AMENDED AND RESTATED MODIFICATION AND CONSENT AGREEMENT
EXHIBIT 10.35C
| THE MODIFICATION AND CONSENT AGREEMENT MADE TO BE EFFECTIVE AS OF FEBRUARY 15, 2005 IS AMENDED, RESTATED, AND REPLACED IN ITS ENTIRETY BY THIS AMENDED AND RESTATED MODIFICATION AND CONSENT AGREEMENT. |
AMENDED AND RESTATED
MODIFICATION AND CONSENT AGREEMENT
MODIFICATION AND CONSENT AGREEMENT
THIS AMENDED AND RESTATED MODIFICATION AND CONSENT AGREEMENT (“AGREEMENT”) is made to be
effective as of the 15th day of February, 2005, by and between MANUFACTURERS AND TRADERS
TRUST COMPANY (“BANK”); MARYLAND INDUSTRIAL DEVELOPMENT FINANCING AUTHORITY (“ISSUER”); and AVALON
PHARMACEUTICALS, INC. (“BORROWER”).
RECITALS
The ISSUER has issued and sold certain bonds (“BONDS”) in the aggregate amount of Twelve
Million Dollars ($12,000,000) and has lent the proceeds thereof to the BORROWER in accordance with
the terms of a Loan Agreement dated April 1, 2003 (“LOAN AGREEMENT”). In order to enhance the
marketability of the BONDS, the BORROWER has entered into a Letter Of Credit Agreement dated April
1, 2003 (“LC AGREEMENT”) pursuant to which the BANK issued to the Trustee named therein for the
holders of the BONDS the BANK’S irrevocable letter of credit (“LETTER OF CREDIT”). As a condition
to its issuance of the LETTER OF CREDIT, the BANK required the ISSUER to insure a portion of the
BORROWER’S obligations under the LC AGREEMENT in accordance with the terms of the Issuer’s
Insurance Agreement dated April 1, 2003 (“INSURANCE AGREEMENT”). Hereafter, the BONDS, the LOAN
AGREEMENT, the BOND AGREEMENT, the INSURANCE AGREEMENT, and all other documents and agreements
which evidence, secure, relate or pertain to the BONDS and the loan of the proceeds of the BONDS by
the ISSUER to the BORROWER are collectively referred to as the “BOND DOCUMENTS.”
The BORROWER proposes to issue an Unsecured Convertible Promissory Note (“SUBORDINATED NOTE”)
and a Warrant For The Purchase Of Shares Of Warrant Stock (“WARRANT”) pursuant to which the
BORROWER will borrow sums (“SUBORDINATED LOAN PROCEEDS’) from the “Payees” (as defined therein) in
an aggregate principal amount of not more than Six Million Dollars ($6,000,000.00). The BORROWER
has represented to the BANK and to the ISSUER that the purpose for the issuance of the SUBORDINATED
NOTE and the WARRANT by the BORROWER and the borrowing of the SUBORDINATED LOAN PROCEEDS by the
BORROWER is to provide the BORROWER with the funding necessary for the BORROWER to enter into a
proposed License, Development And Commercialization Agreement (“VERTEX AGREEMENT”) between Vertex
Pharmaceuticals Incorporated and the BORROWER, a draft copy of which the BORROWER has provided to
the BANK and to the ISSUER, to make certain payments (collectively, “LICENSING PAYMENTS”) in the
aggregate amount of Five Million Dollars ($5,000,000.00) required by Section 6.1 (Consideration for
License) of the VERTEX AGREEMENT, and to otherwise fund the general corporate purposes of the
BORROWER.
The BORROWER has requested that the ISSUER and the BANK consent to: (a) the issuance of the
SUBORDINATED NOTE by the BORROWER and the borrowing of the SUBORDINATED LOAN PROCEEDS by the
BORROWER; and (b) a temporary modification to the calculation of “Current Liabilities” set forth in
the LC AGREEMENT.
