1
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
EXHIBIT 10.114
================================================================================
LOAN AGREEMENT
by and between
AXYS PHARMACEUTICALS, INC.
and
FOOTHILL CAPITAL CORPORATION
Dated as of July 26, 1999
================================================================================
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TABLE OF CONTENTS
Page(s)
1. DEFINITIONS AND CONSTRUCTION.........................................................1
1.1 Definitions...................................................................1
1.2 Accounting Terms.............................................................10
1.3 Code.........................................................................11
1.4 Construction.................................................................11
1.5 Schedules and Exhibits.......................................................11
2. LOAN AND TERMS OF PAYMENT...........................................................11
2.1 Revolving Advances...........................................................11
2.2 Overadvances.................................................................12
2.3 Interest: Rates, Payments, and Calculations.................................13
2.4 Designated Account...........................................................13
2.5 Maintenance of Loan Account; Statements of Obligations.......................14
2.6 Fees.........................................................................14
3. CONDITIONS; TERM OF AGREEMENT.......................................................14
3.1 Conditions Precedent to the Initial Advance..................................14
3.2 Conditions Precedent to all Advances.........................................16
3.3 Condition Subsequent.........................................................17
3.4 Term.........................................................................17
3.5 Effect of Termination........................................................17
3.6 Early Termination by Borrower................................................17
3.7 Termination Upon Event of Default............................................17
4. CREATION OF SECURITY INTEREST.......................................................18
4.1 Grant of Security Interest...................................................18
4.2 Delivery of Additional Documentation Required................................18
4.3 Right to Inspect.............................................................18
5. REPRESENTATIONS AND WARRANTIES......................................................18
5.1 No Encumbrances..............................................................18
5.2 Location of Chief Executive Office; FEIN.....................................18
5.3 Due Organization and Qualification; Subsidiaries.............................19
5.4 Due Authorization; No Conflict...............................................19
5.5 Litigation...................................................................20
5.6 No Material Adverse Change. .................................................20
5.7 Solvency.....................................................................20
5.8 Employee Benefits............................................................20
6. AFFIRMATIVE COVENANTS...............................................................20
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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6.1 Accounting System............................................................20
6.2 Collateral Reporting.........................................................21
6.3 Financial Statements, Reports, Certificates..................................21
6.4 Tax Returns..................................................................22
6.5 Taxes........................................................................22
6.6 Insurance....................................................................22
6.7 No Setoffs or Counterclaims..................................................22
6.8 Compliance with Laws.........................................................22
6.9 Securities Accounts..........................................................22
7. NEGATIVE COVENANTS..................................................................23
7.1 Intentionally Omitted........................................................23
7.2 Liens........................................................................23
7.3 Intentionally Omitted........................................................23
7.4 Intentionally Omitted........................................................23
7.5 Change Name..................................................................23
7.6 Nature of Business...........................................................23
7.7 Change of Control............................................................23
7.8 Accounting Methods...........................................................23
7.9 Intentionally Omitted........................................................23
7.10 Intentionally Omitted........................................................23
7.11 Use of Proceeds..............................................................23
7.12 Change in Location of Chief Executive Office.................................23
8. EVENTS OF DEFAULT...................................................................24
9. FOOTHILL'S RIGHTS AND REMEDIES......................................................25
9.1 Rights and Remedies..........................................................25
9.2 Remedies Cumulative..........................................................25
10. TAXES AND EXPENSES..................................................................26
11. WAIVERS; INDEMNIFICATION............................................................26
11.1 Demand; Protest; etc.........................................................26
11.2 Foothill's Liability for Collateral..........................................26
11.3 Indemnification..............................................................26
12. NOTICES.............................................................................27
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER..........................................28
14. DESTRUCTION OF BORROWER'S DOCUMENTS.................................................29
15. GENERAL PROVISIONS..................................................................29
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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15.1 Effectiveness................................................................29
15.2 Successors and Assigns.......................................................29
15.3 Section Headings.............................................................29
15.4 Interpretation...............................................................29
15.5 Severability of Provisions...................................................30
15.6 Amendments in Writing........................................................30
15.7 Counterparts; Telefacsimile Execution........................................30
15.8 Revival and Reinstatement of Obligations.....................................30
15.9 Integration..................................................................30
15.10 Confidentiality..............................................................30
SCHEDULES AND EXHIBITS
Schedule 5.3 Subsidiaries
Schedule 5.5 Litigation
Exhibit C-1 Form of Compliance Certificate
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement"), is entered into as of July 26,
1999, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 11111 Santa Monica Boulevard,
Suite 1500, Los Angeles, California 90025-3333 and AXYS PHARMACEUTICALS, INC., a
Delaware corporation ("Borrower"), with its chief executive office located at
180 Kimball Way, South San Francisco, CA 94080.
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:
"Advances" has the meaning set forth in Section 2.1(a).
