EXHIBIT 10.38
--------------------------------------------------------------------------------
TRUBION PHARMACEUTICALS, INC.
LOAN AND SECURITY AGREEMENT
--------------------------------------------------------------------------------
This LOAN AND SECURITY AGREEMENT is entered into as of September 12, 2006,
by and between COMERICA BANK ("Bank") and TRUBION PHARMACEUTICALS, INC.
("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms shall
have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, payment intangibles, and all other forms of
obligations owing to Borrower arising out of the sale or lease of goods
(including, without limitation, the licensing of software and other technology)
or the rendering of services by Borrower, whether or not earned by performance,
and any and all credit insurance, guaranties, and other security therefor, as
well as all merchandise returned to or reclaimed by Borrower and Borrower's
Books relating to any of the foregoing.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses, whether generated in-house
or by outside counsel) incurred in connection with the preparation, negotiation,
administration (other than Bank's normal overhead expenses), and enforcement of
the Loan Documents; reasonable Collateral audit fees; and Bank's reasonable
attorneys' fees and expenses (whether generated in-house or by outside counsel)
incurred in amending, enforcing or defending the Loan Documents (including fees
and expenses of appeal), incurred before, during and after an Insolvency
Proceeding, whether or not suit is brought.
"Borrower State" means Delaware, the state under whose laws
Borrower is organized.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California are authorized or required
to close.
"Capitalized Expenditures" means current period cash expenditures
that are amortized over a period of time in accordance with GAAP.
"Cash" means unrestricted cash and cash equivalents held at Bank
or at another financial institution subject to an account control agreement in
favor of Bank.
"Cash Burn" means for each calendar month, the amount equal to
Borrower's Cash on the last day of the previous month minus Borrower's Cash on
the last day of the current month's, each as adjusted for any changes to Cash as
a result of borrowings and repayments of borrowings, proceeds from the sale of
equity and the exercise of stock options or warrants, stock and/or
paid-in-capital and capital expenditures financed under a capital lease and to
the extent not already included therein paid--in-capital and minority interest
and financial debt.
"Change in Control" shall mean a transaction in which any
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly,
of a sufficient number of shares of all classes of stock then outstanding of
Borrower ordinarily entitled to vote in the election of directors, empowering
such "person" or "group" to elect a majority of the Board of Directors of
Borrower, who did not have such power before such transaction.
"Chief Executive Office State" means Washington, where Borrower's
chief executive office is located.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code, as amended
or supplemented from time to time.
"Collateral" means the property described on Exhibit A attached
hereto and all Negotiable Collateral to the extent not described on Exhibit A;
provided that in no case shall the definition of "Collateral" exclude any
Accounts, proceeds of the disposition of any property, or general intangibles
consisting of rights to payment.
"Collateral State" means the state or states where the Collateral
is located, which is Washington.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit, corporate credit cards, and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Credit Extension" means each Equipment Advance, or any other
extension of credit by Bank to or for the benefit of Borrower hereunder.
"Environmental Laws" means all laws, rules, regulations, orders
and the like issued by any federal state, local foreign or other governmental or
quasi-governmental authority or any agency pertaining to the environment or to
any hazardous materials or wastes, toxic substances, flammable, explosive or
radioactive materials, asbestos or other similar materials.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
-2-
"Equipment Advance(s)" means a cash advance or cash advances
under the Equipment Line.
"Equipment Line" means a Credit Extension of up to Eight Million
Dollars ($8,000,000).
"Equipment Maturity Date" means September 12, 2012.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"Event of Default" has the meaning assigned in Section 8.
"GAAP" means generally accepted accounting principles,
consistently applied, as in effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or
the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations, and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in which
Borrower has any interest.
"Investment" means any beneficial ownership of (including stock,
partnership or limited liability company interest other securities) any Person,
or any loan, advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Liquidity" means, as of any date of determination, the ratio of
(i) Borrower's Cash plus, if such balance of Cash is greater than all
Indebtedness of Borrower to Bank hereunder, twenty five percent (25%) of
Borrower's accounts receivable to (ii) all Indebtedness of Borrower to Bank
hereunder.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other document, instrument or agreement
entered into in connection with this Agreement, all as amended or extended from
time to time.
"Material Adverse Effect" means a material adverse effect on (i)
the business operations or condition (financial or otherwise) of Borrower and
its Subsidiaries taken as a whole, (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents, (iii)
Borrower's interest in, or the value, perfection or priority of Bank's security
interest in the Collateral.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, drafts, instruments
(including promissory notes), securities, documents of title, and chattel paper,
and Borrower's Books relating to any of the foregoing.
-3-
"Obligations" means all debt, principal, interest, Bank Expenses
and other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now
existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Periodic Payments" means all installments or similar recurring
payments that Borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Indebtedness not to exceed Two Million Dollars ($2,000,000)
in the aggregate in any fiscal year of Borrower secured by a lien described in
clause (c) of the defined term "Permitted Liens;" provided such Indebtedness
does not exceed the lesser of the cost or fair market value of the equipment
financed with such Indebtedness;
(d) Indebtedness of any Subsidiary to any other Subsidiary and
Indebtedness of any Subsidiary to Borrower to the extent permitted under clause
(e) of the definition of Permitted Investments;
(e) Subordinated Debt;
(f) Indebtedness to trade creditors incurred in the ordinary
course of business including Indebtedness incurred through the use of corporate
credit cards;
(g) Other unsecured Indebtedness not to exceed Ten Thousand
Dollars ($10,000) in the aggregate; and
(h) Extensions, refinancings and renewals of any items of
Permitted Indebtedness, provided that the principal amount is not increased or
the terms modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) Marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the date of creation
thereof and currently having rating of at least A-2 or P-2 from either Standard
& Poor's Corporation or Xxxxx'x Investors Service, (iii) certificates of deposit
maturing no more than one year from the date of investment therein, and (iv)
money market accounts and deposit accounts, and (v) other Investments set forth
in Borrower's investment policy provided Borrower has submitted such policy in
writing to Bank and Bank has approved such policy in writing;
(c) Repurchases of stock from former employees or directors of
Borrower under the terms of applicable repurchase agreements (i) in an aggregate
amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000) in any fiscal
year, provided that no Event of Default has occurred, is continuing or would
exist after
-4-
giving effect to the repurchases, or (ii) in any amount where the consideration
for the repurchase is the cancellation of indebtedness owed by such former
employees to Borrower regardless of whether an Event of Default exists;
(d) Investments accepted in connection with Permitted Transfers;
(e) Investments of Subsidiaries in or to other Subsidiaries or
Borrower and Investments by Borrower in Subsidiaries not to exceed Two Hundred
Fifty Thousand Dollars ($250,000) in the aggregate in any fiscal year;
(f) Investments consisting of employee relocation loans and other
employee loans, travel and other advances in the ordinary course of business,
and loans to employees, officers or directors relating to the purchase of equity
securities of Borrower or its Subsidiaries pursuant to employee stock purchase
plan agreements approved by Borrower's Board of Directors not to exceed Two
Hundred Fifty Thousand Dollars ($250,000) 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 Borrower's business;
(h) Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions, to customers and suppliers who are not
Affiliates, in the ordinary course of business, provided that this subparagraph
(h) shall not apply to Investments of Borrower in any Subsidiary; and
(i) Joint ventures or strategic alliances in the ordinary course
of Borrower's business consisting of the non-exclusive licensing of technology,
the development of technology or the providing of technical support, provided
that any cash Investments by Borrower do not exceed Two Hundred Fifty Thousand
Dollars ($250,000) in the aggregate in any fiscal year.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the
Schedule (excluding Liens to be satisfied with the proceeds of the Advances) or
arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings and for which Borrower maintains adequate reserves,
provided the same have no priority over any of Bank's security interests;
(c) Liens not to exceed Two Million Dollars ($2,000,000) in the
aggregate in any year (including liens related to capital leases) (i) upon or in
any Equipment (other than Equipment financed by an Equipment Advance) acquired
or held by Borrower or any of its Subsidiaries to secure the purchase price of
such Equipment or indebtedness incurred solely for the purpose of financing the
acquisition or lease of such Equipment, or (ii) existing on such Equipment at
the time of its acquisition, provided that the Lien is confined solely to the
property so acquired and improvements thereon, and the proceeds of such
Equipment;
(d) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase;
(e) Liens of materialmen, mechanics, warehousemen, carriers,
artisans or other similar Liens arising in the ordinary course of Borrower's
business or by operation of law, which are not past due or which are
-5-
being contested in good faith by appropriate proceedings and for which reserves
have been established in accordance with GAAP;
(f) Leases or subleases and licenses and sublicenses granted to
others in the ordinary course of business and which do not interfere in any
material respect with the business of Borrower and its Subsidiaries taken as a
whole;
(g) Liens in favor of customs and revenue authorities arising as
a matter of law, in the ordinary course of Borrower's business, to secure
payment of customs duties in connection with the importation of goods;
(h) Deposits in the ordinary course of business under worker's
compensation, unemployment insurance, social security and other similar laws, or
to secure the performance of bids, tenders or contracts (other than for the
repayment of borrowed money) or to secure indemnity, performance or other
similar bonds for the performance of bids, tenders or contracts (other than for
the repayment of borrowed money) or to secure statutory obligations (other than
liens arising under ERISA or environmental liens) or surety or appeal bonds, or
to secure indemnity, performance or other similar bonds.
