Borrower intends to sell, license, or distribute in the future including any products or service offerings under development, collectively, together with all products, software, service offerings, technical data or technology that have been sold,...
EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made and dated as of June 8, 2017 and
is entered into by and between CONCERT PHARMACEUTICALS, INC., a Delaware
corporation, and each of its Qualified Subsidiaries (hereinafter collectively referred to as the
“Borrower”), the several banks and other financial institutions or entities from time to time
parties to this Agreement (collectively, referred to as “Lender”) and HERCULES CAPITAL,
INC., formerly known as Hercules Technology Growth Capital, Inc., a Maryland corporation, in
its capacity as administrative agent and collateral agent for itself and the Lender (in such
capacity, the “Agent”).
RECITALS
A. Borrower has requested Lender to make available to Borrower a loan in an
aggregate principal amount of up to Thirty Million Dollars ($30,000,000.00) (the "Term Loan");
and
B. Lender is willing to make the Term Loan on the terms and conditions set forth in
this Agreement.
AGREEMENT
NOW, THEREFORE, Borrower, Agent and Lender agree as follows:
SECTION 1. DEFINITIONS AND RULES OF
CONSTRUCTION
1.1 Unless otherwise defined herein, the following capitalized terms shall have
the following meanings:
“Account Control Agreement(s)” means any agreement entered into by and
among the Agent, Borrower and a third party bank or other institution (including a Securities
Intermediary) in which Borrower maintains a Deposit Account or an account holding Investment
Property and which perfects Agent’s first priority security interest in the subject account or
accounts.
“ACH Authorization” means the ACH Debit Authorization Agreement in
substantially the form of Exhibit H, which account numbers shall be redacted for security
purposes if and when filed publicly by the Borrower.
“Advance(s)” means a Term Loan Advance.
“Advance Date” means the funding date of any Advance.
“Advance Request” means a request for an Advance submitted by Borrower to
Agent in substantially the form of Exhibit A, which account numbers shall be redacted for
security purposes if and when filed publicly by the Borrower.
“Affiliate” means (a) any Person that directly or indirectly controls, is controlled
by, or is under common control with the Person in question, (b) any Person directly or indirectly
owning, controlling or holding with power to vote thirty-five percent (35%) or more of the
outstanding voting securities of the Person in question, (c) any Person thirty-five percent (35%) or
more of whose outstanding voting securities are directly or indirectly owned, controlled or held by
the Person in question with power to vote such securities, or (d) any Person related by blood or
marriage to any Person described in subsection (a), (b) or (c) of this paragraph. As used in the
definition of “Affiliate,” the term “control” means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.
“Agent” has the meaning given to it in the preamble to this Agreement.
“Agreement” means this Loan and Security Agreement, as amended from time to
time.
“Amortization Date” means January 1, 2019; provided however, if the Interest
Only Extension Conditions are satisfied, then July 1, 2019.
“Anti-Corruption Laws” shall mean all laws, rules, and regulations of any
jurisdiction applicable to Borrower or any of its Affiliates from time to time concerning or
relating to bribery or corruption, including without limitation the United States Foreign Corrupt
Practices Act of 1977, as amended, the UK ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ and other similar legislation in any
other jurisdictions.
“Anti-Terrorism Laws” means any laws, rules, regulations or orders relating to
terrorism or money laundering, including without limitation Executive Order No. 13224
(effective September 24, 2001), the USA PATRIOT Act, the laws comprising or implementing
the Bank Secrecy Act, and the laws administered by OFAC.
“Assignee” has the meaning given to it in Section 11.13.
“Blocked Person” means any Person: (a) listed in the annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224, (b) a Person owned or controlled by, or
acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the
provisions of, Executive Order No. 13224, (c) a Person with which any Lender is prohibited from
dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person that
commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order
No. 13224, or (e) a Person that is named a “specially designated national” or “blocked person” on
the most current list published by OFAC or other similar list.
“Borrower Products” means all products, software, service offerings, technical
data or technology currently being designed, manufactured or sold by Borrower or which
Borrower intends to sell, license, or distribute in the future including any products or service
offerings under development, collectively, together with all products, software, service offerings,
technical data or technology that have been sold, licensed or distributed by Borrower since its
incorporation.
“Business Day” means any day other than Saturday, Sunday and any other day on
which banking institutions in the State of California are closed for business.
“Cash” means all cash, cash equivalents and liquid funds.
“Change in Control” means any reorganization, recapitalization, consolidation or
merger (or similar transaction or series of related transactions) of Borrower, sale or exchange of
outstanding shares (or similar transaction or series of related transactions) of Borrower in which
the holders of Borrower’s outstanding shares immediately before consummation of such
transaction or series of related transactions do not, immediately after consummation of such
transaction or series of related transactions, directly or indirectly retain shares representing more
than fifty percent (50%) of the voting power of the surviving entity of such transaction or series
of related transactions (or the parent of such surviving entity if such surviving entity is wholly
owned by such parent), in each case without regard to whether Borrower is the surviving entity.
“Claims” has the meaning given to it in Section 11.10.
“Closing Date” means the date of this Agreement.
“Collateral” means the property described in Section 3.
“Common Stock” means the Common Stock, $____ par value per share, of the
Borrower.
“Confidential Information” has the meaning given to it in Section 11.12.
“Contingent Obligation” means, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to (i) any Indebtedness, lease,
dividend, letter of credit or other obligation of another, including any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in
respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with
respect to undrawn letters of credit, corporate credit cards or merchant services issued for the
account of that Person; and (iii) all obligations arising under any interest rate, currency or
commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in interest rates,
currency exchange rates or commodity prices; provided, however, that the term “Contingent
Obligation” shall not include endorsements for collection or deposit in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability
in respect thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under the guarantee
or other support arrangement.
“Copyright License” means any written agreement granting any right to use any
Copyright or Copyright registration, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest.
“Copyrights” means all copyrights, whether registered or unregistered, held
pursuant to the laws of the United States of America, any State thereof, or of any other country.
“Deposit Accounts” means any “deposit accounts,” as such term is defined in the
UCC, and includes any checking account, savings account, or certificate of deposit that is not
evidenced by an instrument.
“Domestic Subsidiary” means any Subsidiary that is not a Foreign Subsidiary.
“Due Diligence Fee” means $20,000, which fee has been paid to Lender prior to
the Closing Date, and shall be deemed fully earned on such date regardless of the early
termination of this Agreement.
“Eligible Foreign Subsidiary” means any Foreign Subsidiary whose execution of a
Joinder Agreement could not be reasonably expected to result in a material adverse tax
consequence to Borrower.
“Equity Interests” means, with respect to any Person, the capital stock,
partnership or limited liability company interest, or other equity securities or equity ownership
interests of such Person.
“ERISA” means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.
“Event of Default” has the meaning given to it in Section 9.
“Facility Charge” means $300,000, representing one percent (1.0%) of the
Maximum Term Loan Amount.
“Financial Statements” has the meaning given to it in Section 7.1.
“Foreign Subsidiary” means any Subsidiary other than a Subsidiary organized
under the laws of any state within the United States of America.
“GAAP” means generally accepted accounting principles in the United States of
America, as in effect from time to time.
“Indebtedness” means indebtedness of any kind, including (a) all indebtedness for
borrowed money or the deferred purchase price of property or services (excluding trade credit
entered into in the ordinary course of business due within ninety (90) days), including
reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all
obligations evidenced by notes, bonds, debentures or similar instruments, (c) all capital lease
obligations, and (d) all Contingent Obligations.
“Insolvency Proceeding” is any proceeding by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, compositions, extensions generally with its creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
“Intellectual Property” means all of Borrower’s Copyrights; Trademarks; Patents;
Licenses; trade secrets and inventions; mask works; Borrower’s applications therefor and reissues,
extensions, or renewals thereof; and Borrower’s goodwill associated with any of the foregoing,
together with Borrower’s rights to ▇▇▇ for past, present and future infringement of Intellectual
Property and the goodwill associated therewith.
“Interest Only Extension Conditions” shall mean satisfaction of each of the
following events: (a) no default or Event of Default shall have occurred; and (b) on or before
January 1, 2019, Borrower shall have initiated a Phase 2b trial for CTP-543.
“Investment” means any beneficial ownership (including stock, partnership or
limited liability company interests) of or in any Person, or any loan, advance or capital
contribution to any Person or the acquisition of any capital asset of another Person.
“Joinder Agreements” means for each Qualified Subsidiary, a completed and
executed Joinder Agreement in substantially the form attached hereto as Exhibit G.
“Lender” has the meaning given to it in the preamble to this Agreement.
“License” means any Copyright License, Patent License, Trademark License or
other license of Intellectual Property rights or interests.
“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment for
security, security interest, encumbrance, ▇▇▇▇, ▇▇▇▇ or charge of any kind, whether voluntarily
incurred or arising by operation of law or otherwise, against any property, any conditional sale or
other title retention agreement, and any lease in the nature of a security interest.
“Loan” means the Advances made under this Agreement.
“Loan Documents” means this Agreement, the Notes (if any), the ACH
Authorization, the Account Control Agreements, the Joinder Agreements, all UCC Financing
Statements, the Warrant, the Pledge Agreement, and any other documents executed in connection
with the Secured Obligations or the transactions contemplated hereby, as the same may from time
to time be amended, modified, supplemented or restated.
“Material Adverse Effect” means a material adverse effect upon: (i) the business,
operations, properties, assets or financial condition of Borrower and its Subsidiaries taken as a
whole; or (ii) the ability of Borrower to perform or pay the Secured Obligations in accordance
with the terms of the Loan Documents, or the ability of Agent or Lender to enforce any of its
rights or remedies with respect to the Secured Obligations; or (iii) the Collateral or Agent’s Liens
on the Collateral or the priority of such Liens (other than solely as a result of failure by Agent to
make any necessary filings or maintain possession of any possessory collateral.
“Maximum Term Loan Amount” means Thirty Million and No/100 Dollars
($30,000,000.00).
“Maximum Rate” shall have the meaning assigned to such term in Section 2.3.
“Non-Disclosure Agreement” means that certain Non-Disclosure Agreement by
and between Borrower and Agent dated as of May 20, 2016.
“Note(s)” means a Term Note.
“OCB” means in the ordinary course of business and shall include collaboration or
licensing transactions that are customary in the Borrower’s industry.
“OFAC” is the U.S. Department of Treasury Office of Foreign Assets Control.
“OFAC Lists” are, collectively, the Specially Designated Nationals and Blocked
Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079
(Sept. 25, 2001) and/or any other list of terrorists or other restricted Persons maintained pursuant
to any of the rules and regulations of OFAC or pursuant to any other applicable Executive Orders.
“Patent License” means any written agreement granting any right with respect to
any invention on which a Patent is in existence or a Patent application is pending, in which
agreement Borrower now holds or hereafter acquires any interest.
“Patents” means all letters patent of, or rights corresponding thereto, in the United
States of America or in any other country, all registrations and recordings thereof, and all
applications for letters patent of, or rights corresponding thereto, in the United States of America
or any other country.
“Permitted Indebtedness” means: (i) Indebtedness of Borrower in favor of Lender
or Agent arising under this Agreement or any other Loan Document; (ii) Indebtedness existing on
the Closing Date which is disclosed in Schedule 1A; (iii) Indebtedness of up to $3,000,000
outstanding at any time secured by a Lien described in clause (vii) of the defined term “Permitted
Liens,” provided such Indebtedness does not exceed the cost of the Equipment financed with such
Indebtedness; (iv) Indebtedness to trade creditors incurred in the ordinary course of business,
including Indebtedness incurred in the ordinary course of business with corporate credit cards; (v)
Indebtedness that also constitutes a Permitted Investment; (vi) Subordinated Indebtedness; (vii)
reimbursement obligations in connection with letters of credit that are secured by Cash and
issued on behalf of the Borrower or a Subsidiary thereof in an amount not to exceed $3,000,000
at any time outstanding, (viii) other unsecured Indebtedness in an amount not to exceed $250,000
at any time outstanding, (ix) Contingent Obligations of up to $200,000 described in clause (iii) of
the definition of Contingent Obligations entered into to mitigate risk and not for speculative
purposes; (x) intercompany Indebtedness and as long as each of the Subsidiary obligor and the
Subsidiary obligee under such Indebtedness is a Qualified Subsidiary that has executed a Joinder
Agreement; (xi) intercompany Indebtedness of Subsidiary obligors that are not Qualified
Subsidiaries and have not executed a Joinder Agreement in an amount not to exceed $25,000 at
any time outstanding; and (xii) extensions, refinancings and renewals of any items of Permitted
Indebtedness, provided that the principal amount is not increased or the terms modified to impose
materially more burdensome terms upon Borrower or its Subsidiary, as the case may be.