NOW, THEREFORE, in consideration of the premises, and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows:
AGREEMENT
Section 1. Acknowledgment Of Obligations. The BORROWER acknowledges that: (a) each of
the BOND DOCUMENTS to which the BORROWER is a signatory constitutes the valid and binding
obligation of the BORROWER; (b) the BOND DOCUMENTS are enforceable against the BORROWER in
accordance with all stated terms; and (c) the BORROWER has no defenses, claims of offset, or
counterclaims against the enforcement of the BOND DOCUMENTS strictly in accordance with all stated
terms.
Section 2. Consent To Subordinated Note. Subject to the agreements and covenants of
the BORROWER set forth herein and the satisfaction of all conditions required by this AGREEMENT,
the BANK and the ISSUER hereby consent to the execution and delivery of the SUBORDINATED NOTE by
the BORROWER in form and substance as the unexecuted Unsecured Convertible Promissory Note attached
hereto as Exhibit A. The consents of the BANK and the ISSUER are conditioned upon the receipt by
the BORROWER of paid-in cash SUBORDINATED LOAN PROCEEDS of approximately Four Million Seven Hundred
Sixty-Six Thousand Dollars ($4,766,000.00). All of the paid-in SUBORDINATED LOAN PROCEEDS shall be
maintained on deposit with the BANK until used by the BORROWER to fund the LICENSING PAYMENTS and
the general corporate purposes of the BORROWER as authorized by Section 3.4 of this AGREEMENT.
Section 3. Covenants Of Borrower. In order to induce the BANK and the ISSUER to enter
into this AGREEMENT, the BORROWER covenants and agrees as follows:
Section 3.1 No Amendment To Subordinated Note. The BORROWER will not consent
to any modifications or amendments to any of the terms of the SUBORDINATED NOTE, including
without limitation, the terms of subordination set forth in paragraph 15 of the SUBORDINATED
NOTE.
Section 3.2 No Prepayments Under Subordinated Note. The BORROWER agrees that
it will not make any cash payments of principal, interest or other sums upon either the
SUBORDINATED NOTE or upon any securities issued by the BORROWER with respect to the
SUBORDINATED NOTE until all “Senior Indebtedness” (as defined in the SUBORDINATED NOTE) has
been paid and satisfied in full.
Section 3.3 Use Of Subordinated Loan Proceeds. The BORROWER will use the
SUBORDINATED LOAN PROCEEDS solely for the payment of the LICENSING PAYMENTS and the general
corporate purposes of the BORROWER and for no other purposes.
Section 3.4 No Prepayment Of Licensing Payments. The BORROWER will not pre-pay
any of the LICENSING PAYMENTS prior to the dates upon which each of such LICENSING PAYMENTS
is scheduled for payment in accordance with the provisions of Section 6.1 of the VERTEX
AGREEMENT.
Section 3.5 Prepayment Of Next Scheduled Principal Portion Reduction. The
BORROWER shall pay to the BANK the “Principal Portion” (as defined in the LC AGREEMENT)
reduction in the amount of One Million Two Hundred Thousand Dollars ($1,200,000.00) which is
currently scheduled for payment on April 1, 2005.
Section 4. Calculation Of Current Liabilities. The BORROWER and the BANK agree that
for the period of time commencing on the effective date of this AGREEMENT and ending on August 31,
2005, the obligation of the BORROWER under the SUBORDINATED NOTE and the payment obligations of the
BORROWER pursuant to Section 6.1 of the VERTEX AGREEMENT shall not be included in any calculation
of “Current Liabilities” for the purpose of determining compliance by the BORROWER with the Minimum
Current Ratio financial covenant set forth in Section 10.1(h)(i) of the LC AGREEMENT. Commencing
with the period measured on September 30, 2005 and continuing thereafter, such obligations shall be
included in the calculation of “Current Liabilities.”
