LOAN AND SECURITY AGREEMENT
Exhibit 10.2
THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of August 2, 2011 (the
“Effective Date”) among OXFORD FINANCE LLC, a Delaware limited liability company with an office
located at 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000 (“Oxford”), as collateral agent (in
such capacity, the “Collateral Agent”), the Lenders listed on Schedule 1.1 hereof or otherwise a
party hereto from time to time including Oxford in its capacity as a Lender and SILICON VALLEY
BANK, a California corporation with an office located at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, XX 00000
(“SVB”) (each a “Lender” and collectively, the “Lenders”), and SOMAXON PHARMACEUTICALS, INC., a
Delaware corporation with offices located at 0000 Xxxxxx Xxxxxxxx Xxxx, Xxxxx 000, Xxx Xxxxx,
Xxxxxxxxxx 00000 (“Borrower”), provides the terms on which the Lenders shall lend to Borrower and
Borrower shall repay the Lenders. The parties agree as follows:
1. ACCOUNTING AND OTHER TERMS
1.1 Accounting terms not defined in this Agreement shall be construed in accordance with GAAP.
Calculations and determinations must be made in accordance with GAAP. Capitalized terms not
otherwise defined in this Agreement shall have the meanings set forth in Section 14. All other
terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by
the Code to the extent such terms are defined therein. All references to “Dollars” or “$” are
United States Dollars, unless otherwise noted.
2. LOANS AND TERMS OF PAYMENT
2.1 Promise to Pay. Borrower hereby unconditionally promises to pay each Lender, the
outstanding principal amount of all Term Loans advanced to Borrower by such Lender and accrued and
unpaid interest thereon and any other amounts due hereunder as and when due in accordance with this
Agreement.
2.2 Term Loan.
(a) Availability. Subject to the terms and conditions of this Agreement, the Lenders
agree, severally and not jointly, to make term loans to Borrower on the Effective Date in an
aggregate amount up to Fifteen Million Dollars ($15,000,000) according to each Lender’s Term Loan
Commitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to
singly as a “Term Loan”, and collectively as the “Term Loans”). After repayment, no Term Loan may
be re-borrowed.
(b) Repayment. Borrower shall make monthly payments of interest only commencing on
the first (1st) Payment Date following the Funding Date of the Term Loans, and
continuing on the Payment Date of each successive month thereafter through and including the
Payment Date immediately preceding the Amortization Date. Commencing on the Amortization Date, and
continuing on the Payment Date of each month thereafter, Borrower shall make consecutive equal
monthly payments of principal and interest, in arrears, to each Lender, as calculated by Collateral
Agent (which calculations shall be deemed correct absent manifest error) based upon: (1) the amount
of such Lender’s Term Loan, (2) the effective rate of interest, as determined in Section 2.3(a),
and (3) a repayment schedule equal to twenty-four (24) months. All unpaid principal and accrued
and unpaid interest with respect to the Term Loans is due and payable in full on the Maturity Date.
The Term Loans may only be prepaid in accordance with Sections 2.2(c) and 2.2(d).
(c) Mandatory Prepayments. If the Term Loans are accelerated following the occurrence
of an Event of Default, Borrower shall immediately pay to Lenders, payable to each Lender in
accordance with its respective Pro Rata Share, an amount equal to the sum of: (i) all outstanding
principal of the Term Loans plus accrued but unpaid interest thereon through the prepayment date,
(ii) the Final Payment, (iii) the Prepayment Fee, plus (iv) all other sums, that shall have become
due and payable, including Lenders’ Expenses and interest at the Default Rate with respect to any
past due amounts. Notwithstanding (but without duplication with) the
foregoing, on the Maturity Date, if the Final Payment had not previously been paid in full in connection
with the prepayment of the Term Loans in full, Borrower shall pay to Collateral Agent, for payment
to each Lender in accordance with its respective Pro Rata Share, the Final Payment in respect of
the Term Loan(s).
(d) Permitted Prepayment of Term Loans. Borrower shall have the option to prepay all,
but not less than all, of the Term Loans advanced by the Lenders under this Agreement, provided
Borrower (i) provides written notice to Collateral Agent of its election to prepay the Term Loans
at least fifteen (15) days prior to such prepayment, and (ii) pays to the Lenders on the date of
such prepayment, payable to each Lender in accordance with its respective Pro Rata Share, an amount
equal to the sum of (A) all outstanding principal of the Term Loans plus accrued but unpaid
interest thereon through the prepayment date, (B) the Final Payment, (C) the Prepayment Fee, plus
(D) all other sums, that shall have become due and payable but have not been paid, including
Lenders’ Expenses, if any, and interest at the Default Rate with respect to any past due amounts.
2.3 Payment of Interest on the Credit Extensions.
(a) Interest Rate. Subject to Section 2.3(b), the principal amount outstanding under
the Term Loans shall accrue interest at a fixed per annum rate (which rate shall be fixed for the
duration of the applicable Term Loan) equal to the Basic Rate, determined by Collateral Agent on
the Funding Date of the applicable Term Loan, which interest shall be payable monthly in accordance
with Sections 2.2(b) and 2.3(e). Interest shall accrue on each Term Loan commencing on, and
including, the day on which the Term Loan is made, and shall accrue on a Term Loan, or any portion
thereof, for the day on which the Term Loan or such portion is paid.
(b) Default Rate. Immediately upon the occurrence and during the continuance of an
Event of Default, Obligations shall bear interest at a rate per annum which is five percentage
points (5.00%) above the rate that is otherwise applicable thereto (the “Default Rate”). Payment
or acceptance of the increased interest rate provided in this Section 2.3(b) is not a permitted
alternative to timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of Collateral Agent.
(c) 360-Day Year. Interest shall be computed on the basis of a 360-day year
consisting of twelve (12) months of thirty (30) days.
(d) Debit of Accounts. Collateral Agent and each Lender may debit any of Borrower’s
deposit accounts, including the Designated Deposit Account, for principal and interest payments or
any other amounts Borrower owes the Lenders under the Loan Documents when due. These debits shall
not constitute a set-off.
(e) Payments. Except as otherwise expressly provided herein, all loan payments by
Borrower hereunder shall be made to the respective Lender to which such payments are owed, at such
Lender’s office in immediately available funds on the date specified herein. Unless otherwise
provided, interest is payable monthly on the Payment Date of each month. Payments of principal
and/or interest received after 2:00 p.m. Eastern time are considered received at the opening of
business on the next Business Day. When a payment is due on a day that is not a Business Day, the
payment is due the next Business Day and additional fees or interest, as applicable, shall continue
to accrue until paid. All payments to be made by Borrower hereunder or under any other Loan
Document, including payments of principal and interest made hereunder and pursuant to any other
Loan Document, and all fees, expenses, indemnities and reimbursements, shall be made without
set-off, recoupment or counterclaim, in lawful money of the United States and in immediately
available funds.
2.4 Secured Promissory Notes. Each Term Loan shall be evidenced by a Secured Promissory Note
in the form attached as Exhibit D hereto (each a “Secured Promissory Note”), and shall be
repayable as set forth herein. Borrower irrevocably authorizes each Lender to make or cause to be
made, on or about the Funding Date of any Term Loan or at the time of receipt of any payment of
principal on such Lender’s Secured Promissory Note, an appropriate notation on such Lender’s
Secured Promissory Note Record reflecting the making of such Term Loan or (as the case may be) the
receipt of such payment. The outstanding amount of each Term Loan set forth on such Lender’s
Secured Promissory Note Record shall be prima facie evidence of the principal amount thereof owing
and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount
on such Lender’s Secured Promissory Note Record shall not limit or otherwise affect the obligations
of Borrower hereunder or under any Secured Promissory Note to make payments of principal of or interest on any Secured
Promissory Note when due. Upon receipt of an affidavit of an officer of a Lender as to
the loss, theft, destruction, or mutilation of its Secured Promissory Note, Borrower
shall issue, in lieu thereof, a replacement Secured Promissory Note in the same principal amount
thereof and of like tenor.
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2.5 Fees. Borrower shall pay to Collateral Agent:
(a) Facility Fee. A fully earned, non-refundable facility fee of One Hundred Fifty
Thousand Dollars ($150,000) to be shared between the Lenders pursuant to their respective
Commitment Percentages payable on the Effective Date, receipt of which hereby is acknowledged;
(b) Final Payment. The Final Payment, when due hereunder, to be shared between the
Lenders in accordance with their respective Pro Rata Shares;
(c) Prepayment Fee. The Prepayment Fee, when due hereunder, to be shared between the
Lenders in accordance with their respective Pro Rata Shares; and
(d) Lenders’ Expenses. All Lenders’ Expenses (including reasonable attorneys’ fees
and expenses for documentation and negotiation of this Agreement) incurred through and after the
Effective Date, when due.
2.6 Withholding. Payments received by Lenders from Borrower hereunder will be made free and
clear of any withholding taxes. Specifically, however, if at any time any Governmental Authority,
applicable law, regulation or international agreement requires Borrower to make any such
withholding or deduction from any such payment or other sum payable hereunder to Lenders, Borrower
hereby covenants and agrees that the amount due from Borrower with respect to such payment or other
sum payable hereunder will be increased to the extent necessary to ensure that, after the making of
such required withholding or deduction, each Lender receives a net sum equal to the sum which it
would have received had no withholding or deduction been required and Borrower shall pay the full
amount withheld or deducted to the relevant Governmental Authority. Borrower will, upon request,
furnish Lenders with proof reasonably satisfactory to Lenders indicating that Borrower has made
such withholding payment provided, however, that Borrower need not make any withholding payment if
the amount or validity of such withholding payment is contested in good faith by appropriate and
timely proceedings and as to which payment in full is bonded or reserved against by Borrower. The
agreements and obligations of Borrower contained in this Section 2.6 shall survive the termination
of this Agreement.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. Each Lender’s obligation to make a Term
Loan is subject to the condition precedent that Collateral Agent shall consent to or shall have
received, in form and substance satisfactory to Collateral Agent, such documents, and completion of
such other matters, as Collateral Agent may reasonably deem necessary or appropriate, including,
without limitation:
(a) duly executed original signatures to the Loan Documents to which Borrower is a party;
(b) duly executed original signatures to Control Agreements with each financial institution
with which Borrower maintains Collateral Accounts (other than in respect of the Comerica Letter of
Credit Account and the Existing Comerica Account);
(c) duly executed original Secured Promissory Notes in favor of each Lender according to its
Term Loan Commitment Percentage;
(d) the Operating Documents of Borrower and good standing certificates of Borrower certified
by the Secretary of State of the State of Delaware, California and each state in which Borrower is
qualified to conduct business, each as of a date no earlier than thirty (30) days prior to the
Effective Date;
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(e) the Perfection Certificate for Borrower;
(f) duly executed original signatures to an officer’s certificate for Borrower, in a form
acceptable to Collateral Agent;
(g) Collateral Agent shall have received certified copies, dated as of a recent date, of
financing statement searches, as Collateral Agent shall request, accompanied by written evidence
(including any UCC termination statements) that the Liens indicated in any such financing
statements either constitute Permitted Liens or have been or, in connection with the initial Credit
Extension, will be terminated or released;
(h) a landlord’s consent executed in favor of Collateral Agent in respect of each of
Borrower’s leased locations other than (i) the Carmel Mountain Facility and the (ii) Vista Sorrento
Facility;
(i) a legal opinion of Borrower’s counsel dated as of the Effective Date together with the
duly executed original signatures thereto;
(j) a payoff letter from Comerica in respect of the Existing Indebtedness;
(k) evidence that (i) the Liens securing the Existing Indebtedness will be terminated and (ii)
the documents and/or filings evidencing the perfection of such Liens, including without limitation
any financing statements and/or control agreements, have or will, concurrently with the initial
Credit Extension, be terminated;
(l) evidence satisfactory to Collateral Agent that the insurance policies required by Section
6.5 hereof are in full force and effect, together with appropriate evidence showing loss payable
and/or additional insured clauses or endorsements in favor of Collateral Agent, for the ratable
benefit of the Lenders;
(m) the ATM Agreement, duly executed by Borrower and Citadel; and
(n) payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.
3.2 Conditions Precedent to all Credit Extensions. The obligation of each Lender to make each
Credit Extension, including the initial Credit Extension, is subject to the following conditions
precedent:
(a) receipt by the Lenders of an executed Payment/Advance Form in the form of Exhibit
B-1 attached hereto; and (ii) SVB of an executed Loan Payment/Advance Request Form in the form
of Exhibit B-2 attached hereto;
(b) the representations and warranties in Section 5 hereof shall be true, in all material
respects on the date of the Payment/Advance Form (and the Loan Payment/Advance Request Form) and on
the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall
not be applicable to any representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in all material
respects as of such date, and no Event of Default shall have occurred and be continuing or result
from the Credit Extension. Each Credit Extension is Borrower’s representation and warranty on that
date that the representations and warranties in Section 5 hereof are true, accurate and complete in
all material respects; provided, however, that such materiality qualifier shall not be applicable
to any representations and warranties that already are qualified or modified by materiality in the
text thereof; and provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects as of such date;
(c) in such Lender’s sole discretion, there has not been any Material Adverse Change; and
(d) payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.
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3.3 Covenant to Deliver. Borrower agrees to deliver to Collateral Agent each item required to
be delivered to Collateral Agent under this Agreement as a condition precedent to any Credit
Extension. Borrower expressly agrees that a Credit Extension made prior to the receipt by
Collateral Agent of any such item shall not constitute a waiver by the Lenders of Borrower’s
obligation to deliver such item, and any such Credit Extension in the absence of a required item
shall be made in each Lender’s sole discretion.
3.4 Procedures for Borrowing. Subject to the prior satisfaction of all other applicable
conditions to the making of a Term Loan set forth in this Agreement, to obtain a Term Loan,
Borrower shall notify Lenders (which notice shall be irrevocable) by electronic mail, facsimile, or
telephone by 2:00 p.m. Eastern time three (3) Business Days prior to the date the Term Loan is to
be made. Together with any such electronic or facsimile notification, Borrower shall deliver to
Lenders by electronic mail or facsimile a completed Payment/Advance Form (and the Loan
Payment/Advance Request Form, with respect to SVB) executed by a Responsible Officer or his or her
designee. Lenders may rely on any telephone notice given by a person whom a Lender reasonably
believes is a Responsible Officer or designee. On the Funding Date, each Lender shall credit
and/or transfer (as applicable) to Borrower’s Designated Deposit Account, an amount equal to its
Term Loan Commitment.
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants Collateral Agent, for the ratable
benefit of the Lenders, to secure the payment and performance in full of all of the Obligations, a
continuing security interest in, and pledges to Collateral Agent, for the ratable benefit of the
Lenders, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and
all proceeds and products thereof. Borrower represents, warrants, and covenants that the security
interest granted herein is and shall at all times continue to be a first priority perfected
security interest in the Collateral, subject only to Permitted Liens that are permitted by the
terms of this Agreement to have priority to Collateral Agent’s Lien. If Borrower shall acquire a
commercial tort claim (as defined in the Code), Borrower shall promptly notify Collateral Agent in
a writing signed by Borrower, of the general details thereof (and further details as may be
required by Collateral Agent) and grant to Collateral Agent, for the ratable benefit of the
Lenders, in such writing a security interest therein and in the proceeds thereof, all upon the
terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to
Collateral Agent.