“Permitted Investment” means: (i) Investments existing on the Closing Date which
are disclosed in Schedule 1B; (ii) (a) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof maturing within
one year from the date of acquisition thereof, (b) commercial paper maturing no more than one
year from the date of creation thereof and currently having a rating of at least A-2 or P-2 from
either Standard & Poor’s Corporation or ▇▇▇▇▇’▇ Investors Service, (c) certificates of deposit
issued by any bank with assets of at least $500,000,000 maturing no more than one year from the
date of investment therein, (d) money market accounts, and (e) corporate debt obligations
maturing no more than 24 months from the date of acquisition thereof and at the time of
investment having a rating of at least A3 or A- from either Standard & Poor’s or ▇▇▇▇▇’▇
Investor Service; (iii) repurchases of stock from former or existing employees, directors, or
consultants of Borrower (a) under the terms of applicable repurchase agreements in an aggregate
amount not to exceed $500,000 in any fiscal year or (b) for the purpose of providing funds for tax
liabilities, provided that no Event of Default has occurred, is continuing or could exist after giving
effect to the repurchases; (iv) Investments accepted in connection with Permitted Transfers; (v)
Investments (including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent obligations of, and other
disputes with, customers or suppliers arising in the ordinary course of Borrower’s business; (vi)
Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to
customers and suppliers who are not Affiliates, in the ordinary course of business, provided that
this subparagraph (vi) shall not apply to Investments of Borrower in any Subsidiary; (vii)
Investments consisting of loans not involving the net transfer on a substantially contemporaneous
basis of cash proceeds to employees, officers or directors relating to the purchase of capital stock
of Borrower pursuant to employee stock purchase plans or other similar agreements approved by
Borrower’s Board of Directors; (viii) Investments consisting of travel advances and employee
advances in the ordinary course of business; (ix) Investments in connection with the recruitment
and relocation of employees not to exceed $500,000 in any fiscal year; (x) Investments in newly-
formed Domestic Subsidiaries, provided that each such Domestic Subsidiary has entered into or
enters into a Joinder Agreement promptly after its formation by Borrower and executes such
other documents as shall be reasonably requested by Agent, and, so long as Borrower is in
compliance with the Liquidity Requirement as defined in Section 7.18 hereof, Investments in
Concert Pharmaceuticals Securities Corporation; (xi) Investments in Foreign Subsidiaries
approved in advance in writing by Agent; (xii) licenses, joint ventures or strategic alliances in the
OCB providing for the exclusive or nonexclusive licensing of technology, Intellectual Property, or
Borrower Products, the development of technology Intellectual Property or Borrower Products,
the assignment or ownership or co-ownership rights in connection with the foregoing, or the
providing of technical support, provided that any cash Investments by Borrower in another Person
(other than a Subsidiary that has entered into a Joinder pursuant to the terms hereof) as part of the
foregoing do not exceed $2,000,000]in the aggregate in any fiscal year; (xiii) Investments made
pursuant to any investment policy adopted by a Borrower after the Closing Date and approved by
Lender; (xiv) Investments by Borrower in another Borrower; (xv) the purchase of capital assets in
an amount not to exceed $2,000,000 in any fiscal year and (xvi) additional Investments that do not
exceed $250,000 in the aggregate.
“Permitted Liens” means any and all of the following: (i) Liens in favor of Agent
or Lender; (ii) Liens existing on the Closing Date which are disclosed in Schedule 1C; (iii) Liens
for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being
contested in good faith by appropriate proceedings; provided, that Borrower maintains adequate
reserves therefor in accordance with GAAP; (iv) Liens securing claims or demands of
materialmen, artisans, mechanics, carriers, warehousemen, landlords and other like Persons
arising in the ordinary course of Borrower’s business and imposed without action of such parties;
provided, that the payment thereof is not yet required or is being contested in good faith and the
Borrower maintains adequate reserves therefor in accordance with GAAP; (v) Liens arising from
judgments, decrees or attachments in circumstances which do not constitute an Event of Default
hereunder; (vi) the following deposits, to the extent made in the ordinary course of business:
deposits under worker’s compensation, unemployment insurance, social security and other similar
laws, or to secure the performance of bids, tenders or contracts (other than for the repayment of
borrowed money) or to secure indemnity, performance or other similar bonds for the performance
of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure
statutory obligations (other than Liens arising under ERISA or environmental Liens) or surety or
appeal bonds, or to secure indemnity, performance or other similar bonds; (vii) Liens on
Equipment or software or other intellectual property constituting purchase money Liens and
Liens in connection with capital leases securing Indebtedness permitted in clause (iii) of
“Permitted Indebtedness”; (viii) Liens incurred in connection with Subordinated Indebtedness;
(ix) leasehold interests in leases or subleases and licenses granted in the OCB and not interfering
in any material respect with the business of the licensor; (x) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of custom duties that are
promptly paid on or before the date they become due; (xi) Liens on insurance proceeds securing
the payment of financed insurance premiums that are promptly paid on or before the date they
become due (provided that such Liens extend only to such insurance proceeds and not to any
other property or assets); (xii) statutory and common law rights of set-off and other similar rights
as to deposits of cash and securities in favor of banks, other depository institutions and brokerage
firms; (xiii) easements, zoning restrictions, rights-of-way and similar encumbrances on real
property imposed by law or arising in the ordinary course of business so long as they do not
materially impair the value or marketability of the related property; (xiv) (A) Liens on Cash
securing obligations permitted under clause (vii) of the definition of Permitted Indebtedness and
(B) security deposits in connection with real property leases, the combination of (A) and (B) in
an aggregate amount not to exceed $3,000,000 in any fiscal year at any time; (xv) Liens in
connection with operating leases in the Equipment that is the subject of such Leases; (xvi)
Permitted Transfers; and (xvii) Liens incurred in connection with the extension, renewal or
refinancing of the Indebtedness secured by Liens of the type described in clauses (i) through (xi)
above; provided, that any extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the Indebtedness being extended,
renewed or refinanced (as may have been reduced by any payment thereon) does not increase.
“Permitted Transfers” means (i) sales of Inventory in the ordinary course of
business, (ii) exclusive or non-exclusive licenses, joint ventures, collaboration agreements,
strategic alliances and similar arrangements in the OCB providing for the exclusive or
nonexclusive licensing of technology, Intellectual Property of Borrower Products, the
development of technology Intellectual Property or Borrower Products, the assignment of
ownership or co-ownership rights in connection with the foregoing, or the providing of technical
support, (iii) dispositions of worn-out, obsolete or surplus Equipment at fair market value in the
ordinary course of business, (iv) Permitted Investments, (v) Permitted Liens, (vi) dispositions of
Copyrights in connection with publications in scientific journals, and (vii) the sale or issuance of
any stock of Borrower; (viii) the use or transfer of Cash in the ordinary course of business for
payment of ordinary course business expenses; (ix) transfers in connection with the Vertex
Transaction, provided that the Vertex Purchase Agreement has not been amended, restated or
otherwise modified without the prior written consent of Agent; and (x) other Transfers of assets
having a fair market value of not more than $250,000 in the aggregate in any fiscal year.
“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, limited liability company, institution,
other entity or government.
“Pledge Agreement” means the Pledge Agreement dated as of the Closing Date
between Borrower and Agent, as the same may from time to time be amended, restated, modified
or otherwise supplemented.
“Prepayment Charge” shall have the meaning assigned to such term in Section
2.5.
“Qualified Subsidiary” means other than Concert Pharmaceuticals Securities
Corporation, any direct or indirect Domestic Subsidiary or Eligible Foreign Subsidiary.
“Receivables” means (i) all of Borrower’s Accounts, Instruments, Documents,
Chattel Paper, Supporting Obligations, letters of credit, proceeds of any letter of credit, and
Letter of Credit Rights, and (ii) all customer lists, software, and business records related thereto.
“Required Lenders” means at any time, the holders of more than 50% of the sum
of the aggregate unpaid principal amount of the Term Loans then outstanding.
“Sanctioned Country” shall mean, at any time, a country or territory which is the
subject or target of any Sanctions.
“Sanctioned Person” shall mean, at any time, (a) any Person listed in any
Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of
the U.S. Department of the Treasury or the U.S. Department of State, or by the United Nations
Security Council, the European Union or any EU member state, (b) any Person operating,
organized or resident in a Sanctioned Country or (c) any Person controlled by any such Person.
“Sanctions” shall mean economic or financial sanctions or trade embargoes
imposed, administered or enforced from time to time by (a) the U.S. government, including those
administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or
the U.S. Department of State, or (b) the United Nations Security Council, the European Union or
Her Majesty’s Treasury of the United Kingdom.
“SBA” shall have the meaning assigned to such term in Section 7.16.
“SBIC” shall have the meaning assigned to such term in Section 7.16.
“SBIC Act” shall have the meaning assigned to such term in Section 7.16.
“SEC” means the Securities and Exchange Commission.
“Secured Obligations” means Borrower’s obligations under this Agreement and
any Loan Document (other than the Warrant), including any obligation to pay any amount now
owing or later arising.
“Subordinated Indebtedness” means Indebtedness subordinated to the Secured
Obligations in amounts and on terms and conditions satisfactory to Agent in its sole discretion
and subject to a written subordination agreement in form and substance satisfactory to Agent in
its sole discretion.
“Subsidiary” means an entity, whether corporate, partnership, limited liability
company, joint venture or otherwise, in which Borrower owns or controls 50% or more of the
outstanding voting securities, including each entity listed on Schedule 1 hereto.
“Term Commitment” means as to any Lender, the obligation of such Lender, if
any, to make a Term Loan Advance to the Borrower in a principal amount not to exceed the
amount set forth under the heading “Term Commitment” opposite such Lender’s name on
Schedule 1.1.
“Term Loan Advance” means any Term Loan funds advanced under this
Agreement.
“Term Loan Interest Rate” means for any day a per annum rate of interest equal to
the greater of either (i) 8.55% plus the prime rate as reported in The Wall Street Journal minus
4.50%, and (ii) 8.55%.
“Term Loan Maturity Date” means June 1, 2021.
“Term Note” means a Promissory Note in substantially the form of Exhibit B.
“Trademark License” means any written agreement granting any right to use any
Trademark or Trademark registration, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest.
“Trademarks” means all trademarks (registered, common law or otherwise) and
any applications in connection therewith, including registrations, recordings and applications in
the United States Patent and Trademark Office or in any similar office or agency of the United
States of America, any State thereof or any other country or any political subdivision thereof.
“UCC” means the Uniform Commercial Code as the same is, from time to time, in
effect in the Commonwealth of Massachusetts; provided, that in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies
with respect to, Agent’s Lien on any Collateral is governed by the Uniform Commercial Code as
the same is, from time to time, in effect in a jurisdiction other than the Commonwealth of
Massachusetts, then the term “UCC” shall mean the Uniform Commercial Code as in effect, from
time to time, in such other jurisdiction solely for purposes of the provisions thereof relating to
such attachment, perfection, priority or remedies and for purposes of definitions related to such
provisions.
“Vertex” means Vertex Pharmaceuticals, Inc.
“Vertex Purchase Agreement” means that certain asset purchase agreement entered
into on March 3, 2017.
“Vertex Transaction” means Borrower’s completion of the sale of CTP 656 to
Vertex or any of its Affiliates pursuant to the Vertex Purchase Agreement.
“Warrant” means any warrant entered into in connection with the Loan, as may be
amended, restated or modified from time to time.
Unless otherwise specified, all references in this Agreement or any Annex or Schedule
hereto to a “Section,” “subsection,” “Exhibit,” “Annex,” or “Schedule” shall refer to the
corresponding Section, subsection, Exhibit, Annex, or Schedule in or to this Agreement. Unless
otherwise specifically provided herein, any accounting term used in this Agreement or the other
Loan Documents shall have the meaning customarily given such term in accordance with GAAP,
and all financial computations hereunder shall be computed in accordance with GAAP,
consistently applied. Unless otherwise defined herein or in the other Loan Documents, terms that
are used herein or in the other Loan Documents and defined in the UCC shall have the meanings
given to them in the UCC.
SECTION 2. THE LOAN
2.1 [Intentionally Omitted.]
2.2 Term Loan.
(a) Advances. Subject to the terms and conditions of this Agreement, Lender
will severally (and not jointly) make in an amount not to exceed its respective Term
Commitment, and Borrower agrees to draw, a Term Loan Advance of $30,000,000.00 on
the Closing Date. The aggregate outstanding Term Loan Advances may be up to the
Maximum Term Loan Amount.
(b) Advance Request. To obtain a Term Loan Advance, Borrower shall
complete, sign and deliver an Advance Request (at least one (1) Business Day before the
Advance Date other than the Closing Date, which shall be at least one (1) Business Day)
to Agent. Lender shall fund the Term Loan Advance in the manner requested by the
Advance Request provided that each of the conditions precedent to such Term Loan
Advance as set forth in Section 4 is satisfied as of the requested Advance Date.
(c) Interest. The principal balance of the Term Loan shall bear interest
thereon from such Advance Date at the Term Loan Interest Rate based on a year
consisting of 360 days, with interest computed daily based on the actual number of days
elapsed. The Term Loan Interest Rate will float and change on the day the prime rate
changes from time to time.
(d) Payment. Borrower will pay interest on each Term Loan Advance on the
first Business Day of each month, beginning the month after the Advance Date.
Borrower shall repay the aggregate Term Loan principal balance that is outstanding on
the day immediately preceding the Amortization Date, in equal monthly installments of
principal and interest (mortgage style) beginning on the Amortization Date and
continuing on the first Business Day of each month thereafter until the Secured
Obligations (other than inchoate indemnity obligations) are repaid. The entire Term
Loan principal balance and all accrued but unpaid interest hereunder, shall be due and
payable on Term Loan Maturity Date. Borrower shall make all payments under this
Agreement without setoff, recoupment or deduction and regardless of any counterclaim
or defense. Lender will initiate debit entries to the Borrower’s account as authorized on
the ACH Authorization (i) on each payment date of all periodic obligations payable to
Lender under each Term Advance and (ii) of out-of-pocket legal fees and costs incurred
by Agent or Lender in connection with and payable under Section 11.11 of this
Agreement; provided that, with respect to clause (i) above, in the event that Lender or
Agent notifies Borrower that Lender will not initiate a debit entry to Borrower’s account
for a certain amount of the periodic obligations due on a specific payment date, Borrower
shall pay to Lender such amount of periodic obligations in full in immediately available
funds on such payment date; provided, further, that, with respect to clause (i) above, if
Lender or Agent notifies Borrower that Lender will not initiate a debit entry as described
above later than the date that is three (3) Business Days prior to such payment date,
Borrower shall pay to Lender such amount of periodic obligations in full in immediately
available funds on the date that is three (3) Business Days after the date on which Lender
or Agent notifies Borrower of such; provided, further, that, with respect to clause (ii)
above, (A) Agent will use commercially reasonable efforts to notify Borrower of the
amount of such fees and costs and provide supporting materials in reasonable detail at
least three (3) Business Days before such ACH Authorization; provided that the failure of
the Agent to provide such notification and materials shall not be deemed a breach of this
Agreement or affect Borrower’s obligations hereunder and (B) in the event that Lender or
Agent informs Borrower that Lender will not initiate a debit entry to Borrower’s account
for certain amount of such out-of-pocket legal fees and costs incurred by Agent or Lender,
Borrower shall pay to Lender such amount in full in immediately available funds within
three (3) Business Days.
