for margin stock (under Regulations X, 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.
5.9 Compliance with Laws . Borrower and each
Subsidiary has operated at all times in compliance with the
requirements of all Laws and all orders, writs, conditions of
participation, contracts, standards, policies, injunctions,
decrees, and Governmental Approvals applicable to it, its
properties or the Facilities, except where noncompliance
individually or in the aggregate could not reasonably be expected
to result in a Material Adverse Change. Without limiting the
generality of the foregoing:
(a) neither Borrower nor any
Subsidiary, nor any individual employed by Borrower or any
Subsidiary, has any criminal culpability or has been excluded from
participation in any state or federal program for corporate or
individual actions or failures to act known to Borrower or any
Subsidiary where such culpability or exclusion has resulted or
could reasonably be expected to result in an Exclusion Event and
neither Borrower nor any Subsidiary nor any individual employed by
Borrower or Subsidiary has been subject to sanction or been
indicted or convicted of a crime, or pled nolo contendere or to
sufficient facts, in connection with any allegation of violation of
any state or federal program or other applicable Laws;
(b) no officer or other member of
management continues to be employed by Borrower or any Subsidiary
who may reasonably be expected to have individual culpability for
matters under investigation by a Governmental Authority unless such
officer or other member of management has been, within a reasonable
period of time after discovery of such actual or potential
culpability, either suspended or removed from positions of
responsibility related to those activities under challenge by a
Governmental Authority;
(c) neither Borrower nor any
Subsidiary is in receipt of any written notice of any material
violation of any Law, statute, rule, regulation, ordinance, code,
judgment, order writ, decree, permit, concession, franchise or
other governmental approval applicable to it or any of its
property, which notice, individually or in the aggregate could
reasonably be expected to result in an Exclusion Event or a
Material Adverse Change; and
(d) neither Borrower nor any
Subsidiary or any Affiliate thereof is in violation of and shall
not violate any of the country or list based economic and trade
sanctions administered and enforced by OFAC that are described or
referenced at http://ustreas.gov/offices/enforcement/ofac/ or as
otherwise published from time to time.
5.10 Subsidiaries; Investments . Borrower does
not own any stock, partnership interest or other equity securities
except for Permitted Investments.
5.11 Tax Returns and Payments; Pension
Contributions . Borrower and each of its Subsidiaries has
timely filed all required federal and state income tax returns and
all other material tax returns and reports, and Borrower has 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
10
obligation to pay the taxes by appropriate
proceedings promptly and diligently instituted and conducted,
(b) notifies the Agent, with a copy to each Lender, in writing
of the commencement of, and any material development in, the
proceedings, and (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.
5.12 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.
5.13 Full Disclosure . No written
representation, warranty or other statement of Borrower in any
certificate or written statement given to the Agent or any Lender,
as of the date such representations, warranties, or other
statements were made, taken together with all such written
certificates and written statements given to the Agent or such
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 by the Agent and the Lenders 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).
5.14 No Default .
(a) Borrower is not (i) in
breach of or default under any Material Contract, or (ii) is
in breach of or default under any Contractual Obligation that could
reasonably be expected to result in a Material Adverse
Change.
(b) No Default or Event of Default
has occurred and is continuing.
5.15 Environmental Compliance . Except as
could not reasonably be expected to result in a Material Adverse
Change:
(a) The Businesses and each of the
Facilities and all operations at the Facilities are in compliance
with all applicable Environmental Laws and there are no conditions
relating to the Facilities or the Businesses that could give rise
to liability under any applicable Environmental Laws.
(b) Neither Borrower nor any
Subsidiary has received any written or verbal notice of, or inquiry
from any Governmental Authority regarding, any violation, alleged
violation, non-compliance, liability or potential liability
regarding environmental matters or compliance with Environmental
Laws with regard to any of the Facilities or the Businesses, nor
does any Responsible Officer of Borrower have knowledge or reason
to believe that any such notice will be received or is being
threatened.