If this Agreement is terminated, Collateral Agent’s Lien in the Collateral shall continue
until the Obligations (other than inchoate indemnity obligations) are repaid in full in cash. Upon
payment in full in cash of the Obligations (other than inchoate indemnity obligations) and at such
time as the Lenders’ obligation to make Credit Extensions has terminated, Collateral Agent shall,
at Borrower’s sole cost and expense, release its Liens in the Collateral and all rights therein
shall revert to Borrower.
4.2 Authorization to File Financing Statements. Borrower hereby authorizes Collateral Agent
to file financing statements or take any other action required to perfect Collateral Agent’s
security interests in the Collateral, without notice to Borrower, with all appropriate
jurisdictions to perfect or protect Collateral Agent’s and each Lender’s interest or rights
hereunder, including a notice that any disposition of the Collateral, except to the extent
permitted by the terms of this Agreement, by either Borrower or any other Person, shall be deemed
to violate the rights of Collateral Agent and Lenders under the Code.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Collateral Agent and the Lenders as follows at all times:
5.1 Due Organization, Authorization: Power and Authority. Borrower and each of its
Subsidiaries is duly existing and Borrower is in good standing as a Registered Organization in its
jurisdiction of organization and Borrower and each of its Subsidiaries is qualified and licensed to
do business and is in good standing in any jurisdiction in which the conduct of its business or its
ownership of property requires that it be qualified except where the failure to do so could not
reasonably be expected to have a material adverse effect on Borrower’s business. In connection
with this Agreement, Borrower has delivered to Collateral Agent a completed perfection certificate
signed by an officer of Borrower (the “Perfection Certificate”). Borrower represents and warrants
that (a) Borrower’s exact legal name is that indicated on the Perfection Certificate and on the
signature page hereof; (b) Borrower is an organization of the
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type and is organized in the
jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth Borrower’s organizational identification
number or accurately states that Borrower has none; (d) the Perfection Certificate accurately sets
forth Borrower’s place of business, or, if more than one, its chief executive office as well as
Borrower’s mailing address (if different than its chief executive office); (e) Borrower (and each
of its predecessors) has not, in the past five (5) years, changed its jurisdiction of organization,
organizational structure or type, or any organizational number assigned by its jurisdiction; and
(f) all other information set forth on the Perfection Certificate pertaining to Borrower and each
of its Subsidiaries is accurate and complete (it being understood and agreed that Borrower may
from time to time update certain information in the Perfection Certificate (including the
information set forth in clause (d) above) after the Effective Date to the extent permitted by one
or more specific provisions in this Agreement). If Borrower or any Subsidiary is not now a
Registered Organization but later becomes one, Borrower shall notify Collateral Agent of such
occurrence and provide Collateral Agent with such Person’s organizational identification number
within five (5) Business Days of receiving such organizational identification number.
The execution, delivery and performance by Borrower of the Loan Documents to which it is a
party have been duly authorized, and do not (i) conflict with any of Borrower’s organizational
documents, including the Operating Documents, (ii) contravene, conflict with, constitute a default
under or violate any material Requirement of Law, (iii) contravene, conflict or violate any
applicable order, writ, judgment, injunction, decree, determination or award of any Governmental
Authority by which Borrower or any of its Subsidiaries or any of its property or assets may be
bound or affected, (iv) require any action by, filing, registration, or qualification with, or
Governmental Approval from, any Governmental Authority (except such Governmental Approvals which
have already been obtained and are in full force and effect) or are being obtained pursuant to
Section 6.1(b), or (v) constitute an event of default under any material agreement by which
Borrower or any of its Subsidiaries or its properties is bound. Borrower is not in default under
any agreement to which it is a party or by which it or any of its assets is bound in which such
default could reasonably be expected to have a material adverse effect on Borrower’s business.
5.2 Collateral.
(a) Borrower has good title to, has rights in, and the power to transfer each item of the
Collateral upon which it purports to xxxxx x Xxxx under the Loan Documents, free and clear of any
and all Liens except Permitted Liens, and Borrower does not have any Deposit Accounts, Securities
Accounts, Commodity Accounts or other investment accounts other than the Collateral Accounts or the
other investment accounts, if any, described in the Perfection Certificate delivered to Collateral
Agent in connection herewith with respect of which Borrower has given Collateral Agent notice and
taken such actions as are necessary to give Collateral Agent a perfected security interest therein.
(b) On the Effective Date, Collateral (other than Collateral that is personal property or
samples used to support field services and marketing operations, trade show displays and
work-in-progress having an aggregate book value of up to One Million Two Hundred Thousand Dollars
($1,200,000), provided, however, that no sales representative shall have more than Fifty Thousand
Dollars ($50,000) and no single location shall have more than Two Hundred Thousand Dollars
($200,000)) is not in the possession of any third party bailee (such as a warehouse) except as
disclosed in the Perfection Certificate, and, as of the Effective Date, no such third party bailee
possesses components of the Collateral (other than Collateral that is personal property or samples
used to support field services, trade show displays, and marketing operations and work-in-progress
having an aggregate book value of up to One Million Two Hundred Thousand Dollars ($1,200,000)) in
excess of One Hundred Thousand Dollars ($100,000). None of the components of the Collateral shall
be maintained at locations other than as disclosed in the Perfection Certificate on the Effective
Date or as permitted pursuant to Section 7.2. In the event that Borrower, after the Effective
Date, intends to store or otherwise deliver any portion of the Collateral (other than Collateral
that is personal property or samples used to support field services, trade show displays and
marketing operations and work-in-progress having an aggregate book value of up to One Million Two
Hundred Thousand Dollars ($1,200,000)) to a bailee in excess of Two Hundred Fifty Thousand Dollars
($250,000), then Borrower will first receive the written consent of Collateral Agent and such
bailee must execute and deliver a bailee agreement in form and substance reasonably satisfactory to
Collateral Agent.
(c) All Inventory is in all material respects of good and marketable quality, free from
material defects.
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(d) Borrower is the sole owner of the Intellectual Property it purports to own, except for
non-exclusive licenses granted to its customers in the ordinary course of business. Except as
noted on the Perfection Certificate, Borrower is not a party to, nor is bound by, any material
license or other material agreement with respect to which Borrower is the licensee that (i)
prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest
in such license or agreement or any other property, or (ii) for which a default under or
termination of could interfere with Collateral Agent’s right to sell any Collateral. Borrower
shall provide written notice to Collateral Agent within ten (10) days of entering into or becoming
bound by any material license or material agreement (other than over-the-counter software that is
commercially available to the public). Borrower shall take such commercially reasonable steps as
Collateral Agent requests to obtain the consent of, or waiver by, any Person whose consent or
waiver is necessary for (i) all licenses or agreements to be deemed “Collateral” and for Collateral
Agent to have a security interest in it that might otherwise be restricted or prohibited by law or
by the terms of any such license or agreement, whether now existing or entered into in the future,
and (ii) Collateral Agent shall have the ability in the event of a liquidation of any Collateral to
dispose of such Collateral in accordance with Collateral Agent’s rights and remedies under this
Agreement and the other Loan Documents.
5.3 Litigation. Except as disclosed on the Perfection Certificate, there are no actions,
suits, investigations, or proceedings pending or, to the knowledge of the Responsible Officers,
threatened in writing by or against Borrower or any of its Subsidiaries involving more than One
Hundred Thousand Dollars ($100,000.00).
5.4 No Material Deterioration in Financial Condition; Financial Statements. All consolidated
financial statements for Borrower and its Subsidiaries delivered to Collateral Agent fairly
present, in all material respects the consolidated financial condition of Borrower and its
Subsidiaries and the consolidated results of operations of Borrower and its Subsidiaries. There
has not been any material deterioration in the consolidated financial condition of Borrower and its
Subsidiaries since the date of the most recent financial statements submitted to any Lender.
5.5 Solvency. The fair salable value of Borrower’s assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; Borrower is not left with
unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay
its debts (including trade debts) as they mature.
5.6 Regulatory Compliance. Borrower is not an “investment company” or a company “controlled”
by an “investment company” under the Investment Company Act of 1940, as amended. Borrower is not
engaged as one of its important activities in extending credit for margin stock (under Regulations
X, T and U of the Federal Reserve Board of Governors). Borrower has complied in all material
respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of its Subsidiaries
is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company” of a
“holding company” as each term is defined and used in the Public Utility Holding Company Act of
2005. Borrower has not violated any laws, ordinances or rules, the violation of which could
reasonably be expected to have a material adverse effect on its business. None of Borrower’s or
any of its Subsidiaries’ properties or assets has been used by Borrower or any 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 have 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.
Neither Borrower or its 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) engages in or conspires 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. Neither Borrower, nor, to the
knowledge of Borrower, any of its 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.
5.7 Subsidiaries; Investments. Borrower does not own any stock, shares, partnership interests
or other equity securities except for Permitted Investments.
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5.8 Tax Returns and Payments; Pension Contributions. Borrower and its Subsidiaries have
timely filed all required tax returns and reports, and Borrower and its Subsidiaries have timely
paid all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by
Borrower and its Subsidiaries in all jurisdictions in which Borrower or its Subsidiaries are
subject to taxes, including the United States, unless such taxes are being contested in accordance
with the following sentence. Borrower and its Subsidiaries may defer payment of any contested
taxes, provided that Borrower or such Subsidiary (a) in good faith contests its obligation to pay
the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies
Collateral Agent in writing of the commencement of, and any material development in, the
proceedings, and (c) posts bonds or takes any other steps required to prevent the governmental
authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is
other than a “Permitted Lien”. Borrower is unaware of any claims or adjustments proposed for any
of Borrower or its Subsidiaries prior tax years which could result in additional taxes becoming due
and payable by Borrower or its subsidiaries. Borrower and its Subsidiaries have paid all amounts
necessary to fund all present pension, profit sharing and deferred compensation plans in accordance
with their terms, and Borrower and its Subsidiaries have not withdrawn from participation in, and
have not permitted partial or complete termination of, or permitted the occurrence of any other
event with respect to, any such plan which could reasonably be expected to result in any liability
of Borrower or its Subsidiaries, including any liability to the Pension Benefit Guaranty
Corporation or its successors or any other governmental agency.
5.9 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions solely as
working capital and to fund its general business requirements in accordance with the provisions of
this Agreement, and not for personal, family, household or agricultural purposes. A portion of the
proceeds of the Term Loans shall be used by Borrower to repay the Existing Indebtedness in full on
the Effective Date.
5.10 Full Disclosure. No written representation, warranty or other statement of Borrower in
any certificate or written statement given to Collateral Agent or any Lender, as of the date such
representation, warranty, or other statement was made, taken together with all such written
certificates and written statements given to Collateral Agent or any Lender, contains any untrue
statement of a material fact or omits to state a material fact necessary to make the statements
contained in the certificates or statements not misleading (it being recognized that the
projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions
are not viewed as facts and that actual results during the period or periods covered by such
projections and forecasts may differ from the projected or forecasted results).
5.11 Definition of “Knowledge.” For purposes of the Loan Documents, whenever a representation
or warranty is made to Borrower’s knowledge or awareness, to the “best of” Borrower’s knowledge, or
with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable
investigation, of the Responsible Officers.
6. AFFIRMATIVE COVENANTS
Borrower shall, and shall cause each of its Subsidiaries to, do all of the following:
6.1 Government Compliance.
(a) Maintain its and all its Subsidiaries’ legal existence and good standing in their
respective jurisdictions of organization and maintain qualification in each jurisdiction in which
the failure to so qualify could reasonably be expected to have a material adverse effect on
Borrower’s business or operations. Borrower shall comply, and have each Subsidiary comply, with
all laws, ordinances and regulations to which it is subject, the noncompliance with which could
reasonably be expected to have a material adverse effect on Borrower’s business.
(b) Obtain and keep in full force and effect, all of the Governmental Approvals necessary for
the performance by Borrower of its obligations under the Loan Documents and the grant of a security
interest to Collateral Agent for the ratable benefit of the Lenders, in all of the Collateral.
Borrower shall promptly provide copies to Collateral Agent of any material Governmental Approvals
obtained by Borrower.
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6.2 Financial Statements, Reports, Certificates.
Deliver to each Lender: (i) as soon as available, but no later than thirty (30) days after the
last day of each month, a company prepared consolidated and consolidating balance sheet, income
statement and cash flow statement covering the consolidated operations of Borrower and its
Subsidiaries for such month certified by a Responsible Officer and in a form reasonably acceptable
to Collateral Agent; (ii) as soon as available, but no later than two hundred ten (210) days after
the last day of Borrower’s fiscal year or within five (5) days of filing with the SEC, audited
consolidated financial statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified public accounting
firm acceptable to Collateral Agent in its reasonable discretion; (iii) as soon as
available after approval thereof by Borrower’s Board of Directors, but no later than the earlier of
seven (7) days after Borrower’s Board of Directors approval thereof, or sixty (60) days after the
last day of each of Borrower’s fiscal years, Borrower’s financial projections for the entire
current fiscal year as approved by, and in the form delivered to, Borrower’s Board of Directors
(such annual financial projections as originally delivered to Collateral Agent and the Lenders are
referred to herein as the “Annual Projections”; provided that, any revisions of the Annual
Projections approved by Borrower’s Board of Directors shall be delivered to Collateral Agent no
later than seven (7) days after such approval); (iv) within five (5) days of delivery, copies of
all statements, reports and notices made available to Borrower’s security holders or holders of
Subordinated Debt; (v) within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed
with the Securities and Exchange Commission, (vi) prompt notice of (A) any material change in the
composition of the Intellectual Property, (B) notice of the registration of any material copyright,
including any subsequent ownership right of Borrower in or to any copyright, patent or trademark,
and (C) prompt notice of Borrower’s knowledge of any event that could reasonably be expected to
materially and adversely affect the value of the Intellectual Property; (vii) as soon as available,
but no later than thirty (30) days after the last day of each month, copies of the month-end
account statements for each deposit account or securities account maintained by Borrower or any
Subsidiary, which statements may be provided to Collateral Agent by Borrower or directly from the
applicable institution(s), and (viii) other financial information as reasonably requested by
Collateral Agent or any Lender. Notwithstanding the foregoing, documents required to be delivered
pursuant to the terms hereof (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 posts such documents, or provides a link thereto, on
Borrower’s website on the internet at Borrower’s website address.
(a) Concurrently with the delivery of the financial statements specified in Section 6.2(a)(i)
above but no later than thirty (30) days after the last day of each month, deliver to each Lender,
a duly completed Compliance Certificate signed by a Responsible Officer.