(i) Easements, rights-of-way, restrictions, encroachments and
other similar encumbrances or defects or irregularities in title affecting real
property which, in the aggregate, are not substantial in amount, and which do
not in any case materially detract from the value of the property subject
thereto or materially interfere with the ordinary conduct of the business of
Borrower;
(j) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.5 or 8.9; and
(k) Liens in favor of other financial institutions arising in
connection with Borrower's deposit accounts or securities accounts held at such
institutions to secured standard fees for services charged by, but not financing
made available by such institutions, provided that Bank has a perfected security
interest in the amounts held in such deposit accounts or securities accounts.
"Permitted Transfer" means the conveyance, sale, lease, transfer
or disposition by Borrower or any Subsidiary of:
(a) Inventory in the ordinary course of business;
(b) licenses and similar arrangements for the use of the property
of Borrower or its Subsidiaries in the ordinary course of business;
(c) worn-out, unneeded or obsolete Equipment;
(d) Transfers in connection with transactions permitted by
Section 7 hereof;
(e) Transfers consisting of payments made by Borrower in the
ordinary course of business; or
(f) other assets of Borrower or its Subsidiaries that do not in
the aggregate exceed Two Hundred Fifty Thousand Dollars ($250,000) during any
fiscal year.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
-6-
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"Reporting Milestone" means any date upon which: (i) Borrower is
subject to the reporting requirements of the Securities Act of 1934 and is
publicly reporting, (ii) Borrower is in complete compliance with Section 6.7(a)
of this Agreement and (iii) Borrower's total Cash exceeds three (3) times the
amount of Indebtedness owing to Bank under the Equipment Line.
"Responsible Officer" means each of the Chief Executive Officer,
the Chief Operating Officer, the Chief Financial Officer and the Controller of
Borrower.
"Schedule" means the schedule of exceptions attached hereto and
approved by Bank, if any.
"SOS Reports" means the official reports from the Secretaries of
State of each Collateral State, Chief Executive Office State and the Borrower
State and other applicable federal, state or local government offices
identifying all current security interests filed in the Collateral and Liens of
record as of the date of such report.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated in writing to the debt owing by Borrower to Bank on terms
reasonably acceptable to Bank (and identified as being such by Borrower and
Bank).
"Subsidiary" means any corporation, partnership or limited
liability company or joint venture in which (i) any general partnership interest
or (ii) more than fifty percent (50%) of the stock, limited liability company
interest or joint venture of which by the terms thereof has the ordinary voting
power to elect the Board of Directors, managers or trustees of the entity, at
the time as of which any determination is being made, is owned by Borrower,
either directly or through an Affiliate.
1.2 Accounting Terms. Any accounting term not specifically defined
herein shall be construed in accordance with GAAP and all calculations shall be
made in accordance with GAAP. The term "financial statements" shall include the
accompanying notes and schedules.
2. LOAN AND TERMS OF PAYMENT.
2.1 Credit Extensions.
(a) Promise to Pay. Borrower promises to pay to Bank, in lawful
money of the United States of America, the aggregate unpaid principal amount of
all Credit Extensions made by Bank to Borrower, together with interest on the
unpaid principal amount of such Credit Extensions at rates in accordance with
the terms hereof.
(b) Equipment Advances.
(i) Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make Equipment Advances to Borrower. Borrower may
request Equipment Advances at any time from the date hereof through September
12, 2007. The aggregate outstanding amount of Equipment Advances shall not
exceed the Equipment Line. Each Equipment Advance shall not exceed one hundred
percent (100%) of the invoice amount of equipment and tenant improvements
approved by Bank from time to time (which Borrower shall, in any case, have
purchased within 90 days of the date of the corresponding Equipment Advance),
excluding taxes, shipping, warranty charges, freight discounts and installation
expense. Notwithstanding the foregoing, no later than seven (7) days after the
Closing Date, Borrower may request and, if so requested, Bank will make a single
Equipment Advance for equipment and tenant improvements purchased between
January 1, 2006 and June 1, 2006 in an amount not to exceed Two Million Six
Hundred Thousand Dollars ($2,600,000), including total soft costs (for software
& tenant improvements) not to
-7-
exceed One Million Five Hundred Thousand One Dollars ($1,500,001). Equipment
Advances for tenant improvements shall not exceed Five Million Dollars
($5,000,000) in the aggregate.
(ii) Interest shall accrue from the date of each Equipment
Advance at the rate specified in Section 2.3(a), and shall be payable in
accordance with Section 2.3(c). Any Equipment Advances that are outstanding on
September 12, 2007 shall be payable in sixty (60) equal monthly installments of
principal, plus all accrued interest, beginning on October 12, 2007, and
continuing on the same day of each month thereafter through the Equipment
Maturity Date, at which time all amounts due in connection with Equipment
Advances made under this Section 2.1(b) and any other amounts due under this
Agreement shall be immediately due and payable. Equipment Advances, once repaid,
may not be reborrowed. Except as set forth in the LIBOR Addendum with respect to
LIBOR Option Advances (as defined therein), Borrower may prepay any Equipment
Advances without penalty or premium.
(iii) When Borrower desires to obtain an Equipment Advance,
Borrower shall notify Bank (which notice shall be irrevocable) by facsimile
transmission to be received no later than 3:00 p.m. Pacific time three (3)
Business Days before the day on which the Equipment Advance is to be made. Such
notice shall be substantially in the form of Exhibit B. The notice shall be
signed by a Responsible Officer or its designee and include a copy of the
invoice for any Equipment to be financed.
2.2 Intentionally Omitted.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rates for Equipment Advances. Except as set forth in
Section 2.3(b), the Equipment Advances shall bear interest, on the outstanding
daily balance thereof, as set forth in the LIBOR Addendum to Loan & Security
Agreement attached as Exhibit C.
(b) Late Fee; Default Rate. If any payment is not made within ten
(10) days after the date such payment is due, Borrower shall pay Bank a late fee
equal to the lesser of (i) five percent (5%) of the amount of such unpaid amount
or (ii) the maximum amount permitted to be charged under applicable law. All
Obligations shall bear interest, from and after the occurrence and during the
continuance of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on the
first calendar day of each month during the term hereof. Bank shall charge such
interest, all Bank Expenses, and all Periodic Payments against any of Borrower's
deposit accounts. Any interest not paid when due shall be compounded by becoming
a part of the Obligations, and such interest shall thereafter accrue interest at
the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time
to time hereafter, the applicable rate of interest hereunder shall be increased
or decreased, effective as of the day the Prime Rate is changed, by an amount
equal to such change in the Prime Rate. All interest chargeable under the Loan
Documents shall be computed on the basis of a three hundred sixty (360) day year
for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence and continuance of an
Event of Default, Bank shall credit a wire transfer of funds, check or other
item of payment to such deposit account or Obligation as Borrower specifies.
After the occurrence and during the continuance of an Event of Default, Bank
shall have the right, in its sole discretion, to immediately apply any wire
transfer of funds, check, or other item of payment to conditionally reduce
Obligations, but such applications of funds shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon Pacific time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
-8-
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. On the Closing Date, a fee equal to $8,000,
which shall be nonrefundable; and
(b) Bank Expenses. On the Closing Date, all Bank Expenses
incurred through the Closing Date, and, after the Closing Date, all Bank
Expenses as and when they become due.
2.6 Term. This Agreement shall become effective on the Closing Date
and, subject to Section 13.7, shall continue in full force and effect for so
long as any Obligations remain outstanding or Bank has any obligation to make
Credit Extensions under this Agreement. Notwithstanding the foregoing, Bank
shall have the right to terminate its obligation to make Credit Extensions under
this Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default.
3. CONDITIONS OF LOANS.
3.1 Conditions Precedent to Initial Credit Extension. The obligation
of Bank to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:
(a) this Agreement;
(b) an officer's certificate of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) UCC National Form Financing Statement;
(d) current SOS Reports indicating that except for Permitted
Liens, there are no other security interests or Liens of record in the
Collateral;
(e) securities and/or deposit account control agreements with
respect to any accounts permitted hereunder to be maintained outside Bank;
(f) a Lessor's Acknowledgment and Subordination;
(g) an Equipment Holder's Acknowledgement;
(h) agreement to provide insurance;
(i) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof;
(j) current financial statements, including audited statements
for Borrower's most recently ended fiscal year, together with an unqualified
opinion, company prepared consolidated and consolidating balance sheets and
income statements for the most recently ended month in accordance with Section
6.2, and such other updated financial information as Bank may reasonably
request;
(k) current Compliance Certificate in accordance with Section
6.2; and
-9-
(l) such other documents or certificates, and completion of such
other matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. The obligation of
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
(b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would exist after giving effect to such Credit
Extension (provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date). The making of each Credit Extension shall be
deemed to be a representation and warranty by Borrower on the date of such
Credit Extension as to the accuracy of the facts referred to in this Section
3.2.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower grants and pledges to Bank a
continuing security interest in the Collateral to secure prompt repayment of any
and all Obligations and in order to secure prompt performance by Borrower of
each of its covenants and duties under the Loan Documents. Except as set forth
in the Schedule and except for Permitted Liens, such security interest
constitutes a valid, first priority security interest in the presently existing
Collateral, and will constitute a valid, first priority security interest in
later-acquired Collateral. Except for Permitted Transfers, Borrower also hereby
agrees to not sell, transfer, assign, mortgage, pledge, lease, grant a security
interest in, or encumber any of its intellectual property. Notwithstanding any
termination, Bank's Lien on the Collateral shall remain in effect for so long as
any Obligations (other than inchoate indemnity obligations) are outstanding.