(c) No judicial proceeding or
governmental or administrative action is pending or, to the
knowledge of the Responsible Officers of Borrower, threatened,
under any Environmental Law to which Borrower or any Subsidiary is
or will be named as a party, nor are there any consent decrees or
other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements
outstanding under any Environmental Law with respect to Borrower,
any Subsidiary, the Facilities or the Businesses.
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5.16 ERISA Compliance .
(a) Each Plan is in compliance in
all material respects with the applicable provisions of ERISA, the
Internal Revenue Code, the Consolidated Omnibus Budget
Reconciliation Act of 1985 (“ COBRA ”) and the
regulations and published interpretations thereunder, and other
federal or state Laws. Borrower and each ERISA Affiliate has made
all required contributions to each Plan subject to Section 412
of the Internal Revenue Code, and no application for a funding
waiver or an extension of any amortization period pursuant to
Section 412 of the Internal Revenue Code has been made with
respect to any Plan. Borrower and each ERISA Affiliate has
performed all their obligations under each Plan according to their
terms.
(b) There are no pending or, to the
knowledge of Borrower, threatened claims, actions or lawsuits, or
action by any Governmental Authority, with respect to any Plan.
There has been no prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan.
(c) (i) No ERISA Event has occurred
or is reasonably expected to occur; (ii) no Pension Plan has
any Unfunded Pension Liability; (iii) neither Borrower nor or
any ERISA Affiliate has incurred, or reasonably expects to incur,
any liability under Title IV of ERISA with respect to any Pension
Plan (other than premiums due and not delinquent under
Section 4007 of ERISA); (iv) neither Borrower nor any
ERISA Affiliate has incurred, or reasonably expects to incur, any
liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such
liability) under Sections 4201 or 4243 of ERISA with respect to a
Multiemployer Plan; and (v) neither Borrower nor any ERISA
Affiliate has engaged in a transaction that could be subject to
Section 4069 or 4212(c) of ERISA.
5.17 Labor Matters . There are no collective
bargaining agreements or Multiemployer Plans covering the employees
of Borrower or any Subsidiary as of the date hereof, and neither
Borrower nor any Subsidiary has suffered any strikes, walkouts,
work stoppages or other material labor difficulty within the last
five (5) years.
5.18 Material Contracts . Schedule 5.18
contains a true, correct and complete list of all Material
Contracts in effect as of the Effective Date, and except as
described thereon, all such Material Contracts are in full force
and effect and no material breaches, defaults or events of default
currently exist thereunder.
5.19 Patriot Act . To the extent applicable,
Borrower is in compliance with the (i) Trading with the Enemy
Act, and each of the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B, Chapter V)
and any other enabling legislation or executive order relating
thereto, and (ii) Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism (USA Patriot Act of 2001) (the “ Patriot Act
”). No part of the proceeds of the Credit Extensions will be
used, directly or indirectly, for any payments to any governmental
official or employee, political party, official of a political
party, candidate for political office, or anyone else acting in an
official capacity, in order to obtain, retain or direct business or
obtain any improper advantage, in violation of the United States
Foreign Corrupt Practices Act of 1977, as amended.
5.20 Licensing and Accreditation . Except as
set forth in Schedule 5.20 , each of Borrower and its
Subsidiaries has, to the extent applicable: (i) obtained (or
been duly assigned) all required Governmental Approvals as required
by the relevant state Governmental Authority for the acquisition,
construction, expansion of, investment in or operation of its
businesses and Facilities as currently operated; and
(ii) obtained and maintains in good standing all Governmental
Approvals; and (iii) ensured that all such Governmental
Approvals are in full force and effect on the date hereof and have
not been revoked or suspended or otherwise limited (collectively,
“ Certificates, Licenses and Government Approvals
”), except in each case where the failure to obtain or
maintain such Certificates, Licenses and Government Approvals could
reasonably be expected to result in a Material Adverse Change. No
event has occurred or other fact exists with respect to the
Certificates, Licenses and Governmental Approvals that allows, or
after notice or lapse of time or both, would allow, revocation,
suspension, restriction, limitation or termination of any of the
Certificates, Licenses and Governmental Approvals. No notice from
any Governmental Authority in respect to the revocation,
suspension, restriction, limitation or termination of any
Certificates, Licenses and Governmental Approvals has been
delivered, issued, proposed or threatened.