2.3 Maximum Interest. Notwithstanding any provision in this Agreement or any
other Loan Document, it is the parties’ intent not to contract for, charge or receive interest
at a rate that is greater than the maximum rate permissible by law that a court of competent
jurisdiction shall deem applicable hereto (which under the laws of the Commonwealth of
Massachusetts shall be deemed to be the laws relating to permissible rates of interest on
commercial loans) (the “Maximum Rate”). If a court of competent jurisdiction shall finally
determine that Borrower has actually paid to Lender an amount of interest in excess of the
amount that would have been payable if all of the Secured Obligations had at all times
borne interest at the Maximum Rate, then such excess interest actually paid by Borrower
shall be applied as follows: first, to the payment of the Secured Obligations consisting of
the outstanding principal; second, after all principal is repaid, to the payment of Lender’s
accrued interest, costs, expenses, professional fees and any other Secured Obligations; and
third, after all Secured Obligations are repaid, the excess (if any) shall be refunded to
Borrower.
2.4 Default Interest. In the event any payment is not paid on the scheduled
payment date, an amount equal to five percent (5%) of the past due amount shall be
payable on demand. In addition, upon the occurrence and during the continuation of an
Event of Default hereunder, all Secured Obligations, including principal, interest,
compounded interest, and professional fees, shall bear interest at a rate per annum equal to
the rate set forth in 2.2(c), plus five percent (5%) per annum. In the event any interest is
not paid when due hereunder, delinquent interest shall be added to principal and shall bear
interest on interest, compounded at the rate set forth in 2.2(c) or Section 2.4, as applicable.
2.5 Prepayment. At its option upon at least seven (7) Business Days prior notice
to Agent, Borrower may prepay all or a portion (in minimum increments of $100,000) of the
outstanding Advances by paying the entire principal balance (or such portion thereof), all
accrued and unpaid interest thereon, together with a prepayment charge equal to the
following percentage of the Advance amount being prepaid: if such Advance amounts are
prepaid in any of the first twelve (12) months following the Closing Date, 2.0%; after twelve
(12) months but prior to twenty four (24) months, 1.0%; and thereafter, 0.50% (each, a
“Prepayment Charge”). Borrower agrees that the Prepayment Charge is a reasonable
calculation of Lender’s lost profits in view of the difficulties and impracticality of
determining actual damages resulting from an early repayment of the Advances. Borrower
shall prepay the outstanding amount of all principal and accrued interest through the
prepayment date and the Prepayment Charge upon the occurrence of a Change in Control.
Notwithstanding the foregoing, Agent and Lender agree to waive the Prepayment Charge (i)
if Agent and Lender (in its sole and absolute discretion) agree in writing to refinance the
Advances prior to the Maturity Date, or (ii) if the Vertex Transaction closes, and Borrower
prepays all of the outstanding Advances after the 90th day following the Closing Date but
prior to the six month anniversary of the Closing Date.
2.6 End of Term Charge. On the earliest to occur of (i) the Term Loan Maturity
Date, (ii) the date that Borrower prepays the outstanding Secured Obligations (other than
any inchoate indemnity obligations and any other obligations which, by their terms, are to
survive the termination of this Agreement) in full, or (iii) the date that the Secured
Obligations become due and payable, Borrower shall pay Lender a charge of $1,485,000;
provided, however, that if the Vertex Transaction closes, and Borrower prepays all of the
outstanding Advances after the 90th day following the Closing but prior to the six month
anniversary of the Closing Date, such charge shall be reduced to $742,500. Notwithstanding
the required payment date of such charge, it shall be deemed earned by Lender as of the
Closing Date.
2.7 Notes. If so requested by Lender by written notice to Borrower, then
Borrower shall execute and deliver to Lender (and/or, if applicable and if so specified in
such notice, to any Person who is an assignee of Lender pursuant to Section 11.13)
(promptly after the Borrower’s receipt of such notice) a Note or Notes to evidence Lender’s
Loans.
2.8 Pro Rata Treatment. Each payment (including prepayment) on account of
any fee and any reduction of the Term Loans shall be made pro rata according to the Term
Commitments of the relevant Lender.
SECTION 3. SECURITY INTEREST
3.1 As security for the prompt and complete payment when due (whether on the
payment dates or otherwise) of all the Secured Obligations, Borrower grants to Agent a
security interest in all of Borrower’s right, title, and interest in, to and under all of
Borrower’s personal property (other than, subject to the proviso at the end of this sentence
and the last sentence of this Section 3.1, Intellectual Property) and any other assets (other
than real property assets) including without limitation the following (except as set forth
herein), whether now owned or hereafter acquired (collectively, the “Collateral”): (a)
Receivables; (b) Equipment; (c) Fixtures; (d) General Intangibles; (e) Inventory; (f)
Investment Property; (g) Deposit Accounts; (h) Cash; (i) Goods; and all other tangible and
intangible personal property of Borrower whether now or hereafter owned or existing,
leased, consigned by or to, or acquired by, Borrower and wherever located, and any of
Borrower’s property in the possession or under the control of Agent; and, to the extent not
otherwise included, all Proceeds of each of the foregoing and all accessions to, substitutions
and replacements for, and rents, profits and products of each of the foregoing; provided,
however, that the Collateral shall include all Accounts and General Intangibles that consist
of rights to payment and proceeds from the sale, licensing or disposition of all or any part,
or rights in, the Intellectual Property (the “Rights to Payment”). Notwithstanding the
foregoing, if a judicial authority (including a U.S. Bankruptcy Court) holds that a security
interest in the underlying Intellectual Property is necessary to have a security interest in the
Rights to Payment, then the Collateral shall automatically, and effective as of the date of
this Agreement, include the Intellectual Property to the extent necessary to permit
perfection of Agent’s security interest in the Rights to Payment.
3.2 Notwithstanding the broad grant of the security interest set forth in Section
3.1, above, the Collateral shall not under any circumstances include and no security interest
is granted in (a) more than 65% of the presently existing and hereafter arising issued and
outstanding shares of capital stock owned by Borrower of any Foreign Subsidiary (other
than an Eligible Foreign Subsidiary) which shares entitle the holder thereof to vote for
directors or any other matter; (b) nonassignable licenses or contracts, which by their terms
require the consent of the licensor thereof or another party (but only to the extent such
prohibition on transfer is enforceable under applicable law, including, without limitation,
Sections 9406, 9407 and 9408 of the UCC); (c) to the extent permitted hereunder,
equipment financed by capital leases or purchase money financing and all Borrower’s
books and records relating to the foregoing, and any and all claims, rights and interest in
such assets and all substitutions for, additions, attachments, accessories, accessions and
improvements to and replacements, products, proceeds and insurance proceeds of any or all
of the foregoing, provided, however, that upon termination of such capital leases or
repayment of such purchase money financing, to the extent Borrower then owns the
equipment financed thereby, such interest shall immediately become Collateral without any
action by Borrower, Agent or Lender; or (d) to the extent permitted hereunder, any interest
of Borrower as a lessee under an equipment lease if Borrower is prohibited by the terms of
such lease from granting a security interest in such lease or under which such an
assignment or Lien would cause a default to occur under such lease; provided, however,
that upon termination of such prohibition, such interest shall immediately become
Collateral without any action by Borrower, Agent or Lender.
SECTION 4. CONDITIONS PRECEDENT TO LOAN
The obligations of Lender to make the Loan hereunder are subject to the satisfaction by
Borrower of the following conditions:
4.1 Initial Advance. On or prior to the Closing Date, Borrower shall have
delivered to Agent the following:
(a) executed copies of the Loan Documents (other than the Warrant, which
shall be an original), Account Control Agreements, a legal opinion of Borrower’s
counsel, and all other documents and instruments reasonably required by Agent to
effectuate the transactions contemplated hereby or to create and perfect the Liens of
Agent with respect to all Collateral to the extent such security interests may be perfected
by (i) the filing of a Uniform Commercial Code Financing Statement, (ii) delivery of
certificated securities to the Agent, or (iii) control pursuant to Account Control
Agreements, in all cases in form and substance reasonably acceptable to Agent;
(b) certified copy of resolutions of Borrower’s board of directors evidencing
approval of (i) the Loan and other transactions evidenced by the Loan Documents; and
(ii) the Warrant and transactions evidenced thereby;
(c) certified copies of the Certificate of Incorporation and the Bylaws, as
amended through the Closing Date, of Borrower;
(d) a certificate of good standing for Borrower from its state of incorporation
and similar certificates from all other jurisdictions in which it does business and where
the failure to be qualified could have a Material Adverse Effect;
(e) payment of the Facility Charge and reimbursement of Agent’s and
Lender’s current expenses reimbursable pursuant to this Agreement, which amounts shall
be deducted from the initial Advance;
(f) copies of each insurance policy in effect on the Closing Date, with
updated copies showing endorsements in favor of Agent required hereunder to be
delivered promptly and in any event within 30 days of the Closing Date; and
(g) such other documents as Agent may reasonably request.
4.2 All Advances. On each Advance Date:
(a) Agent shall have received (i) an Advance Request for the relevant
Advance as required by 2.2(b), each duly executed by Borrower’s Chief Executive
Officer or Chief Financial Officer, and (ii) any other documents Agent may reasonably
request.
(b) The representations and warranties set forth in this Agreement shall be
true and correct in all material respects on and as of the Advance Date with the same
effect as though made on and as of such date, except to the extent such representations
and warranties expressly relate to an earlier date.
(c) Borrower shall be in compliance with all the terms and provisions set forth
herein and in each other Loan Document on its part to be observed or performed, and at
the time of and immediately after such Advance no Event of Default shall have occurred
and be continuing.
(d) Each Advance Request shall be deemed to constitute a representation and
warranty by Borrower on the relevant Advance Date as to the matters specified in
paragraphs (b) and (c) of this Section 4.2 and as to the matters set forth in the Advance
Request.
4.3 No Default. As of the Closing Date and each Advance Date, (i) no fact or
condition exists that could (or could, with the passage of time, the giving of notice, or both)
constitute an Event of Default and (ii) no event that has had or could reasonably be
expected to have a Material Adverse Effect has occurred and is continuing.
SECTION 5. REPRESENTATIONS AND WARRANTIES
OF BORROWER
Borrower represents and warrants that:
5.1 Corporate Status. Borrower is a corporation duly organized, legally existing
and in good standing under the laws of the State of Delaware, and is duly qualified as a
foreign corporation in all jurisdictions in which the nature of its business or location of its
properties require such qualifications and where the failure to be qualified could reasonably
be expected to have a Material Adverse Effect. Borrower’s present name, former names (if
any), locations, place of formation, tax identification number, organizational identification
number and other information are correctly set forth in Exhibit C, as may be updated by
Borrower in a written notice (including any Compliance Certificate) provided to Agent
after the Closing Date.
5.2 Collateral. Borrower owns the Collateral and the Intellectual Property, free
of all Liens, except for Permitted Liens. Borrower has the power and authority to grant to
Agent a Lien in the Collateral as security for the Secured Obligations.
5.3 Consents. Borrower’s execution, delivery and performance of this
Agreement and all other Loan Documents, and Borrower’s execution of the Warrant,
(i) have been duly authorized by all necessary corporate action of Borrower, (ii) will not
result in the creation or imposition of any Lien upon the Collateral, other than Permitted
Liens and the Liens created by this Agreement and the other Loan Documents, (iii) do not
violate any provisions of Borrower’s Certificate or Articles of Incorporation (as
applicable), bylaws, or any, law, regulation, order, injunction, judgment, decree or writ to
which Borrower is subject and (iv) do not violate any material contract or agreement or
require the consent or approval of any other Person which has not already been obtained.
The individual or individuals executing the Loan Documents and the Warrant are duly
authorized to do so.
5.4 Material Adverse Effect. No event that has had or could reasonably be
expected to have a Material Adverse Effect has occurred and is continuing. Borrower is not
aware of any event likely to occur that is reasonably expected to result in a Material
Adverse Effect.
5.5 Actions Before Governmental Authorities. There are no actions, suits or
proceedings at law or in equity or by or before any governmental authority now pending or,
to the knowledge of Borrower, threatened against or affecting Borrower or its property, that
is reasonably expected to result in a Material Adverse Effect.
5.6 Laws. Neither Borrower nor any of its Subsidiaries is in violation of any
law, rule or regulation, or in default with respect to any judgment, writ, injunction or decree
of any governmental authority, where such violation or default is reasonably expected to
result in a Material Adverse Effect. To Borrower’s knowledge, Borrower is not in default
in any manner under any provision of any agreement or instrument evidencing
Indebtedness, or any other agreement to which it is a party or by which it is bound which
could reasonably be expected to have a Material Adverse Effect.
Neither Borrower nor any of its Subsidiaries is an “investment company” or a
company “controlled” by an “investment company” under the Investment Company Act of
1940, as amended. Neither Borrower nor any of its Subsidiaries is 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 and each of its Subsidiaries has
complied in all respects with the Federal Fair Labor Standards Act, except where such
failure could not reasonably be expected to have a Material Adverse Effect. 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. Neither Borrower’s nor any of
its Subsidiaries’ properties or assets has been used by Borrower or such Subsidiary or, to
Borrower’s Knowledge, by previous Persons, in disposing, producing, storing, treating, or
transporting any hazardous substance other than in material compliance with applicable
laws. Borrower and each of its Subsidiaries has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices to, all
Governmental Authorities that are necessary to continue their respective businesses as
currently conducted, except where the failure to do so in any such case could not
reasonably be expected to have a Material Adverse Effect.
