Exhibit 99.1
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
BETWEEN
HYBRIDON, INC.
AND
SILICON VALLEY BANK
This Third Amendment is made, effective as of the 18th day of
September, 1998 to that certain Loan and Security Agreement between Hybridon,
Inc., a Delaware corporation with a principal place of business at 000 Xxxxxxx
Xxxxxxxxx, Xxxxxxx, Xxxxxxxxxxxxx (the "Borrower") and Silicon Valley Bank (the
"Bank") dated as of December 31, 1996, as amended by consent letter agreement
(the "Consent Letter") dated January 15, 1998 and by First Amendment to Loan
Security Agreement dated March 30, 1998 (the "First Amendment") and Second
Amendment to Loan and Security Agreement dated April 16, 1998 (the "Second
Amendment"). The Loan and Security Agreement as so amended is hereinafter
referred to as the "Loan Agreement." Capitalized terms used, but not defined in
this Third Amendment shall have the meanings ascribed to them in the Loan
Agreement and ancillary documents, instruments and agreements, or if not so
defined, shall have the meanings ascribed to them in the Uniform Commercial
Code, or in the case of financial and accounting terms, in accordance with
generally accepted accounting principles.
RECITALS
Pursuant to the Loan Agreement and on the terms and conditions set
forth therein, on December 31, 1996, the Bank made a secured term loan to the
Borrower in the original face amount of $7,500,000 (the "Loan"). The Borrower
advised the Bank of its planned offering of Units of investment in the Borrower
in January, 1998 (the "Original Offering"), which was consented to by the Bank
pursuant to the Consent Letter and which was subsequently amended by the
Borrower and consented to by the Bank in March, 1998 pursuant to the First
Amendment and in April, 1998 pursuant to the Second Amendment. The term
"Offering" as used in this Third Amendment shall include the amended Offering or
any other equity offering or corporate collaboration not involving indebtedness
of the Borrower. In connection with the Borrower's continuing sales of equity
interests and on the terms and conditions set forth herein, the Borrower has
requested that the Bank temporarily waive compliance by the Borrower with the
application of the Minimum Liquidity and Tangible Net Worth covenants.
The Bank is willing to consent to a temporary waiver of the Minimum
Liquidity and Tangible Net Worth covenants, but only upon the terms and
conditions set forth in this Third Amendment.
AGREEMENT
In consideration of the foregoing, and of the undertakings and
obligations of the Borrower and the Bank set forth herein and for other good and
valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the Borrower and Bank agree as follows:
1. The Borrower confirms that the outstanding balance of principal and
interest on the Loan as of September 18th, 1998 is as set forth in
Schedule 1 hereto, and that the Borrower has no defense, claim or
offset which would preclude full payment of such amount.
2. The Borrower ratifies and confirms: (i) its Obligations to the Bank
under the Loan Agreement, as amended hereby, (ii) all of the
representations and warranties made by it in the Loan Agreement,
except as expressly disclosed to the Bank, and (iii) that it is in
compliance with the covenants and agreements contained in the Loan
Agreement except for its failure to maintain compliance with the
covenants waived in the First Amendment, its failure to comply with
Section 6.10(c) of the Loan Agreement, to the extent that such failure
is nevertheless in compliance with the Intellectual Property Security
Agreement (the "IP Security Agreement") delivered by the Borrower in
connection with the Consent Letter (it being agreed that the
provisions of Section 6.10(c) shall be deemed superseded by the
analogous provisions of the IP Security Agreement), and except for
Borrower's failure to comply with the Minimum Liquidity and Tangible
Net Worth covenants as of June 30, 1998 and thereafter.
3. On August 7, 1998, the Borrower established with the Bank a
certificate of deposit in the amount of $1,592,386 (the "Deposit"). On
the date of this Amendment, the Borrower authorizes the Bank to apply
the Deposit against the outstanding principal of the Obligations as a
permanent reduction therein. Such payment is in addition to any other
regularly scheduled payments due under the Loan Agreement.