12
Borrower shall, and shall cause each
of its Subsidiaries to, do all of the following:
6.1 Government Compliance; Compliance with
Laws .
(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 could
reasonably be expected to have a material adverse effect on
Borrower’s business or operations. Borrower shall comply, and
have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, the noncompliance with which
could reasonably be expected to have a material adverse effect on
Borrower or Borrower’s business.
(b) Obtain and keep in full force
and effect, all of the Governmental Approvals necessary for the
performance by Borrower of its business, its obligations under the
Loan Documents to which it is a party and the grant of a security
interest to the Agent, for the benefit of the Lenders, in all of
its property. Borrower shall promptly provide copies of any such
obtained Governmental Approvals to the Agent with a copy to each
Lender.
(c) Maintain its and all its
Subsidiaries’ compliance with the laws and regulations
described in Sections 5.15 and 5.16 and maintain its and all
its Subsidiaries’ compliance at all times with the
representations and warranties contain in Sections 5.15 and
5.16 .
6.2 Financial Statements, Reports,
Certificates .
(a) Deliver to the Agent, with a
copy to each Lender: (i) 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; (ii) a prompt report of any
legal actions pending or threatened against Borrower or any of its
Subsidiaries that could result in damages or costs to Borrower or
any of its Subsidiaries of Two Hundred Fifty Thousand Dollars
($250,000) or more; (iii) as soon as available, but no later
than thirty (30) days following the last day of
Borrower’s fiscal year, an annual business plan and budget
approved by Borrower’s Board of Directors, containing, among
other things, projected financial statements (including, without
limitation, consolidated balance sheets of the Borrower and its
Subsidiaries as at the end of each such Fiscal Quarter, and the
related consolidated statements of income or operations, retained
earnings, shareholders’ equity and cash flows for each such
Fiscal Quarter) for each Fiscal Quarter through the Maturity Date;
and (iv) such budgets, sales projections, operating plans,
board presentations and operating plans (including scientific
updates) and other financial information reasonably requested by
the Agent or any Lender.
(b) Within thirty (30) days
after the last day of each month, deliver to the Agent, with a copy
to the Lenders, a monthly cash flow statement and a duly completed
Compliance Certificate signed by a Responsible Officer.
(c) Promptly after the same are
available (and in any event within ten (10) days thereof),
deliver to the Agent, with a copy to each Lender, all reports and
written information to and from the United States Environmental
Protection Agency, or any state or local agency responsible for
environmental matters, the United States Occupational Health and
Safety Administration or any successor agencies or authorities
concerning any material environmental, health or safety matters,
and all material reports and written information to and from any
state or local agency responsible for health and safety matters, or
any successor agencies or authorities concerning environmental,
health or safety matters.
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 the Agent, with a
copy to each Lender, of all returns, recoveries, disputes and
claims that involve more than Two Hundred Fifty Thousand Dollars
($250,000).
6.4 Taxes; Pensions . Timely file, and
require each of its Subsidiaries to timely file, all required tax
returns and reports and timely pay, and require each of its
Subsidiaries to timely file, all foreign, federal, state and local
taxes, assessments, deposits and contributions owed by Borrower and
each of its Subsidiaries, except for deferred payment of any taxes
contested pursuant to the terms of Section 5.11 hereof,
and shall deliver to the Agent, with a copy to each Lender, on
demand, appropriate certificates attesting to such payments, and
pay all amounts necessary to fund all present pension, profit
sharing and deferred compensation plans in accordance with their
terms.