None of Borrower, any of its Subsidiaries, or any of Borrower’s or its
Subsidiaries’ Affiliates or any of their respective agents acting or benefiting in any capacity
in connection with the transactions contemplated by this Agreement is (i) in violation of
any Anti-Terrorism Law, (ii) engaging in or conspiring to engage in any transaction that
evades or avoids, or has the purpose of evading or avoiding or attempts to violate, any of
the prohibitions set forth in any Anti-Terrorism Law, or (iii) is a Blocked Person. None of
Borrower, any of its Subsidiaries, or to the knowledge of Borrower and any of their
Affiliates or agents, acting or benefiting in any capacity in connection with the transactions
contemplated by this Agreement, (x) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of any Blocked
Person, or (y) deals in, or otherwise engages in any transaction relating to, any property or
interest in property blocked pursuant to Executive Order No. 13224, any similar executive
order or other Anti-Terrorism Law. None of the funds to be provided under this
Agreement will be used, directly or indirectly, (a) for any activities in violation of any
applicable anti-money laundering, economic sanctions and anti-bribery laws and
regulations laws and regulations or (b) for any payment 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.
5.7 Information Correct and Current. No information, report, Advance Request,
financial statement, exhibit or schedule furnished, by or on behalf of Borrower to Agent in
connection with any Loan Document or included therein or delivered pursuant thereto
contained, or, when taken together with all such other reports, statements or other
documents or writings, contains or will contain any material misstatement of fact or, when
taken together with all other such information or documents, omitted, omits or will omit to
state any material fact necessary to make the statements therein, in the light of the
circumstances under which they were, are or will be made, not materially misleading at the
time such statement was made or deemed made. Additionally, any and all financial or
business projections provided by Borrower to Agent, whether prior to or after the Closing
Date, shall be (i) provided in good faith and based on the most current data and information
available to Borrower, and (ii) the most current of such projections provided to Borrower’s
Board of Directors (it being understood that such projections are subject to significant
uncertainties and contingencies, many of which are beyond the control of Borrower, that no
assurance is given that any particular projections will be realized, that actual results may
differ).
5.8 Tax Matters. Except as described on Schedule 5.8, and except those being
contested in good faith with adequate reserves under GAAP, (a) Borrower has filed all
material federal, state and local tax returns that it is required to file, (b) Borrower has duly
paid or fully reserved for all taxes or installments thereof (including any interest or
penalties) as and when due, which have or may become due pursuant to such returns, and
(c) Borrower has paid or fully reserved for any tax assessment received by Borrower for the
three (3) years preceding the Closing Date, if any (including any taxes being contested in
good faith and by appropriate proceedings).
5.9 Intellectual Property Claims. Except for Permitted Liens, Borrower is the
sole owner of, or otherwise has the right to use, the Intellectual Property material to
Borrower’s business. Except as described on Schedule 5.9, (i) each of the material
Copyrights, Trademarks and Patents is valid and enforceable, (ii) no material part of the
Intellectual Property has been judged invalid or unenforceable, in whole or in part, and (iii)
to Borrower’s knowledge, no claim has been made to Borrower that any material part of
the Intellectual Property violates the rights of any third party. Exhibit D is a true, correct
and complete list of each of Borrower’s Patents, registered Trademarks, registered
Copyrights, and material agreements under which Borrower licenses Intellectual Property
from third parties (shrink-wrap software licenses, click-on license agreements, open source
code and other licenses available to the public without customization shall not be
considered a material License or agreement), together with application or registration
numbers, as applicable, owned by Borrower or any Subsidiary, in each case as of the
Closing Date. Borrower is not in material breach of, nor has Borrower failed to perform
any material obligations under, any of the foregoing contracts, licenses or agreements and,
to Borrower’s knowledge, no third party to any such contract, license or agreement is in
material breach thereof or has failed to perform any material obligations thereunder.
5.10 Intellectual Property. Except as described on Schedule 5.10, Borrower has
all material rights with respect to Intellectual Property necessary or material in the
operation or conduct of Borrower’s business as currently conducted and proposed to be
conducted by Borrower. Without limiting the generality of the foregoing, except as
described on Schedule 5.10 and other than in connection with Permitted Transfers, and in
the case of Licenses, except for restrictions that are unenforceable under Division 9 of the
UCC, Borrower has the right, to the extent required to operate Borrower’s business, to
freely transfer, license or assign Intellectual Property necessary or material in the operation
or conduct of Borrower’s business as currently conducted and proposed to be conducted by
Borrower, without condition, restriction or payment of any kind (other than license
payments in the ordinary course of business) to any third party, and Borrower owns or has
the right to use, pursuant to valid licenses, all software development tools, library
functions, compilers and all other third-party software and other items that are material to
Borrower’s business and used in the design, development, promotion, sale, license,
manufacture, import, export, use or distribution of Borrower Products， except customary
covenants in inbound license agreements and equipment leases where Borrower is the
licensee or lessee.
5.11 Borrower Products. Except as described on Schedule 5.11 , no material
Intellectual Property owned by Borrower or any Borrower Product has been or is subject to
any actual or, to the knowledge of Borrower, threatened litigation in writing, proceeding
(including any proceeding in the United States Patent and Trademark Office or any
corresponding foreign office or agency) or outstanding decree, order, judgment, settlement
agreement or stipulation that restricts in any manner Borrower’s use, transfer or licensing
thereof or that could reasonably be expected to affect the validity, use or enforceability
thereof. Except as described on Schedule 5.11, there is no decree, order, judgment,
agreement, stipulation, arbitral award or other document entered into in connection with
any litigation or proceeding that obligates Borrower to grant licenses or ownership interest
in any future Intellectual Property material or necessary to the operation or conduct of the
business of Borrower or Borrower Products. Except as described on Schedule 5.11,
Borrower has not received any written notice or claim, or, to the knowledge of Borrower,
oral notice or claim, challenging or questioning Borrower’s ownership in any Intellectual
Property material or necessary to the operation or conduct of the business of Borrower or
Borrower Products (or written notice of any claim challenging or questioning the
ownership in any material licensed Intellectual Property of the owner thereof) or suggesting
that any third party has any claim of legal or beneficial ownership with respect thereto nor,
to Borrower’s knowledge, is there a reasonable basis for any such claim. Except as
described on Schedule 5.11, to the Borrower’s knowledge, neither Borrower’s use of its
Intellectual Property nor the production and sale of Borrower Products infringes the
Intellectual Property or other rights of others.
5.12 Financial Accounts. Exhibit E, as may be updated by the Borrower in a
written notice provided to Agent after the Closing Date, is a true, correct and complete list
of (a) all banks and other financial institutions at which Borrower or any Subsidiary
maintains Deposit Accounts and (b) all institutions at which Borrower or any Subsidiary
maintains an account holding Investment Property, and such exhibit correctly identifies the
name, address and telephone number of each bank or other institution, the name in which
the account is held, a description of the purpose of the account, and the complete account
number therefor.
5.13 Employee Loans. Except for Permitted Investments, Borrower has no
outstanding loans to any employee, officer or director of the Borrower nor has Borrower
guaranteed the payment of any loan made to an employee, officer or director of the
Borrower by a third party.
5.14 Capitalization and Subsidiaries. Borrower’s capitalization as of the Closing
Date is set forth on Schedule 5.14 annexed hereto. Borrower does not own any stock,
partnership interest or other securities of any Person, except for Permitted Investments.
Attached as Schedule 5.14, as may be updated by Borrower in a written notice provided
after the Closing Date, is a true, correct and complete list of each Subsidiary.
5.15 Foreign Subsidiary Voting Rights. No decision or action in any governing
document of any Foreign Subsidiary (other than an Eligible Foreign Subsidiary) requires a
vote of greater than 50.1% of the Equity Interests or voting rights of such Foreign
Subsidiary.
SECTION 6. INSURANCE; INDEMNIFICATION
6.1 Coverage. Borrower shall cause to be carried and maintained commercial
general liability insurance, on an occurrence form, against risks customarily insured against
by businesses of Borrower’s size in Borrower’s line of business. Such risks shall include
the risks of bodily injury, including death, property damage, personal injury, advertising
injury, and contractual liability per the terms of the indemnification agreement found in
Section 6.3. Borrower must maintain a minimum of $2,000,000 of commercial general
liability insurance for each occurrence. Borrower has and agrees to maintain a minimum of
$2,000,000 of directors’ and officers’ insurance for each occurrence and $5,000,000 in the
aggregate. So long as there are any Secured Obligations outstanding, Borrower shall also
maintain a key person life insurance policy for the Chief Executive Officer in form and
substance reasonably satisfactory to Agent. So long as there are any Secured Obligations
outstanding, Borrower shall also cause to be carried and maintained insurance upon the
Collateral, insuring against all risks of physical loss or damage howsoever caused, in an
amount not less than the full replacement cost of the Collateral, provided that such
insurance may be subject to standard exceptions and deductibles. 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 under all casualty policies in any twelve-month period, toward
the replacement or repair of destroyed or damaged property; provided that any such
replaced or repaired property (a) shall be of equal or like value as the replaced or repaired
Collateral and (b) shall be deemed Collateral in which Agent has been granted a first
priority security interest, and after the occurrence and during the continuance of an Event
of Default, all proceeds payable under such casualty policy shall, at the option of Agent, be
payable to Agent on account of the Obligations.
6.2 Certificates. Borrower on or before the Closing Date shall deliver to Agent
certificates of insurance that evidence Borrower’s compliance with its insurance
obligations in Section 6.1 and the obligations contained in this Section 6.2. Borrower’s
insurance certificate shall state Agent (shown as “Hercules Capital, Inc., as Agent”) is an
additional insured for commercial general liability, a loss payee for all risk property
damage insurance, subject to the insurer’s approval, and a loss payee for property insurance
and additional insured for liability insurance for any future insurance that Borrower may
acquire from such insurer. Attached to the certificates of insurance will be additional
insured endorsements for liability and lender’s loss payable endorsements for all risk
property damage insurance. All certificates of insurance will provide for a minimum of
thirty (30) days advance written notice to Agent of cancellation (other than cancellation for
non-payment of premiums, for which ten (10) days’ advance written notice shall be
sufficient) or any other change adverse to Agent’s interests. Any failure of Agent to
scrutinize such insurance certificates for compliance is not a waiver of any of Agent’s
rights, all of which are reserved. Borrower shall provide Agent with copies of each
insurance policy no later than 30 days following the Closing Date, and upon entering or
amending any insurance policy required hereunder, Borrower shall provide Agent with
copies of such policies and shall promptly deliver to Agent updated insurance certificates
with respect to such policies.
6.3 Indemnity. Borrower agrees to indemnify and hold Agent, Lender and their
officers, directors, employees, agents, in-house attorneys, representatives and shareholders
(each, an “Indemnified Person”) harmless from and against any and all claims, costs,
expenses, damages and liabilities (including such claims, costs, expenses, damages and
liabilities based on liability in tort, including strict liability in tort), including reasonable
attorneys’ fees and disbursements and other costs of investigation or defense (including
those incurred upon any appeal) (collectively, “Liabilities”), that may be instituted or
asserted against or incurred by such Indemnified Person as the result of credit having been
extended, suspended or terminated under this Agreement and the other Loan Documents or
the administration of such credit, or in connection with or arising out of the transactions
contemplated hereunder and thereunder, or any actions or failures to act in connection
therewith, or arising out of the disposition or utilization of the Collateral, excluding in all
cases Liabilities to the extent resulting solely from any Indemnified Person’s gross
negligence or willful misconduct. Borrower agrees to pay, and to save Agent and Lender
harmless from, any and all liabilities with respect to, or resulting from any delay in paying,
any and all excise, sales or other similar taxes (excluding taxes imposed on or measured by
the net income of Agent or Lender) that may be payable or determined to be payable with
respect to any of the Collateral or this Agreement; provided, however, that (i) with respect
to such liabilities imposed originally and independently on Agent or Lender, Agent or
Lender shall notify Borrower of any such liabilities within 180 days of the initial date
Agent or Lender had actual knowledge of Agent’s or Lender’s direct exposure to such
liabilities, and (ii) with respect to all other such liabilities not described in subsection (i),
Agent or Lender shall notify Borrower of any such liabilities within 180 days of the initial
date Agent or Lender has actual knowledge of its direct exposure to such liabilities.. In no
event shall any Indemnified Person be liable on any theory of liability for any special,
indirect, consequential or punitive damages (including any loss of profits, business or
anticipated savings). This Section 6.3 shall survive the repayment of indebtedness under,
and otherwise shall survive the expiration or other termination of, the Loan Agreement.