"Affiliate" means, as applied to any Person, any other Person
who directly or indirectly controls, is controlled by, is under common control
with or is a director or officer of such Person. For purposes of this
definition, "control" means the possession, directly or indirectly, of the power
to vote 5% or more of the securities having ordinary voting power for the
election of directors or the direct or indirect power to direct the management
and policies of a Person.
"Agreement" has the meaning set forth in the preamble hereto.
"Authorized Person" means any officer or other employee of
Borrower.
"Average Unused Portion of the Maximum Amount" means, as of any
date of determination, (a) the Maximum Amount, less (b) the average Daily
Balance of Advances that were outstanding during the immediately preceding
calendar month.
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C. Section 101 et seq.), as amended, and any successor statute.
"Benefit Plan" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which Borrower, any Subsidiary of Borrower, or any
ERISA Affiliate has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years.
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing Borrower's
properties or assets
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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(including the Collateral) or liabilities; all information relating to
Borrower's business operations or financial condition; and all computer
programs, disk or tape files, printouts, runs, or other computer prepared
information.
"Borrowing Base" has the meaning set forth in Section 2.1(a).
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which national banks in California are authorized or required to
close.
"Change of Control" shall be deemed to have occurred at such
time as a "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 more than 25% of the total voting power of all classes of stock
then outstanding of Borrower entitled to vote in the election of directors.
"Closing Date" means the date of the making of the initial
Advance.
"Code" means the California Uniform Commercial Code.
"Collateral" has the meaning set forth in the Security
Agreement.
"Compliance Certificate" means a certificate substantially in
the form of Exhibit C-1 and delivered by the chief accounting officer of
Borrower to Foothill.
"Control Agreements" means: (a) that certain Control Agreement,
of even date herewith, among Foothill, Borrower and Wells Capital, (b) that
certain Control Agreement, of even date herewith, among Foothill, Sequana and
Wells Capital and (c) a control agreement with respect to another Securities
Account that is acceptable to Foothill in form and substance.
"Daily Balance" means, with respect to each day during the term
of this Agreement, the amount of an Obligation owed at the end of such day.
"Default" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"Designated Account" means account number [ * ] of Borrower
maintained with Borrower's Designated Account Bank, or such other deposit
account of Borrower (located within the United States) which has been
designated, in writing and from time to time, by Borrower to Foothill.
"Designated Account Bank" means Bank of America, whose office is
located at 345 Montgomery Street, San Francisco, California 94104, and whose ABA
number is 121000358.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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"Disbursement Letter" means an instructional letter executed and
delivered by Borrower to Foothill regarding the extensions of credit to be made
on the Closing Date, the form and substance of which shall be satisfactory to
Foothill.
"Dollars or $" means United States dollars.
"Early Termination Premium" has the meaning set forth in Section
3.6.
"ERISA" means the Employee Retirement Income Security Act of
1974, 29 U.S.C. Sections 1000 et seq., amendments thereto, successor statutes,
and regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"Event of Default" has the meaning set forth in Section 8.
"Existing Lender" means Sumitomo Bank Limited and Sumitomo Bank
Limited and Silicon Valley Bank, as co-lenders.
"FEIN" means Federal Employer Identification Number.
"Foothill" has the meaning set forth in the preamble to this
Agreement.