13
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 the Agent, or the
Lenders, may reasonably request. Insurance policies shall be in a
form, with companies, and in amounts that are satisfactory to the
Agent or the Lenders. All property policies shall have a
lender’s loss payable endorsement showing the Agent, for the
benefit of the Lenders, as an additional lender loss payee and
waive subrogation against the Agent, and all liability policies
shall show, or have endorsements showing, the Agent as an
additional insured. All policies (or the loss payable and
additional insured endorsements) shall provide that the insurer
must give the Agent, with a copy to the Lenders, at least thirty
(30) days notice before canceling, amending, or declining to
renew its policy. At the Agent’s or any Lender’s
request, Borrower shall deliver certified copies of policies and
evidence of all premium payments to the Agent with a copy to each
Lender. Proceeds payable under any policy shall, at the
Agent’s option or at the direction of the Lenders, be payable
to the Agent, for the benefit 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 Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate
for all losses, 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 the Agent, on behalf of the Lenders, has 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 the Agent or at
the direction of the Lenders, be payable to the Agent, for the
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 the Agent (with a
copy to the Lenders), the Agent or the Lenders 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
the Agent or the Lenders deem prudent.
6.6 Operating Accounts . Provide the Agent
(with a copy to the Lenders) five (5) days prior written
notice before establishing any Collateral Account at or with any
bank or financial institution. For each Collateral Account that
Borrower at any time maintains, Borrower shall cause the applicable
bank or financial institution 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 the Agent’s Lien in such Collateral
Account in accordance with the terms hereunder. 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 the Agent and the Lenders by Borrower
as such.
6.7 Protection of Intellectual Property
Rights . Borrower shall: (a) protect, defend and maintain
the validity and enforceability of any Intellectual Property that
is material to its business; (b) promptly advise the Agent in
writing, with a copy to each Lender, of material infringements of
its Intellectual Property; and (c) not allow any Intellectual
Property material to Borrower’s business to be abandoned,
forfeited or dedicated to the public without the Agent’s or
the Lenders’ written consent.
6.8 Litigation Cooperation . From the date
hereof and continuing through the termination of this Agreement,
make available to the Agent and each Lender, without expense to the
Agent or any Lender, Borrower and its officers, employees and
agents and Borrower’s books and records, to the extent that
the Agent or any Lender may deem them reasonably necessary to
prosecute or defend any third-party suit or proceeding instituted
by or against the Agent or any Lender with respect to any
Collateral or relating to Borrower.
6.9 Right to Invest . Grant to each Lender or
its Affiliates a right (but not an obligation) to invest up to One
Million Dollars ($1,000,000) in the aggregate (each such
Lender’s investment being limited to its Pro Rata share of
$1,000,000) according to each Lender’s Pro Rata share, in any
of Borrower’s rounds of private equity financing occurring
after the Effective Date on the same terms, conditions and pricing
offered to its lead investors. Borrower shall give the Agent, with
a copy to each Lender, at least twenty (20) days prior written
notice of each private equity financing which notice shall
(a) identify the investors participating in such private
equity financing and contain the terms, conditions and pricing of
each private equity financing, and (b) be delivered to the
Agent’s addresses, with a copy to each Lender, set forth in
Section 10 hereof. The rights granted hereunder shall
survive the termination of this Agreement.
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6.10 Notices of Litigation and Default .
Borrower shall give prompt written notice to the Agent, with a copy
to each Lender, of any litigation or governmental proceedings
pending or threatened (in writing) against Borrower which would
reasonably be expected to result in a Material Adverse Change.
Without limiting or contradicting any other more specific provision
of this Agreement, promptly (and in any event within three
(3) Business Days) upon Borrower becoming aware of the
existence of any Event of Default or event which, with the giving
of notice or passage of time, or both, would constitute an Event of
Default, Borrower shall give written notice to the Agent with a
copy to each Lender of such occurrence, which such notice shall
include a reasonably detailed description of such Event of Default
or event which, with the giving of notice or passage of time, or
both, would constitute an Event of Default.
6.11 Collateral of Subsidiaries;
Creation/Acquisition of Subsidiaries . Borrower and such
Subsidiary shall take all such action as may be reasonably required
by the Agent or the Lenders to cause each domestic Subsidiary to
guarantee the Obligations of Borrower under the Loan Documents and
grant a continuing pledge and security interest, in favor of the
Agent, in and to the assets of such Subsidiary; and Borrower shall
grant and pledge to the Agent, for its benefit and the benefit of
the 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). In the event Borrower or any
Subsidiary creates or acquires any Subsidiary, Borrower and such
Subsidiary shall promptly notify the Agent with a copy to each
Lender of the creation or acquisition of such new Subsidiary and
take all such action as may be reasonably required by the Agent or
the Lenders 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 favor of the Agent, in
and to the assets of such Subsidiary.