Section 5. Calculation Of Tangible Net Worth. The BORROWER and the BANK agree that
the SUBORDINATED NOTE shall contain subordination language satisfactory to the BANK in its sole
discretion and shall provide for repayment of principal and interest solely by the conversion of
the SUBORDINATED NOTE into either subordinated Series C Preferred Stock or subordinated Capital
Stock. The BORROWER and the BANK agree that the amount of the indebtedness evidenced by the
SUBORDINATED NOTE shall be included in any calculation of “Tangible Net Worth” for the purpose of
determining compliance by the BORROWER with the Tangible Net Worth financial covenant set forth in
Section 10.1(h)(iii) of the LC AGREEMENT.
Section 6. Borrower’s Payment Of Modification Fees. The BORROWER agrees to pay to the
BANK a modification fee in the amount of Ten Thousand Dollars ($10,000.00) contemporaneously with
the effective date of this AGREEMENT, which fee shall be the absolute property of the BANK upon
payment, and shall not be considered to be a payment of any of the BANK’S expenses incurred in
connection with this AGREEMENT. The BORROWER shall pay an additional modification fee to the BANK
in the amount of Fifteen Thousand Dollars ($15,000.00) on or before
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April 11, 2005. Hereafter, the
above-described modification fees are collectively described as the “MODIFICATION FEES.”
Section 7. Bank’s Expenses. The BORROWER agrees to reimburse the BANK upon demand for
the costs and expenses incurred by the BANK in connection with the preparation of this AGREEMENT,
including reasonable attorneys’ fees. The execution and delivery by the BORROWER of this AGREEMENT
to the BANK shall authorize the BANK to debit and charge the BORROWER’S deposit account #970184752
for the MODIFICATION FEES and the costs and expenses incurred by the BANK, including reasonable
attorneys’ fees, in connection with the preparation of this AGREEMENT.
Section 8. Issuer’s Expenses. The BORROWER agrees to reimburse the ISSUER upon demand
for the costs and expenses incurred by the ISSUER in connection with the preparation of this
AGREEMENT, including reasonable attorneys’ fees.
Section 9. Borrower’s Representations. The BORROWER represents and warrants to the
BANK and the ISSUER that: (a) the BORROWER is not in default of any of its agreements or covenants
set forth in any of the BOND DOCUMENTS; and (b) the BORROWER is duly authorized and has obtained
all necessary consents and approvals to: (i) enter into this AGREEMENT, (ii) execute and deliver
the SUBORDINATED NOTE, and (iii) execute, deliver and perform the VERTEX AGREEMENT.
Section 10. Vertex Agreement. The BORROWER agrees that it will not modify the
provisions of Section 6.1 of the VERTEX AGREEMENT without the prior written consent of the ISSUER
and the BANK.
Section 11. Cross Default. The parties agree that a default by the BORROWER under any
of the terms of this AGREEMENT or the SUBORDINATED NOTE shall constitute an event of default under
the BOND DOCUMENTS.
Section 12. No Novation. It is the intent of the BORROWER, the ISSUER, and the BANK
that nothing contained in this AGREEMENT shall be deemed to effect or accomplish or otherwise
constitute a novation of any of the BOND DOCUMENTS or of any of the obligations owed by the
BORROWER in accordance with any of the BOND DOCUMENTS.
Section 13. Enforceability. This AGREEMENT shall inure to the benefit of and be
enforceable against the parties hereto and their respective successors and assigns.
Section 14. Appraisal. The BORROWER agrees to cooperate with the BANK in the
obtaining of an appraisal of the BORROWER’S assets which secure the BORROWER’S obligations under
the BOND DOCUMENTS, and agrees to reimburse the BANK for the actual costs incurred by the BANK in
obtaining such appraisal.
Section 15. Choice Of Law; Consent To Jurisdiction; Agreement As To Venue. This
AGREEMENT shall be construed, performed and enforced and its validity and enforceability determined
in accordance with the laws of the State of Maryland (excluding, however, conflict of laws
principles). The BORROWER consents to the jurisdiction of the courts of the State of Maryland and
the jurisdiction of the United States District Court for the District of Maryland, if a basis for
federal jurisdiction exists. The BORROWER waives any right to object to the maintenance of a suit
in any of the state or federal courts of the State of Maryland on the basis of improper venue or
inconvenience of forum.