(b) Keep proper books of record and account in accordance with GAAP in all material respects,
in which full, true and correct entries shall be made of all dealings and transactions in relation
to its business and activities. Borrower shall allow, at the sole cost of Borrower, Collateral
Agent and any Lender, during regular business hours upon reasonable prior notice (except while an
Event of Default has occurred and is continuing), to visit and inspect any of its properties, to
examine and make abstracts or copies from any of its books and records, and to conduct a collateral
audit and analysis of its operations and the Collateral. Such audits shall be conducted no more
often than twice every year unless (and more frequently if) an Event of Default has occurred and is
continuing.
6.3 Inventory; Returns. Keep all Inventory in good and marketable condition, free from
material defects except for Inventory for which adequate reserves have been made. Returns and
allowances between Borrower and its Account Debtors shall follow Borrower’s customary practices as
they exist at the Effective Date. Borrower must promptly notify Collateral Agent of all returns,
recoveries, disputes and claims that involve more than Five Hundred Thousand Dollars ($500,000)
individually or in the aggregate in any calendar year other than in compliance with the Borrower’s
returned goods policy as in effect on the date hereof.
6.4 Taxes; Pensions. Timely file and require each of its Subsidiaries to timely file, all
required tax returns and reports and timely pay, and require each of its Subsidiaries to timely
file, all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by
Borrower and its Subsidiaries, except for deferred payment of any taxes contested pursuant to the
terms of Section 5.8 hereof, and shall deliver to Lenders, on demand,
appropriate certificates attesting to such payments, and pay all amounts necessary to fund all
present pension, profit sharing and deferred compensation plans in accordance with their terms.
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6.5 Insurance. Keep its business and the Collateral insured for risks and in amounts standard
for companies in Borrower’s industry and location and as Collateral Agent may reasonably request.
Insurance policies shall be in a form, with companies, and in amounts that are reasonably
satisfactory to Collateral Agent. All property policies shall have a lender’s loss payable
endorsement showing Collateral Agent as lender loss payee and waive subrogation against Collateral
Agent, and all liability policies shall show, or have endorsements showing, Collateral Agent, as an
additional insured. All policies (or the loss payable and additional insured endorsements) shall
provide that the insurer shall endeavor to give Collateral Agent at least twenty (20) days notice
before canceling, amending, or declining to renew its policy. At Collateral Agent’s request,
Borrower shall deliver certified copies of policies and evidence of all premium payments. Proceeds
payable under any policy shall, at Collateral Agent’s option, be payable to Collateral Agent on
behalf of the Lenders on account of the Obligations. Notwithstanding the foregoing, (a) so long as
no Event of Default has occurred and is continuing, Borrower shall have the option of applying the
proceeds of any casualty policy up to Five Hundred Thousand Dollars ($500,000) with respect to any
loss, but not exceeding Five Hundred Thousand Dollars ($500,000) in the aggregate for all losses
under all casualty policies in any one year, toward the replacement or repair of destroyed or
damaged property; provided that any such replaced or repaired property (i) shall be of equal or
like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which
Collateral Agent and Lenders have been granted a first priority security interest, and (b) after
the occurrence and during the continuance of an Event of Default, all proceeds payable under such
casualty policy shall, at the option of Collateral Agent, be payable to Collateral Agent, for the
ratable benefit of the Lenders, on account of the Obligations. If Borrower fails to obtain
insurance as required under this Section 6.5 or to pay any amount or furnish any required proof of
payment to third persons and Collateral Agent, Collateral Agent may make all or part of such
payment or obtain such insurance policies required in this Section 6.5, and take any action under
the policies Collateral Agent deems prudent.
6.6 Operating Accounts.
(a) Borrower’s and its Subsidiaries’ primary operating and securities accounts with SVB or its
Affiliates in accounts which are subject to a Control Agreement in favor of Collateral Agent.
Until such time as Borrower has delivered to Collateral Agent a Control Agreement, in favor of, and
in form and substance reasonably acceptable to, Collateral Agent with respect to the Existing
Comerica Account, Borrower must maintain an aggregate amount of not less than Fifteen Million
Dollars ($15,000,000) at accounts with SVB, which accounts are subject to a Control Agreement in
favor of Collateral Agent.
(b) Borrower and its Subsidiaries shall provide Collateral Agent five (5) days’ prior written
notice before establishing any Collateral Account at or with any Person other than SVB. In
addition, for each Collateral Account that Borrower or any of its Subsidiaries any time maintains
(other than the Comerica Letter of Credit Account and the Existing Comerica Account), Borrower
shall cause the applicable bank or financial institution at or with which such Collateral Account
is maintained to execute and deliver a Control Agreement or other appropriate instrument with
respect to such Collateral Account to perfect Collateral Agent’s Lien in such Collateral Account in
accordance with the terms hereunder, which Control Agreement may not be terminated without prior
written consent of Collateral Agent. The provisions of the previous sentence shall not apply to
deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit
payments to or for the benefit of Borrower’s or such Subsidiary’s employees and identified to
Collateral Agent by Borrower as such.
(c) Borrower and its Subsidiaries shall not maintain any Collateral Accounts except Collateral
Accounts located in the United States in accordance with Sections 6.6(a) and (b).
6.7 Protection of Intellectual Property Rights. Borrower shall: (a) use commercially
reasonable efforts to protect, defend and maintain the validity and enforceability of its
Intellectual Property that is material to Borrower’s business; (b) promptly advise Collateral Agent
in writing of material infringement by a third party of its Intellectual Property; and (c) not
allow any Intellectual Property material to Borrower’s business to be abandoned, forfeited or
dedicated to the public without Collateral Agent’s written consent.
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6.8 Litigation Cooperation. From the date hereof and continuing through the termination of
this Agreement, make available to Collateral Agent, without expense to Collateral Agent or the
Lenders, Borrower and its officers, employees and agents and Borrower’s Books, to the extent that
Collateral Agent may reasonably deem them necessary to prosecute or defend any third-party suit or
proceeding instituted by or against Collateral Agent or the Lenders with respect to any Collateral
or relating to Borrower.
6.9 Notices of Litigation and Default. Borrower will give prompt written notice to Collateral
Agent of any litigation or governmental proceedings pending or threatened (in writing) against
Borrower or any of its Subsidiaries which could reasonably be expected to result in damages or
costs to Borrower or any of its Subsidiaries of Two Hundred Fifty Thousand Dollars ($250,000) or
more or which could reasonably be expected to have a material adverse effect with respect to
Borrower’s business. Without limiting or contradicting any other more specific provision of this
Agreement, promptly (and in any event within three (3) Business Days) upon Borrower becoming aware
of the existence of any Event of Default or event which, with the giving of notice or passage of
time, or both, would constitute an Event of Default, Borrower shall give written notice to
Collateral Agent of such occurrence, which such notice shall include a reasonably detailed
description of such Event of Default or event which, with the giving of notice or passage of time,
or both, would constitute an Event of Default.
6.10 Creation/Acquisition of Subsidiaries. In the event Borrower or any Subsidiary creates or
acquires any Subsidiary, Borrower and such Subsidiary shall promptly notify Collateral Agent of the
creation or acquisition of such new Subsidiary and take all such action as may be reasonably
required by Collateral Agent to cause each such Subsidiary to become a co-Borrower hereunder or to
guarantee the Obligations of Borrower under the Loan Documents and, in each case, grant a
continuing pledge and security interest in and to the assets of such Subsidiary (substantially as
described on Exhibit A hereto); and Borrower shall grant and pledge to Collateral Agent,
for the ratable benefit of the Lenders, a perfected security interest in the stock, units or other
evidence of ownership of each Subsidiary; provided that Borrower shall not be required to pledge
more than sixty-five percent (65%) of the Shares of any Subsidiary of Borrower not incorporated or
organized under the laws of one of the States or jurisdictions of the United States, and any such
Subsidiary shall not be required to execute a guaranty in favor of Collateral Agent or become a
co-Borrower hereunder, if Borrower demonstrates to Collateral Agent’s reasonable satisfaction that
a pledge of more than sixty five percent (65%) of the Shares, or a guaranty from such Subsidiary,
or the adding of such Subsidiary as a co-Borrower hereunder, creates a present and existing adverse
tax consequence to Borrower under the U.S. Internal Revenue Code.
6.11 Covenant to Deliver Landlord Waivers.
(a) No later than September 30, 2011, Borrower shall deliver a landlord consent in favor of,
and in form and substance reasonably satisfactory to, Collateral Agent in respect of Borrower’s
Carmel Mountain Facility; provided that Borrower shall be under no obligation to deliver such a
waiver if prior to September 30, 2011 Borrower provides evidence reasonably satisfactory to
Collateral Agent that the lease in respect of the Carmel Mountain Facility has terminated and
Borrower does not maintain any assets at the Carmel Mountain Facility.
(b) Within thirty (30) days of the Effective Date, Borrower shall deliver a landlord consent
in favor of, and in form and substance reasonably satisfactory to, Collateral Agent in respect of
Borrower’s Vista Sorrento Facility.
6.12 Further Assurances.
(a) Execute any further instruments and take further action as Collateral Agent reasonably
requests to perfect or continue Collateral Agent’s Lien in the Collateral or to effect the purposes
of this Agreement.
(b) Deliver to Collateral Agent, within five (5) days after the same are sent or received,
copies of all material correspondence, reports, documents and other filings with any Governmental
Authority that could reasonably be expected to have a material adverse effect on any of the
Governmental Approvals material to Borrower’s business or otherwise on the operations of Borrower
or any of its Subsidiaries.
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7. NEGATIVE COVENANTS
Borrower shall not, and shall not permit any of its Subsidiaries to, do any of the following
without Collateral Agent’s prior written consent:
7.1 Dispositions. Without the prior written consent of the Collateral Agent, which consent
shall not be unreasonably withheld or delayed, convey, sell, lease, transfer, or otherwise dispose
of (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, except for Transfers (a) of Inventory in the ordinary course of business;
(b) of worn-out or obsolete Equipment; and (c) in connection with Permitted Liens and Permitted
Investments; (d) of non-exclusive licenses for the use of the Intellectual Property of Borrower or
its Subsidiaries, in connection with joint ventures and corporate collaborations in the ordinary
course of business, such as agreements with contract sales organizations, pharmaceutical companies
or specialty pharmaceutical companies to co-promote or otherwise further the commercialization of
Borrower’s product SILENOR® (doxepin), (e) licenses that could not result in a legal transfer of
title of the licensed property but that may be exclusive in respects other than territory and that
may be exclusive as to territory only as to discreet geographical areas outside the United States;
or (f) in the ordinary course of business for reasonably equivalent consideration.
7.2 Changes in Business, Management, Ownership, or Business Locations. (a) Engage in or
permit any of its Subsidiaries to engage in any business other than the businesses engaged in by
Borrower as of the Effective Date or reasonably related thereto; (b) liquidate or dissolve; or (c)
(i) any Key Person shall cease to be actively engaged in the management of Borrower unless a
replacement for such Key Person is approved by Borrower’s Board of Directors and engaged by
Borrower within ninety (90) days of such change, or (ii) enter into any transaction or series of
related transactions in which the stockholders of Borrower who were not stockholders immediately
prior to the first such transaction own more than forty nine percent (49%) of the voting stock of
Borrower immediately after giving effect to such transaction or related series of such transactions
(other than by the sale of Borrower’s equity securities in a public offering, a private placement
of public equity or to venture capital investors so long as Borrower identifies to Collateral Agent
the venture capital investors prior to the closing of the transaction). Borrower shall not,
without at least five (5) days prior written notice to Collateral Agent: (1) add any new offices or
business locations, including warehouses (unless such new offices or business locations contain
less than One Hundred Thousand Dollars ($100,000) in Borrower’s assets or property), (2) change its
jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal
name, or (5) change any organizational number (if any) assigned by its jurisdiction of
organization.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge
or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire,
all or substantially all of the capital stock or property of another Person; provided, however,
that if Lenders do not consent to any such transaction, then Borrower shall be entitled to prepay
all of the Obligations. Not withstanding the forgoing, a Subsidiary may merge or consolidate into
another Subsidiary or into Borrower. Notwithstanding the foregoing, Borrower or any Subsidiary may
merge or consolidate so long as: (A) the entity or entities that result from such merger or
consolidation (collectively, the “Surviving Entity”) shall have executed and delivered to Lenders
an agreement in form and substance reasonably satisfactory to Lenders, containing an assumption by
the Surviving Entity of the due and punctual payment and performance of all Obligations and
performance and observance of each covenant and condition of Borrower in the Loan Documents: (B)
all such obligations of the Surviving Entity to Lenders shall be guaranteed by any entity, if any,
that directly or indirectly owns or controls more than 50% of the voting stock of the Surviving
Entity (which guaranty shall be secured in the reasonable discretion of the Lenders); (C)
immediately after giving effect to such merger or consolidation, no Default or Event of Default
shall have occurred and be continuing; and (D) the credit risk to Lenders, in their sole
discretion, of the Surviving Entity shall not be increased. In determining whether the proposed
merger or consolidation would result in any increased credit risk, Lenders may consider, among
other things, changes in Borrower’s management team, employee base, access to equity markets,
investor support, financial position, business plan, and/or disposition of Intellectual Property
rights which may reasonably be anticipated as a result of the transaction.
7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
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7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of its property, or assign
or convey any right to receive income, including the sale of any Accounts, or permit any of its
Subsidiaries to do so, except for Permitted Liens, and licenses permitted under Section 7.1, or
permit any Collateral not to be subject to the first priority security interest granted herein
(which Collateral may be subject to Permitted Liens), or enter into any agreement, document,
instrument or other arrangement (except with or in favor of Collateral Agent or any Lender) with
any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower or any
Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or
encumbering any of Borrower’s or any Subsidiary’s Intellectual Property, except as is otherwise
permitted in Section 7.1 hereof and the definition of “Permitted Liens” herein.
7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to
the terms of Section 6.6 hereof.
7.7 Distributions; Investments. (a) Pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock provided that (i) Borrower may convert any of its
convertible securities into other securities pursuant to the terms of such convertible securities
or otherwise in exchange thereof, (ii) Borrower may pay dividends or distributions solely in
capital stock; (iii) Borrower may repurchase the stock of employees, directors, officers, or
consultants pursuant to stock repurchase agreements so long as an Event of Default does not exist
at the time of such repurchase and would not exist after giving effect to such repurchase, provided
such repurchase does not exceed in the aggregate of Seven Hundred Fifty Thousand Dollars ($750,000)
per fiscal year; (iv) purchases for value of any rights distributed in connection with any
stockholder rights plan; (v) purchases of capital stock or options to acquire such capital stock
with the proceeds received from a substantially concurrent issuance of capital stock or convertible
securities; (vi) purchases of capital stock in connection with the exercise of stock options or
stock appreciation by way of a cashless exercise; and (vii) purchases of fractional shares of
capital stock arising out of stock dividends, splits or combinations or business combinations; or
(b) directly or indirectly make any Investment other than Permitted Investments, or permit any of
its Subsidiaries to do so.