6.12 Further Assurances . Borrower shall
execute any further instruments and take further action as the
Agent or Lenders reasonably request to perfect or continue the
Agent’s Lien in the Collateral or to effect the purposes of
this Agreement. Borrower shall deliver to the Agent with a copy to
each Lender, within five (5) days after the same are sent or
received, copies of all material 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.
6.13 Notices .
(a) Promptly (and in any event
within two (2) Business Days) notify the Agent and each Lender
in writing of the occurrence (i) of any Default or Event of
Default, (ii) of any matter that has resulted or could
reasonably be expected to result in a Material Adverse Change,
(iii) an ERISA Event, (iv) any material change in
accounting policies or financial reporting practices by Borrower or
any Subsidiary, (v) any fact or change in circumstances that
would be expected to cause any of the representations and
warranties contained in Section 5.15 to cease to be
true in all material respects at any time during the duration of
this Agreement, (vi) an actual or threatened Exclusion Event,
or the institution of any investigation, review or proceeding
against Borrower that may result in an Exclusion Event,
(vii) any notice of loss or threatened loss of any applicable
Governmental Approval or accreditation, in each case, that could
reasonably be expected to result in a Material Adverse Change, or
(viii) any loss, damage or destruction to the Collateral in
the amount of $50,000 or more individually, whether or not covered
by insurance.
(b) Immediately upon the occurrence
of, upon becoming aware of, or upon receipt of notice from a third
party to Borrower of, (i) Borrower’s default pursuant to
the terms of any Material Contract to which Borrower is a party or
(ii) the termination of, or the intent or threat to terminate,
any such Material Contract or lease, notify the Agent in writing
with a copy to each Lender of such default, termination or
threat.
(c) Each notice pursuant to this
Section 6.13 shall be accompanied by a statement of a
Responsible Officer of Borrower setting forth details of the
occurrence referred to therein and stating what action Borrower has
taken and proposes to take with respect thereto. Each notice
pursuant to Section 6.13(a) shall describe with
particularity any and all provisions of this Agreement and any
other Loan Document that have been breached.
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6.14 Maintenance of Properties .
(a) Maintain, preserve and protect
all of its property necessary in the operation of its business in
good working order and condition, ordinary wear and tear and
Involuntary Dispositions excepted.
(b) Make all necessary repairs
thereto and renewals and replacements thereof.
(c) Use the standard of care typical
in the industry in the operation and maintenance of its
Facilities.
6.15 Books and Records .
(a) Maintain proper books of record
and account, in which full, true and correct entries in conformity
with GAAP consistently applied shall be made of all financial
transactions and matters involving the assets and business of
Borrower or such Subsidiary, as the case may be.
(b) Maintain such books of record
and account in material conformity with all applicable requirements
of any Governmental Authority having regulatory jurisdiction over
Borrower or such Subsidiary, as the case may be.
6.16 Inspection Rights . Permit
representatives and independent contractors of the Agent and the
Lenders to visit and inspect any of its properties, to examine its
corporate, financial and operating records, and make copies thereof
or abstracts therefrom, and to discuss its affairs, finances and
accounts with its directors, officers, and independent public
accountants, all at the expense of Borrower and at such reasonable
times during normal business hours, upon reasonable advance notice
to Borrower; provided, however, that (i) such visits and
inspections at Borrower’s expense shall be limited to no more
than two (2) times per calendar year unless a Default or an
Event of Default exists, (ii) when a Default or an Event of
Default exists, the Agent and the Lenders (or any of its
representatives or independent contractors) may do any of the
foregoing at the expense of Borrower at any time during normal
business hours and without advance notice; and (iii) whether
or not a Default or Event of Default exists, the Agent and the
Lenders (or any of its representatives or independent contractors)
may conduct such visits and inspections at any time at their own
expense during normal business hours upon reasonable advance notice
to Borrower.