"Foothill Expenses" means all: costs or expenses (including
taxes, and insurance premiums) required to be paid by Borrower under any of the
Loan Documents that are paid or incurred by Foothill pursuant hereto; fees or
charges paid or incurred by Foothill in connection with Foothill's transactions
with Borrower, including, fees or charges for photocopying, notarization,
couriers and messengers, telecommunication, public record searches (including
tax lien, litigation, and UCC searches) filing, recording, publication; costs
and expenses incurred by Foothill in the disbursement of funds to Borrower (by
wire transfer or otherwise); charges paid or incurred by Foothill resulting from
the dishonor of checks; costs and expenses paid or incurred by Foothill to
correct any default or enforce any provision of the Loan Documents, or in
gaining possession of, maintaining, handling, preserving, selling or preparing
for sale the Collateral or any portion thereof, irrespective of whether a sale
is consummated; costs and expenses paid or incurred by Foothill in examining
Borrower's Books; costs and expenses of third party claims or any other suit
paid or incurred by Foothill in enforcing or
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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defending the Loan Documents or in connection with the transactions contemplated
by the Loan Documents or Foothill's relationship with Borrower; and Foothill's
reasonable attorneys fees and expenses incurred in advising, structuring,
drafting, reviewing, administering, amending, terminating, enforcing, defending,
or concerning the Loan Documents (including attorneys fees and expenses incurred
in connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning Borrower), irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"Governing Documents" means the certificate or articles of
incorporation, by-laws, or other organizational or governing documents of any
Person.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guaranty" means that certain Continuing Guaranty, of even date
herewith, in which Sequana has guaranteed the Obligations.
"Indebtedness" means: (a) all obligations of Borrower for
borrowed money, (b) all obligations of Borrower evidenced by bonds, debentures,
notes, or other similar instruments and all reimbursement or other obligations
of Borrower in respect of letters of credit, bankers acceptances, interest rate
swaps, or other financial products, (c) all obligations of Borrower under
capital leases, (d) all obligations or liabilities of others secured by a Lien
on any property or asset of Borrower, irrespective of whether such obligation or
liability is assumed, and (e) any obligation of Borrower guaranteeing or
intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or
sold with recourse to Borrower) any indebtedness, lease, dividend, letter of
credit, or other obligation of any other Person.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"Inventory" has the meaning given to that term in Division 9 of
the Code.
"Investment Management Agreement" means an investment management
agreement between Borrower or Sequana and Wells Capital establishing and
governing a Securities Account.
"Investment Property" means all of Borrower's presently existing
and hereafter acquired or arising (a) investment property (as that term is
defined in Section 9115 of
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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the Code), held in or as part of the Securities Account, (b) all rights and
interest of Borrower with respect to the Investment Account and such investment
property, and (c) all other financial assets held in or as part of the
Securities Account, including without limitation, the Short-Term Cash Equivalent
Securities and the Long-Term Cash Equivalent Securities, together with any
certificates, options, warrants, moneys or other distributions issued in
addition to, in substitution or exchange for, or on account of said assets.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Lien" means any interest in property securing an obligation
owed to, or a claim by, any Person other than the owner of the property, whether
such interest shall be based on the common law, statute, or contract, whether
such interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, adverse
claim or charge, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting
estates or interests in real property.
"Loan Account" has the meaning set forth in Section 2.5.
"Loan Documents" means this Agreement, the Security Agreement,
each Control Agreement, the Disbursement Letter, the Guaranty and any security
agreements relating thereto, any note or notes executed by Borrower and payable
to Foothill, and any other agreement entered into, now or in the future, in
connection with this Agreement.
"Long-Term Cash Equivalent Securities" means each of the
following securities, provided such securities have maturities greater than 365
days and equal to or less than 545 days:
(a) United States Government Obligations
(i) United States Treasury Bills,
(ii) United States Government Coupon Issues, and
(iii) United States Federal Agencies and
Instrumentalities;
(b) Domestic Money Market Instruments
(i) Certificates of Deposit,
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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(ii) Repurchase Agreements Fully Collateralized by
United States Government or Agency Securities,
(iii) Bankers Acceptances,
(iv) Commercial Paper/Medium Term Notes,
(v) Short-Term Money Market Funds Issued by an
Affiliate of Wells Fargo & Company, and
(vi) Master Notes;
(c) Except for the United States Government Obligations, the
Securities Described in (a) and (b) above must meet or exceed the following
ratings:
(i) Variable rate demand notes/municipal notes and
bonds: AA/AAA long-term or MIGI, VMIGI, SPI
short-term; pre-funded; escrow to maturity; AA/AAA
letter of credit,
(ii) Bank holding companies: a rating of at least
A-1/P-1 short-term and AA-AA long-term, and
(iii) Commercial paper: a rating of at least A-1/P-1.
"Material Adverse Change" means (a) a material adverse effect on
the value of the Collateral or the amount that Foothill would be likely to
receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of such Collateral or (b) a material impairment
of the priority of Foothill's Liens with respect to the Collateral.