7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any
material transaction with any Affiliate of Borrower, except for (a) transactions that are in the
ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable
to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person, or
(b) equity investments by Borrower’s investors.
7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under
the terms of the subordination, intercreditor, or other similar agreement to which such
Subordinated Debt is subject, or (b) amend any provision in any document relating to the
Subordinated Debt which would increase the amount thereof or adversely affect the subordination
thereof to Obligations owed to the Lenders.
7.10 Compliance. Become an “investment company” or a company controlled by an “investment
company”, under the Investment Company Act of 1940, as amended, or undertake as one of its
important activities extending credit to purchase or carry margin stock (as defined in Regulation U
of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit
Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could
reasonably be expected to have a material adverse effect on Borrower’s business, or permit any of
its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in,
permit partial or complete termination of, or permit the occurrence of any other event with respect
to, any present pension, profit sharing and deferred compensation plan which could reasonably be
expected to result in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
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7.11 Compliance with Anti-Terrorism Laws. Collateral Agent hereby notifies Borrower
that pursuant to the requirements of Anti-Terrorism Laws, and Collateral Agent’s policies and
practices, Collateral Agent is required to obtain, verify and record certain information and
documentation that identifies Borrower and its principals, which information includes the name and
address of Borrower and its principals and such other information that will allow Collateral Agent
to identify such party in accordance with Anti-Terrorism Laws. Borrower will not, nor will Borrower permit any Subsidiary or Affiliate to, directly or
indirectly, knowingly enter into any documents, instruments, agreements or contracts with any
Person listed on the OFAC Lists. Borrower shall immediately notify Collateral Agent if Borrower
has knowledge that Borrower or any Subsidiary or Affiliate 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 will not,
nor will Borrower permit any Subsidiary or 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, 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.
8. EVENTS OF DEFAULT
Any one of the following shall constitute an event of default (an “Event of Default”) under
this Agreement:
8.1 Payment Default. Borrower fails to (a) make any payment of principal or interest on any
Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days
after such Obligations are due and payable (which three (3) Business Day grace period shall not
apply to payments due on the Maturity Date or the date of acceleration pursuant to Section 9.1 (a)
hereof). During the cure period, the failure to cure the payment default is not an Event of
Default (but no Credit Extension will be made during the cure period);
8.2 Covenant Default.
(a) Borrower fails or neglects to perform any obligation in Sections 6.2 (Financial
Statements, Reports, Certificates), 6.4 (Taxes), 6.5 (Insurance), 6.6 (Operating Accounts), 6.9
(Notices of Default) or 6.10 (Creation/Acquisition of Subsidiaries) or Borrower violates any
covenant in Section 7; or
(b) Borrower or any of its Subsidiaries fails or neglects to perform, keep, or observe any
other term, provision, condition, covenant or agreement contained in this Agreement or any Loan
Documents, and as to any default (other than those specified in this Section 8) under such other
term, provision, condition, covenant or agreement that can be cured, has failed to cure the default
within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by
its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be
cured within such ten (10) day period, and such default is likely to be cured within a reasonable
time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30)
days) to attempt to cure such default, and within such reasonable time period the failure to cure
the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during
such cure period). Grace periods provided under this Section shall not apply, among other things,
to financial covenants or any other covenants set forth in subsection (a) above;
8.3 Material Adverse Change. A Material Adverse Change occurs;
8.4 Attachment; Levy; Restraint on Business.
(a) (i) The service of process seeking to attach, by trustee or similar process, any funds of
Borrower or of any entity under control of Borrower (including a Subsidiary) on deposit with any
Lender or any Lender’s Affiliate or any bank or other institution at which Borrower maintains a
Collateral Account, or (ii) a notice of lien, levy, or assessment is filed against any of
Borrower’s assets by any government agency, and the same under subclauses (i) and (ii) hereof are
not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the
posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any
ten (10) day cure period; and
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(b) (i) any material portion of Borrower’s assets is attached, seized, levied on, or comes
into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents
Borrower from conducting any part of its business;
8.5 Insolvency (a) Borrower is unable to pay its debts (including trade debts) as they become
due or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an
Insolvency Proceeding is begun against Borrower and not dismissed or stayed within forty-five (45)
days (but no Credit Extensions shall be made while any of the conditions described in clause (a)
exist and/or until any Insolvency Proceeding is dismissed);
8.6 Other Agreements. There is a default in any agreement to which Borrower is a party with a
third party or parties resulting in a right by such third party or parties, whether or not
exercised, to accelerate the maturity of any Indebtedness in an amount in excess of Three Hundred
Fifty Thousand Dollars ($350,000) or that could have a material adverse effect on Borrower’s
business.
8.7 Judgments. One or more judgments, orders, or decrees for the payment of money in an
amount, individually or in the aggregate, of at least Three Hundred Fifty Thousand Dollars
($350,000) (not covered by independent third-party insurance as to which liability has been
accepted by such insurance carrier) shall be rendered against Borrower and shall remain
unsatisfied, unvacated, or unstayed for a period of twenty (20) days after the entry thereof
(provided that no Credit Extensions will be made prior to the satisfaction, vacation, or stay of
such judgment, order or decree);
8.8 Misrepresentations. Borrower or any Person acting for Borrower makes any representation,
warranty, or other statement now or later in this Agreement, any Loan Document or in any writing
delivered to Collateral Agent and/or Lenders or to induce Collateral Agent and/or the Lenders to
enter this Agreement or any Loan Document, and such representation, warranty, or other statement is
incorrect in any material respect when made;
8.9 Subordinated Debt. A default or breach occurs under any agreement between Borrower and
any creditor of Borrower that signed a subordination, intercreditor, or other similar agreement
with Collateral Agent or the Lenders, or any creditor that has signed such an agreement with
Collateral Agent or the Lenders breaches any material terms of such agreement; or
8.10 Governmental Approvals. Any Governmental Approval shall have been (a) revoked,
rescinded, suspended, modified in an adverse manner or not renewed in the ordinary course for a
full term or (b) subject to any decision by a Governmental Authority that designates a hearing with
respect to any applications for renewal of any of such Governmental Approval or that could result
in the Governmental Authority taking any of the actions described in clause (a) above, and such
decision or such revocation, rescission, suspension, modification or non-renewal (i) has, or could
reasonably be expected to have, a Material Adverse Change, or (ii) adversely affects the legal
qualifications of Borrower or any of its Subsidiaries to hold such Governmental Approval in any
applicable jurisdiction and such revocation, rescission, suspension, modification or non-renewal
could reasonably be expected to affect the status of or legal qualifications of Borrower or any of
its Subsidiaries to hold any Governmental Approval in any other jurisdiction that could reasonably
be expected to have a material adverse effect on Borrower’s business.
8.11 Acceleration Event. The Acceleration Event occurs and the Obligations remain unpaid for
more than five (5) Business Days of the date thereof.
8.12 Lien Priority. Any Lien created hereunder or by any other Loan Document shall at any
time fail to constitute a valid and perfected Lien on any of the Collateral purported to be secured
thereby, subject to no prior or equal Lien, other than Permitted Liens.
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9. RIGHTS AND REMEDIES
9.1 Rights and Remedies.
(a) Upon the occurrence and during the continuance of an Event of Default, Collateral Agent
may, and at the written direction of any Lender shall, without notice or demand, do any or all of
the following: (i) deliver notice of the Event of Default to Borrower, (ii) by notice to Borrower
declare all Obligations immediately due and payable (but if an Event of Default described in
Section 8.5 occurs all Obligations shall be immediately due and payable without any action by
Collateral Agent or the Lenders) or (iii) by notice to Borrower suspend or terminate the
obligations, if any, of the Lenders to advance money or extend credit for Borrower’s benefit under
this Agreement or under any other agreement between Borrower and Collateral Agent and/or the
Lenders (but if an Event of Default described in Section 8.5 occurs all obligations, if any, of the
Lenders to advance money or extend credit for Borrower’s benefit under this Agreement or under any
other agreement between Borrower and Collateral Agent and/or the Lenders shall be immediately
terminated without any action by Collateral Agent or the Lenders).
(b) Without limiting the rights of the Collateral Agent and the Lenders set forth in Section
9.1(a) above, upon the occurrence and during the continuance of an Event of Default Collateral
Agent shall have the right, without notice or demand, to do any or all of the following:
(i) foreclose upon and/or sell or otherwise liquidate, the Collateral;
(ii) apply to the Obligations any (a) balances and deposits of Borrower that Collateral Agent
or any Lender holds or controls, or (b) any amount held or controlled by Collateral Agent or any
Lender owing to or for the credit or the account of Borrower; and/or
(iii) commence and prosecute an Insolvency Proceeding or consent to Borrower commencing any
Insolvency Proceeding.
(c) Without limiting the rights of the Collateral Agent and the Lenders set forth in Sections
9.1(a) and (b) above, upon the occurrence and during the continuance of an Event of Default
Collateral Agent shall have the right, without notice or demand, to do any or all of the following:
(i) settle or adjust disputes and claims directly with Account Debtors for amounts on terms
and in any order that Collateral Agent considers advisable, notify any Person owing Borrower money
of Collateral Agent’s security interest in such funds, and verify the amount of such account;
(ii) make any payments and do any acts it considers necessary or reasonable to protect the
Collateral and/or its security interest in the Collateral. Borrower shall assemble the Collateral
if Collateral Agent requests and make it available in a location as Collateral Agent reasonably
designates. Collateral Agent may enter premises where the Collateral is located, take and maintain
possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which
appears to be prior or superior to its security interest and pay all expenses incurred. Borrower
grants Collateral Agent a license to enter and occupy any of its premises, without charge, to
exercise any of Collateral Agent’s rights or remedies;
(iii) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, and/or
advertise for sale, the Collateral. Collateral Agent is hereby granted a non-exclusive,
royalty-free license or other right to use, without charge, Borrower’s labels, patents, copyrights,
mask works, rights of use of any name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in connection with Collateral
Agent’s exercise of its rights under this Section 9.1, Borrower’s rights under all licenses and all
franchise agreements inure to Collateral Agent, for the benefit of the Lenders;
(iv) place a “hold” on any account maintained with Collateral Agent or the Lenders and/or
deliver a notice of exclusive control, any entitlement order, or other directions or instructions
pursuant to any Control Agreement or similar agreements providing control of any Collateral;
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(v) demand and receive possession of Borrower’s Books;
(vi) appoint a receiver to seize, manage and realize any of the Collateral, and such receiver
shall have any right and authority as any competent court will grant or authorize in accordance
with any applicable law, including any power or authority to manage the business of Borrower; and
(vii) Subject to clauses 9.1(a) and (b), exercise all rights and remedies available to
Collateral Agent under the Loan Documents or at law or equity, including all remedies provided
under the Code (including disposal of the Collateral pursuant to the terms thereof).
9.2 Power of Attorney. Borrower hereby irrevocably appoints Collateral Agent as its lawful
attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of
Default, to: (a) endorse Borrower’s name on any checks or other forms of payment or security; (b)
sign Borrower’s name on any invoice or xxxx of lading for any Account or drafts against Account
Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account
Debtors, for amounts and on terms Collateral Agent determines reasonable; (d) make, settle, and
adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge,
encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the
Collateral into the name of Collateral Agent or a third party as the Code or any applicable law
permits. Borrower hereby appoints Collateral Agent as its lawful attorney-in-fact to sign
Borrower’s name on any documents necessary to perfect or continue the perfection of Collateral
Agent’s security interest in the Collateral regardless of whether an Event of Default has occurred
until all (other than inchoate indemnity obligations) Obligations have been satisfied in full and
Collateral Agent and the Lenders are under no further obligation to make Credit Extensions
hereunder. Collateral Agent’s foregoing appointment as Borrower’s attorney in fact, and all of
Collateral Agent’s rights and powers, coupled with an interest, are irrevocable until all
Obligations (other than inchoate indemnity obligations) have been fully repaid and performed and
Collateral Agent’s and the Lenders’ obligation to provide Credit Extensions terminates.
9.3 Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.5
or fails to pay any premium thereon or fails to pay any other amount to a third party which
Borrower is obligated to pay under this Agreement or any other Loan Document, Collateral Agent may
obtain such insurance or make such payment, and all amounts so paid by Collateral Agent are
Lenders’ Expenses and immediately due and payable, bearing interest at the Default Rate, and
secured by the Collateral. Collateral Agent will make reasonable efforts to provide Borrower with
notice of Collateral Agent obtaining such insurance or making such payment at the time it is
obtained or paid or within a reasonable time thereafter. No such payments by Collateral Agent are
deemed an agreement to make similar payments in the future or Collateral Agent’s waiver of any
Event of Default.
9.4 Application of Payments and Proceeds. Notwithstanding anything to the contrary contained
in this Agreement, upon the occurrence and during the continuance of an Event of Default, (a)
Borrower irrevocably waives the right to direct the application of any and all payments at any time
or times thereafter received by Collateral Agent from or on behalf of Borrower of all or any part
of the Obligations, and, as between Borrower on the one hand and Collateral Agent and Lenders on
the other, Collateral Agent shall have the continuing and exclusive right to apply and to reapply
any and all payments received against the Obligations in such manner as Collateral Agent may deem
advisable notwithstanding any previous application by Collateral Agent, and (b) the proceeds of any
sale of, or other realization upon all or any part of the Collateral shall be applied: first, to
the Lenders’ Expenses; second, to accrued and unpaid interest on the Obligations (including any
interest which, but for the provisions of the United States Bankruptcy Code, would have accrued on
such amounts); third, to the principal amount of the Obligations outstanding; and fourth, to any
other indebtedness or obligations of Borrower owing to Collateral Agent or any Lender under the
Loan Documents. Any balance remaining shall be delivered to Borrower or to whoever may be lawfully
entitled to receive such balance or as a court of competent jurisdiction may direct. In carrying
out the foregoing, (x) amounts received shall be applied in the numerical order provided until
exhausted prior to the application to the next succeeding category, and (y) each of the Persons
entitled to receive a payment in any particular category shall receive an amount equal to its pro
rata share of amounts available to be applied
pursuant thereto for such category. Any reference in this Agreement to an allocation between
or sharing by the Lenders of any right, interest or obligation “ratably,” “proportionally” or in
similar terms shall refer to Pro Rata Share unless expressly provided otherwise. Collateral Agent,
or if applicable, each Lender, shall promptly remit to the other Lenders such sums as may be
necessary to ensure the ratable repayment of each Lender’s portion of any
17
Term
Loan and the ratable
distribution of interest, fees and reimbursements paid or made by Borrower. Notwithstanding the
foregoing, a Lender receiving a scheduled payment shall not be responsible for determining whether
the other Lenders also received their scheduled payment on such date; provided, however, if it is
later determined that a Lender received more than its ratable share of scheduled payments made on
any date or dates, then such Lender shall remit to Collateral Agent or other Lenders such sums as
may be necessary to ensure the ratable payment of such scheduled payments, as instructed by
Collateral Agent. If any payment or distribution of any kind or character, whether in cash,
properties or securities, shall be received by a Lender in excess of its ratable share, then the
portion of such payment or distribution in excess of such Lender’s ratable share shall be received
by such Lender in trust for and shall be promptly paid over to the other Lender for application to
the payments of amounts due on the other Lenders’ claims. To the extent any payment for the
account of Borrower is required to be returned as a voidable transfer or otherwise, the Lenders
shall contribute to one another as is necessary to ensure that such return of payment is on a pro
rata basis. If any Lender shall obtain possession of any Collateral, it shall hold such Collateral
for itself and as agent and bailee for Collateral Agent and other Lenders for purposes of
perfecting Collateral Agent’s security interest therein.