SECTION 7. COVENANTS OF BORROWER
Borrower agrees as follows:
7.1 Financial Reports. Borrower shall furnish to Agent the financial statements
and reports listed hereinafter (the “Financial Statements”):
(a) as soon as practicable (and in any event within 30 days) after the end of
each month, unaudited interim and year-to-date financial statements as of the end of such
month (prepared on a consolidated and consolidating basis, if applicable), including
balance sheet and related statements of income and cash flows, all certified by
Borrower’s Chief Executive Officer or Chief Financial Officer to the effect that they have
been prepared in accordance with GAAP, except (i) for the absence of footnotes, (ii) that
they are subject to normal year end adjustments, and (iii) they do not contain certain non-
cash items that are customarily included in quarterly and annual financial statements;
(b) as soon as practicable (and in any event within 45 days) after the end of
each calendar quarter, unaudited interim and year-to-date financial statements as of the
end of such calendar quarter (prepared on a consolidated and consolidating basis, if
applicable), including balance sheet and related statements of income and cash flows,
certified by Borrower’s Chief Executive Officer or Chief Financial Officer to the effect
that they have been prepared in accordance with GAAP, except (i) for the absence of
footnotes, (ii) that they are subject to normal year-end adjustments; and (iii) they are
subject to adjustment with respect to revenue recognition for up-front and milestone
payments, as well as the most recent capitalization table for Borrower, including the
weighted average exercise price of employee stock options;
(c) as soon as practicable (and in any event within ninety (90) days) after the
end of each fiscal year, unqualified (other than as to going concern qualification solely
with respect to Borrower having less than twelve (12) months of cash for each fiscal year
during the term of the Agreement) audited financial statements as of the end of such year
(prepared on a consolidated and consolidating basis, if applicable), including balance
sheet and related statements of income and cash flows, and setting forth in comparative
form the corresponding figures for the preceding fiscal year, certified by a firm of
independent certified public accountants selected by Borrower and reasonably acceptable
to Agent, accompanied by any management report from such accountants;
(d) as soon as practicable (and in any event within 30 days) after the end of
each month, a Compliance Certificate in the form of Exhibit F;
(e) as soon as practicable (and in any event within 30 days) after the end of
each month, a report showing agings of accounts receivable and accounts payable;
(f) promptly after the sending or filing thereof, copies of any regular, periodic
and special reports or registration statements that Borrower files with the Securities and
Exchange Commission or any governmental authority that may be substituted therefor, or
any national securities exchange;
(g) [Reserved]
(h) financial and business projections promptly following their approval by
Borrower’s Board of Directors, and in any event, within 30 days after the end of
Borrower’s fiscal year, as well as budgets, operating plans and other financial
information reasonably requested by Agent; and
(i) immediate notice if Borrower or any Subsidiary has knowledge that
Borrower, or any Subsidiary or Affiliate of Borrower, is listed on the OFAC Lists or
(a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is arraigned
and held over on charges involving money laundering or predicate crimes to money
laundering.
Borrower shall not (without the consent of Agent, such consent not to be unreasonably
withheld or delayed), make any change in its (a) accounting policies or reporting practices,
except, with prior written notification to Agent, as permitted by GAAP or (b) fiscal years or
fiscal quarters. The fiscal year of Borrower shall end on December 31.
The executed Compliance Certificate and all Financial Statements required to be delivered
pursuant to clauses (a), (b) and (c) shall be sent via e-mail to ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
with a copy to ▇▇▇▇▇@▇▇▇▇.▇▇▇ provided, that if e-mail is not available or sending the
Financial Statements via e-mail is not possible, they shall be faxed to Agent at: (650) 473-
9194, attention Account Manager: Concert Pharmaceuticals, Inc.
Notwithstanding the foregoing, documents required to be delivered under Sections 7.1(a),
(b), (c) or (f) (to the extent any such documents are included in materials otherwise filed
with the SEC) may be delivered electronically and if so delivered, shall be deemed to have
been delivered on the date on which Borrower emails a link thereto to Agent; provided that
Borrower shall directly provide Agent all Financial Statements required to be delivered
pursuant to Section 7.1(b) and (c) hereunder or a specific link thereto.
7.2 Management Rights. Borrower shall permit any representative that Agent or
Lender authorizes, including its attorneys and accountants, to inspect the Collateral and
examine and make copies and abstracts of the books of account and records of Borrower at
reasonable times and upon reasonable notice during normal business hours; provided,
however, that so long as no Event of Default has occurred and is continuing, such
examinations shall be limited to no more often than twice per fiscal year. In addition, any
such representative shall have the right to meet with management and officers of Borrower
to discuss such books of account and records. In addition, Agent or Lender shall be
entitled at reasonable times and intervals to consult with and advise the management and
officers of Borrower concerning significant business issues affecting Borrower. Such
consultations shall not unreasonably interfere with Borrower’s business operations. The
parties intend that the rights granted Agent and Lender shall constitute “management
rights” within the meaning of 29 C.F.R. Section 2510.3-101(d)(3)(ii), but that any advice,
recommendations or participation by Agent or Lender with respect to any business issues
shall not be deemed to give Agent or Lender, nor be deemed an exercise by Agent or
Lender of, control over Borrower’s management or policies.
7.3 Further Assurances. Borrower shall from time to time execute, deliver and
file, alone or with Agent, any financing statements, security agreements, collateral
assignments, notices, control agreements, or other documents to perfect or give the highest
priority to Agent’s Lien on the Collateral (subject to Permitted Liens). Borrower shall from
time to time procure any instruments or documents as may be reasonably requested by
Agent, and take all further action that may be necessary, or that Agent may reasonably
request, to perfect and protect the Liens granted hereby and thereby. In addition, and for
such purposes only, Borrower hereby authorizes Agent to execute and deliver on behalf of
Borrower and to file such financing statements (including an indication that the financing
statement covers “all assets or all personal property” of Borrower in accordance with
Section 9-504 of the UCC), collateral assignments, notices, control agreements, security
agreements and other documents without the signature of Borrower either in Agent’s name
or in the name of Agent as agent and attorney-in-fact for Borrower. Borrower shall protect
and defend Borrower’s title to the Collateral and Agent’s Lien thereon against all Persons
claiming any interest adverse to Borrower or Agent other than Permitted Liens.
7.4 Indebtedness. Borrower shall not create, incur, assume, guarantee or be or
remain liable with respect to any Indebtedness, or permit any Subsidiary so to do, other
than Permitted Indebtedness, or prepay any Indebtedness or take any actions which impose
on Borrower an obligation to prepay any Indebtedness, except for (a) the conversion of
Indebtedness into equity securities and the payment of cash in lieu of fractional shares in
connection with such conversion, (b) purchase money Indebtedness pursuant to its then
applicable payment schedule, (c) termination of letters of credit prior to their maturity, (d)
prepayment by any Subsidiary of (i) inter-company Indebtedness owed by such Subsidiary
to any Borrower, or (ii) if such Subsidiary is not a Borrower, intercompany Indebtedness
owed by such Subsidiary to another Subsidiary that is not a Borrower or (e) as otherwise
permitted hereunder or approved in writing by Agent.
7.5 Collateral. Borrower shall at all times keep the Collateral, the Intellectual
Property and all other property and assets used in Borrower’s business or in which Borrower
now or hereafter holds any interest free and clear from any legal process or Liens
whatsoever (except for Permitted Liens), and shall give Agent prompt written notice of any
known legal process affecting the Collateral valued in excess of $500,000, the Intellectual
Property, such other property and assets, or any Liens thereon, provided however, that the
Collateral and such other property and assets may be subject to Permitted Liens except that
there shall be no Liens whatsoever on Intellectual Property other than Permitted Liens
described in clauses (iii) and (v) thereof. Borrower shall not agree with any Person other
than Agent or Lender not to encumber its property, except for customary anti-assignment
provisions in connection with Permitted Liens of the type described in clauses (vii), (ix) and
(xiv) of the definition of Permitted Liens, in each case only to the extent such covenant not
to encumber is limited to the specific asset that is the subject of the applicable Permitted
Lien. Borrower shall not enter into or suffer to exist or become effective any agreement
that prohibits or limits the ability of any Borrower to create, incur, assume or suffer to exist
any Lien upon any of its Intellectual Property, whether now owned or hereafter acquired, to
secure its obligations under the Loan Documents to which it is a party other than (a) this
Agreement and the other Loan Documents, (b) any agreements governing any purchase
money Liens or capital lease obligations otherwise permitted hereby (in which case, any
prohibition or limitation shall only be effective against the assets financed thereby) and (c)
customary restrictions on the assignment of leases, licenses and other agreements.
Borrower shall cause its Subsidiaries to protect and defend such Subsidiary’s title to its
assets from and against all Persons claiming any interest adverse to such Subsidiary, and
Borrower shall cause its Subsidiaries at all times to keep such Subsidiary’s property and
assets free and clear from any legal process or Liens whatsoever (except for Permitted
Liens, provided however, that there shall be no Liens whatsoever on Intellectual Property),
and shall give Agent prompt written notice of any legal process affecting such Subsidiary’s
assets.
7.6 Investments. Borrower shall not directly or indirectly acquire or own, or
make any Investment in or to any Person, or permit any of its Subsidiaries so to do, other
than Permitted Investments.
7.7 Distributions. Borrower shall not, and shall not allow any Subsidiary to, (a)
except for Permitted Investments, repurchase or redeem any class of stock or other Equity
Interest other than pursuant to employee, director or consultant repurchase plans or other
similar agreements, or (b) declare or pay any cash dividend or make a cash distribution on
any class of stock or other Equity Interest, except that a Subsidiary may pay dividends or
make distributions to Borrower, or (c) except for Permitted Investments, lend money to any
employees, officers or directors, or guarantee the payment of any such loans granted by a
third party in excess of $100,000 in the aggregate or (d) waive, release or forgive any
Indebtedness owed by any employees, officers or directors in excess of $100,000 in the
aggregate.
7.8 Transfers. Except for Permitted Transfers, Borrower shall not, and shall not
allow any Subsidiary to, voluntarily or involuntarily transfer, sell, lease, license, lend or in
any other manner convey any equitable, beneficial or legal interest in any material portion
of its assets.
7.9 Mergers or Acquisitions. (a) Borrower shall not merge or consolidate, or
permit any of its Subsidiaries to merge or consolidate, with or into any other business
organization (other than mergers or consolidations of (i) a Subsidiary which is not a
Borrower into another Subsidiary or into Borrower or (ii) a Borrower into another
Borrower), or (b) acquire, or permit any of its Subsidiaries to acquire, all or substantially
all of the capital stock or property of another Person other than Permitted Investments.
7.10 Taxes. Borrower and its Subsidiaries shall pay when due all material taxes,
fees or other charges of any nature whatsoever (together with any related interest or
penalties) now or hereafter imposed or assessed against Borrower, Agent, Lender or the
Collateral or upon Borrower’s ownership, possession, use, operation or disposition thereof
or upon Borrower’s rents, receipts or earnings arising therefrom. Borrower shall file on or
before the due date therefor all personal property tax returns in respect of the Collateral.
Notwithstanding the foregoing, Borrower may contest, in good faith and by appropriate
proceedings, taxes for which Borrower maintains adequate reserves therefor in accordance
with GAAP.
7.11 Corporate Changes.
(a) Neither Borrower nor any Subsidiary shall change its corporate name,
legal form or jurisdiction of formation without twenty (20) days’ prior written notice to
Agent.
(b) Neither Borrower nor any Subsidiary shall suffer a Change in Control.
(c) Neither Borrower nor any Subsidiary shall relocate its chief executive
office or its principal place of business unless: (i) it has provided prior written notice to
Agent; and (ii) such relocation shall be within the continental United States of America.
(d) Neither Borrower nor any Qualified Subsidiary shall relocate any tangible
item of Collateral (other than (v) Borrower Products, including compounds and raw
materials used to manufacture biopharmaceuticals or which are used for preclinical
testing or clinical trials, in the ordinary course of business, (w) Permitted Transfers, (x)
sales of Inventory in the ordinary course of business, (y) relocations of Equipment having
an aggregate value of up to $150,000 in any fiscal year, and (z) relocations of Collateral
from a location described on Exhibit C to another location described on Exhibit C) unless
(i) it has provided prompt written notice to Agent, (ii) such relocation is within the
continental United States of America and, (iii) if such relocation is to a third party bailee,
and the Collateral has a value in excess of $250,000, it has delivered a bailee agreement
in form and substance reasonably acceptable to Agent.
7.12 Deposit Accounts. Neither Borrower nor any Qualified Subsidiary shall
maintain any Deposit Accounts, or accounts holding Investment Property, except with
respect to which Agent has an Account Control Agreement.
7.13 Subsidiaries. Borrower shall notify Agent of each Subsidiary formed
subsequent to the Closing Date and, within 15 days of formation, shall cause any such
Qualified Subsidiary to execute and deliver to Agent a Joinder Agreement.
7.14 Notification of Event of Default. Borrower shall notify Agent immediately
of the occurrence of any Event of Default.
7.15 SBIC Matters. Agent and Lender have received a license from the U.S.
Small Business Administration (“SBA”) to extend loans as a small business investment
company (“SBIC”) pursuant to the Small Business Investment Act of 1958, as amended,
and the associated regulations (collectively, the “SBIC Act”). Portions of the loan to
Borrower will be made under the SBA license and the SBIC Act. Addendum 1 to this
Agreement outlines various responsibilities of Agent, Lender and Borrower associated with
an SBA loan, and such Addendum 1 is hereby incorporated in this Agreement.
7.16 Use of Proceeds. Borrower agrees that the proceeds of the Loans shall be
used solely to pay related fees and expenses in connection with this Agreement and for
working capital and general corporate purposes. The proceeds of the Loans Credit will not
be used in violation of Anti-Corruption Laws or applicable Sanctions.
7.17 Foreign Subsidiary Voting Rights. Borrower shall not, and shall not permit
any Subsidiary, to amend or modify any governing document of any Foreign Subsidiary of
Borrower (other than an Eligible Foreign Subsidiary) the effect of which is to require a vote
of greater than 50.1% of the Equity Interests or voting rights of such entity for any decision
or action of such entity.
7.18 Liquidity Requirement. If at any time, Borrower fails to maintain in its
accounts subject to an Account Control Agreement unrestricted and unencumbered (other
than as a result of this Agreement) Cash in an aggregate amount greater than or equal to
one hundred twenty-five percent (125%) of the aggregate outstanding Advances (the
"Liquidity Requirement"), Borrower shall immediately cause its wholly owned Subsidiary
Concert Pharmaceuticals Securities Corporation to (i) transfer all of its Cash to an account
held by Borrower that is subject to an Account Control Agreement and (ii) thereafter
refrain from holding any Cash.