6.17 Pledged Assets .
(a) At all times, (a) cause all
of the owned and leased personal Property of Borrower to be subject
at all times to a first priority, perfected Lien in favor of the
Agent to secure the Obligations pursuant to the terms and
conditions of the Loan Documents or, with respect to any such
Property acquired subsequent to the date hereof, such other
additional security documents as the Agent or any Lender shall
reasonably request, subject in any case to Permitted Liens and
(b) deliver such other documentation as the Agent or any
Lender may reasonably request in connection with the foregoing,
including appropriate UCC financing statements, landlord’s
waivers, certified resolutions and other organizational and
authorizing documents of such Person, favorable opinions of counsel
to such Person (which shall cover, among other things, the
legality, validity, binding effect and enforceability of the
documentation referred to above and the perfection of the
Agent’s Liens thereunder) and other items of the types
required to be delivered pursuant to Section 3.1(l) ,
all in form, content and scope reasonably satisfactory to the Agent
and each Lender.
(b) Without limiting the generality
of the above, Borrower will cause 100% of the issued and
outstanding Capital Stock of each domestic Subsidiary and 65% of
the issued and outstanding Capital Stock of each foreign Subsidiary
to be subject at all times to a first priority, perfected Lien in
favor of the Agent pursuant to the terms and conditions of the Loan
Documents or such other security documents as the Agent or any
Lender shall request, subject to Permitted Liens.
(c) With respect to each Account for
which either the perfection, enforceability, or validity of the
Agent’s Liens in such Account, or the Agent’s right or
ability to obtain direct payment to the Agent of the proceeds of
such Account, is governed by any federal, state, or local statutory
requirements other than those of the UCC, Borrower will take such
steps as the Agent or any Lender may from time to time reasonably
request, including compliance with the Federal Assignment of Claims
Act of 1940, and the Social Security Act, in each case and such
acts, rules and regulations may be amended, modified, supplemented
and/or replaced from time to time.
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(d) If an Event of Default exists,
Borrower shall grant a first priority, perfected Lien (except for
Permitted Liens) on any additional Property of Borrower in favor of
the Agent for the benefit of itself and the other Lenders to secure
the Obligations pursuant to the terms and conditions of the Loan
Documents as requested by the Agent or the Lenders in their sole
discretion.
6.18 Lenders’ Meetings . Borrower will,
upon the request of the Agent or any Lender, participate in a
meeting of the Agent and the Lenders once during each Fiscal Year
to be held at Borrower’s corporate offices (or at such other
location as may be agreed to by Borrower and the Agent) at such
time as may be agreed to by Borrower and the Agent; provided that
during the existence of a Default or Event of Default, meetings may
be held more frequently than once per Fiscal Year.
6.19 Agreement with Landlord . Borrower shall
use commercially reasonable efforts to obtain and maintain such
landlord agreements with respect to any real property on which
(a) Borrower’s principal place of business,
(b) Borrower’s books or records, or (c) Collateral
with an aggregate value in excess of Two Hundred Fifty Thousand
Dollars ($250,000) is located (other than real property owned by
Borrower) as the Agent or the Lenders may reasonably
require.
Borrower shall not, and shall not
permit any of its Subsidiaries to, do any of the
following:
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; (c) in connection
with Permitted Liens and Permitted Investments; (d) of
non-exclusive and exclusive licenses for the use of Intellectual
Property and rights to Intellectual Property, collaborative
transactions, and/or joint ventures each entered in the ordinary
course of business; and (e) other Transfers of property with
an aggregate value of up to Two Hundred Fifty Thousand Dollars
($250,000) in each calendar year.
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) suffer or permit a Change in Control.
Borrower shall not, without at least twenty (20) days prior
written notice to the Agent with a copy to each Lender:
(1) add any new offices or business locations, including
warehouses (unless such new offices or business locations contain
less than Two Hundred Fifty Thousand Dollars ($250,000) 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 a Subsidiary may
merge or consolidate into another Subsidiary (provided such
surviving Subsidiary is a Guarantor and has provided the Agent
with