4.2 Perfection of Security Interest. Borrower authorizes Bank to file
at any time financing statements, continuation statements, and amendments
thereto that (i) either specifically describe the Collateral or describe the
Collateral as all assets of Borrower of the kind pledged hereunder, and (ii)
contain any other information required by the Code for the sufficiency of filing
office acceptance of any financing statement, continuation statement, or
amendment, including whether Borrower is an organization, the type of
organization and any organizational identification number issued to Borrower, if
applicable. Any such financing statements may be signed by Bank on behalf of
Borrower, as provided in the Code, and may be filed at any time in any
jurisdiction whether or not Revised Article 9 of the Code is then in effect in
that jurisdiction. Borrower shall from time to time endorse and deliver to Bank,
at the request of Bank, all Negotiable Collateral and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
Borrower shall have possession of the Collateral, except where expressly
otherwise provided in this Agreement or where Bank chooses to perfect its
security interest by possession in addition to the filing of a financing
statement. Where Collateral with an aggregate value in excess of Fifty Thousand
Dollars ($50,000) is in possession of a third party bailee, Borrower shall take
such steps as Bank reasonably requests for Bank to (i) obtain an acknowledgment,
in form and substance satisfactory to Bank, of the bailee that the bailee holds
such Collateral for the benefit of Bank, and (ii) obtain "control" of any
Collateral consisting of investment property, deposit accounts, letter-of-credit
rights or electronic chattel paper (as such items and the term "control" are
defined in Revised Article 9 of the Code) by causing the securities intermediary
or depositary institution or issuing bank to execute a control agreement in form
and substance satisfactory to Bank. Borrower will not create any chattel paper
without placing a legend on the chattel paper acceptable to Bank indicating that
Bank has a security interest in the chattel paper. Borrower from time to time
may deposit with Bank specific cash collateral to secure specific Obligations;
Borrower authorizes Bank to hold such specific balances in pledge and to decline
to honor any drafts thereon or any request by Borrower or any other Person to
pay or otherwise transfer any part of such balances for so long as the specific
Obligations are outstanding.
-10-
4.3 Right to Inspect. Bank (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours but no more than twice a year (unless an
Event of Default has occurred and is continuing), to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary
is duly existing under the laws of the state in which it is organized and
qualified and licensed to do business in any state in which the conduct of its
business or its ownership of property requires that it be so qualified, except
where the failure to do so could not reasonably be expected to cause a Material
Adverse Effect.
5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement by which it is
bound, except to the extent such default could not reasonably be expected to
cause a Material Adverse Effect.
5.3 Collateral. Borrower has rights in or the power to transfer the
Collateral, and its title to the Collateral is free and clear of Liens, adverse
claims, and restrictions on transfer or pledge except for Permitted Liens.
Except as set forth in the Schedule, all Collateral is located solely in the
Collateral States. All Inventory is in all material respects of good and
merchantable quality, free from all material defects, except for Inventory for
which adequate reserves have been made. Except as set forth in the Schedule and
as permitted pursuant to Section 6.6, none of the Collateral is maintained or
invested with a Person other than Bank or Bank's Affiliates.
5.4 Intellectual Property. Borrower is the sole owner of its patents,
trademarks, copyrights and other intellectual property, except for non-exclusive
licenses granted by Borrower to its customers in the ordinary course of
business. To the best of Borrower's knowledge, each of Borrower's issued or
granted patents, trademarks and copyrights is valid and enforceable, and no part
of its intellectual property has been judged invalid or unenforceable, in whole
or in part, and no claim has been made to Borrower that any part of its
intellectual property violates the rights of any third party except to the
extent such claim could not reasonably be expected to cause a Material Adverse
Effect.
5.5 Name; Location of Chief Executive Office. Except as disclosed in
the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof, and its exact legal name is as set forth
in the first paragraph of this Agreement. The chief executive office of Borrower
is located in the Chief Executive Office State at the address indicated in
Section 10 hereof.
5.6 Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which a likely adverse decision could
reasonably be expected to have a Material Adverse Effect.
5.7 No Material Adverse Change in Financial Statements. All
consolidated and consolidating financial statements related to Borrower and any
Subsidiary that are delivered by Borrower to Bank fairly present in all material
respects Borrower's consolidated and consolidating financial condition as of the
date thereof and Borrower's consolidated and consolidating results of operations
for the period then ended. There has not been a material adverse change in the
consolidated or in the consolidating financial condition of Borrower since the
date of the most recent of such financial statements submitted to Bank.
5.8 Solvency, Payment of Debts. Borrower is able to pay its debts
(including trade debts) as they mature; the fair saleable value of Borrower's
assets (including goodwill minus disposition costs) exceeds the fair value
-11-
of its liabilities; and Borrower is not left with unreasonably small capital
after the transactions contemplated by this Agreement.
5.9 Compliance with Laws and Regulations. Borrower and each Subsidiary
have met the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. No event has occurred resulting from Borrower's
failure to comply with ERISA that is reasonably likely to result in Borrower's
incurring any liability that could reasonably be expected to have a Material
Adverse Effect. Borrower is not regulated as an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940. Borrower is not engaged principally, or as one
of the important activities, in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulations T and
U of the Board of Governors of the Federal Reserve System). Borrower has
complied in all material respects with all the provisions of the Federal Fair
Labor Standards Act. Borrower is in compliance with all environmental laws,
regulations and ordinances except where the failure to comply is not reasonably
likely to have a Material Adverse Effect. Borrower has not violated any
statutes, laws, ordinances or rules applicable to it, the violation of which
could reasonably be expected to have a Material Adverse Effect. Borrower and
each Subsidiary have filed or caused to be filed all tax returns required to be
filed, and have paid, or have made adequate provision for the payment of, all
taxes reflected therein except those being contested in good faith with adequate
reserves under GAAP or where the failure to file such returns or pay such taxes
could not reasonably be expected to have a Material Adverse Effect.
5.10 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.
5.11 Government Consents. Borrower and each Subsidiary 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
for the continued operation of Borrower's business as currently conducted,
except where the failure to do so could not reasonably be expected to cause a
Material Adverse Effect.
5.12 Inbound Licenses. Except as disclosed on the Schedule, Borrower
is not a party to, nor is bound by, any material license or other agreement,
failure of which to maintain in force and effect could reasonably be expected to
have a Material Adverse Effect, that prohibits or otherwise restricts Borrower
from granting a security interest in Borrower's interest in such license or
agreement or any other property.
5.13 Full Disclosure. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank taken
together with all such certificates and written statements furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading it being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not to be viewed as facts and that actual results during the
period or periods covered by any such projections and forecasts may differ from
the projected or forecasted results.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:
6.1 Good Standing and Government Compliance. Borrower shall maintain
its and each of its Subsidiaries' corporate existence and good standing in the
Borrower State, shall maintain qualification and good standing in each other
jurisdiction in which the failure to so qualify could reasonably be expected to
have a Material Adverse Effect, and shall furnish to Bank the organizational
identification number issued to Borrower by the authorities of the state in
which Borrower is organized, if applicable. Borrower shall meet, and shall cause
each Subsidiary to meet, the minimum funding requirements of ERISA with respect
to any employee benefit plans subject to ERISA. Borrower shall comply in all
material respects with all applicable Environmental Laws, and maintain all
material permits, licenses and approvals required thereunder where the failure
to do so could have a Material Adverse Effect. Borrower shall
-12-
comply, and shall cause each Subsidiary to comply, with all statutes, laws,
ordinances and government rules and regulations to which it is subject, and
shall maintain, and shall cause each of its Subsidiaries to maintain, in force
all licenses, approvals and agreements, the loss of which or failure to comply
with which could reasonably be expected to have a Material Adverse Effect.
6.2 Financial Statements, Reports, Certificates. Borrower shall
deliver the following to Bank: (i) if Borrower has not met the Reporting
Milestone, as soon as available, but in any event within thirty (30) days after
the end of each calendar month, a company prepared consolidated and
consolidating balance sheet and income statement covering Borrower's operations
during such period, in a form reasonably acceptable to Bank and certified by a
Responsible Officer; (ii) if Borrower has not met the Reporting Milestone, as
soon as available, but in any event within one hundred twenty (120) days after
the end of Borrower's fiscal year, audited consolidated and consolidating
financial statements of Borrower prepared in accordance with GAAP, consistently
applied, together with an opinion which is unqualified or otherwise consented to
in writing by Bank on such financial statements of an independent certified
public accounting firm reasonably acceptable to Bank; (iii) if applicable,
copies of all statements, reports and notices sent or made available generally
by Borrower to its security holders or to any holders of Subordinated Debt and
all reports on Forms 10-K and 10-Q filed with the Securities and Exchange
Commission within five (5) days of the standard SEC filing date, provided that
in lieu of the foregoing delivery, Borrower may provide Bank with a link to such
filings on a website by electronic mail; (iv) promptly upon receipt of notice
thereof, a report of any legal actions pending or threatened against Borrower or
any Subsidiary that could result in damages or costs to Borrower or any
Subsidiary of Five Hundred Thousand Dollars ($500,000) or more; (v) promptly
upon receipt, each management letter prepared by Borrower's independent
certified public accounting firm regarding Borrower's management control
systems; (vi) such budgets, sales projections, operating plans or other
financial information as Bank may reasonably request from time to time and (vii)
as soon as available, but in any event within thirty (30) days of the end of
each calendar quarter, copies of quarterly brokerage account statements from all
financial institutions where Borrower holds Cash (other than Bank).
(a) Within thirty (30) days after the last day of each month,
Borrower shall deliver to Bank aged listings by invoice date of accounts
receivable and accounts payable; provided however if Borrower has achieved the
Reporting Milestone, Borrower shall only be required to provide such listings to
Bank within thirty (30) days after the last day of each fiscal quarter.