9.5 Liability for Collateral. So long as Collateral Agent and the Lenders comply with
reasonable banking practices regarding the safekeeping of the Collateral in the possession or under
the control of Collateral Agent and the Lenders, Collateral Agent and the Lenders shall not be
liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any
carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or
destruction of the Collateral.
9.6 No Waiver; Remedies Cumulative. Collateral Agent’s failure, at any time or times, to
require strict performance by Borrower of any provision of this Agreement or any other Loan
Document shall not waive, affect, or diminish any right of Collateral Agent thereafter to demand
strict performance and compliance herewith or therewith. No waiver hereunder shall be effective
unless signed by Collateral Agent and then is only effective for the specific instance and purpose
for which it is given. Collateral Agent’s rights and remedies under this Agreement and the other
Loan Documents are cumulative. Collateral Agent has all rights and remedies provided under the
Code, any applicable law, by law, or in equity. Collateral Agent’s exercise of one right or remedy
is not an election, and Collateral Agent’s waiver of any Event of Default is not a continuing
waiver. Collateral Agent’s delay in exercising any remedy is not a waiver, election, or
acquiescence.
9.7 Demand Waiver. Borrower waives, to the fullest extent permitted by law, demand, notice of
default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Collateral Agent on which Borrower is liable.
10. NOTICES
All notices, consents, requests, approvals, demands, or other communication (collectively,
“Communication”) by any party to this Agreement or any other Loan Document must be in writing and
shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual
receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or
certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when
sent by facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight
courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of
which shall be addressed to the party to be notified and sent to the address, facsimile number, or
email address indicated below. Any of Collateral Agent, Lender or Borrower may change its mailing
or electronic mail address or facsimile number by giving the other party written notice thereof in
accordance with the terms of this Section 10.
If to Borrower:
|
SOMAXON PHARMACEUTICALS, INC. | |
| 0000 Xxxxxx Xxxxxxxx Xxxx, Xxxxx 000 | ||
| Xxx Xxxxx, Xxxxxxxxxx 00000 | ||
| Attn: Xxxx X. Xxxxxx, SVP, Chief Financial Officer | ||
| Fax: (000) 000-0000 |
18
with a copy to:
|
SOMAXON PHARMACEUTICALS, INC. | |
| 0000 Xxxxxx Xxxxxxxx Xxxx, Xxxxx 000 | ||
| Xxx Xxxxx, Xxxxxxxxxx 00000 | ||
| Attn: Xxxxxxx X. Xxxxxxx, General Counsel | ||
| Fax: (000) 000-0000 | ||
and with a copy to:
|
Xxxxxx & Xxxxxxx LLP | |
| 00000 Xxxx Xxxxx Xxxxx, Xxxxx 000 | ||
| Xxx Xxxxx, Xxxxxxxxxx 00000 | ||
| Attn: Xxxxxxx X. Xxxxxx, Esquire | ||
| Fax: (000) 000-0000 | ||
If to Collateral Agent:
|
Oxford Finance LLC | |
| 000 Xxxxx Xxxxxxx Xxxxxx | ||
| Xxxxxxxxxx, Xxxxxxxx 00000 | ||
| Attention: General Counsel | ||
| Fax: (000) 000-0000 | ||
with a copy to:
|
DLA Piper LLP (US) | |
| 0000 Xxxxxxxxx Xxxxx, Xxxxx 0000 | ||
| Xxx Xxxxx, Xxxxxxxxxx 00000-0000 | ||
| Attn: Xxxx Xxxxxx | ||
| Fax: (000) 000-0000 |
11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER, AND JUDICIAL REFERENCE
California law governs the Loan Documents without regard to principles of conflicts of law.
Borrower, Collateral Agent and each Lender each submit to the exclusive jurisdiction of the State
and Federal courts in Santa Xxxxx County, California; provided, however, that nothing in this
Agreement shall be deemed to operate to preclude Collateral Agent or Lenders from bringing suit or
taking other legal action in any other jurisdiction to realize on the Collateral or any other
security for the Obligations, or to enforce a judgment or other court order in favor of Collateral
Agent or Lenders. Borrower expressly submits and consents in advance to such jurisdiction in any
action or suit commenced in any such court, and Borrower hereby waives any objection that it may
have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby
consents to the granting of such legal or equitable relief as is deemed appropriate by such court.
Borrower hereby waives personal service of the summons, complaints, and other process issued in
such action or suit and agrees that service of such summons, complaints, and other process may be
made by registered or certified mail addressed to Borrower at the address set forth in, or
subsequently provided by Borrower in accordance with, Section 10 of this Agreement and that service
so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or
three (3) days after deposit in the U.S. mails, proper postage prepaid.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER, COLLATERAL AGENT AND EACH LENDER EACH
WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF
DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
19
WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A
TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties
hereto agree that any and all disputes or controversies of any nature between them arising at any
time shall be decided by a reference to a private judge, mutually selected by the parties (or, if
they cannot agree, by the
Presiding Judge of the Santa Xxxxx County, California Superior Court) appointed in accordance with
California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law
if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a
jury, in Santa Xxxxx County, California; and the parties hereby submit to the jurisdiction of such
court. The reference proceedings shall be conducted pursuant to and in accordance with the
provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private
judge shall have the power, among others, to grant provisional relief, including without
limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions
and appointing receivers. All such proceedings shall be closed to the public and confidential and
all records relating thereto shall be permanently sealed. If during the course of any dispute, a
party desires to seek provisional relief, but a judge has not been appointed at that point pursuant
to the judicial reference procedures, then such party may apply to the Santa Xxxxx County,
California Superior Court for such relief. The proceeding before the private judge shall be
conducted in the same manner as it would be before a court under the rules of evidence applicable
to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in
the same manner as it would be before a court under the rules of discovery applicable to judicial
proceedings. The private judge shall oversee discovery and may enforce all discovery rules and
orders applicable to judicial proceedings in the same manner as a trial court judge. The parties
agree that the selected or appointed private judge shall have the power to decide all issues in the
action or proceeding, whether of fact or of law, and shall report a statement of decision thereon
pursuant to California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the
right of any party at any time to exercise self-help remedies, foreclose against collateral, or
obtain provisional remedies. The private judge shall also determine all issues relating to the
applicability, interpretation, and enforceability of this paragraph.
12. GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not transfer, pledge or assign this Agreement or any
rights or obligations under it without Collateral Agent’s prior written consent (which may be
granted or withheld in Collateral Agent’s discretion, subject to Section 12.6). The Lenders have
the right, without the consent of or notice to Borrower, to sell, transfer, assign, pledge,
negotiate, or grant participation in (any such sale, transfer, assignment, negotiation, or grant of
a participation, a “Lender Transfer”) all or any part of, or any interest in, the Lenders’
obligations, rights, and benefits under this Agreement and the other Loan Documents; provided,
however, that any such Lender Transfer (other than a transfer, pledge, sale or assignment to an
Eligible Assignee) of its obligations, rights, and benefits under this Agreement and the other Loan
Documents shall require the prior written consent of the Required Lenders (such approved assignee,
an “Approved Lender”). Borrower and Collateral Agent shall be entitled to continue to deal solely
and directly with such Lender in connection with the interests so assigned until Collateral Agent
shall have received and accepted an effective assignment agreement in form satisfactory to
Collateral Agent, executed, delivered and fully completed by the applicable parties thereto, and
shall have received such other information regarding such Eligible Assignee or Approved Lender as
Collateral Agent reasonably shall require. Notwithstanding anything to the contrary contained
herein, so long as no Event of Default has occurred and is continuing, no Lender Transfer (other
than a Lender Transfer (i) in respect of the Warrants or (ii) in connection with (x) assignments by
a Lender due to a forced divestiture at the request of any regulatory agency; or (y) a Lender’s own
financing or securitization transactions and upon the occurrence of a default, event of default or
similar occurrence with respect to such financing or securitization transaction) shall be permitted
to any Person if such person is a direct competitor of Borrower as determined by Collateral Agent,
without Borrower’s consent.
12.2 Indemnification. Borrower agrees to indemnify, defend and hold Collateral Agent and the
Lenders and their respective directors, officers, employees, agents, attorneys, or any other Person
affiliated with or representing Collateral Agent or the Lenders (each, an “Indemnified Person”)
harmless against: (a) all obligations, demands, claims, and liabilities (collectively, “Claims”)
asserted by any other party in connection with; following; or arising from, out of or related to,
the transactions contemplated by the Loan Documents; and (b) all losses or Lenders’ Expenses
incurred, or paid by Indemnified Person in connection with; following; or arising from, out of or
related to, the transactions contemplated by the Loan Documents between Collateral Agent, and/or
the Lenders and Borrower (including reasonable attorneys’ fees and expenses), except for Claims
and/or losses directly caused by such Indemnified Person’s gross negligence or willful misconduct.
Borrower hereby further indemnifies, defends and holds each Indemnified Person harmless from and
against any and all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the
fees and disbursements of counsel for such Indemnified Person) in connection with any
investigative,
response, remedial, administrative or judicial matter or proceeding, whether or not such
Indemnified Person shall be designated a party thereto and including any such proceeding initiated
by or on behalf of Borrower, and the reasonable expenses of investigation by engineers,
environmental consultants and similar technical personnel and any commission, fee or compensation
claimed by any broker (other than any broker retained by Collateral Agent or Lenders) asserting any
right to payment for the transactions contemplated hereby which may be imposed on, incurred by or
asserted against such Indemnified Person as a result of or in connection with the transactions
contemplated hereby and the use or intended use of the proceeds of the loan proceeds.
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12.3 Time of Essence. Time is of the essence for the performance of all Obligations in this
Agreement.
12.4 Severability of Provisions. Each provision of this Agreement is severable from every
other provision in determining the enforceability of any provision.
12.5 Correction of Loan Documents. Collateral Agent and the Lenders may correct patent errors
and fill in any blanks in this Agreement and the other Loan Documents consistent with the agreement
of the parties.
12.6 Amendments in Writing; Integration. (a) No amendment, modification, termination or
waiver of any provision of this Agreement or any other Loan Document, no approval or consent
thereunder, or any consent to any departure by Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed by Borrower, Collateral Agent and the Required
Lenders provided that
(i) no such amendment, waiver or other modification that would have the effect of increasing
or reducing a Lender’s Term Loan Commitment or Commitment Percentage shall be effective as to such
Lender without such Lender’s written consent;
(ii) no such amendment, waiver or modification that would affect the rights and duties of
Collateral Agent shall be effective without Collateral Agent’s written consent or signature;
(iii) no such amendment, waiver or other modification shall, unless signed by all the Lenders
directly affected thereby, (A) reduce the principal of, rate of interest on or any fees with
respect to any Term Loan or forgive any principal, interest (other than default interest) or fees
(other than late charges) with respect to any Term Loan (B) postpone the date fixed for, or waive,
any payment of principal of any Term Loan or of interest on any Term Loan (other than default
interest) or any fees provided for hereunder (other than late charges or for any termination of any
commitment); (C) change the definition of the term “Required Lenders” or the percentage of Lenders
which shall be required for Lenders to take any action hereunder; (D) release all or substantially
all or any material portion of the Collateral, authorize Borrower to sell or otherwise dispose of
all or substantially all or any material portion of the Collateral or release any guarantor of all
or any portion of the Obligations or its guaranty obligations with respect thereto, except, in each
case with respect to this clause (D), as otherwise may be expressly permitted under this Agreement
or the other Loan Documents (including in connection with any disposition permitted hereunder); (E)
amend, waive or otherwise modify this Section 12.6 or the definitions of the terms used in this
Section 12.6 insofar as the definitions affect the substance of this Section 12.6; (F) consent to
the assignment, delegation or other transfer by Borrower of any of its rights and obligations under
any Loan Document or release Borrower of its payment obligations under any Loan Document, except,
in each case with respect to this clause (F), pursuant to a merger or consolidation permitted
pursuant to this Agreement; (G) amend any of the provisions of Section 9.4 or amend any of the
definitions Pro Rata Share, Term Loan Commitment, Commitment Percentage or that provide for the
Lenders to receive their Pro Rata Shares of any fees, payments, setoffs or proceeds of Collateral
hereunder; (H) subordinate the Liens granted in favor of Collateral Agent securing the Obligations;
or (I) amend any of the provisions of Section 12.10. It is hereby understood and agreed that all
Lenders shall be deemed directly affected by an amendment, waiver or other modification of the type
described in the preceding clauses (C), (D), (E), (F), (G) and (H) of the preceding sentence;
(iv) the provisions of the foregoing clauses (i), (ii) and (iii) are subject to the provisions
of any interlender or agency agreement among the Lenders and Collateral Agent pursuant to which any
Lender may agree to give its consent in connection with any amendment, waiver or modification of
the Loan Documents only in the event of the unanimous agreement of all Lenders.
21
(b) Other than as expressly provided for in Section 12.6(a)(i)-(iii), Collateral Agent may, if
requested by the Required Lenders, from time to time designate covenants in this Agreement less
restrictive by notification to a representative of Borrower.
(c) This Agreement and the Loan Documents represent the entire agreement about this subject
matter and supersede prior negotiations or agreements. All prior agreements, understandings,
representations, warranties, and negotiations between the parties about the subject matter of this
Agreement and the Loan Documents merge into this Agreement and the Loan Documents.
12.7 Counterparts. This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and delivered, is an
original, and all taken together, constitute one Agreement.
12.8 Survival. All covenants, representations and warranties made in this Agreement continue
in full force until this Agreement has terminated pursuant to its terms and all Obligations (other
than inchoate indemnity obligations and any other obligations which, by their terms, are to survive
the termination of this Agreement) have been satisfied. The obligation of Borrower in Section 12.2
to indemnify each Lender and Collateral Agent, as well as the confidentiality provisions in Section
12.9 below, shall survive until the statute of limitations with respect to such claim or cause of
action shall have run.