4. The Bank hereby waives any existing defaults of the Minimum Liquidity
and Tangible Net Worth covenants and also waives compliance by the
Borrower with the Minimum Liquidity and Tangible Net Worth covenants
through September 29, 1998; provided, however that if the Borrower
earlier receives the cash payment due to it for its sale of its
partnership interest (the "CRLP Interest") in Xxxxxxx River Building
Limited Partnership (such date of receipt, the "CRLP Put Date"),
testing of such covenants shall begin on the following business day
after the CRLP Put Date rather than on September 30, 1998.
5. Section 6.8 of the Loan Agreement, as previously amended, is hereby
amended in its entirety to read as follows:
"Borrower shall maintain, as of the last day of each quarter of
Borrower's fiscal year, a Tangible Net Worth of not less than Six
Million Dollars ($6,000,000.00)."
6. Section 6.9 of the Loan Agreement, as previously amended, is hereby
amended in its entirety to read as follows:
"Borrower shall maintain Minimum Liquidity (as hereinafter
defined) of at least $4,000,000 as of the fifteenth (15th) and as
of the last day of the month (or the next business day if either
is not a business day). If the Borrower fails to maintain Minimum
Liquidity at any test date, the Borrower shall immediately repay
the then outstanding Obligations in full. "Minimum Liquidity" is
defined as consolidated cash on hand (other than cash in which an
entity other than the Bank or its assignee has a security
interest, and other than the CRLP Withhold), cash equivalents and
marketable securities, plus 50% of the Borrower's Trade Accounts
Receivable. "Trade Accounts Receivable" means accounts receivable
arising from the sale of goods and services and the licensing of
technology in the ordinary course of the Borrower's business, but
excluding the
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extraordinary sale of assets or other transactions not in the ordinary
course of the Borrower's business."
7. Within two (2) business days after the CRLP Put Date, the Borrower
will pay to the Bank in good and collected funds, in addition to any
regularly scheduled payments on the Obligations, the sum of $750,000
as an additional payment against the principal of the Obligations.
Until payment of such sum to the Bank, all proceeds of the CRLP
interest received shall be held in trust by the Borrower for the Bank.
The Borrower and the Bank agree that this requirement supersedes any
requirement contained in the Loan Agreement, as previously amended,
relating to funds received by the Borrower from CRLP or its partners,
including, without limitation, any requirement as to the use of the
proceeds of such funds.
8. Conditioned upon satisfaction of the requirements set forth in this
paragraph, the Bank consents to the exclusive license by the Borrower
to OriGenix Therapeutics, Inc., a Quebec corporation ("OriGenix"), of
the specific patents and applications listed in Schedule 8 hereto (the
"Patents"), which license shall be limited to use of the Patents for
the development of treatments for Human Papilloma Virus ("HPV"),
Hepatitis B Virus ("HBV") and up to three (3) additional viral
indications to be agreed upon among OriGenix and the Borrower, subject
to the prior written consent of the Bank which will not be
unreasonably withheld (collectively, the "Indications"). The Borrower
will retain the rights to the Patents for other indication and
molecular targets. The Bank agrees to deliver to the Borrower
documents necessary to (i) release its security interest in the
patents and applications listed in Schedule 8 which are designated
with the 189 and 190 suffixes, and (ii) subordinate, pursuant to an
agreement acceptable to the Borrower and OriGenix, its security
interest to the exclusive licenses to be granted to OriGenix with
respect to all of the other patents and applications listed in
Schedule 8. The consents, release and subordinations referenced in
this paragraph are conditioned upon (a) the Borrower retaining a 40%
equity ownership in OriGenix, (b) the Borrower granting to the Bank a
perfected, first priority security interest in the Borrower's entire
ownership interest in OriGenix pursuant to a Pledge Agreement in the
form of Exhibit 8, (c) OriGenix being capitalized with a minimum cash
equity investment of CDN $4,000,000 from investors other than the
Borrower, and (d) the Borrower warranting and representing that no
investor in OriGenix owns more than five (5%) percent of the stock of
the Borrower on a fully converted basis. The Borrower shall, prior to
the Bank's delivery of the releases and subordinations referenced
above, make a best efforts attempt to provide the Bank in writing with
the names and addresses of the investors in the new entity and their
respective ownership interests, a complete copy of any prospectus or
offering memorandum provided to investors, a complete copy of the
business plan for the new entity and such other information as the
Bank may reasonably require, including evidence of the Borrower's 40%
interest in OriGenix.