(b) Within thirty (30) days after the last day of each month,
Borrower shall deliver to Bank with the monthly financial statements, a
Compliance Certificate certified as of the last day of the applicable month and
signed by a Responsible Officer in substantially the form of Exhibit D hereto;
provided however if Borrower has achieved the Reporting Milestone, Borrower
shall only be required to provide a Compliance Certificate to Bank within thirty
(30) days after the last day of each fiscal quarter.
(c) As soon as possible and in any event within three (3)
calendar days after becoming aware of the occurrence or existence of an Event of
Default hereunder, a written statement of a Responsible Officer setting forth
details of the Event of Default, and the action which Borrower has taken or
proposes to take with respect thereto.
(d) Bank shall have a right from time to time hereafter to audit
Borrower's Accounts and appraise Collateral at Borrower's expense, provided that
such audits will be conducted no more often than every six (6) months unless an
Event of Default has occurred and is continuing.
Borrower may deliver to Bank on an electronic basis any certificates,
reports or information required pursuant to this Section 6.2, and Bank shall be
entitled to rely on the information contained in the electronic files, provided
that Bank in good faith believes that the files were delivered by a Responsible
Officer. If Borrower delivers this information electronically, it shall also
deliver to Bank by U.S. Mail, reputable overnight courier service, hand
delivery, facsimile or .pdf file within five (5) Business Days of submission of
the unsigned electronic copy the certification of monthly financial statements
and the Compliance Certificate, each bearing the physical signature of the
Responsible Officer.
-13-
6.3 Inventory; Returns. Borrower shall keep all Inventory (if any) in
good and merchantable condition, free from all material defects except for
Inventory for which adequate reserves have been made. Returns and allowances, if
any, as between Borrower and its account debtors shall be on the same basis and
in accordance with the usual customary practices of Borrower, as they exist on
the Closing Date. Borrower shall promptly notify Bank of all returns and
recoveries and of all disputes and claims involving more than Two Hundred Fifty
Thousand Dollars ($250,000).
6.4 Taxes. Borrower shall make, and cause each Subsidiary to make, due
and timely payment or deposit of all material federal, state, and local taxes,
assessments, or contributions required of it by law, including, but not limited
to, those laws concerning income taxes, F.I.C.A., F.U.T.A. and state disability,
and will execute and deliver to Bank, on demand, proof satisfactory to Bank
indicating that Borrower or a Subsidiary has made such payments or deposits and
any appropriate certificates attesting to the payment or deposit thereof;
provided that Borrower or a Subsidiary need not make any payment if the amount
or validity of such payment is contested in good faith by appropriate
proceedings and is reserved against (to the extent required by GAAP) by
Borrower.
6.5 Insurance.
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain liability
and other insurance in amounts and of a type that are customary to businesses
similar to Borrower's.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as are reasonably satisfactory to Bank. All
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee, and all liability insurance policies shall show the Bank as an additional
insured and shall specify that the insurer must give at least 20 days notice to
Bank before canceling its policy for any reason. Upon Bank's request, Borrower
shall deliver to Bank certified copies of the policies of insurance and evidence
of all premium payments. If no Event of Default has occurred and is continuing,
proceeds payable under any casualty policy will, at Borrower's option, be
payable to Borrower to replace the property subject to the claim, provided that
any such replacement property shall be deemed Collateral in which Bank has been
granted a first priority security interest. If an Event of Default has occurred
and is continuing, all proceeds payable under any such policy shall, at Bank's
option, be payable to Bank to be applied on account of the Obligations.
6.6 Accounts. Borrower shall maintain its primary depository and
operating accounts with Bank and Borrower may maintain investment accounts with
Bank or Bank's Affiliates. Borrower may maintain accounts outside Bank subject
to account control agreements and provided Bank has daily monitoring
capabilities with respect to any such Accounts.
6.7 Minimum Cash. Borrower shall at all times maintain a balance of
Cash not less than the greater of (i) the dollar amount required so that
Borrower's Liquidity is greater than or equal to 1.50:1.00 or (ii) Cash Burn,
measured on a trailing three month basis.
6.8 Inbound Licenses. Prior to entering into or becoming bound by any
license or agreement, failure of which to maintain in force or effect could
reasonably be expected to have a Material Adverse Effect, Borrower shall provide
written notice to Bank of the material terms of such license or agreement with a
description of its likely impact on Borrower's business or financial condition.
6.9 Creation/Acquisition of Subsidiaries. In the event Borrower or any
Subsidiary creates or acquires any Subsidiary, Borrower and such Subsidiary
shall promptly notify Bank of the creation or acquisition of such new Subsidiary
and, so long as the Subsidiary is incorporated under the laws of a State of the
United States, take all such action as may be reasonably required by Bank to
cause such Subsidiary to guarantee the Obligations of Borrower under
-14-
the Loan Documents and grant a continuing pledge and security interest in and to
the collateral of such Subsidiary (substantially as described on Exhibit A
hereto), and Borrower shall grant and pledge to Bank a perfected security
interest in the stock, units or other evidence of ownership of such Subsidiary;
provided that Borrower shall pledge no more than 65% of the stock of any
Subsidiary formed in a jurisdiction outside the United States.
6.10 Further Assurances. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until the outstanding Obligations are paid in full or for
so long as Bank may have any commitment to make any Credit Extensions, Borrower
will not do any of the following without Bank's prior written consent, which
shall not be unreasonably withheld:
7.1 Dispositions. Convey, sell, lease, license, transfer or otherwise
dispose of (collectively, to "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, including its
intellectual property, other than Permitted Transfers.
7.2 Change in Name, Location, Executive Office, or Executive
Management; Change in Business; Change in Fiscal Year; Change in Control. Change
its name or the Borrower State or relocate its chief executive office without
twenty (20) days' prior written notification to Bank; replace its chief
executive officer or chief financial officer without prompt written notification
to Bank thereafter; engage in any business, or permit any of its Subsidiaries to
engage in any business, other than or reasonably related or incidental to the
businesses currently engaged in by Borrower; change its fiscal year end; suffer
or permit a Change in Control.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with or into any other business
organization (other than mergers or consolidations of a Subsidiary into another
Subsidiary or into Borrower), or acquire, or permit any of its Subsidiaries to
acquire, all or substantially all of the capital stock or property of another
Person except where (i) either (A) the consideration for such transactions is
comprised exclusively (other than cash paid for fractional shares or with
respect to statutory dissenters' rights) of the capital stock of Borrower; or
(B) if Borrower is publicly reporting, such transactions do not result in the
payment of cash consideration in the aggregate exceeding Five Million Dollars
($5,000,000) during any fiscal year, (ii) no Event of Default has occurred, is
continuing or would exist after giving effect to such transactions, (iii) such
transactions do not result in a Change in Control, (iv) Borrower is the
surviving entity (if the transaction is a merger involving Borrower); and (v) on
a pro forma basis giving effect to the proposed acquisition, Borrower remains in
compliance with Section 6.7.
7.4 Indebtedness. Create, incur, assume, guarantee or be or remain
liable with respect to any Indebtedness, or permit any Subsidiary so to do,
other than Permitted Indebtedness, or prepay any Indebtedness or take any
actions which impose on Borrower an obligation to prepay any Indebtedness,
except Indebtedness to Bank.
7.5 Encumbrances. Create, incur, assume or allow any Lien with respect
to any of its property, or assign or otherwise convey any right to receive
income, including the sale of any Accounts, or permit any of its Subsidiaries so
to do, except for Permitted Liens. Agree with any Person other than Bank not to
grant a security interest in, or otherwise encumber, any of its, or covenant to
any other Person that Borrower in the future will refrain from creating,
incurring, assuming or allowing any Lien with respect to any of Borrower's
property, or permit any Subsidiary to do so.
7.6 Distributions. Pay any dividends or make any other distribution or
payment on account of or in redemption, retirement or purchase of any capital
stock, except that Borrower may (i) pay a dividend payable solely in shares of
capital stock, (ii) pay cash in lieu of fractional shares upon conversion of
convertible securities or upon any stock dividend, stock split or combination or
business combination, (iii) make acquisitions of capital stock of Borrower,
-15-
solely by issuance of capital stock, in connection with either (A) the exercise
of stock options or warrants by way of cashless exercise, or (B) in connection
with the satisfaction of withholding tax obligations related to the exercise of
stock options; (iv) make Permitted Investments; and (v) in connection with any
transaction not prohibited by Section 7.3, Borrower or any of its Subsidiaries
may, (A) receive or accept the return of capital stock of Borrower constituting
a portion of the purchase price in settlement of indemnification claims, or (B)
make payments or distributions to dissenting stockholders pursuant to applicable
law.
7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments, or maintain or invest any of its property with
a Person other than Bank or Bank's Affiliates or permit any Subsidiary to do so
unless such Person has entered into a control agreement with Bank, in form and
substance satisfactory to Bank, or suffer or permit any Subsidiary to be a party
to, or be bound by, an agreement that restricts such Subsidiary from paying
dividends or otherwise distributing property to Borrower.
7.8 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower (other
than a Subsidiary) except for (i) 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; (ii) reasonable and customary fees paid to members of
the board of directors (or similar governing body) of Borrower; (iii)
compensation arrangements for officers and other employees of or consultants to
Borrower and its Subsidiaries entered into in the ordinary course of business;
and (iv) transactions described in the Schedule.
7.9 Subordinated Debt. Make any payment in respect of any Subordinated
Debt, or permit any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt, or amend any provision
affecting Bank's rights contained in any documentation relating to the
Subordinated Debt without Bank's prior written consent.