"Maximum Amount" means $30,000,000.
"Mid Term Cash Equivalent Securities" means each of the
following securities, provided such securities have maturities greater than 180
days and equal to or less than 365 days:
(a) United States Government Obligations
(i) United States Treasury Bills,
(ii) United States Government Coupon Issues, and
(iii) United States Federal Agencies and
Instrumentalities;
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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(b) Domestic Money Market Instruments
(i) Certificates of Deposit,
(ii) Repurchase Agreements Fully Collateralized by
United States Government or Agency Securities,
(iii) Bankers Acceptances,
(iv) Commercial Paper/Medium Term Notes,
(v) Short-Term Money Market Funds Issued by an
Affiliate of Wells Fargo & Company, and
(vi) Master Notes;
(c) Except for the United States Government Obligations, the
Securities Described in (a) and (b) above must meet or exceed the following
ratings:
(i) Variable rate demand notes/municipal notes and
bonds: AA/AAA long-term or MIGI, VMIGI, SPI
short-term; pre-funded; escrow to maturity; AA/AAA
letter of credit,
(ii) Bank holding companies: a rating of at least
A-1/P-1 short-term and AA-AA long-term, and
(iii) Commercial paper: a rating of at least A-1/P-1.
"Obligations" means all loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), premiums (including Early Termination Premiums),
liabilities (including all amounts charged to Borrower's Loan Account pursuant
hereto), obligations, fees, charges, costs, or Foothill Expenses (including any
fees or expenses that, but for the provisions of the Bankruptcy Code, would have
accrued), lease payments, guaranties, covenants, and duties owing by Borrower to
Foothill of any kind and description (whether pursuant to or evidenced by the
Loan Documents or pursuant to any other agreement between Foothill and Borrower,
and irrespective of whether for the payment of money), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including all interest not paid when due and all Foothill
Expenses that Borrower is required to pay or reimburse by the Loan Documents, by
law, or otherwise.
"Overadvance" has the meaning set forth in Section 2.2.
"Pay-Off Letter" means a letter, in form and substance
reasonably satisfactory to Foothill, from Existing Lender respecting the amount
necessary to repay in full all
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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of the obligations of Borrower owing to Existing Lender and obtain a termination
or release of all of the Liens existing in favor of Existing Lender in and to
the properties or assets of Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation as defined
in Title IV of ERISA, or any successor thereto.
"Permitted Liens" means (a) Liens held by Foothill, (b) Liens
held by Wells Capital as permitted under any Control Agreement and (c) Liens for
unpaid taxes that are the subject of a Permitted Protest.
"Permitted Protest" means the right of Borrower to protest any
Lien (other than any such Lien that secures the Obligations), tax (other than
payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve with respect to such
obligation is established on the books of Borrower in an amount that is
reasonably satisfactory to Foothill, (b) any such protest is instituted and
diligently prosecuted by Borrower in good faith, and (c) Foothill is satisfied
that, while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Liens of Foothill in and to
the Collateral.
"Person" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Plan" means any employee benefit plan, program, or arrangement
maintained or contributed to by Borrower or with respect to which it may incur
liability.
"Reference Rate" means the variable rate of interest, per annum,
most recently announced by Wells Fargo Bank, National Association, or any
successor thereto, as its "base rate," irrespective of whether such announced
rate is the best rate available from such financial institution.
"Reportable Event" means any of the events described in Section
4043(c) of ERISA or the regulations thereunder other than a Reportable Event as
to which the provision of 30 days notice to the PBGC is waived under applicable
regulations.
"Retiree Health Plan" means an "employee welfare benefit plan"
within the meaning of Section 3(1) of ERISA that provides benefits to
individuals after termination of their employment, other than as required by
Section 601 of ERISA.
"Securities Account" means: (a) that certain securities account
(as defined in Division 8 of the Code), Account Number [ * ], established by
Borrower with Wells Capital pursuant to an agreement between Wells Capital,
dated as of July ___, 1999, (b) that certain
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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securities account (as defined in Division 8 of the Code), Account Number [ * ],
established by Sequana, dated as of July ___, 1999 and (c) such other account
that has been established by Borrower or Sequana and approved by Foothill in
writing and is expressly designated therein as a Securities Account.
"Security Agreement" means that certain Security Agreement, of
even date herewith, between Foothill and Borrower.