12.9 Confidentiality. In handling any confidential information, Lenders and Collateral Agent
shall exercise the same degree of care that each exercises for its own proprietary information, but
disclosure of information may be made: (a) subject to the terms and conditions of this Agreement,
to Lenders’ and Collateral Agent’s Subsidiaries or Affiliates, excluding warrant holders other than
the existing Lenders, (b) subject to the terms and conditions of this Agreement, the Lenders’
assignees in connection with the Loan Documents, and their Affiliates; (c) to prospective
transferees or purchasers of any interest in the Credit Extensions (provided, however, Lenders and
Collateral Agent shall use commercially reasonable efforts to obtain such prospective transferee’s
or purchaser’s agreement to the terms of this provision); (d) as required by law, regulation,
subpoena, or other order; (e) to regulators or as otherwise required in connection with an
examination or audit; (f) as Collateral Agent and Lenders consider reasonably appropriate in
exercising remedies under this Agreement; and (g) to third-party service providers of Collateral
Agent and Lenders so long as such service providers have executed a confidentiality agreement with
Lenders and Collateral Agent with terms no less restrictive than those contained herein.
Confidential information does not include information that either: (i) is in the public domain or
in Lenders’ and/or Collateral Agent’s possession when disclosed to Lenders and/or Collateral Agent,
or becomes part of the public domain after disclosure to Lenders and/or Collateral Agent; or (ii)
is disclosed to Lenders and/or Collateral Agent by a third party, if Lenders and/or Collateral
Agent does not know that the third party is prohibited from disclosing the information.
Collateral Agent and Lenders may use confidential information for any purpose, including,
without limitation, for the development of client databases, reporting purposes, and market
analysis, so long as Collateral Agent and Lenders do not disclose Borrower’s identity or the
identity of any person associated with Borrower unless otherwise expressly permitted by this
Agreement. The provisions of the immediately preceding sentence shall survive the termination of
this Agreement.
12.10 Right of Set Off. Borrower hereby grants to Collateral Agent and to each Lender, a
lien, security interest and right of set off as security for all Obligations to Collateral Agent
and each Lender hereunder, whether now existing or hereafter arising upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody, safekeeping or
control of Collateral Agent or the Lenders or any entity under the control of Collateral Agent or
the Lenders (including a Collateral Agent affiliate) or in transit to any of them. At any time
after the occurrence and during the continuance of an Event of Default, without demand or notice,
Collateral Agent or the Lenders may set off the same or any part thereof and apply the same to any
liability or obligation of Borrower even though unmatured and regardless of the adequacy of any
other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE COLLATERAL AGENT TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS,
PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF
BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
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13. ACCELERATION EVENT In the event a generic version of SILENOR™(doxepin HCl) enters the
market (the “Acceleration Event”), the Obligations shall automatically become due and payable in
full five (5) days after the occurrence of such event.
14. DEFINITIONS
14.1 Definitions. As used in this Agreement, the following terms have the following meanings:
“Acceleration Event” is defined in Article 13.
“Account” is any “account” as defined in the Code with such additions to such term as may
hereafter be made, and includes, without limitation, all accounts receivable and other sums owing
to Borrower.
“Account Debtor” is any “account debtor” as defined in the Code with such additions to such
term as may hereafter be made.
“Affiliate” of any Person is a Person that owns or controls directly or indirectly the Person,
any Person that controls or is controlled by or is under common control with the Person, and each
of that Person’s senior executive officers, directors, partners and, for any Person that is a
limited liability company, that Person’s managers and members.
“Agreement” is defined in the preamble hereof.
“Amortization Date” is January 1, 2012.
“Anti-Terrorism Laws” means any laws relating to terrorism or money laundering, including
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.
“Approved Fund” means any (i) investment company, fund, trust, securitization vehicle or
conduit that is (or will be) engaged in making, purchasing, holding or otherwise investing in
commercial loans and similar extensions of credit in the ordinary course of its business or (ii)
any Person (other than a natural person) which temporarily warehouses loans for any Lender or any
entity described in the preceding clause (i) and that, with respect to each of the preceding
clauses (i) and (ii), is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or
(c) a Person (other than a natural person) or an Affiliate of a Person (other than a natural
person) that administers or manages a Lender.
“Approved Lender” has the meaning given it in Section 12.1.
“ATM Agreement” is that certain At The Market Equity Offering Sales Agreement by and between
Citadel and Borrower, together with all schedules and exhibits thereto and all instruments executed
and/or delivered in connection therewith, all in form and content reasonably acceptable to
Collateral Agent, pursuant to which Borrower shall be permitted to raise gross proceeds of at least
Thirty Million Dollars ($30,000,000) from the sale and issues of Borrower’s equity securities.
“Basic Rate” means the per annum rate of interest (based on a year of 360 days) equal to the
greater of (i) seven and one half percent (7.50%) and (ii) the sum of (a) U.S. Treasury note yield
to maturity for a term equal to the Treasury Note Maturity as reported in the Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading “U.S. Government
Securities/Treasury Constant Maturities” three (3) Business Days prior to the Funding Date, plus
(b) six and sixty-five one hundredths percent (6.65%). (In the event Release H.15 is no longer
published, Lenders shall select a comparable publication to determine the U.S. Treasury note yield
to maturity.)
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“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” is defined in the preamble hereof.
“Borrower’s Books” are all Borrower’s books and records including ledgers, federal, and state
tax returns, records regarding Borrower’s assets or liabilities, the Collateral, business
operations or financial condition, and all computer programs or storage or any equipment containing
such information.
“Business Day” is any day that is not a Saturday, Sunday or a day on which Collateral Agent is
closed.
“Carmel Mountain Facility” means Borrower’s leased location located at 0000 Xxxxxx Xxxxxxxx
Xxxx, Xxxxx 000, Xxx Xxxxx, XX 00000.
“Cash Equivalents” are (a) marketable direct obligations issued or unconditionally guaranteed
by the United States or any agency or any State thereof having maturities of not more than one (1)
year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after
its creation and having the highest rating from either Standard & Poor’s Ratings Group or Xxxxx’x
Investors Service, Inc., and (c) certificates of deposit maturing no more than one (1) year after
issue provided that the account in which any such certificate of deposit is maintained is subject
to a Control Agreement in favor of Collateral Agent. For the avoidance of doubt, the direct
purchase by Borrower, co-borrower, or any subsidiary of Borrower of any Auction Rate Securities, or
purchasing participations in, or entering into any type of swap or other derivative transaction, or
otherwise holding or engaging in any ownership interest in any type of Auction Rate Security by
Borrower, co-borrower, or any subsidiary of Borrower shall be conclusively determined by the
Lenders as an ineligible Cash Equivalent, and any such transaction shall expressly violate each
other provision of this Agreement governing Permitted Investments. Notwithstanding the foregoing,
Cash Equivalents does not include and Borrower and its Subsidiaries are prohibited from purchasing,
purchasing participations in, entering into any type of swap or other equivalent derivative
transaction, or otherwise holding or engaging in any ownership interest in any type of debt
instrument, including, without limitation, any corporate or municipal bonds with a long-term
nominal maturity for which the interest rate is reset through a dutch auction and more commonly
referred to as an auction rate security.
“Citadel” is Citadel Securities LLC.
“Claims” are defined in Section 12.2.
“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in
effect in the State of California; provided, that, to the extent that the Code is used to define
any term herein or in any Loan Document and such term is defined differently in different Articles
or Divisions of the Code, the definition of such term contained in Article or Division 9 shall
govern; provided further, 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, Collateral Agent’s
Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other
than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and
in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such
attachment, perfection, priority, or remedies and for purposes of definitions relating to such
provisions.
“Collateral” is any and all properties, rights and assets of Borrower described on Exhibit
A and any and all other properties, rights and assets of Borrower granted by Borrower to
Collateral Agent, for the ratable benefit of the Lenders, or arising under the Code or other
applicable law, now, or in the future.
“Collateral Account” is any Deposit Account, Securities Account, or Commodity Account.
“Collateral Agent” means, Oxford, not in its individual capacity, but solely in its capacity
as agent on behalf of and for the benefit of the Lenders.
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“Collateral Agent-Related Person” means the Collateral Agent, together with its Affiliates,
and the officers, directors, employees, agents, advisors, auditors and attorneys-in-fact of such
Persons; provided, however, that no Collateral Agent-Related Person shall be an Affiliate of
Borrower.
“Comerica” means Comerica Bank, a Texas banking association.
“Comerica Letter of Credit” means that certain letter of credit issued by Comerica on behalf
of Borrower in favor of TREA Pacific Plaza, LLV, provided that the principal amount of such letter
of credit at no time exceeds Two Hundred Thousand Dollars ($200,000).
“Comerica Letter of Credit Account” means that certain money market account (account no.
1894499381) held by Borrower at Comerica Bank as collateral for the Comerica Letter of Credit;
provided that the principal amount held in such account at no time exceeds Two Hundred Ten Thousand
Dollars ($210,000).
“Commitment Percentage” is set forth in Schedule 1.1, as amended from time to time.
“Commodity Account” is any “commodity account” as defined in the Code with such additions to
such term as may hereafter be made.
“Communication” is defined in Section 10.
“Compliance Certificate” is that certain certificate in the form attached hereto as
Exhibit C.
“Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or
not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation
of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted
or sold with recourse by that Person, or for which that Person is directly or indirectly liable;
(b) any obligations for undrawn letters of credit for the account of that Person; and (c) all
obligations from any interest rate, currency or commodity swap agreement, interest rate cap or
collar agreement, or other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent
Obligation” does not include endorsements in the ordinary course of business. The amount of a
Contingent Obligation is the stated or determined amount of the primary obligation for which the
Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability
for it determined by the Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.
“Control Agreement” is any control agreement entered into among the depository institution at
which Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary
at which Borrower maintains a Securities Account or a Commodity Account, Borrower, and Collateral
Agent pursuant to which Collateral Agent obtains control (within the meaning of the Code) for the
benefit of the Lenders over such Deposit Account, Securities Account, or Commodity Account.
“Credit Extension” is any Term Loan or any other extension of credit by Collateral Agent or
Lenders for Borrower’s benefit.
“Default Rate” is defined in Section 2.3(b).
“Deposit Account” is any “deposit account” as defined in the Code with such additions to such
term as may hereafter be made.
“Designated Deposit Account” is Borrower’s deposit account, account number 0000000000,
maintained with SVB.
“Dollars,” “dollars” and “$” each mean lawful money of the United States.
“Effective Date” is defined in the preamble of this Agreement.
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“Eligible Assignee” means (i) a Lender, (ii) an Affiliate of a Lender, (iii) an Approved Fund
and (iv) any commercial bank, savings and loan association or savings bank or any other entity
which is an “accredited investor” (as defined in Regulation D under the Securities Act of 1933, as
amended) and which extends credit or buys loans as one of its businesses, including insurance
companies, mutual funds, lease financing companies and commercial finance companies, in each case,
which either (A) has a rating of BBB or higher from Standard & Poor’s Rating Group and a rating of
Baa2 or higher from Xxxxx’x Investors Service, Inc. at the date that it becomes a Lender or (B) has
total assets in excess of Five Billion Dollars ($5,000,000,000), and in each case of clauses (i)
through (iv), which, through its applicable lending office, is capable of lending to Borrower
without the imposition of any withholding or similar taxes; provided that notwithstanding the
foregoing, “Eligible Assignee” shall not include (i) Borrower, any guarantor or any of Borrower’s
or any such guarantor’s Affiliates or Subsidiaries or (ii) unless an Event of Default has occurred
and is continuing, a direct competitor of Borrower or a guarantor or a vulture hedge fund, each as
determined by Collateral Agent. Notwithstanding the foregoing, (x) in connection with assignments
by a Lender due to a forced divestiture at the request of any regulatory agency, the restrictions
set forth herein shall not apply and Eligible Assignee shall mean any Person or party and (y) in
connection with a Lender’s own financing or securitization transactions, the restrictions set forth
herein shall not apply and Eligible Assignee shall mean any Person or party providing such
financing or formed to undertake such securitization transaction and any transferee of such Person
or party upon the occurrence of a default, event of default or similar occurrence with respect to
such financing or securitization transaction; provided that no such sale, transfer, pledge or
assignment under this clause (y) shall release such Lender from any of its obligations hereunder or
substitute any such Person or party for such Lender as a party hereto until Collateral Agent shall
have received and accepted an effective assignment agreement from such Person or party in form
satisfactory to Collateral Agent executed, delivered and fully completed by the applicable parties
thereto, and shall have received such other information regarding such Eligible Assignee as
Collateral Agent reasonably shall require.
“Equipment” is all “equipment” as defined in the Code with such additions to such term as may
hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles
(including motor vehicles and trailers), and any interest in any of the foregoing.
“ERISA” is the Employee Retirement Income Security Act of 1974, as amended, and its
regulations.
“Existing Indebtedness” means the indebtedness of Borrower to Comerica in the aggregate
principal outstanding amount as of the Effective Date of approximately Two Thousand Three Hundred
Ninety Five and 83/100 Dollars ($2,395.83) pursuant to that certain Loan and Security Agreement,
dated as of February 7, 2011, entered into by and between Comerica and Borrower; provided that the
“Existing Indebtedness” shall not include the Comerica Letter of Credit.
“Existing Comerica Account” means, collectively, those certain accounts (account numbers:
1894397882, BG5040274, and 1894397890) maintained by Borrower with Comerica Bank, existing as of
the Effective Date; provided that the aggregate amount in such accounts does not exceed One Million
One Hundred Thousand Dollars ($1,100,000) at any time; (ii) within fifteen (15) days of the
Effective date there is a Control Agreement, in favor of, and in form and substance reasonably
acceptable to, Collateral Agent with respect to such accounts and (iii) such accounts shall be
terminated within one hundred eighty (180) days of the Effective Date.
“Event of Default” is defined in Section 8.
“Final Payment” is a payment (in addition to and not a substitution for the regular monthly
payments of principal plus accrued interest) due on the earliest to occur of (a) the Maturity Date,
or (b) the acceleration of any Term Loan, or (c) the prepayment of a Term Loan pursuant to Section
2.2(c) or (d), equal to the original principal amount of such Term Loan multiplied by the Final
Payment Percentage, payable to Lenders in accordance with their respective Pro Rata Shares.
“Final Payment Percentage” is four and one quarter percent (4.25%).
“Funding Date” is any date on which a Credit Extension is made to or on account of Borrower
which shall be a Business Day.
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“GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other Person as may be approved by a significant segment of the
accounting profession in the United States, which are applicable to the circumstances as of the
date of determination.
“General Intangibles” is all “general intangibles” as defined in the Code in effect on the
date hereof with such additions to such term as may hereafter be made, and includes without
limitation, all copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work, whether published or unpublished, any
patents, trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights, including any rights to
unpatented inventions, payment intangibles, royalties, contract rights, goodwill, franchise
agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims,
income and other tax refunds, security and other deposits, options to purchase or sell real or
personal property, rights in all litigation presently or hereafter pending (whether in contract,
tort or otherwise), insurance policies (including without limitation key man, property damage, and
business interruption insurance), payments of insurance and rights to payment of any kind.