7.10 Inventory and Equipment. Store the Inventory or the Equipment
with an aggregate value in excess of Fifty Thousand Dollars ($50,000) with a
bailee, warehouseman, or similar third party unless the third party has been
notified of Bank's security interest and Bank (a) has received an acknowledgment
from the third party that it is holding or will hold the Inventory or Equipment
for Bank's benefit or (b) is in possession of the warehouse receipt, where
negotiable, covering such Inventory or Equipment. Except for Inventory sold in
the ordinary course of business and except for such other locations as Bank may
approve in writing, Borrower shall keep the Inventory and Equipment only at the
location set forth in Section 10 and such other locations of which Borrower
gives Bank prior written notice and as to which Bank files a financing
statement, or takes other action, where needed to perfect (or otherwise protect)
its security interest.
7.11 No Investment Company; Margin Regulation. Become regulated or be
controlled by a regulated "investment company," within the meaning of the
Investment Company Act of 1940, or become principally engaged in, or undertake
as one of its important activities, the business of extending credit for the
purpose of purchasing or carrying margin stock, or use the proceeds of any
Credit Extension for such purpose.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay any of the Obligations
within three (3) days of the date when due;
-16-
8.2 Covenant Default.
(a) If Borrower fails to perform any obligation under Sections
6.2, 6.4, 6.5, 6.6 or 6.7 or violates any of the covenants contained in Section
7 of this Agreement; or
(b) If Borrower fails or neglects to perform or observe any other
material term, provision, condition, covenant contained in this Agreement, in
any of the Loan Documents, or in any other present or future agreement between
Borrower and Bank and as to any default under such other term, provision,
condition or covenant that can be cured, has failed to cure such default within
fifteen (15) days after Borrower receives notice thereof or any officer of
Borrower becomes aware thereof; provided, however, that if the default cannot by
its nature be cured within the fifteen (15) day period or cannot after diligent
attempts by Borrower be cured within such fifteen (15) day period, and such
default is likely to be cured within a reasonable time, then Borrower shall have
an additional reasonable 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 have cured such default shall not be deemed an Event of Default
but no Credit Extensions will be made;
8.3 Defective Perfection. If Bank shall receive at any time following
the Closing Date an SOS Report indicating that except for Permitted Liens,
Bank's security interest in the Collateral is not prior to all other security
interests or Liens of record reflected in such SOS Report;
8.4 Material Adverse Effect. If there occurs any circumstance or
circumstances that could reasonably be expected to have a Material Adverse
Effect;
8.5 Attachment. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within fifteen (15) days, or if Borrower
is enjoined, restrained, or in any way prevented by court order from continuing
to conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within fifteen (15)
days after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be made during such cure period);
8.6 Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within forty five (45) days
(provided that no Credit Extensions will be made prior to the dismissal of such
Insolvency Proceeding);
8.7 Other Agreements. If there is a default or other failure to
perform 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 Five Hundred Thousand Dollars ($500,000) or that could reasonably be expected
to have a Material Adverse Effect;
8.8 Subordinated Debt. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.9 Judgments. If a judgment or judgments for the payment of money in
an amount, individually or in the aggregate, of at least Two Hundred Fifty
Thousand Dollars ($250,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no Credit
Extensions will be made prior to the satisfaction or stay of such judgment); or
-17-
8.10 Misrepresentations. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document.
9. BANK'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement,
by any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of Default described in Section
8.6, all Obligations shall become immediately due and payable without any action
by Bank);
(b) Demand that Borrower (i) deposit cash with Bank in an amount
equal to the amount of any letters of credit remaining undrawn, as collateral
security for the repayment of any future drawings under such letters of credit,
and (ii) pay in advance all letter of credit fees scheduled to be paid or
payable over the remaining term of the letters of credit, and Borrower shall
promptly deposit and pay such amounts;
(c) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(d) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(e) Make such payments and do such acts as Bank considers
necessary or reasonable to protect its security interest in the Collateral.
Borrower agrees to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's owned
premises, Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(f) Set off and apply to the Obligations any and all (i) balances
and deposits of Borrower held by Bank, and (ii) indebtedness at any time owing
to or for the credit or the account of Borrower held by Bank;
(g) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(h) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate. Bank may sell the Collateral
without giving any warranties as to the Collateral. Bank may specifically
disclaim any warranties of title or the like. This procedure will not be
considered adversely to affect the commercial reasonableness of any sale of the
Collateral. If Bank sells any of the Collateral upon credit, Borrower will be
credited only with payments actually made by the purchaser, received by Bank,
and applied to the indebtedness of the
-18-
purchaser. If the purchaser fails to pay for the Collateral, Bank may resell the
Collateral and Borrower shall be credited with the proceeds of the sale;
(i) Bank may credit bid and purchase at any public sale;
(j) Apply for the appointment of a receiver, trustee, liquidator
or conservator of the Collateral, without notice and without regard to the
adequacy of the security for the Obligations and without regard to the solvency
of Borrower, any guarantor or any other Person liable for any of the
Obligations; and
(k) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
Bank may comply with any applicable state or federal law requirements in
connection with a disposition of the Collateral and compliance will not be
considered adversely to affect the commercial reasonableness of any sale of the
Collateral.
9.2 Power of Attorney. Effective only upon the occurrence and during
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as Borrower's true
and lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or xxxx of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims
under and decisions with respect to Borrower's policies of insurance; (f) settle
and adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable; and
(g) to file, in its sole discretion, one or more financing or continuation
statements and amendments thereto, relative to any of the Collateral without the
signature of Borrower where permitted by law; provided Bank may exercise such
power of attorney to sign the name of Borrower on any of the documents described
in clause (g) above, regardless of whether an Event of Default has occurred. The
appointment of Bank as Borrower's attorney in fact, and each and every one of
Bank's rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations (other than inchoate indemnity obligations) have been
fully repaid and performed and Bank's obligation to provide Credit Extensions
hereunder is terminated.
9.3 Accounts Collection. At any time after the occurrence and during
the continuance of an Event of Default, Bank may notify any Person owing funds
to Borrower of Bank's security interest in such funds and verify the amount of
such Account. Borrower shall collect all amounts owing to Borrower for Bank,
receive in trust all payments as Bank's trustee, and immediately deliver such
payments to Bank in their original form as received from the account debtor,
with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following after
reasonable notice to Borrower: (a) make payment of the same or any part thereof;
(b) set up such reserves under the Equipment Line as Bank deems necessary to
protect Bank from the exposure created by such failure; or (c) obtain and
maintain insurance policies of the type discussed in Section 6.5 of this
Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.
9.5 Bank's Liability for Collateral. Bank has no obligation to clean
up or otherwise prepare the Collateral for sale. All risk of loss, damage or
destruction of the Collateral shall be borne by Borrower.
9.6 No Obligation to Pursue Others. Bank has no obligation to attempt
to satisfy the Obligations by collecting them from any other Person liable for
them and Bank may release, modify or waive any collateral provided
-19-
by any other Person to secure any of the Obligations, all without affecting
Bank's rights against Borrower. Borrower waives any right it may have to require
Bank to pursue any other Person for any of the Obligations.
9.7 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given. Borrower expressly agrees that this Section may
not be waived or modified by Bank by course of performance, conduct, estoppel or
otherwise.
9.8 Demand; Protest. Except as otherwise provided in this Agreement,
Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment and any other notices relating to the
Obligations.
10. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: TRUBION PHARMACEUTICALS, INC.
0000 0xx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Chief Financial Officer
FAX: (000) 000-0000
If to Bank: Comerica Bank
75 East Xxxxxxx Road, M/C 4770
Xxx Xxxx, Xxxxxxxxxx 00000
Attn: Manager
FAX: (000) 000-0000
with a copy to: Comerica Bank
00000 XX 0xx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx - Vice President
FAX: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the State of California.
THE UNDERSIGNED ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL
ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES. TO THE EXTENT
PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO
CONSULT) WITH COUNSEL OF ITS, HIS
-20-
OR HER CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL
PARTIES, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION ARISING
OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER DOCUMENT, INSTRUMENT OR
AGREEMENT BETWEEN THE UNDERSIGNED PARTIES.
12. REFERENCE PROVISION.
In the event the Jury Trial Waiver set forth above is not enforceable,
the parties elect to proceed under this Judicial Reference Provision.
12.1 Mechanics.
(a) With the exception of the items specified in clause (c),
below, any controversy, dispute or claim (each, a "Claim") between the parties
arising out of or relating to this Agreement or any other document, instrument
or agreement between the undersigned parties (collectively in this Section, the
"Comerica Documents"), will be resolved by a reference proceeding in California
in accordance with the provisions of Sections 638 et seq. of the California Code
of Civil Procedure ("CCP"), or their successor sections, which shall constitute
the exclusive remedy for the resolution of any Claim, including whether the
Claim is subject to the reference proceeding. Except as otherwise provided in
the Comerica Documents, venue for the reference proceeding will be in the state
or federal court in the county or district where the real property involved in
the action, if any, is located or in the state or federal court in the county or
district where venue is otherwise appropriate under applicable law (the
"Court").
(b) The matters that shall not be subject to a reference are the
following: (i) nonjudicial foreclosure of any security interests in real or
personal property, (ii) exercise of self-help remedies (including, without
limitation, set-off), (iii) appointment of a receiver and (iv) temporary,
provisional or ancillary remedies (including, without limitation, writs of
attachment, writs of possession, temporary restraining orders or preliminary
injunctions). This reference provision does not limit the right of any party to
exercise or oppose any of the rights and remedies described in clauses (i) and
(ii) or to seek or oppose from a court of competent jurisdiction any of the
items described in clauses (iii) and (iv). The exercise of, or opposition to,
any of those items does not waive the right of any party to a reference pursuant
to this reference provision as provided herein.