9. The Borrower further acknowledges that all reasonable out-of-pocket
costs and expenses of the Bank in connection with negotiation,
documentation and administration of this Third Amendment, including
reasonable fees of attorneys engaged to represent the Bank, shall be
borne by the Borrower.
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10. The Borrower acknowledges and confirms that to the extent that the
Borrower may have any claims, offsets, counterclaims, or defenses,
asserted or unasserted, the Borrower, for itself, and on behalf of its
successors, assigns, parents, subsidiaries, agents, affiliates,
predecessors, employees, officers, directors, executors and heirs, as
applicable (collectively, the "Borrower Affiliates") releases and
forever discharges the Bank, its subsidiaries, affiliates, employees,
officers, directors, agents, successors and assigns, both present and
former (collectively, the "Bank Affiliates") of and from any and all
manner of claims, offsets, counterclaims, defenses, action and
actions, cause and causes of action, suits, debts, controversies,
damages, judgments, executions, and demands whatsoever, asserted or
unasserted, in law or in equity, which against the Bank and/or the
Bank Affiliates, they or the Borrower Affiliates ever had to and
including the date hereof, upon or by reason of any matter, cause,
causes or thing whatsoever, in connection with the Loan and/or any of
the transactions and matters related thereto, except for the
obligations of the Bank in such documents, instruments and agreements
to be performed after the date of this Third Amendment. The Borrower
shall indemnify, defend and hold the Bank harmless of and from any
claim brought or threatened against the Bank by the Borrower or any
other person (as well as from attorneys' fees and expenses in
connection therewith) on account of the Loan Agreement, the Note, the
Consent Letter, the Intellectual Property Security Agreement, Pledge
Agreement, Intercreditor Agreement, the First Amendment, the Second
Amendment, this Third Amendment and any other document, instrument or
agreement given in connection with the Loan and any of the
transactions and matters related thereto (each of which may be
defended, compromised, settled or pursued by the Bank with counsel of
the Bank's election reasonably acceptable to the Borrower, but at the
expense of the Borrower), except in the case of the Bank's failure to
comply with its obligations hereunder or thereunder, its gross
negligence or willful misconduct.
11. The Borrower acknowledges and agrees that the Bank's agreement herein
to temporarily waive compliance with the Minimum Liquidity and
Tangible Net Worth covenants shall not create a course of dealing or
conduct and that the Bank has not agreed to waive any other covenant
or agreement with the Borrower or to waive compliance with the Minimum
Liquidity and Tangible Net Worth covenants other than for the limited
time period set forth in this Third Amendment.
12. To the extent possible, this Third Amendment shall be construed to be
consistent with the provisions of the Loan Agreement; however, to the
extent that the provisions of this Third Amendment expressly conflict
with or contradict the provisions of the Loan Agreement, the
provisions of this Third Amendment shall be deemed to control.
13. This Third Amendment represents the entire agreement between the
parties with respect to the modifications contained herein, and shall
be construed in accordance with the laws of the Commonwealth of
Massachusetts as an agreement under seal. The Borrower has voluntarily
entered into this Third Amendment without coercion or duress of any
kind and has been or has had the opportunity to have been represented
by legal counsel of their choosing.
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WITNESS OUR hands and seals on this 18th day of September, 1998.
HYBRIDON, INC. SILICON VALLEY BANK
By: /s/Xxxxxx X. Xxxxxxxx By: /s/ Xxxx Lynden
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SCHEDULE 1 TO
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
BETWEEN
SILICON VALLEY BANK
AND HYBRIDON, INC.
Principal Balance as of September 15, 1998 $4,487,175.22
Interest outstanding at September 15, 1998 23,768.61
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