7.19 Regulatory Compliance. Neither Borrower nor any of its Subsidiaries shall,
nor shall Borrower or any of its Subsidiaries permit any Affiliate to, directly or indirectly,
knowingly enter into any documents, instruments, agreements or contracts with any Person
listed on the OFAC Lists. Neither Borrower nor any of its Subsidiaries shall, nor shall
Borrower or any of its Subsidiaries, permit any Affiliate to, directly or indirectly,
(i) conduct any business or engage in any transaction or dealing with any Blocked Person,
including, without limitation, the making or receiving of any contribution of funds, goods
or services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in
any transaction relating to, any property or interests in property blocked pursuant to
Executive Order No. 13224 or any similar executive order or other Anti-Terrorism Law, or
(iii) engage in or conspire to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in
Executive Order No. 13224 or other Anti-Terrorism Law.
Borrower has implemented and maintains in effect policies and procedures
designed to ensure compliance by the Borrower, its Subsidiaries and their respective
directors, officers, employees and agents with Anti-Corruption Laws and applicable
Sanctions, and Borrower, its Subsidiaries and their respective officers and employees and
to the knowledge of Borrower its directors and agents, are in compliance with Anti-
Corruption Laws and applicable Sanctions in all material respects.
None of Borrower, any of its Subsidiaries or any of their respective
directors, officers or employees, or to the knowledge of Borrower, any agent for Borrower
or its Subsidiaries that will act in any capacity in connection with or benefit from the credit
facility established hereby, is a Sanctioned Person. No Loan, use of proceeds or other
transaction contemplated by this Agreement will violate Anti-Corruption Laws or
applicable Sanctions.
7.20 Post-Closing Items. On or before the corresponding dates set forth on
Schedule 7.20, Borrower shall use its commercially reasonable efforts to deliver or cause to
be delivered or completed the items listed on Schedule 7.20.
SECTION 8. [INTENTIONALLY OMITTED.]
SECTION 9. EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall be an Event of Default:
9.1 Payments. Borrower fails to pay any amount due under this Agreement or
any of the other Loan Documents on the due date; provided, however, that an Event of
Default shall not occur on account of a failure to pay due solely to an administrative or
operational error of Agent or Lender or Borrower’s bank if Borrower had the funds to make
the payment when due and makes the payment within three (3) Business Days following
Borrower’s knowledge of such failure to pay; or
9.2 Covenants. Borrower breaches or defaults in the performance of any
covenant or Secured Obligation under this Agreement, or any of the other Loan Documents
or any other agreement among Borrower, Agent and Lender, and (a) with respect to a
default under any covenant under this Agreement (other than under Sections 6.1, 7.4, 7.5,
7.6, 7.7, 7.8, 7.9, 7.15, 7.16, 7.17, 7.18 and 7.19), any other Loan Document or any other
agreement among Borrower, Agent and Lender, such default continues for more than ten
(10) days after the earlier of the date on which (i) Agent or Lender has given notice of such
default to Borrower and (ii) Borrower has actual knowledge of such default or (b) with
respect to a default under any of Sections 6.1, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.15, 7.16 , 7.17,
7.18 and 7.19, the occurrence of such default; or
9.3 Material Adverse Effect. A circumstance has occurred that could reasonably
be expected to have a Material Adverse Effect; provided that solely for purposes of this
Section 9.3, the occurrence of any of the following, in and of itself, shall not constitute a
Material Adverse Effect: (a) adverse results or delays in any nonclinical or clinical trial,
including without limitation, the failure to demonstrate the desired safety or efficacy of any
drug or companion diagnostic; (b) the denial, delay or limitation of approval of, or taking
of any other regulatory action by, the United States Food and Drug Administration or any
other governmental entity with respect to any drug or companion diagnostic; (c) a change
in or discontinuation of a strategic partnership or other collaboration or license
arrangement; or (d) a going concern qualification in a financial statement in audit report to
the extent permitted under Section 7.1(c); or
9.4 Representations. Any representation or warranty made by Borrower in any
Loan Document or in the Warrant shall have been false or misleading in any material
respect when made or when deemed made; provided that solely for purposes of this Section
9.4, the occurrence of any of the following, in and of itself, shall not constitute a Material
Adverse Effect: (a) adverse results or delays in any nonclinical or clinical trial, including
without limitation, the failure to demonstrate the desired safety or efficacy of any drug or
companion diagnostic; (b) the denial, delay or limitation of approval of, or taking of any
other regulatory action by, the United States Food and Drug Administration or any other
governmental entity with respect to any drug or companion diagnostic; (c) a change in or
discontinuation of a strategic partnership or other collaboration or license arrangement; or
(d) a going concern qualification in a financial statement in audit report to the extent
permitted under Section 7.1(c); or
9.5 Insolvency. Borrower (A) (i) shall make an assignment for the benefit of
creditors; or (ii) shall be unable to pay its debts as they become due, or be unable to pay or
perform under the Loan Documents, or shall become insolvent; or (iii) shall file a voluntary
petition in bankruptcy; or (iv) shall file any petition, answer, or document seeking for itself
any reorganization, arrangement, composition, readjustment, liquidation, dissolution or
similar relief under any present or future statute, law or regulation pertinent to such
circumstances; or (v) shall seek or consent to or acquiesce in the appointment of any
trustee, receiver, or liquidator of Borrower or of all or any substantial part (i.e., 33-1/3% or
more) of the assets or property of Borrower; or (vi) shall cease operations of its business as
its business has normally been conducted, or terminate substantially all of its employees; or
(vii) Borrower or its directors or majority shareholders shall take any action initiating any
of the foregoing actions described in clauses (i) through (vi); or (B) either (i) forty-five (45)
days shall have expired after the commencement of an involuntary action against Borrower
seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or
similar relief under any present or future statute, law or regulation, without such action
being dismissed or all orders or proceedings thereunder affecting the operations or the
business of Borrower being stayed; or (ii) a stay of any such order or proceedings shall
thereafter be set aside and the action setting it aside shall not be timely appealed; or
(iii) Borrower shall file any answer admitting or not contesting the material allegations of a
petition filed against Borrower in any such proceedings; or (iv) the court in which such
proceedings are pending shall enter a decree or order granting the relief sought in any such
proceedings; or (v) forty-five (45) days shall have expired after the appointment, without
the consent or acquiescence of Borrower, of any trustee, receiver or liquidator of Borrower
or of all or any substantial part of the properties of Borrower without such appointment
being vacated; or
9.6 Attachments; Judgments. Any portion of Borrower’s assets having a value
in excess of $1,000,000 is attached or seized, or a levy is filed against any such assets that
in any such case is not removed, rescinded or dismissed within thirty (30) days, or a
judgment or judgments is/are entered for the payment of money (not covered by
independent third party insurance as to which liability has not been rejected by such
insurance carrier), individually or in the aggregate, of at least $1,000,000, and remains
unstayed, unbonded and unsatisfied for more than 30 days, or Borrower is enjoined or in
any way prevented by court order from conducting any part of its business; or
9.7 Other Obligations. The occurrence of any default under any agreement or
obligation of Borrower involving any Indebtedness resulting in the right of any third party
or parties to accelerate the maturity of any Indebtedness in excess of $500,000.
9.8 Stop Trade. At any time, an SEC stop trade order or NASDAQ market
trading suspension of the Common Stock shall be in effect for five (5) consecutive days or
five (5) days during a period of ten (10) consecutive days, excluding in all cases a
suspension of all trading on a public market, provided that Borrower shall not have been
able to cure such trading suspension within thirty (30) days of the notice thereof or list the
Common Stock on another public market within sixty (60) days of such notice.
SECTION 10. REMEDIES
10.1 General. Upon and during the continuance of any one or more Events of
Default, (i) Agent may, and at the direction of the Required Lenders shall, accelerate and
demand payment of all or any part of the Secured Obligations together with a Prepayment
Charge and declare them to be immediately due and payable (provided, that upon the
occurrence of an Event of Default of the type described in Section 9.5, all of the Secured
Obligations shall automatically be accelerated and made due and payable, in each case
without any further notice or act); (ii) Agent may, at its option, sign and file in Borrower’s
name any and all collateral assignments, notices, control agreements, security agreements
and other documents it deems necessary or appropriate to perfect or protect the repayment
of the Secured Obligations, and in furtherance thereof, Borrower hereby grants Agent an
irrevocable power of attorney coupled with an interest; and (iii) Agent may notify any of
Borrower’s account debtors to make payment directly to Agent, compromise the amount of
any such account on Borrower’s behalf and endorse Agent’s name without recourse on any
such payment for deposit directly to Agent’s account. Agent may, and at the direction of
the Required Lenders shall, exercise all rights and remedies with respect to the Collateral
under the Loan Documents or otherwise available to it under the UCC and other applicable
law, including the right to release, hold, sell, lease, liquidate, collect, realize upon, or
otherwise dispose of all or any part of the Collateral and the right to occupy, utilize,
process and commingle the Collateral. All Agent’s rights and remedies shall be cumulative
and not exclusive.
10.2 Collection; Foreclosure. Upon the occurrence and during the continuance of
any Event of Default, Agent may, and at the direction of the Required Lenders shall, at any
time or from time to time, apply, collect, liquidate, sell in one or more sales, lease or
otherwise dispose of, any or all of the Collateral, in its then condition or following any
commercially reasonable preparation or processing, in such order as Agent may elect. Any
such sale may be made either at public or private sale at its place of business or elsewhere.
Borrower agrees that any such public or private sale may occur upon ten (10) calendar
days’ prior written notice to Borrower. Agent may require Borrower to assemble the
Collateral and make it available to Agent at a place designated by Agent that is reasonably
convenient to Agent and Borrower. The proceeds of any sale, disposition or other
realization upon all or any part of the Collateral shall be applied by Agent in the following
order of priorities:
First, to Agent and Lender in an amount sufficient to pay in full Agent’s and
Lender’s reasonable costs and professionals’ and advisors’ fees and expenses as
described in Section 11.11;
Second, to Lender in an amount equal to the then unpaid amount of the Secured
Obligations (including principal, interest, and the Default Rate interest), in such
order and priority as Agent may choose in its sole discretion; and
Finally, after the full and final payment in Cash of all of the Secured Obligations
(other than inchoate obligations), to any creditor holding a junior Lien on the
Collateral, or to Borrower or its representatives or as a court of competent
jurisdiction may direct.
Agent shall be deemed to have acted reasonably in the custody, preservation and disposition of
any of the Collateral if it complies with the obligations of a secured party under the UCC.
10.3 Control Notices. The Agent agrees not to issue a notice of exclusive control
or any other instruction under any Account Control Agreement unless an Event of Default
has occurred and is continuing.
10.4 No Waiver. Agent shall be under no obligation to marshal any of the
Collateral for the benefit of Borrower or any other Person, and Borrower expressly waives
all rights, if any, to require Agent to marshal any Collateral.
10.5 Cumulative Remedies. The rights, powers and remedies of Agent hereunder
shall be in addition to all rights, powers and remedies given by statute or rule of law and
are cumulative. The exercise of any one or more of the rights, powers and remedies
provided herein shall not be construed as a waiver of or election of remedies with respect to
any other rights, powers and remedies of Agent.
SECTION 11. MISCELLANEOUS
11.1 Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under such law, such
provision shall be ineffective only to the extent and duration of such prohibition or
invalidity, without invalidating the remainder of such provision or the remaining provisions
of this Agreement.
11.2 Notice. Except as otherwise provided herein, any notice, demand, request,
consent, approval, declaration, service of process or other communication (including the
delivery of Financial Statements) that is required, contemplated, or permitted under the
Loan Documents or with respect to the subject matter hereof shall be in writing, and shall
be deemed to have been validly served, given, delivered, and received upon the earlier of:
(i) the day of transmission by electronic mail or hand delivery or delivery by an overnight
express service or overnight mail delivery service; or (ii) the third calendar day after
deposit in the United States of America mails, with proper first class postage prepaid, in
each case addressed to the party to be notified as follows:
(a) If to Agent:
HERCULES CAPITAL, INC.
Legal Department
Attention: Chief Legal Officer and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
email: ▇▇▇▇▇@▇▇▇▇.▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
(b) If to Lender:
HERCULES TECHNOLOGY II, L.P. and
HERCULES TECHNOLOGY III, L.P.
Legal Department
Attention: Chief Legal Officer and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
email: ▇▇▇▇▇@▇▇▇▇.▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
(c) If to Borrower:
CONCERT PHARMACEUTICALS, INC.
Attention: Chief Financial Officer
▇▇ ▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (which shall not constitute notice) to:
CONCERT PHARMACEUTICALS, INC.
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
Vice President and Associate General Counsel
▇▇ ▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
email: ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as each party may designate for itself by like notice.
11.3 Entire Agreement; Amendments.
(a) This Agreement and the other Loan Documents constitute the entire
agreement and understanding of the parties hereto in respect of the subject matter hereof
and thereof, and supersede and replace in their entirety any prior proposals, term sheets,
non-disclosure or confidentiality agreements, letters, negotiations or other documents or
agreements, whether written or oral, with respect to the subject matter hereof or thereof
(including Agent’s revised proposal letter dated May 11, 2017 and accepted by Borrower
on May 15, 2017 and the Non-Disclosure Agreement).