“Governmental Approval” is any consent, authorization, approval, order, license, franchise,
permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or
other act by or in respect of, any Governmental Authority.
“Governmental Authority” is any nation or government, any state or other political subdivision
thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other
entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions
of or pertaining to government, any securities exchange and any self-regulatory organization.
“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or
services, such as reimbursement and other obligations for surety bonds and letters of credit, (b)
obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease
obligations, and (d) Contingent Obligations.
“Indemnified Person” is defined in Section 12.2.
“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 relief.
“Intellectual Property” includes all intellectual property, including without limitation, all
copyright rights, copyright applications, copyright registrations and like protections in each work
of authorship and derivative work, whether published or unpublished, any patents, patent
applications and like protections, including improvements, divisions, continuations, renewals,
reissues, extensions, and continuations-in-part of the same, trademarks, trade names, service
marks, mask works, rights of use of any name, domain names, or any other similar rights, any
applications therefor, whether registered or not, and the goodwill of the business of any Person
connected with and symbolized thereby, know-how, operating manuals, trade secret rights, clinical
and non-clinical data, rights to unpatented inventions, and any claims for damage by way of any
past, present, or future infringement of any of the foregoing.
“Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation all merchandise,
raw materials, parts, supplies, packing and shipping materials, work in process and finished
products, including without limitation such inventory as is temporarily out of any Person’s custody
or possession or in transit and including any returned goods and any documents of title
representing any of the above.
“Investment” is any beneficial ownership interest in any Person (including stock, partnership
interest or other securities), and any loan, advance or capital contribution to any Person.
27
“Key Person” means each of Borrower’s (a) President and Chief Executive Officer, who is
Xxxxxxx X. Xxxxxx as of the Effective Date and (b) Senior Vice President and Chief Financial
Officer, who is Xxxx X. Xxxxxx as of the Effective Date.
“Lender” is any one of the Lenders.
“Lenders” shall mean the Persons identified on Schedule 1.1 hereto and each assignee that
becomes a party to this Agreement pursuant to Section 12.1.
“Lenders’ Expenses” are all audit fees and expenses, costs, and expenses (including reasonable
attorneys’ fees and expenses, as well as appraisal fees, fees incurred on account of lien searches,
inspection fees, and filing fees) for preparing, amending, negotiating, administering, defending
and enforcing the Loan Documents (including, without limitation, those incurred in connection with
appeals or Insolvency Proceedings) or otherwise incurred by Collateral Agent and/or the Lenders in
connection with the Loan Documents.
“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest, or other
encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise
against any property.
“Loan Documents” are, collectively, this Agreement, the Warrants, the Perfection Certificates,
each Compliance Certificate, any subordination agreements in respect of Subordinated Debt, the
Post-Closing Letter, any note, or notes or guaranties executed by Borrower, and any other present
or future agreement entered into by Borrower for the benefit of Lenders and Collateral Agent in
connection with this Agreement, all as amended, restated, or otherwise modified.
“Loan Payment/Advance Request Form” is that certain form attached hereto as Exhibit
B-2.
“Material Adverse Change” is (a) a material impairment in the perfection or priority of
Collateral Agent’s Lien in the Collateral or in the value of such Collateral; (b) a material
adverse change in the business, operations, or condition (financial or otherwise) of Borrower; or
(c) a material impairment of the prospect of repayment of any portion of the Obligations.
“Maturity Date” is the date which is twenty-three (23) months after the Amortization Date.
“Obligations” are Borrower’s obligation to pay when due any debts, principal, interest,
Lenders’ Expenses, the Prepayment Fee, the Final Payment, and other amounts Borrower owes the
Lenders now or later, in connection with; following; or arising from, out of or related to, this
Agreement or, the other Loan Documents (other than the Warrants), including, without limitation,
all obligations relating to letters of credit (including reimbursement obligations for drawn and
undrawn letters of credit), cash management services, and foreign exchange contracts, if any, and
including interest accruing after Insolvency Proceedings begin (whether or not allowed) and debts,
liabilities, or obligations of Borrower assigned to the Lenders and/or Collateral Agent, and the
performance of Borrower’s duties under the Loan Documents (other than the Warrants).
“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.
“Operating Documents” are, for any Person, such Person’s formation documents, as certified by
the Secretary of State of such Person’s jurisdiction of organization on a date that is no earlier
than 30 days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in
current form, (b) if such Person is a limited liability company, its limited liability company
agreement (or similar agreement), and (c) if such Person is a partnership, its partnership
agreement (or similar agreement), each of the foregoing with all current amendments or
modifications thereto.
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“Payment/Advance Form” is that certain form attached hereto as Exhibit B-1.
“Payment Date” is the first (1st) calendar day of each calendar month.
“Perfection Certificate” is defined in Section 5.1.
“Permitted Indebtedness” is:
(a) Borrower’s Indebtedness to the Lenders and Collateral Agent under this Agreement and the
other Loan Documents;
(b) Indebtedness existing on the Effective Date and shown on the Perfection Certificate
(including Indebtedness in respect of the Comerica Letter of Credit);
(c) Subordinated Debt;
(d) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;
(e) Indebtedness secured by Permitted Liens;
(f) Indebtedness incurred as a result of endorsing negotiable instruments received in the
ordinary course of Borrower’s business;
(g) other unsecured Indebtedness not otherwise permitted by Section 7.4 not exceeding One
Hundred Fifty Thousand Dollars ($150,000) in the aggregate outstanding at any time; and
(h) extensions, refinancings, modifications, amendments and restatements of any items of
Permitted Indebtedness (a) through (e) above, provided that the principal amount thereof is not
increased or the terms thereof are not modified to impose materially more burdensome terms upon
Borrower or its Subsidiary, as the case may be.
“Permitted Investments” are:
(a) Investments shown on the Perfection Certificate and existing on the Effective Date;
(b) Cash Equivalents, and (ii) any Investments permitted by Borrower’s investment policy, as
amended from time to time, provided that such investment policy (and any such amendment thereto)
has been approved by the board of directors of Borrower or the audit committee of the board of
directors of Borrower;
(c) Investments consisting of the endorsement of negotiable instruments for deposit of
collection or similar transactions in the ordinary course of Borrower;
(d) Investments consisting of deposit accounts in which Collateral Agent has a first perfected
security interest;
(e) Investments accepted in connection with Transfers permitted by Section 7.1;
(f) Investments of Subsidiaries in or to other Subsidiaries or Borrower and Investments by
Borrower in Subsidiaries not to exceed One Hundred Thousand Dollars ($100,000) in the aggregate in
any fiscal year;
(g) 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 business;
29
(h) Investments in connection with joint ventures or strategic alliances in the ordinary
course of Borrower’s business consisting of the non-exclusive licensing of Intellectual Property,
the development of technology or the providing of technical support, provided that any such
Investments by Borrower do not exceed Two Hundred Fifty Thousand Dollars ($250,000) in the
aggregate in any fiscal year;
(i) 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 paragraph (h) shall not apply to Investments of Borrower in any Subsidiary; and
(j) Investments not to exceed Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate
in any fiscal year consisting of (i) travel advances and employee relocation loans and other
employee loans and advances in the ordinary course of business, and (ii) loans to employees,
officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries
pursuant to stock option plan agreements (and similar agreements) approved by Borrower’s Board of
Directors.
“Permitted Liens” are:
(a) Liens existing on the Effective Date and shown on the Perfection Certificate (including
Liens on the Comerica Letter of Credit Account) or arising under this Agreement and the other Loan
Documents;
(b) Liens for taxes, fees, assessments or other government charges or levies, either not
delinquent or being contested in good faith and for which Borrower maintains adequate reserves on
its Books, provided that no notice of any such Lien has been filed or recorded under the Internal
Revenue Code of 1986, as amended , and the Treasury Regulations adopted thereunder;
(c) purchase money Liens and capital leases (i) on Equipment acquired or held by Borrower
incurred for financing the acquisition of the Equipment securing no more than Seven Hundred Fifty
Thousand Dollars ($750,000) in the aggregate amount outstanding (exclusive of amounts under (e)
below), or (ii) existing on Equipment when acquired, if the Lien is confined to the property and
improvements and the proceeds of the Equipment;
(d) purchase money Liens or leases associated with providing automobiles to employees or
consultants with the written consent of the Collateral Agent;
(e) leases or subleases of real property granted in the ordinary course of business, and
leases, subleases, non-exclusive licenses or sublicenses of property (other than real property or
intellectual property) granted in the ordinary course of Borrower’s business, if the leases,
subleases, licenses and sublicenses do not prohibit granting Collateral Agent a security interest;
(f) non exclusive licenses of the Intellectual Property granted to third parties in the
ordinary course of business and licenses of intellectual property that could not result in a legal
transfer of title of the licensed property that may be exclusive in respects other than territory
and that may be exclusive as to territory only as to discreet geographical areas outside of the
United States; in each case pursuant to the terms of Section 7.1 hereof;
(g) statutory Liens securing claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other Persons imposed without action of such parties, provided they
have no priority over any of Collateral Agent’s Lien and the aggregate amount of such Liens does
not any time exceed Two Hundred Fifty Thousand Dollars ($250,000);
(h) Liens to secure payment of workers’ compensation, employment insurance, old-age pensions,
social security and other like obligations incurred in the ordinary course of business, provided,
they have no priority over any of Collateral Agent’s Liens and the aggregate amount of the
Indebtedness secured by such Liens does not at any time exceed Two Hundred Fifty Thousand
($250,000);
30
(i) Liens arising from judgment, decrees or attachments in circumstances not constituting an
Event of Default; and
(j) Subject to Section 6.6, Liens in favor of other financial institutions arising in
connection with Borrower’s deposit and/or securities accounts held at such institutions, provided
that Collateral Agent has a first perfected security interest in the amounts held in such deposit
and/or securities accounts; and
(k) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by
Liens described in (a) through (j), but any extension, renewal or replacement lien must be limited
to the property encumbered by the existing Lien and principal amount of the indebtedness may not
increase.
“Person” is any individual, sole proprietorship, partnership, limited liability company, joint
venture, company, trust, unincorporated organization, association, corporation, institution, public
benefit corporation, firm, joint stock company, estate, entity or government agency.
“Post-Closing Letter” means that certain Post-Closing Letter dated as of the Effective Date by
and between Collateral Agent and Borrower.
“Prepayment Fee” means with respect to any Term Loan subject to prepayment prior to the
Maturity Date, whether by mandatory or voluntary prepayment, acceleration or otherwise, an
additional fee payable to the Lenders in amount equal to one percent (1.00%) of the principal
amount of the Term Loans prepaid.
“Pro Rata Share” means, as of any date of determination, with respect to each Lender, a
percentage (expressed as a decimal, rounded to the ninth decimal place) determined by dividing the
outstanding principal amount of Term Loans held by such Lender by the aggregate outstanding
principal amount of all Term Loans.
“Registered Organization” is any “registered organization” as defined in the Code with such
additions to such term as may hereafter be made
“Required Lenders” means (i) for so long as all of the Persons that are Lenders on the
Effective Date (each an “Original Lender”) have not assigned or transferred any of their interests
in their respective Term Loans, Lenders holding one hundred percent (100%) of the aggregate
outstanding principal balance of the Term Loans, or (ii) at any time from and after any Original
Lender has assigned or transferred any interest in its Term Loans, Lenders holding, sixty-six
percent (66%) or more of the aggregate outstanding principal balance of the Term Loans, plus, in
respect of this clause (ii), (A) each Original Lender that has not assigned or transferred any
portion of its respective Term Loan and (B) each assignee of an Original Lender provided such
assignee was assigned or transferred and continues to hold one hundred percent (100%) of the
assigning Original Lender’s interest in the Term Loans (in each case in respect of clauses (A) and
(B) of this clause (ii), whether or not such Lender is included within the Lenders holding
sixty-six percent (66%) of the Terms Loans). For purposes of this definition only, a Lender shall
be deemed to include itself, and any Lender that is an Affiliate or Approved Fund of such Lender.
“Requirement of Law” is as to any Person, the organizational or governing documents of such
Person, and any law (statutory or common), treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon
such Person or any of its property or to which such Person or any of its property is subject.
“Responsible Officer” is any of the President, Chief Executive Officer, or Chief Financial
Officer of Borrower acting alone.
“Secured Promissory Note” is defined in Section 2.4.
“Secured Promissory Note Record” is a record maintained by each Lender with respect to the
outstanding Obligations owed by Borrower to Lender and credits made thereto.
31
“Securities Account” is any “securities account” as defined in the Code with such additions to
such term as may hereafter be made.
“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of Borrower’s now
or hereafter indebtedness to the Lenders (pursuant to a subordination, intercreditor, or other
similar agreement in form and substance satisfactory to Collateral Agent and the Lenders entered
into between Collateral Agent, Borrower, and the other creditor), on terms acceptable to Collateral
Agent and the Lenders.
“Subsidiary” means, with respect to any Person, any Person of which more than 50.0% of the
voting stock or other equity interests (in the case of Persons other than corporations) is owned or
controlled, directly or indirectly, by such Person or one or more of Affiliates of such Person.
“Term Loan” is defined in Section 2.2(a)(ii) hereof.
“Term Loan” is defined in Section 2.2(a)(i) hereof.
“Term Loan Commitment” means, for any Lender, the obligation of such Lender to make a Term
Loan, up to the principal amount shown on Schedule 1.1. “Term Loan Commitments” means the
aggregate amount of such commitments of all Lenders.
“Transfer” is defined in Section 7.1.
“Treasury Note Maturity” is thirty-six (36) months.
“Vista Sorrento Facility” means Borrower’s leased location located at Vista Xxxxxxxx Xxxxxxx,
Xxxxx 000, Xxx Xxxxx, XX 00000.
“Warrants” are those certain Warrants to Purchase Stock dated as of the Effective Date
executed by Borrower in favor of Lenders.
[Signature Page to Follow]
32
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the
Effective Date.
| BORROWER: | ||||||||
| SOMAXON PHARMACEUTICALS, INC. | ||||||||
| By | /s/ Xxxxxxx X. Xxxxxxx | |||||||
| Name: | Xxxxxxx X. Xxxxxxx | |||||||
| Title: | Senior Vice President, General Counsel and Secretary | |||||||
| COLLATERAL AGENT AND LENDER: | ||||||||
| OXFORD FINANCE LLC, as Collateral Agent and as a Lender | ||||||||
By |
/s/ Xxxx X. Xxxxxxxxx | |||||||
| Name: | Xxxx X. Xxxxxxxxx | |||||||
| Title: | Vice President & General Counsel | |||||||
| SILICON VALLEY BANK, as a Lender | ||||||||
By |
/s/ Xxxxx Xxxxxxx | |||||||
| Name: | Xxxxx Xxxxxxx | |||||||
| Title: | Relationship Manager | |||||||
[Signature Page to Loan and Security Agreement]
SCHEDULE 1.1
LENDERS AND COMMITMENTS
Term Loans
Term Loans
| Lender | Term Loan Commitment | Commitment Percentage | ||||||
Oxford Finance LLC |
$ | 10,000,000 | 66.66667 | % | ||||
Silicon Valley Bank |
$ | 5,000,000 | 33.33333 | % | ||||
TOTAL |
$ | 15,000,000 | 100.00 | % | ||||
EXHIBIT A
The Collateral consists of all of Borrower’s right, title and interest in and to the following
personal property:
All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights
or rights to payment of money, leases, license agreements, franchise agreements, General
Intangibles (except as provided below), commercial tort claims, documents, instruments (including
any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, all
certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is
evidenced by a writing), securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and
All Borrower’s Books relating to the foregoing, and any and all claims, rights and interests
in any of the above 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.