Section 16. Waiver Of Jury Trial. Each of the parties agrees that any suit, action,
or proceeding, whether claim or counterclaim, brought or instituted by any of the parties, or any
successor or assign of any of the parties , on or with respect to this AGREEMENT or any of the BOND
DOCUMENTS or which in any way relates, directly or indirectly, to the obligations of the BORROWER
under the BOND DOCUMENTS or this AGREEMENT or the dealings of the parties with respect thereto,
shall be tried by a court and not by a jury. THE PARTIES HEREBY EXPRESSLY WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY SUCH SUIT, ACTION, OR PROCEEDING.
Section 17. RELEASE. IN ORDER TO INDUCE THE BANK AND THE ISSUER TO ENTER INTO THIS
AGREEMENT, THE BORROWER FOREVER RELEASES AND DISCHARGES THE BANK AND THE ISSUER AND THE OFFICERS,
DIRECTORS, EMPLOYEES, ATTORNEYS, AGENTS, SUCCESSORS,
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AND ASSIGNS OF THE BANK AND THE ISSUER
(COLLECTIVELY, THE “RELEASED PARTIES”) FROM ANY AND ALL CLAIMS, CAUSES OF ACTION, SUITS AND DAMAGES
(INCLUDING CLAIMS FOR ATTORNEYS’ FEES AND COSTS) WHICH THE BORROWER EVER HAD OR MAY NOW HAVE
AGAINST ANY OF THE RELEASED PARTIES, WHETHER KNOWN OR UNKNOWN, INCLUDING BUT NOT LIMITED TO ANY AND
ALL CLAIMS BASED UPON OR RELYING ON ANY ALLEGATIONS OR ASSERTIONS OF DURESS, ILLEGALITY,
UNCONSCIONABILITY, BAD FAITH, BREACH OF CONTRACT, REGULATORY VIOLATIONS, NEGLIGENCE, MISCONDUCT, OR
ANY OTHER TORT, CONTRACT OR REGULATORY CLAIM OF ANY KIND OR NATURE. THIS RELEASE IS INTENDED TO BE
FINAL AND IRREVOCABLE AND IS NOT SUBJECT TO THE SATISFACTION OF ANY CONDITIONS OF ANY KIND.
Section 18. Replacement Of Initial Modification And Consent Agreement. The parties
acknowledge and agree that the Modification And Consent Agreement made to be effective as of
February 15, 2005 is amended, restated, and replaced in its entirety by this Amended And Restated
Modification And Consent Agreement.
IN WITNESS WHEREOF, the parties have executed this AGREEMENT with the specific intention of
creating a document under seal to be effective as of the date first above written. This AGREEMENT
may be executed and delivered in counterparts.
| WITNESS/ATTEST: | AVALON PHARMACEUTICALS, INC. | ||||||||||
| By: | /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | (SEAL) | |||||||||
| Name: | ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Ph.D. | ||||||||||
| Title: | President & CEO | ||||||||||
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
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Signature Page to Modification And Consent Agreement – Continued:
| WITNESS/ATTEST: | MARYLAND INDUSTRIAL DEVELOPMENT FINANCING AUTHORITY |
|||||||||
| By: | /s/ D. ▇▇▇▇▇▇▇ ▇▇▇▇ | (SEAL) | ||||||||
| Name: | D. ▇▇▇▇▇▇▇ ▇▇▇▇ | |||||||||
| Title: | Director | |||||||||
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
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Signature Page to Modification And Consent Agreement – Continued:
| MANUFACTURERS AND TRADERS TRUST COMPANY |
||||||||||
| By: | /s/ ▇▇▇▇▇▇▇ Gattiff | (SEAL) | ||||||||
| Name: | ▇▇▇▇▇▇▇ Gattiff | |||||||||
| Title: | Vice-President | |||||||||
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