(b) Neither this Agreement, any other Loan Document, nor any terms hereof
or thereof may be amended, supplemented or modified except in accordance with the
provisions of this Section 11.3(b). The Required Lenders and Borrower party to the
relevant Loan Document may, or, with the written consent of the Required Lenders, the
Agent and the Borrower party to the relevant Loan Document may, from time to time, (i)
enter into written amendments, supplements or modifications hereto and to the other
Loan Documents for the purpose of adding any provisions to this Agreement or the other
Loan Documents or changing in any manner the rights of the Lenders or of the Borrower
hereunder or thereunder or (ii) waive, on such terms and conditions as the Required
Lenders or the Agent, as the case may be, may specify in such instrument, any of the
requirements of this Agreement or the other Loan Documents or any default or Event of
Default and its consequences; provided, however, that no such waiver and no such
amendment, supplement or modification shall (A) forgive the principal amount or extend
the final scheduled date of maturity of any Loan, extend the scheduled date of any
amortization payment in respect of any Term Loan, reduce the stated rate of any interest
or fee payable hereunder) or extend the scheduled date of any payment thereof, in each
case without the written consent of each Lender directly affected thereby; (B) eliminate
or reduce the voting rights of any Lender under this Section 11.3(b) without the written
consent of such Lender; (C) reduce any percentage specified in the definition of Required
Lenders, consent to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement and the other Loan Documents, release all or
substantially all of the Collateral or release a Borrower from its obligations under the
Loan Documents, in each case without the written consent of all Lenders; or (D) amend,
modify or waive any provision of Section 11.17 without the written consent of the Agent.
Any such waiver and any such amendment, supplement or modification shall apply
equally to each Lender and shall be binding upon Borrower, the Lender, the Agent and all
future holders of the Loans.
11.4 No Strict Construction. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties
hereto and no presumption or burden of proof shall arise favoring or disfavoring any party
by virtue of the authorship of any provisions of this Agreement.
11.5 No Waiver. The powers conferred upon Agent and Lender by this
Agreement are solely to protect its rights hereunder and under the other Loan Documents
and its interest in the Collateral and shall not impose any duty upon Agent or Lender to
exercise any such powers. No omission or delay by Agent or Lender at any time to enforce
any right or remedy reserved to it, or to require performance of any of the terms, covenants
or provisions hereof by Borrower at any time designated, shall be a waiver of any such
right or remedy to which Agent or Lender is entitled, nor shall it in any way affect the right
of Agent or Lender to enforce such provisions thereafter.
11.6 Survival. All agreements, representations and warranties contained in this
Agreement and the other Loan Documents or in any document delivered pursuant hereto or
thereto shall be for the benefit of Agent and Lender and shall survive the execution and
delivery of this Agreement. Section 6.3 shall survive the termination of this Agreement.
11.7 Successors and Assigns. The provisions of this Agreement and the other
Loan Documents shall inure to the benefit of and be binding on Borrower and its permitted
assigns (if any). Borrower shall not assign its obligations under this Agreement or any of
the other Loan Documents without Agent’s express prior written consent, and any such
attempted assignment shall be void and of no effect. Agent and Lender may assign,
transfer, or endorse its rights hereunder and under the other Loan Documents without prior
notice to Borrower, and all of such rights shall inure to the benefit of Agent’s and Lender’s
successors and assigns; provided that as long as no Event of Default has occurred and is
continuing, neither Agent nor any Lender may assign, transfer or endorse its rights
hereunder or under the Loan Documents without Borrower’s consent which shall not be
unreasonably held or delayed to any party that (a) is a competitor of Borrower, or (b) is a
Person organized or resident outside the United States, it being acknowledged that in all
cases, any transfer to an Affiliate of any Lender or Agent shall be allowed.
11.8 Governing Law. This Agreement and the other Loan Documents have been
negotiated and delivered to Agent and Lender in the Commonwealth of Massachusetts, and
shall have been accepted by Agent and Lender in the Commonwealth of Massachusetts.
Payment to Agent and Lender by Borrower of the Secured Obligations is due in the
Commonwealth of Massachusetts. This Agreement and the other Loan Documents shall be
governed by, and construed and enforced in accordance with, the laws of the
Commonwealth of Massachusetts, excluding conflict of laws principles that would cause
the application of laws of any other jurisdiction.
11.9 Consent to Jurisdiction and Venue. All judicial proceedings (to the extent
that the reference requirement of Section 11.10 is not applicable) arising in or under or
related to this Agreement or any of the other Loan Documents may be brought in any state
or federal court located in the Commonwealth of Massachusetts. By execution and
delivery of this Agreement, each party hereto generally and unconditionally: (a) consents to
nonexclusive personal jurisdiction in Suffolk County, Commonwealth of Massachusetts;
(b) waives any objection as to jurisdiction or venue in the Business Litigation Session of
the Suffolk Superior County, Suffolk County, Commonwealth of Massachusetts; (c) agrees
not to assert any defense based on lack of jurisdiction or venue in the aforesaid courts; and
(d) irrevocably agrees to be bound by any judgment rendered thereby in connection with
this Agreement or the other Loan Documents. Service of process on any party hereto in
any action arising out of or relating to this Agreement shall be effective if given in
accordance with the requirements for notice set forth in Section 11.2, and shall be deemed
effective and received as set forth in Section 11.2. Nothing herein shall affect the right to
serve process in any other manner permitted by law or shall limit the right of either party to
bring proceedings in the courts of any other jurisdiction.
11.10 Mutual Waiver of Jury Trial.
(a) Because disputes arising in connection with complex financial transactions
are most quickly and economically resolved by an experienced and expert Person and the
parties wish applicable state and federal laws to apply (rather than arbitration rules), the
parties desire that their disputes be resolved by a judge applying such applicable laws.
EACH OF BORROWER, AGENT AND LENDER SPECIFICALLY WAIVES ANY
RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY CAUSE OF ACTION,
CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY
OTHER CLAIM (COLLECTIVELY, “CLAIMS”) ASSERTED BY BORROWER
AGAINST AGENT, LENDER OR THEIR RESPECTIVE ASSIGNEE OR BY AGENT,
LENDER OR THEIR RESPECTIVE ASSIGNEE AGAINST BORROWER. This
waiver extends to all such Claims, including Claims that involve Persons other than
Agent, Borrower and Lender; Claims that arise out of or are in any way connected to the
relationship among Borrower, Agent and Lender; and any Claims for damages, breach of
contract, tort, specific performance, or any equitable or legal relief of any kind, arising
out of this Agreement, any other Loan Document.
11.11 Professional Fees. Borrower promises to pay Agent’s and Lender’s
reasonable out-of-pocket fees and expenses necessary to finalize the loan documentation,
including but not limited to reasonable attorneys fees, UCC searches, filing costs, and other
miscellaneous expenses. In addition, Borrower promises to pay any and all reasonable
attorneys’ and other professionals’ fees and expenses incurred by Agent and Lender after
the Closing Date in connection with or related to: (a) the Loan; (b) the administration,
collection, or enforcement of the Loan; (c) the amendment or modification of the Loan
Documents; (d) any waiver, consent, release, or termination under the Loan Documents;
(e) the protection, preservation, audit, field exam, sale, lease, liquidation, or disposition of
Collateral or the exercise of remedies with respect to the Collateral; (f) any legal, litigation,
administrative, arbitration, or out of court proceeding in connection with or related to
Borrower or the Collateral, and any appeal or review thereof; and (g) any bankruptcy,
restructuring, reorganization, assignment for the benefit of creditors, workout, foreclosure,
or other action related to Borrower, the Collateral, the Loan Documents, including
representing Agent or Lender in any adversary proceeding or contested matter commenced
or continued by or on behalf of Borrower’s estate, and any appeal or review thereof.
11.12 Confidentiality. Agent and Lender acknowledge that certain items of
Collateral and information provided to Agent and Lender by Borrower are confidential and
proprietary information of Borrower, if and to the extent such information either (x) is
marked as confidential by Borrower at the time of disclosure, or (y) should reasonably be
understood to be confidential (the “Confidential Information”). Accordingly, Agent and
Lender agree that any Confidential Information it may obtain in the course of administering
the Loan or acquiring, administering, or perfecting Agent’s security interest in the
Collateral shall not be disclosed to any other Person or entity in any manner whatsoever, in
whole or in part, without the prior written consent of Borrower, except that Agent and
Lender may disclose any such information: (a) to its own directors, officers, employees,
accountants, counsel and other professional advisors and to its Affiliates if Agent or Lender
in their sole discretion determines that any such party should have access to such
information in connection with such party’s responsibilities in connection with the Loan or
this Agreement and, provided that such recipient of such Confidential Information either (i)
agrees to be bound by the confidentiality provisions of this paragraph or (ii) is otherwise
subject to confidentiality restrictions that reasonably protect against the disclosure of
Confidential Information and are no less restrictive than the terms of this Section 11.12;
(b) if such information is generally available to the public; (c) if required or appropriate in
any report, statement or testimony submitted to any governmental authority having or
claiming to have jurisdiction over Agent or Lender; (d) if required or appropriate in
response to any summons or subpoena or in connection with any litigation, to the extent
permitted or deemed advisable by Agent’s or Lender’s counsel; (e) to comply with any
legal requirement or law applicable to Agent or Lender; (f) to the extent reasonably
necessary in connection with the exercise of any right or remedy under any Loan
Document, including Agent’s sale, lease, or other disposition of Collateral after default;
(g) to any participant or assignee of Agent or Lender or any prospective participant or
assignee; provided, that such participant or assignee or prospective participant or assignee
agrees in writing to be bound by this Section prior to disclosure; or (h) otherwise with the
prior consent of Borrower; provided, that any disclosure made in violation of this
Agreement shall not affect the obligations of Borrower or any of its Affiliates or any
guarantor under this Agreement or the other Loan Documents. Agent’s and Lender’s
obligations under this Section 11.12 shall supersede all of their respective obligations under
the Non-Disclosure Agreement.
11.13 Assignment of Rights. Borrower acknowledges and understands that Agent
or Lender may, subject to Section 11.7, sell and assign all or part of its interest hereunder
and under the Loan Documents to any Person or entity (an “Assignee”). After such
assignment the term “Agent” or “Lender” as used in the Loan Documents shall mean and
include such Assignee, and such Assignee shall be vested with all rights, powers and
remedies of Agent and Lender hereunder with respect to the interest so assigned; but with
respect to any such interest not so transferred, Agent and Lender shall retain all rights,
powers and remedies hereby given. No such assignment by Agent or Lender shall relieve
Borrower of any of its obligations hereunder. Lender agrees that in the event of any
transfer by it of the Note(s)(if any), it will endorse thereon a notation as to the portion of
the principal of the Note(s), which shall have been paid at the time of such transfer and as
to the date to which interest shall have been last paid thereon.
11.14 Revival of Secured Obligations. This Agreement and the Loan Documents
shall remain in full force and effect and continue to be effective if any petition is filed by or
against Borrower for liquidation or reorganization, if Borrower becomes insolvent or
makes an assignment for the benefit of creditors, if a receiver or trustee is appointed for all
or any significant part of Borrower’s assets, or if any payment or transfer of Collateral is
recovered from Agent or Lender. The Loan Documents and the Secured Obligations and
Collateral security shall continue to be effective, or shall be revived or reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations or any
transfer of Collateral to Agent, or any part thereof is rescinded, avoided or avoidable,
reduced in amount, or must otherwise be restored or returned by, or is recovered from,
Agent, Lender or by any obligee of the Secured Obligations, whether as a “voidable
preference,” “fraudulent conveyance,” or otherwise, all as though such payment,
performance, or transfer of Collateral had not been made. In the event that any payment, or
any part thereof, is rescinded, reduced, avoided, avoidable, restored, returned, or recovered,
the Loan Documents and the Secured Obligations shall be deemed, without any further
action or documentation, to have been revived and reinstated except to the extent of the
full, final, and indefeasible payment to Agent or Lender in Cash.
11.15 Counterparts. This Agreement and any amendments, waivers, consents or
supplements hereto may be executed in any number of counterparts, and by different
parties hereto in separate counterparts, each of which when so delivered shall be deemed an
original, but all of which counterparts shall constitute but one and the same instrument.
11.16 No Third Party Beneficiaries. No provisions of the Loan Documents are
intended, nor will be interpreted, to provide or create any third-party beneficiary rights or
any other rights of any kind in any Person other than Agent, Lender and Borrower unless
specifically provided otherwise herein, and, except as otherwise so provided, all provisions
of the Loan Documents will be personal and solely among Agent, the Lender and the
Borrower.
11.17 Agency.
(a) Lender hereby irrevocably appoints Hercules Capital, Inc. to act on its
behalf as the Agent hereunder and under the other Loan Documents and authorizes the
Agent to take such actions on its behalf and to exercise such powers as are delegated to
the Agent by the terms hereof or thereof, together with such actions and powers as are
reasonably incidental thereto.
(b) Lender agrees to indemnify the Agent in its capacity as such (to the extent
not reimbursed by Borrower and without limiting the obligation of Borrower to do so),
according to its respective Term Commitment percentages (based upon the total
outstanding Term Commitments) in effect on the date on which indemnification is sought
under this Section 11.17, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever that may at any time be imposed on, incurred by or asserted against the
Agent in any way relating to or arising out of, this Agreement, any of the other Loan
Documents or any documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or omitted by the Agent
under or in connection with any of the foregoing. The agreements in this Section shall
survive the payment of the Loans and all other amounts payable hereunder.
(c) Agent in Its Individual Capacity. The Person serving as the Agent
hereunder shall have the same rights and powers in its capacity as a Lender as any other
Lender and may exercise the same as though it were not the Agent and the term “Lender”
shall, unless otherwise expressly indicated or unless the context otherwise requires,
include each such Person serving as Agent hereunder in its individual capacity.
(d) Exculpatory Provisions. The Agent shall have no duties or obligations
except those expressly set forth herein and in the other Loan Documents. Without
limiting the generality of the foregoing, the Agent shall not:
(i) be subject to any fiduciary or other implied duties, regardless of
whether any default or any Event of Default has occurred and is
continuing;
(ii) have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that the Agent is
required to exercise as directed in writing by the Lender, provided that
the Agent shall not be required to take any action that, in its opinion or
the opinion of its counsel, may expose the Agent to liability or that is
contrary to any Loan Document or applicable law; and
(iii)except as expressly set forth herein and in the other Loan Documents,
have any duty to disclose, and the Agent shall not be liable for the
failure to disclose, any information relating to the Borrower or any of
its Affiliates that is communicated to or obtained by any Person
serving as the Agent or any of its Affiliates in any capacity.