(c) The referee shall be a retired judge or justice selected by
mutual written agreement of the parties. If the parties do not agree within ten
(10) days of a written request to do so by any party, then, upon request of any
party, the referee shall be selected by the Presiding Judge of the Court (or his
or her representative). A request for appointment of a referee may be heard on
an ex parte or expedited basis, and the parties agree that irreparable harm
would result if ex parte relief is not granted. Pursuant to CCP Section 170.6,
each party shall have one peremptory challenge to the referee selected by the
Presiding Judge of the Court (or his or her representative).
(d) The parties agree that time is of the essence in conducting
the reference proceedings. Accordingly, the referee shall be requested, subject
to change in the time periods specified herein for good cause shown, to (i) set
the matter for a status and trial-setting conference within fifteen (15) days
after the date of selection of the referee, (ii) if practicable, try all issues
of law or fact within one hundred twenty (120) days after the date of the
conference and (iii) report a statement of decision within twenty (20) days
after the matter has been submitted for decision.
(e) The referee will have power to expand or limit the amount and
duration of discovery. The referee may set or extend discovery deadlines or
cutoffs for good cause, including a party's failure to provide requested
discovery for any reason whatsoever. Unless otherwise ordered based upon good
cause shown, no party shall be entitled to "priority" in conducting discovery,
depositions may be taken by either party upon seven (7) days written notice, and
all other discovery shall be responded to within fifteen (15) days after
service. All disputes relating to discovery which cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding.
-21-
12.2 Procedures. Except as expressly set forth herein, the referee
shall determine the manner in which the reference proceeding is conducted
including the time and place of hearings, the order of presentation of evidence,
and all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter, except that when any
party so requests, a court reporter will be used at any hearing conducted before
the referee, and the referee will be provided a courtesy copy of the transcript.
The party making such a request shall have the obligation to arrange for and pay
the court reporter. Subject to the referee's power to award costs to the
prevailing party, the parties will equally share the cost of the referee and the
court reporter at trial.
12.3 Application of Law. The referee shall be required to determine
all issues in accordance with existing case law and the statutory laws of the
State of California. The rules of evidence applicable to proceedings at law in
the State of California will be applicable to the reference proceeding. The
referee shall be empowered to enter equitable as well as legal relief, enter
equitable orders that will be binding on the parties and rule on any motion
which would be authorized in a court proceeding, including without limitation
motions for summary judgment or summary adjudication. The referee shall issue a
decision at the close of the reference proceeding which disposes of all claims
of the parties that are the subject of the reference. Pursuant to CCP Section
644, such decision shall be entered by the Court as a judgment or an order in
the same manner as if the action had been tried by the Court and any such
decision will be final, binding and conclusive. The parties reserve the right to
appeal from the final judgment or order or from any appealable decision or order
entered by the referee. The parties reserve the right to findings of fact,
conclusions of laws, a written statement of decision, and the right to move for
a new trial or a different judgment, which new trial, if granted, is also to be
a reference proceeding under this provision.
12.4 Repeal. If the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by reference
procedure will be resolved and determined by arbitration. The arbitration will
be conducted by a retired judge or justice, in accordance with the California
Arbitration Act Section 1280 through Section 1294.2 of the CCP as amended from
time to time. The limitations with respect to discovery set forth above shall
apply to any such arbitration proceeding.
12.5 THE PARTIES RECOGNIZE AND AGREE THAT ALL CONTROVERSIES, DISPUTES
AND CLAIMS RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE
AND NOT BY A JURY. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT)
WITH COUNSEL OF ITS, HIS OR HER OWN CHOICE, EACH PARTY KNOWINGLY AND
VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, AGREES THAT THIS
REFERENCE PROVISION WILL APPLY TO ANY CONTROVERSY, DISPUTE OR CLAIM BETWEEN OR
AMONG THEM ARISING OUT OF OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE OTHER
COMERICA DOCUMENTS.
13. GENERAL PROVISIONS.
13.1 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties and shall bind all Persons who become bound as a debtor to this
Agreement; provided, however, that neither this Agreement nor any rights
hereunder may be assigned by Borrower without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion. Bank shall
have the right without the consent of or notice to Borrower to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits hereunder.
13.2 Indemnification. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank,
its officers, employees and agents as a result of or in any way arising out of,
following, or consequential to transactions between Bank and Borrower whether
under this Agreement, or otherwise (including without limitation reasonable
attorneys' fees and expenses), except for losses caused by Bank's gross
negligence or willful misconduct.
-22-
13.3 Time of Essence. Time is of the essence for the performance of
all obligations set forth in this Agreement.
13.4 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
13.5 Amendments in Writing, Integration. All amendments to or
terminations of this Agreement or the other Loan Documents must be in writing.
All prior agreements, understandings, representations, warranties, and
negotiations between the parties hereto with respect to the subject matter of
this Agreement and the other Loan Documents, if any, are merged into this
Agreement and the Loan Documents.
13.6 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, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
13.7 Survival. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations (other than inchoate indemnity obligations) remain outstanding or
Bank has any obligation to make any Credit Extension to Borrower. The
obligations of Borrower to indemnify Bank with respect to the expenses, damages,
losses, costs and liabilities described in Section 13.2 shall survive until all
applicable statute of limitations periods with respect to actions that may be
brought against Bank have run.
13.8 Confidentiality. In handling any confidential information, Bank
and all employees and agents of Bank shall exercise the same degree of care that
Bank exercises with respect to its own proprietary information of the same types
to maintain the confidentiality of any non-public information thereby received
or received pursuant to this Agreement except that disclosure of such
information may be made (i) to the subsidiaries or Affiliates of Bank in
connection with their present or prospective business relations with Borrower,
(ii) to prospective transferees or purchasers of any interest in the Credit
Extensions, provided that they have entered into a comparable confidentiality
agreement in favor of Borrower and have delivered a copy to Borrower, (iii) as
required by law, regulations, rule or order, subpoena, judicial order or similar
order, (iv) as may be required in connection with the examination, audit or
similar investigation of Bank and (v) as Bank may determine in connection with
the enforcement of any remedies hereunder. Confidential information hereunder
shall not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.
-23-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
TRUBION PHARMACEUTICALS, INC.
By: /s/ Xxxxxxxx Xxxxxx
------------------------------------
Title: Senior Vice President &
Chief Financial Officer
COMERICA BANK
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Title: Assistant Vice President
---------------------------------
[SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT]
DEBTOR: TRUBION PHARMACEUTICALS, INC.
SECURED PARTY: COMERICA BANK
EXHIBIT A
COLLATERAL DESCRIPTION ATTACHMENT
TO LOAN AND SECURITY AGREEMENT
All personal property of Borrower (herein referred to as "Borrower" or
"Debtor") whether presently existing or hereafter created or acquired, and
wherever located, including, but not limited to:
(a) all accounts (including health-care-insurance receivables),
chattel paper (including tangible and electronic chattel paper), deposit
accounts, documents (including negotiable documents), equipment (including all
accessions and additions thereto), general intangibles (including payment
intangibles and software), goods (including fixtures), instruments (including
promissory notes), inventory (including all goods held for sale or lease or to
be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities
entitlements), letter of credit rights, money, and all of Debtor's books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records;
(b) any and all cash proceeds and/or noncash proceeds of any of the
foregoing, including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All terms
above have the meanings given to them in the California Uniform Commercial Code,
as amended or supplemented from time to time, including revised Division 9 of
the Uniform Commercial Code-Secured Transactions, added by Stats. 1999, c.991
(S.B. 45), Section 35, operative July 1, 2001.
Notwithstanding the foregoing, the Collateral shall not include (i)
any intellectual property, including, without limitation, copyrights, patents,
trademarks, servicemarks and applications therefor, now owned or hereafter
acquired, or any claims for damages by way of any past, present and future
infringement of any of the foregoing (collectively, the "Intellectual
Property"); provided, however, that the Collateral shall include all accounts
and general intangibles that consist of rights to payment and proceeds from the
sale, licensing or disposition of all or any part, or rights in, the foregoing
(the "Rights to Payment"), (ii) property that is nonassignable by its terms
without the consent of the licensor thereof or another party (but only to the
extent such prohibition on transfer is enforceable under applicable law,
including, without limitation, Sections 9406 and 9408 of the Code), (iii)
property in which the granting of a security interest therein is contrary to
applicable law, provided that upon the cessation of any such restriction or
prohibition, such property shall automatically become part of the Collateral,
(iv) property that constitutes the capital stock of a controlled foreign
corporation (as defined in the IRC), in excess of 65% of the voting power of all
classes of capital stock of such controlled foreign corporations entitled to
vote or (v) or property subject to a lien described in clause (c) of the
definition of Permitted Lien (as defined in that certain Loan and Security
Agreement between Borrower and Comerica Bank dated as of September 12, 2006) in
which the granting of a security interest therein is prohibited by or would
constitute a default under any agreement or document governing such property
(but only to the extent such prohibition is enforceable under applicable law);
provided that upon the termination or lapsing of any such prohibition, such
property shall automatically be part of the Collateral. Notwithstanding the
foregoing, if a judicial authority (including a U.S. Bankruptcy Court) holds
that a security interest in the underlying Intellectual Property is necessary to
have a security interest in the Rights to Payment, then the Collateral shall
automatically, and effective as of the Closing Date, include the Intellectual
Property to the extent necessary to permit perfection of Bank's security
interest in the Rights to Payment.