Notwithstanding the foregoing, the Collateral does not include any of the following, whether
now owned or hereafter acquired: (i) any copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative work, whether
published or unpublished, any patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part
of the same, trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, and the goodwill of the business of Borrower
connected with and symbolized thereby, know-how, operating manuals, trade secret rights, clinical
and non-clinical data, rights to unpatented inventions, and any claims for damage by way of any
past, present, or future infringement of any of the foregoing; (collectively “Intellectual
Property”); provided, however, the Collateral shall include all Accounts, license and royalty fees
and other revenues, proceeds, or income arising out of or relating to any of the foregoing; and
(ii) more than 65% of the total combined voting power of all classes of stock entitled to vote the
shares of capital stock (the “Shares”) of any Subsidiary of Borrower not incorporated or organized
under the laws of one of the States or jurisdictions of the United States (in the event that
Borrower demonstrates to Collateral Agent’s reasonable satisfaction that a pledge of more than
sixty five percent (65%) of the Shares creates a present and existing adverse tax consequence to
Borrower under the U.S. Internal Revenue Code).
Pursuant to the terms of a certain negative pledge arrangement with Collateral Agent and
Lenders, Borrower has agreed not to encumber any of its Intellectual Property.
EXHIBIT B-1
[See attached]
Loan Payment/Advance Request Form
DISBURSEMENT LETTER
The undersigned, being the duly elected and acting of SOMAXON PHARMACEUTICALS, INC., a Delaware
corporation with offices located at 0000 Xxxxxx Xxxxxxxx Xxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx
00000 (“Borrower”), does hereby certify to OXFORD FINANCE LLC, (“Oxford” and “Lender”), as
collateral agent (the “Collateral Agent”) in connection with that certain Loan and Security
Agreement dated as of August 2, 2011, by and between Borrower, Collateral Agent and the Lenders
from time to time party thereto (the “Loan Agreement”; with other capitalized terms used below
having the meanings ascribed thereto in the Loan Agreement) that:
1. The representations and warranties made by Borrower in Section 5 of the Loan
Agreement and in the other Loan Documents are true and correct in all material respects as of the
date hereof.
2. No event or condition has occurred that would constitute an Event of Default under the Loan
Agreement or any other Loan Document.
3. Borrower is in compliance with the covenants and requirements contained in Sections 4,
6 and 7 of the Loan Agreement.
4. All conditions referred to in Section 3 of the Loan Agreement to the making of the
Loan to be made on or about the date hereof have been satisfied or waived by Collateral Agent.
5. No Material Adverse Change has occurred.
6. The undersigned is a Responsible Officer.
[Balance of Page Intentionally Left Blank]
7. The proceeds of the Term Loan shall be disbursed as follows:
Disbursement from Oxford: |
||||
Loan Amount |
$ | 10,000,000.00 | ||
Plus: |
||||
—Deposit Received |
$ | 100,000.00 | ||
Less: |
||||
—Lender’s Legal Fees |
$ | (52,358.02 | )* | |
—Facility Fee |
$ | (100,000.00 | ) | |
Net Proceeds due from Oxford: |
$ | 9,947,641.98 | ||
Disbursement from SVB: |
||||
Loan Amount |
$ | 5,000,000.00 | ||
Plus: |
||||
—Deposit Received |
$ | 50,000.00 | ||
Less: |
||||
—Facility Fee |
$ | (50,000.00 | ) | |
Net Proceeds due from SVB: |
$ | 5,000,000.00 | ||
TOTAL TERM A NET PROCEEDS FROM LENDERS |
$ | 14,947,641.98 |
8. The aggregate net proceeds of the Term Loan shall be transferred to Borrower’s account as
follows:
Account Name:
|
SOMAXON PHARMACEUTICALS, INC. | |||
Bank Name:
|
Silicon Valley Bank | |||
Bank Address:
|
0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, XX 00000 | |||
Account Number:
|
||||
ABA Number:
|
||||
[Balance of Page Intentionally Left Blank]
| * | Legal fees and costs are through the Effective Date. Post-closing
legal fees and costs, payable after the Effective Date, to be invoiced and paid
post-closing. |
Dated as of the date first set forth above.
| BORROWER: | ||||||
| SOMAXON PHARMACEUTICALS, INC. | ||||||
By |
||||||
| Name: | ||||||
| Title: | ||||||
| AS COLLATERAL AGENT AND LENDER: | ||||||
| OXFORD FINANCE LLC | ||||||
By |
||||||
| Name: | ||||||
| Title: | ||||||
[Signature Page to Loan Payment/Advance Request Form; Disbursement Letter]
EXHIBIT B-2 — LOAN PAYMENT/ADVANCE REQUEST FORM
Deadline for same day processing is 2:00 p.m. Pacific Time*
| Fax To: | Date: |
Loan Payment:
From Account #
|
To Account # | |||||||
| (Deposit Account #) | (Loan Account #) |
Principal $
|
and/or Interest $ | |||||||
Authorized Signature:
|
Phone Number: | |||||||
Print Name/Title: |
||||||||
Loan Advance:
Complete Outgoing Wire Request section below if all or a portion of the funds from this loan
advance are for an outgoing wire.
From Account #
|
To Account # | |||||||
| (Loan Account #) | (Deposit Account #) |
Amount of Advance $ |
||||||||
All Borrower’s representations and warranties in the Loan and Security Agreement are true, correct
and complete in all material respects on the date of the request for an advance; provided, however,
that such materiality qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and provided, further that
those representations and warranties expressly referring to a specific date shall be true, accurate
and complete in all material respects as of such date:
Authorized Signature:
|
Phone Number: | |||||||
Print Name/Title: |
||||||||
Outgoing
Wire Request:
Complete only if all or a portion of funds from the loan advance above is to be wired.
Deadline for same day processing is noon, Pacific Time
Complete only if all or a portion of funds from the loan advance above is to be wired.
Deadline for same day processing is noon, Pacific Time
Beneficiary Name:
|
Amount of Wire: $ | |||||||
Beneficiary Bank:
|
Account Number: | |||||||
City and State: |
||||||||
Beneficiary Bank Transit (ABA) #:
|
Beneficiary Bank Code (Swift, Sort, Chip, etc.): | |||||||
| (For International Wire Only) |
Intermediary Bank: |
Transit (ABA) #: | |||||||
For Further Credit to: |
||||||||
Special Instruction: |
||||||||
By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be
processed in accordance with and subject to the terms and conditions set forth in the agreements(s)
covering funds transfer service(s), which agreements(s) were previously received and executed by me
(us).
Authorized Signature:
|
2nd Signature (if required): | |||||||
Print Name/Title:
|
Print Name/Title: | |||||||
| TELEPHONE #: | TELEPHONE #: |
EXHIBIT C -COMPLIANCE CERTIFICATE
TO:
|
Oxford Finance LLC, as Collateral Agent and Lender Silicon Valley Bank, as Lender | |
FROM:
|
SOMAXON PHARMACEUTICALS, INC. |
The undersigned authorized officer of SOMAXON PHARMACEUTICALS, INC. (“Borrower”) hereby certifies
that in accordance with the terms and conditions of the Loan and Security Agreement among Borrower,
Collateral Agent, and the Lenders (the “Agreement”),
(i) Borrower is in complete compliance for the period ending with all required
covenants except as noted below;
(ii) There are no Events of Default, except as noted below;
(iii) Except as noted below, all representations and warranties of Borrower stated in the Loan
Documents are true and correct in all material respects on this date except as noted below;
provided, however, that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring to a specific date
shall be true, accurate and complete in all material respects as of such date.
(iv) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports,
and Borrower has timely paid all foreign, federal, state, and local taxes, assessments, deposits
and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section
5.8 of the Agreement;
(v) No Liens have been levied or claims made against Borrower or any of its Subsidiaries relating
to unpaid employee payroll or benefits of which Borrower has not previously provided written
notification to Collateral Agent
Attached are the required documents, if any, supporting our certification(s). The Officer on
behalf of Borrower further certifies that the attached financial statements are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from
one period to the next except as explained in an accompanying letter or footnotes and except, in
the case of unaudited financial statements, for the absence of footnotes and subject to year-end
audit adjustments as to the interim financial statements. Capitalized terms used but not otherwise
defined herein shall have the meanings given them in the Agreement.
Please indicate compliance status since the last Compliance Certificate by circling Yes, No, or N/A
under “Complies” column.
| Reporting Covenant | Requirement | Complies | ||||||||
1)
|
Financial statements | Monthly within 30 days | Yes | No | N/A | |||||
2)
|
Annual (CPA Audited) statements | Within 210 days after Fiscal Year End | Yes | No | N/A | |||||
3)
|
Annual Financial Projections/Budget (prepared on a monthly basis) | Annually (w/n earlier of 60 days of FYE or 7 days of Board approval) and when revised | Yes | No | N/A | |||||
4)
|
A/R & A/P agings | If applicable | Yes | No | N/A | |||||
5)
|
8-K, 10-K and 10-Q Filings | Within 5 days of filing | Yes | No | N/A | |||||
6)
|
Compliance Certificate | Monthly within 30 days | Yes | No | N/A | |||||
7)
|
IP Report | when required | Yes | No | N/A | |||||
8)
|
Total amount of Borrower’s cash and cash equivalents at the last day of the measurement period | $_____ | ||||||||
| $_____ | ||||||||||
Deposit and Securities Accounts
|
(Please list all accounts; attach separate sheet if additional space needed) |
| Acct Control | ||||||||||||
| Bank | Account Number | New Account? | Agmt in place? | |||||||||
1)
|
Yes | No | Yes | No | ||||||||
2)
|
Yes | No | Yes | No | ||||||||
3)
|
Yes | No | Yes | No | ||||||||
4)
|
Yes | No | Yes | No | ||||||||
5)
|
Yes | No | Yes | No | ||||||||
6)
|
Yes | No | Yes | No | ||||||||
Financial Covenants
None
Other Matters
Have there been any changes in management since the last Compliance Certificate?
|
Yes | No | ||
Have there been any transfers/sales/disposals/retirement of Collateral or IP prohibited by the Agreement?
|
Yes | No | ||
Have there been any new or pending claims or causes of action against Borrower that involve more than $250,000?
|
Yes | No |
Exceptions
Please explain any exceptions with respect to the certification above: (If no exceptions
exist, state “No exceptions.” Attach separate sheet if additional space needed.) |
||
| LENDERS USE ONLY | |||||||||||||||||
SOMAXON PHARMACEUTICALS, INC. |
DATE | ||||||||||||||||
| By: | Received by: ______ | Verified by: ______ | |||||||||||||||
| Name: | |||||||||||||||||
Title: |
Date: ______ | Date: ______ | |||||||||||||||
| Compliance Status | Yes | No | |||||||||||||||
EXHIBIT D
SECURED PROMISSORY NOTE
| $[_____][5,000,000] | Dated: August 2, 2011 |
FOR VALUE RECEIVED, the undersigned, SOMAXON PHARMACEUTICALS, INC., a Delaware corporation
with offices located at 0000 Xxxxxx Xxxxxxxx Xxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx 00000
(“Borrower”) HEREBY PROMISES TO PAY to the order of [OXFORD FINANCE LLC][SILICON VALLEY BANK]
(“Lender”) the principal amount of [_____][FIVE] MILLION DOLLARS ($[_____][5,000,000])
or such lesser amount as shall equal the outstanding principal balance of the Term Loan made to
Borrower by Lender, plus interest on the aggregate unpaid principal amount of Term Loan, at the
rates and in accordance with the terms of the Loan and Security Agreement dated August 2, 2011 by
and among Borrower, Lender, Oxford Finance LLC, as Collateral Agent, and the Lenders from time to
time party thereto (as amended, restated, supplemented or otherwise modified from time to time, the
“Loan Agreement”). If not sooner paid, the entire principal amount and all accrued and unpaid
interest hereunder shall be due and payable on the Maturity Date as set forth in the Loan
Agreement. Any capitalized term not otherwise defined herein shall have the meaning attributed to
such term in the Loan Agreement.
Borrower agrees to pay any initial partial monthly interest payment from the date the Term Loan is
made to Borrower under this Secured Promissory Note (this “Note”) to the first Payment Date
(“Interim Interest”) on the first Payment Date.
Principal, interest and all other amounts due with respect to the Term Loan, are payable in lawful
money of the United States of America to Lender as set forth in the Loan Agreement and this Note.
The principal amount of this Note and the interest rate applicable thereto, and all payments made
with respect thereto, shall be recorded by Lender and, prior to any transfer hereof, endorsed on
the grid attached hereto which is part of this Note.
The Loan Agreement, among other things, (a) provides for the making of a secured Term Loan by
Lender to Borrower, and (b) contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events.
This Note may not be prepaid except as set forth in Section 2.2 (c) and Section 2.2(d) of the Loan
Agreement.
This Note and the obligation of Borrower to repay the unpaid principal amount of the Term Loan,
interest on the Term Loan and all other amounts due Lender under the Loan Agreement is secured
under the Loan Agreement.
Presentment for payment, demand, notice of protest and all other demands and notices of any kind in
connection with the execution, delivery, performance and enforcement of this Note are hereby
waived.
Borrower shall pay all reasonable fees and expenses, including, without limitation, reasonable
attorneys’ fees and costs, incurred by Lender in the enforcement or attempt to enforce any of
Borrower’s obligations hereunder not performed when due.
This Note shall be governed by, and construed and interpreted in accordance with, the internal laws
of the State of California.
Note Register; Ownership of Note. The ownership of an interest in this Note shall be
registered on a record of ownership maintained by Lender or its agent. Notwithstanding anything
else in this Note to the contrary, the right to the principal of, and stated interest on, this Note
may be transferred only if the transfer is registered on such record of ownership and the
transferee is identified as the owner of an interest in the obligation. Borrower shall be entitled
to treat the registered holder of this Note (as recorded on such record of ownership) as the owner
in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim
to or interest in this Note on the part of any other person or entity.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of its officers
thereunto duly authorized on the date hereof.
| BORROWER: SOMAXON PHARMACEUTICALS, INC. |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
LOAN INTEREST RATE AND PAYMENTS OF PRINCIPAL
| Principal | Scheduled | |||||||
| Date | Amount | Interest Rate | Payment Amount | Notation By | ||||