(e) The Agent shall not be liable for any action taken or not taken by it (i)
with the consent or at the request of the Lender or as the Agent shall believe in good faith
shall be necessary, under the circumstances or (ii) in the absence of its own gross
negligence or willful misconduct.
(f) The Agent shall not be responsible for or have any duty to ascertain or
inquire into (i) any statement, warranty or representation made in or in connection with
this Agreement or any other Loan Document; (ii) the contents of any certificate, report or
other document delivered hereunder or thereunder or in connection herewith or therewith;
(iii) the performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein or therein or the occurrence of any default or Event of Default;
(iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other
Loan Document or any other agreement, instrument or document; or (v) the satisfaction
of any condition set forth in Section 4 or elsewhere herein, other than to confirm receipt
of items expressly required to be delivered to the Agent.
(g) Reliance by Agent. Agent may rely, and shall be fully protected in acting,
or refraining to act, upon, any resolution, statement, certificate, instrument, opinion,
report, notice, request, consent, order, bond or other paper or document that it has no
reason to believe to be other than genuine and to have been signed or presented by the
proper party or parties or, in the case of cables, telecopies and telexes, to have been sent
by the proper party or parties. In the absence of its gross negligence or willful
misconduct, Agent may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or opinions furnished
to Agent and conforming to the requirements of the Loan Agreement or any of the other
Loan Documents. Agent may consult with counsel, and any opinion or legal advice of
such counsel shall be full and complete authorization and protection in respect of any
action taken, not taken or suffered by Agent hereunder or under any Loan Documents in
accordance therewith. Agent shall have the right at any time to seek instructions
concerning the administration of the Collateral from any court of competent jurisdiction.
Agent shall not be under any obligation to exercise any of the rights or powers granted to
Agent by this Agreement, the Loan Agreement and the other Loan Documents at the
request or direction of Lenders unless Agent shall have been provided by Lender with
adequate security and indemnity against the costs, expenses and liabilities that may be
incurred by it in compliance with such request or direction.
11.18 Publicity. None of the parties hereto nor any of its respective member
businesses and Affiliates shall, without the other parties’ prior written consent (which shall
not be unreasonably withheld or delayed), publicize or use (a) the other party's name
(including a brief description of the relationship among the parties hereto), logo or
hyperlink to such other parties’ web site, separately or together, in written and oral
presentations, advertising, promotional and marketing materials, client lists, public
relations materials or on its web site (together, the " Publicity Materials"); (b) the names of
officers of such other parties in the Publicity Materials; and (c) such other parties’ name,
trademarks, servicemarks in any news or press release concerning such party; provided
however, notwithstanding anything to the contrary herein, no such consent shall be
required (i) to the extent necessary to comply with the requests of any regulators, legal
requirements or laws applicable to such party, pursuant to any listing agreement with any
national securities exchange (so long as such party provides prior notice to the other party
hereto to the extent reasonably practicable) and (ii) to comply with Section 11.12.
(SIGNATURES TO FOLLOW)
IN WITNESS WHEREOF, Borrower, Agent and Lender have duly executed and
delivered this Loan and Security Agreement as of the day and year first above written.
BORROWER:
CONCERT PHARMACEUTICALS, INC.
Signature: /s/ ▇▇▇▇▇ ▇. Tung_________
Print Name: ▇▇▇▇▇ ▇. Tung___________
Title: Chief Executive Officer____
[Signatures continued on next page]
Accepted in Boston, Massachusetts:
AGENT:
HERCULES CAPITAL, INC.
/s/ ▇▇▇▇ Huang____________________
▇▇▇▇ ▇▇▇▇▇, Associate General Counsel
LENDER:
HERCULES TECHNOLOGY II, L.P.,
a Delaware limited partnership
By: Hercules Technology SBIC
Management, LLC, its General
Partner
By: Hercules Capital, Inc., its Manager
By: /s/ ▇▇▇▇ Huang__________
▇▇▇▇ ▇▇▇▇▇,
Associate General Counsel
HERCULES TECHNOLOGY III, L.P.,
a Delaware limited partnership
By: Hercules Technology SBIC
Management, LLC, its General
Partner
By: Hercules Capital, Inc., its Manager
By: /s/ ▇▇▇▇ Huang__________
▇▇▇▇ ▇▇▇▇▇,
Associate General Counsel
Table of Addenda, Exhibits and Schedules
Addendum 1: SBA Provisions
Exhibit A: Advance Request
Attachment to Advance Request
Exhibit B: Term Note
Exhibit C: Name, Locations, and Other Information for Borrower
Exhibit D: Borrower’s Patents, Trademarks, Copyrights and Licenses
Exhibit E: Borrower’s Deposit Accounts and Investment Accounts
Exhibit F: Compliance Certificate
Exhibit G: Joinder Agreement
Exhibit H: ACH Debit Authorization Agreement
Schedule 1 Subsidiaries
Schedule 1.1 Commitments
Schedule 1A Existing Permitted Indebtedness
Schedule 1B Existing Permitted Investments
Schedule 1C Existing Permitted Liens
Schedule 5.3 Consents, Etc.
Schedule 5.5 Actions Before Governmental Authorities
Schedule 5.8 Tax Matters
Schedule 5.9 Intellectual Property Claims
Schedule 5.10 Intellectual Property
Schedule 5.11 Borrower Products
Schedule 5.14 Capitalization
Schedule 7.20 Post-Closing Obligations
ADDENDUM 1 to LOAN AND SECURITY AGREEMENT
(a) Borrower’s Business. For purposes of this Addendum 1, Borrower shall
be deemed to include its “affiliates” as defined in Title 13 Code of Federal Regulations
Section 121.103. Borrower represents and warrants to Agent and Lender as of the
Closing Date and covenants to Agent and Lender for a period of one year after the
Closing Date with respect to subsections 2, 3, 4, 5, 6 and 7 below, as follows:
1. Size Status. Borrower does not have tangible net worth in excess
of $19.5 million or average net income after Federal income taxes
(excluding any carry-over losses) for the preceding two completed
fiscal years in excess of $6.5 million. Borrower’s primary NAICS
code is 325412 and has less than 70 employees in the aggregate;
2. No Relender. Borrower’s primary business activity does not
involve, directly or indirectly, providing funds to others,
purchasing debt obligations, factoring, or long-term leasing of
equipment with no provision for maintenance or repair;
3. No Passive Business. Borrower is engaged in a regular and
continuous business operation (excluding the mere receipt of
payments such as dividends, rents, lease payments, or
royalties). Borrower’s employees are carrying on the majority of
day to day operations. Borrower will not pass through
substantially all of the proceeds of the Loan to another entity;
4. No Real Estate Business. Borrower is not classified under Major
Group 65 (Real Estate) or Industry No. 1531 (Operative Builders)
of the SIC Manual. The proceeds of the Loan will not be used to
acquire or refinance real property unless Borrower (x) is acquiring
an existing property and will use at least 51 percent of the usable
square footage for its business purposes; (y) is building or
renovating a building and will use at least 67 percent of the usable
square footage for its business purposes; or (z) occupies the subject
property and uses at least 67 percent of the usable square footage
for its business purposes.
5. No Project Finance. Borrower’s assets are not intended to be
reduced or consumed, generally without replacement, as the life of
its business progresses, and the nature of Borrower’s business does
not require that a stream of cash payments be made to the
business's financing sources, on a basis associated with the
continuing sale of assets (e.g., real estate development projects and
oil and gas ▇▇▇▇▇). The primary purpose of the Loan is not to fund
production of a single item or defined limited number of items,
generally over a defined production period, where such production
will constitute the majority of the activities of Borrower (e.g.,
motion pictures and electric generating plants).
6. No Farm Land Purchases. Borrower will not use the proceeds of
the Loan to acquire farm land which is or is intended to be used for
agricultural or forestry purposes, such as the production of food,
fiber, or wood, or is so taxed or zoned.
7. No Foreign Investment. The proceeds of the Loan will not be used
substantially for a foreign operation. At the time of the Loan,
Borrower will not have more than 49 percent of its employees or
tangible assets located outside the United States of America. The
representation in this subsection (7) is made only as of the date
hereof and shall not continue for one year as contemplated in the
first sentence of this Section 1.
(b) Small Business Administration Documentation. Agent and Lender
acknowledge that Borrower completed, executed and delivered to Agent SBA Forms 480,
652 and 1031 (Parts A and B) together with a business plan showing Borrower’s financial
projections (including balance sheets and income and cash flows statements) for the
period described therein and a written statement (whether included in the purchase
agreement or pursuant to a separate statement) from Agent regarding its intended use of
proceeds from the sale of securities to Lender (the “Use of Proceeds
Statement”). Borrower represents and warrants to Agent and Lender that the information
regarding Borrower and its affiliates set forth in the SBA Form 480, Form 652 and
Form 1031 and the Use of Proceeds Statement delivered as of the Closing Date is
accurate and complete.
(c) Inspection. The following covenants contained in this Section (c) are
intended to supplement and not to restrict the related provisions of the Loan
Documents. Subject to the preceding sentence, Borrower will permit, for so long as
Lender holds any debt or equity securities of Borrower, Agent, Lender or their
representative, at Agent’s or Lender’ expense, and examiners of the SBA to visit and
inspect the properties and assets of Borrower, to examine its books of account and
records, and to discuss Borrower’s affairs, finances and accounts with Borrower’s
officers, senior management and accountants, all at such reasonable times as may be
requested by Agent or Lender or the SBA.
(d) Annual Assessment. Promptly after the end of each calendar year (but in
any event prior to February 28 of each year) and at such other times as may be reasonably
requested by Agent or Lender, Borrower will deliver to Agent a written assessment of the
economic impact of Lender’s investment in Borrower, specifying the full-time equivalent
jobs created or retained in connection with the investment, the impact of the investment
on the businesses of Borrower in terms of expanded revenue and taxes, other economic
benefits resulting from the investment (such as technology development or
commercialization, minority business development, or expansion of exports) and such
other information as may be required regarding Borrower in connection with the filing of
Lender’s SBA Form 468. Lender will assist Borrower with preparing such
assessment. In addition to any other rights granted hereunder, Borrower will grant Agent
and Lender and the SBA access to Borrower’s books and records for the purpose of
verifying the use of such proceeds. Borrower also will furnish or cause to be furnished to
Agent and Lender such other information regarding the business, affairs and condition of
Borrower as Agent or Lender may from time to time reasonably request.
(e) Use of Proceeds. Borrower will use the proceeds from the Loan only for
purposes set forth in Section 7.17. Borrower will deliver to Agent from time to time
promptly following Agent’s request, a written report, certified as correct by Borrower's
Chief Financial Officer, verifying the purposes and amounts for which proceeds from the
Loan have been disbursed. Borrower will supply to Agent such additional information
and documents as Agent reasonably requests with respect to its use of proceeds and will
permit Agent and Lender and the SBA to have access to any and all Borrower records
and information and personnel as Agent deems necessary to verify how such proceeds
have been or are being used, and to assure that the proceeds have been used for the
purposes specified in Section 7.17.
(f) Activities and Proceeds. Neither Borrower nor any of its affiliates (if any)
will engage in any activities or use directly or indirectly the proceeds from the Loan for
any purpose for which a small business investment company is prohibited from providing
funds by the SBIC Act, including 13 C.F.R. §107.720. Without obtaining the prior
written approval of Agent, Borrower will not change within 1 year of the date hereof,
Borrower’s current business activity to a business activity which a licensee under the
SBIC Act is prohibited from providing funds by the SBIC Act.
(g) Redemption Provisions. Notwithstanding any provision to the contrary
contained in the Certificate of Incorporation of Borrower, as amended from time to time
(the “Charter”), if, pursuant to the redemption provisions contained in the Charter, if any,
Lender is entitled to a redemption of its Warrant, such redemption (in the case of Lender)
will be at a price equal to the redemption price set forth in the Charter (the “Existing
Redemption Price”). If, however, Lender delivers written notice to Borrower that the
then current regulations promulgated under the SBIC Act prohibit payment of the
Existing Redemption Price in the case of an SBIC, the amount Lender will be entitled to
receive shall be the greater of (i) fair market value of the securities being redeemed
taking into account the rights and preferences of such securities plus any costs and
expenses of the Lender incurred in making or maintaining the Warrant, and (ii) the
Existing Redemption Price where the amount of accrued but unpaid dividends payable to
the Lender is limited to Borrower's earnings plus any costs and expenses of the Lender
incurred in making or maintaining the Warrant; provided, however, the amount
calculated in subsections (i) or (ii) above shall not exceed the Existing Redemption Price.
(h) Compliance and Resolution. Borrower agrees that a failure to comply
with Borrower’s obligations under this Addendum, or any other set of facts or
circumstances where it has been asserted by any governmental regulatory agency (or
Agent or Lender believes that there is a substantial risk of such assertion) that Agent,
Lender and their affiliates are not entitled to hold, or exercise any significant right with
respect to, any securities issued to Lender by Borrower, will constitute a breach of the
obligations of Borrower under the financing agreements among Borrower, Agent and
Lender. In the event of (i) a failure to comply with Borrower’s obligations under this
Addendum; or (ii) an assertion by any governmental regulatory agency (or Agent or
Lender believes that there is a substantial risk of such assertion) of a failure to comply
with Borrower’s obligations under this Addendum, then (i) Agent, Lender and Borrower
will meet and resolve any such issue in good faith to the satisfaction of Borrower, Agent,
Lender, and any governmental regulatory agency, and (ii) upon request of Lender or
Agent, Borrower will cooperate and assist with any assignment of the financing
agreements among Hercules Technology II, L.P., Hercules Technology III, L.P. and
Hercules Capital, Inc.