EXHIBIT B
TECHNOLOGY & LIFE SCIENCES DIVISION
LOAN ANALYSIS
LOAN ADVANCE/PAYDOWN REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS [3:00* P.M., Pacific Time/ 3:30 P.M.
Eastern Time]
DEADLINE FOR EQUIPMENT ADVANCES IS [3:00 P.M., Pacific Time/ 3:30 P.M.
Eastern Time]**
DEADLINE FOR WIRE TRANSFERS IS [1:30 P.M., Pacific Time/ 3:30 P.M. Eastern
Time]
[*At month end and the day before a holiday, the cut off time is 1:30 P.M.,
Pacific Time]
**Subject to 3 day advance notice.
To: Loan Analysis DATE: ____________________ TIME: __________________
FAX #: (000) 000-0000
FROM: TRUBION TELEPHONE REQUEST (For Bank Use Only):
PHARMACEUTICALS, INC.
Borrower's Name The following person is authorized to
request the loan payment transfer/loan
FROM: _______________________________ advance on the designated account and is
Authorized Signer's Name known to me.
________________________________________
Authorized Request & Phone #
FROM: _______________________________ ________________________________________
Authorized Signer's Name Received by (Bank) & Phone #
PHONE #: ____________________________ ________________________________________
FROM Authorized Signature (Bank)
ACCOUNT#: ___________________________
(please include Note number, if
applicable)
TO ACCOUNT#: ________________________
(please include Note number if
applicable)
REQUESTED TRANSACTION TYPE REQUESTED DOLLAR AMOUNT For Bank Use Only
-------------------------- -----------------------
PRINCIPAL INCREASE* (ADVANCE) $______________________ Date Rec'd: __________
PRINCIPAL PAYMENT (ONLY) $______________________ Time: ________________
Comp. Status: YES NO
OTHER INSTRUCTIONS: Status Date:__________
_______________________________________________________ Time: ________________
_______________________________________________________ Approval: ____________
All representations and warranties of Borrower stated in the Loan Agreement are
true, correct and complete in all material respects as of the date of the
telephone request for and advance confirmed by this Borrowing Certificate,
including without limitation the representation that Borrower has paid for and
owns the equipment financed by the Bank; provided, however, that those
representations and warranties the date expressly referring to another date
shall be true, correct and complete in all material respects as of such date.
*IS THERE A WIRE REQUEST TIED TO THIS LOAN ADVANCE? (PLEASE CIRCLE ONE) YES NO
If YES, the Outgoing Wire Transfer Instructions must be completed below.
OUTGOING WIRE TRANSFER INSTRUCTIONS Fed Reference Number Bank Transfer Number
____________________ ____________________
THE ITEMS MARKED WITH AN ASTERISK (*) ARE REQUIRED TO BE COMPLETED.
*Beneficiary Name ______________________________________________________________
*Beneficiary Account Number ____________________________________________________
*Beneficiary Address ___________________________________________________________
Currency Type US DOLLARS ONLY
*ABA Routing Number (9 Digits) _______________________________________________
*Receiving Institution Name ____________________________________________________
*Receiving Institution Address _________________________________________________
*Wire Account $_________________________________________________________________
EXHIBIT C
LIBOR ADDENDUM
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: COMERICA BANK
FROM: TRUBION PHARMACEUTICALS, INC.
The undersigned authorized officer of TRUBION PHARMACEUTICALS, INC. hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending _______________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct as of the date hereof.
Attached herewith are the required documents supporting the above certification.
The Officer further certifies that these 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 for the absence of footnotes and subject to year end
adjustments with respect to unaudited financial statements.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
(if Reporting Milestone not met)
Annual (CPA Audited) FYE within 120 days Yes No
(if Reporting Milestone not met)
10K and 10Q Within 5 days of Standard SEC Yes No
filing date
Quarterly Brokerage Statements Within 30 days of quarter end
A/R & A/P Agings Monthly within 30 days or Yes No
Quarterly within 30 days if
Reporting Milestone met
Compliance Cert. Monthly within 30 days or Yes No
Quarterly within 30 days if
Reporting Milestone met
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
(A) Dollar amount required so None $__________
that Borrower's Liquidity is
greater than or equal to
1.50:1.00
(B) Cash Burn, measured on a None $__________
trailing three month basis.
Measured on a Monthly Basis:
Total amount of cash and Greater of items (A) $__________ Yes No
investments or (B) above
Comments Regarding Exceptions: See Attached. BANK USE ONLY
Received by:
---------------------------
AUTHORIZED SIGNER
Sincerely Date:
----------------------------------
Verified:
------------------------------------- ------------------------------
SIGNATURE AUTHORIZED SIGNER
------------------------------------- Date:
TITLE ----------------------------------
------------------------------------- Compliance Status Yes No
DATE
SCHEDULE OF EXCEPTIONS
Permitted Indebtedness (Section 1.1)
Term Sheet Letter from Oxford Finance Corporation, dated April 2, 2003 for
$1,700,000
Term Sheet Letter from Oxford Finance Corporation, dated November 3, 2004 for
$2,000,000
Master Security Agreement with Oxford Finance Corporation, dated June 18, 2003
Permitted Investments (Section 1.1)
None.
Permitted Liens (Section 1.1)
Liens in favor of Oxford Finance Corporation in connection with the Permitted
Indebtedness listed above provided that such Liens are confined solely to the
equipment financed by Oxford Finance Corporation in connection with such
Permitted Indebtedness.
Prior Names (Section 5.5)
GeneCraft LLC
Genecraft, Inc.
Litigation (Section 5.6)
None.
Inbound Licenses (Section 5.12)
None.
CORPORATION RESOLUTIONS AND INCUMBENCY CERTIFICATION
AUTHORITY TO PROCURE LOANS
I certify that I am the duly elected and qualified Secretary of TRUBION
PHARMACEUTICALS, INC.; that the following is a true and correct copy of
resolutions duly adopted by the Board of Directors of the Corporation in
accordance with its bylaws and applicable statutes.
COPY OF RESOLUTIONS:
BE IT RESOLVED, THAT:
1. Any one (1) of the following __________________________ (insert titles
only) of the Corporation are/is authorized, for, on behalf of, and in the
name of the Corporation to:
(a) Negotiate and procure loans, letters of credit and other credit or
financial accommodations from Comerica Bank ("Bank"), a Michigan
banking corporation, including, without limitation, that certain Loan
and Security Agreement dated as of September 12, 2006, as may
subsequently be amended from time to time.
(b) Discount with the Bank, commercial or other business paper belonging
to the Corporation made or drawn by or upon third parties, without
limit as to amount;
(c) Purchase, sell, exchange, assign, endorse for transfer and/or deliver
certificates and/or instruments representing stocks, bonds, evidences
of Indebtedness or other securities owned by the Corporation, whether
or not registered in the name of the Corporation;
(d) Give security for any liabilities of the Corporation to the Bank by
grant, security interest, assignment, lien, deed of trust or mortgage
upon any real or personal property, tangible or intangible of the
Corporation; and
(e) Execute and deliver in form and content as may be required by the Bank
any and all notes, evidences of Indebtedness, applications for letters
of credit, guaranties, subordination agreements, loan and security
agreements, financing statements, assignments, liens, deeds of trust,
mortgages, trust receipts and other agreements, instruments or
documents to carry out the purposes of these Resolutions, any or all
of which may relate to all or to substantially all of the
Corporation's property and assets.
2. Said Bank be and it is authorized and directed to pay the proceeds of any
such loans or discounts as directed by the persons so authorized to sign,
whether so payable to the order of any of said persons in their individual
capacities or not, and whether such proceeds are deposited to the
individual credit of any of said persons or not;
3. Any and all agreements, instruments and documents previously executed and
acts and things previously done to carry out the purposes of these
Resolutions are ratified, confirmed and approved as the act or acts of the
Corporation.
4. These Resolutions shall continue in force, and the Bank may consider the
holders of said offices and their signatures to be and continue to be as
set forth in a certified copy of these Resolutions delivered to the Bank,
until notice to the contrary in writing is duly served on the Bank (such
notice to have no effect on any action previously taken by the Bank in
reliance on these Resolutions).
5. Any person, corporation or other legal entity dealing with the Bank may
rely upon a certificate signed by an officer of the Bank to effect that
these Resolutions and any agreement, instrument or document executed
pursuant to them are still in full force and effect and binding upon the
Corporation.
6. The Bank may consider the holders of the offices of the Corporation and
their signatures, respectively, to be and continue to be as set forth in
the Certificate of the Secretary of the Corporation until notice to the
contrary in writing is duly served on the Bank.
I further certify that the above Resolutions are in full force and effect as of
the date of this Certificate; that these Resolutions and any borrowings or
financial accommodations under these Resolutions have been properly noted in the
corporate books and records, and have not been rescinded, annulled, revoked or
modified; that neither the foregoing Resolutions nor any actions to be taken
pursuant to them are or will be in contravention of any provision of the
articles of incorporation or bylaws of the Corporation or of any agreement,
indenture or other instrument to which the Corporation is a party or by which it
is bound; and that neither the articles of incorporation nor bylaws of the
Corporation nor any agreement, indenture or other instrument to which the
Corporation is a party or by which it is bound require the vote or consent of
shareholders of the Corporation to authorize any act, matter or thing described
in the foregoing Resolutions.
I further certify that the following named persons have been duly elected to the
offices set opposite their respective names, that they continue to hold these
offices at the present time, and that the signatures which appear below are the
genuine, original signatures of each respectively:
(PLEASE SUPPLY GENUINE SIGNATURES OF AUTHORIZED SIGNERS BELOW)
NAME (TYPE OR PRINT) TITLE SIGNATURE
-------------------- -------------- ----------------------------------------
-------------------- -------------- ----------------------------------------
-------------------- -------------- ----------------------------------------
-------------------- -------------- ----------------------------------------
-------------------- -------------- ----------------------------------------
-------------------- -------------- ----------------------------------------
-------------------- -------------- ----------------------------------------
In Witness Whereof, I have affixed my name as Secretary and have caused the
corporate seal (where available) of said Corporation to be affixed on September
12, 2006.
----------------------------------------
Secretary
The Above Statements are Correct.
----------------------------------------
SIGNATURE OF OFFICER OR DIRECTOR OR, IF
NONE, A SHAREHOLDER OTHER THAN SECRETARY
WHEN SECRETARY IS AUTHORIZED TO SIGN
ALONE.
FAILURE TO COMPLETE THE ABOVE WHEN THE SECRETARY IS AUTHORIZED TO SIGN ALONE
SHALL CONSTITUTE A CERTIFICATION BY THE SECRETARY THAT THE SECRETARY IS THE SOLE
SHAREHOLDER, DIRECTOR AND OFFICER OF THE CORPORATION.
ATTN: TRUBION PHARMACEUTICALS, INC.
USA PATRIOT ACT
NOTICE
OF
CUSTOMER IDENTIFICATION
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT
To help the government fight the funding of terrorism and money laundering
activities, Federal law requires all financial institutions to obtain, verify,
and record information that identifies each person who opens an account.
WHAT THIS MEANS FOR YOU: when you open an account, we will ask your name,
address, date of birth, and other information that will allow us to identify
you. We may also ask to see your driver's license or other identifying
documents.
COMERICA BANK
MEMBER FDIC
ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
(EQUIPMENT LINE)
Name(s): TRUBION PHARMACEUTICALS, INC. Date: September 12, 2006
$__________________ credited to deposit account No. ___________ when Equipment
Advances are requested or disbursed to Borrower by cashiers
check or by wire transfer
Amounts paid to others on your behalf:
$__________________ to Comerica Bank for Loan Fee
$__________________ to Comerica Bank for Document Fee
$__________________ to Comerica Bank for accounts receivable audit (estimate)
$__________________ to Bank counsel fees and expenses
$__________________ to _______________
$__________________ to _______________
$__________________ to TOTAL (AMOUNT FINANCED)
Upon consummation of this transaction, this document will also serve as the
authorization for Comerica Bank to disburse the loan proceeds as stated above.
------------------------------------- ----------------------------------------
Signature Signature
AGREEMENT TO PROVIDE INSURANCE
TO: COMERICA BANK Date: September 12, 2006
Attn: Xxxx X. Xxxxxx, MC 4770
00 X. Xxxxxxx Xxxx
Xxx Xxxx, XX 00000 Borrower: TRUBION PHARMACEUTICALS, INC.
In consideration of a loan in the amount of $8,000,000, secured by all
tangible personal property including inventory and equipment.
I/We agree to obtain adequate insurance coverage to remain in force during
the term of the loan.
I/We also agree to advise the below named agent to add Comerica Bank as
lender's loss payable on the new or existing insurance policy, and to furnish
Bank at above address with a copy of said policy/endorsements and any subsequent
renewal policies.
I/We understand that the policy must contain:
1. Fire and extended coverage in an amount sufficient to cover:
(a) The amount of the loan, OR
(b) All existing encumbrances, whichever is greater,
But not in excess of the replacement value of Borrower's tangible property.
2. Lender's "Loss Payable" Endorsement Form 438 BFU in favor of Comerica
Bank, or any other form acceptable to Bank.
INSURANCE INFORMATION
Insurance Co./Agent _________________ Telephone No.: ________________
Agent's Address: ____________________
Signature of Obligor:
------------------
Signature of Obligor:
------------------
FOR BANK USE ONLY
INSURANCE VERIFICATION: _______________ Date: ______________
Person Spoken to: __________________________________________
Policy Number: _____________________________________________
Effective From: _______________________ To: ________________
Verified by: _______________________________________________
COMERICA BANK
MEMBER FDIC
AUTOMATIC DEBIT AUTHORIZATION
To: COMERICA BANK
Re: LOAN # ___________________________________
You are hereby authorized and instructed to charge account No. _________________
in the name of TRUBION PHARMACEUTICALS, INC. for principal, interest and other
payments due on above referenced loan as set forth below and credit the loan
referenced above.
[X] Debit each interest payment as it becomes due according to the terms
of the Loan and Security Agreement and any renewals or amendments
thereof.
[X] Debit each principal payment as it becomes due according to the terms
of the Loan and Security Agreement and any renewals or amendments
thereof.
[X] Debit each payment for Bank Expenses as it becomes due according to
the terms of the Loan and Security Agreement and any renewals or
amendments thereof.
This Authorization is to remain in full force and effect until revoked in
writing.
Borrower Signature Date
September 12, 2006
-------------------------------------
September 12, 2006
-------------------------------------
COMERICA BANK
MEMBER FDIC
AUTOMATIC DEBIT AUTHORIZATION
To: COMERICA BANK
Re: LOAN # ___________________________________
You are hereby authorized and instructed to charge account No. _________________
in the name of TRUBION PHARMACEUTICALS, INC. for principal, interest and other
payments due on above referenced loan as set forth below and credit the loan
referenced above.
[X] Debit each interest payment as it becomes due according to the terms
of the Loan and Security Agreement and any renewals or amendments
thereof.
[X] Debit each principal payment as it becomes due according to the terms
of the Loan and Security Agreement and any renewals or amendments
thereof.
[X] Debit each payment for Bank Expenses as it becomes due according to
the terms of the Loan and Security Agreement and any renewals or
amendments thereof.
This Authorization is to remain in full force and effect until revoked in
writing.
Borrower Signature Date
September 12, 2006
-------------------------------------
September 12, 2006
-------------------------------------
COMERICA BANK
COMERICA BANK
CLIENT AUTHORIZATION
Fax (000) 000-0000
GENERAL AUTHORIZATION
I hereby authorize Comerica Bank to use my company name, logo, and information
relating to our banking relationship in its marketing and advertising campaigns
which is intended for Comerica Bank's customers, prospects and shareholders.
Comerica Bank will forward any advertising or article including client for prior
review and approval.
----------------------------------------
Signature
----------------------------------------
Printed Name Title
----------------------------------------
Company
----------------------------------------
Mailing Address
----------------------------------------
City, State, Zip Code
----------------------------------------
Phone Number
----------------------------------------
Fax Number
----------------------------------------
E-Mail
September 12, 2006
DEBTOR TRUBION PHARMACEUTICALS, INC.
SECURED PARTY: COMERICA BANK
EXHIBIT A
COLLATERAL DESCRIPTION ATTACHMENT
TO UCC NATIONAL FORM FINANCING STATEMENT
All personal property of Borrower (herein referred to as "Borrower" or
"Debtor") whether presently existing or hereafter created or acquired, and
wherever located, including, but not limited to:
(a) all accounts (including health-care-insurance receivables),
chattel paper (including tangible and electronic chattel paper), deposit
accounts, documents (including negotiable documents), equipment (including all
accessions and additions thereto), general intangibles (including payment
intangibles and software), goods (including fixtures), instruments (including
promissory notes), inventory (including all goods held for sale or lease or to
be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities
entitlements), letter of credit rights, money, and all of Debtor's books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records;
(b) any and all cash proceeds and/or noncash proceeds of any of the
foregoing, including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All terms
above have the meanings given to them in the California Uniform Commercial Code,
as amended or supplemented from time to time, including revised Division 9 of
the Uniform Commercial Code-Secured Transactions, added by Stats. 1999, c.991
(S.B. 45), Section 35, operative July 1, 2001.
Notwithstanding the foregoing, the Collateral shall not include (i)
any intellectual property, including, without limitation, copyrights, patents,
trademarks, servicemarks and applications therefor, now owned or hereafter
acquired, or any claims for damages by way of any past, present and future
infringement of any of the foregoing (collectively, the "Intellectual
Property"); provided, however, that the Collateral shall include all accounts
and general intangibles that consist of rights to payment and proceeds from the
sale, licensing or disposition of all or any part, or rights in, the foregoing
(the "Rights to Payment"), (ii) property that is nonassignable by its terms
without the consent of the licensor thereof or another party (but only to the
extent such prohibition on transfer is enforceable under applicable law,
including, without limitation, Sections 9406 and 9408 of the Code), (iii)
property in which the granting of a security interest therein is contrary to
applicable law, provided that upon the cessation of any such restriction or
prohibition, such property shall automatically become part of the Collateral,
(iv) property that constitutes the capital stock of a controlled foreign
corporation (as defined in the IRC), in excess of 65% of the voting power of all
classes of capital stock of such controlled foreign corporations entitled to
vote or (v) or property subject to a lien described in clause (c) of the
definition of Permitted Lien (as defined in the that certain Loan and Security
Agreement between Borrower and Comerica Bank dated as of September 12, 2006) in
which the granting of a security interest therein is prohibited by or would
constitute a default under any agreement or document governing such property
(but only to the extent such prohibition is enforceable under applicable law);
provided that upon the termination or lapsing of any such prohibition, such
property shall automatically be part of the Collateral. Notwithstanding the
foregoing, if a judicial authority (including a U.S. Bankruptcy Court) holds
that a security interest in the underlying Intellectual Property is necessary to
have a security interest in the Rights to Payment, then the Collateral shall
automatically, and effective as of the Closing Date, include the Intellectual
Property to the extent necessary to permit perfection of Bank's security
interest in the Rights to Payment.