"Sequana" means Sequana Therapeutics, Inc., a California
corporation.
"Short-Term Cash Equivalent Securities" means each of the
following securities, provided such securities have maturities of 180 days or
less:
(a) United States Government Obligations
(i) United States Treasury Bills,
(ii) United States Government Coupon Issues, and
(iii) United States Federal Agencies and
Instrumentalities;
(b) Domestic Money Market Instruments
(i) Certificates of Deposit,
(ii) Repurchase Agreements Fully Collateralized by
United States Government or Agency Securities,
(iii) Bankers Acceptances,
(iv) Commercial Paper/Medium Term Notes,
(v) Short-Term Money Market Funds Issued by an
Affiliate of Wells Fargo & Company, and
(vi) Master Notes;
(c) Except for the United States Government Obligations, the
Securities Described in (a) and (b) above must meet or exceed the following
ratings:
(i) Variable rate demand notes/municipal notes and
bonds: AA/AAA long-term or MIGI, VMIGI, SPI
short-term; pre-funded; escrow to maturity; AA/AAA
letter of credit,
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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(ii) Bank holding companies: a rating of at least
A-1/P-1 short-term and AA-AA long-term, and
(iii) Commercial paper: a rating of at least A-1/P-1.
"Solvent" means, with respect to any Person on a particular
date, that on such date (a) at fair valuations, all of the properties and assets
of such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person's ability to pay as such debts mature, and (e)
such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person's properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount that, in light of
all the facts and circumstances existing at such time, represents the amount
that reasonably can be expected to become an actual or matured liability.
"Subsidiary" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors (or
appoint other comparable managers) of such corporation, partnership, limited
liability company, or other entity.
"Termination Date" has the meaning set forth in Section 3.4.
"Voidable Transfer" has the meaning set forth in Section 15.8.
"Wells Capital" means Wells Capital Management Incorporated, a
California corporation.
"Year 2000 Compliant" means, with regard to any Person, that all
software in goods produced or sold by, or utilized by and material to the
business operations or financial condition of, such entity are able to interpret
and manipulate data on and involving all calendar dates correctly and without
causing any abnormal ending scenario, including in relation to dates in and
after the year 2000.
1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower on a consolidated basis
unless the context clearly requires otherwise.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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1.3 Code. Any terms used in this Agreement that are defined in the
Code shall be construed and defined as set forth in the Code unless otherwise
defined herein.
1.4 Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the term "including" is not limiting, and the
term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. An Event of Default
shall "continue" or be "continuing" until such Event of Default has been waived
in writing by Foothill. Section, subsection, clause, schedule, and exhibit
references are to this Agreement unless otherwise specified. Any reference in
this Agreement or in the Loan Documents to this Agreement or any of the Loan
Documents shall include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, and supplements, thereto
and thereof, as applicable.
1.5 Schedules and Exhibits. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT
2.1 Revolving Advances.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to make advances ("Advances") to Borrower in an amount
outstanding not to exceed at any one time the lesser of (i) the Maximum Amount,
or (ii) the Borrowing Base. For purposes of this Agreement, "Borrowing Base", as
of any date of determination, shall mean:
(y) an amount equal to [ * ] of:
(i) cash deposited with Foothill or with Wells Capital
in a Securities Account, (ii) the market value of the Short-Term
Cash Equivalent Securities in a Securities Account, (iii) the
market value of the Mid-Term Cash Equivalent Securities in a
Securities Account, and (iv) the market value of the Long-Term
Cash Equivalent Securities in a Securities Account, minus
(z) a reserve for [ * ].
In the event that Borrower elects to transfer the Collateral
to a wholly-owned Subsidiary (other than Sequana) that has been structured and
organized in a manner that is acceptable to Foothill, and Foothill has a first
priority, perfected Lien on the Collateral, for purposes of this Agreement,
"Borrowing Base", as of any date of determination, shall mean the result of:
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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(v) [ * ] of the market value of the Long-Term Cash
Equivalent Securities in a Securities Account, plus
(w) [ * ] of the market value of the Mid-Term Cash
Equivalent Securities in a Securities Account, plus
(x) [ * ] of the market value of the Short Term Cash
Equivalent Securities in a Securities Account, plus
(y) 100% of cash deposited by such Subsidiary with
Foothill or with Wells Capital in a Securities Account which is
intended be invested within two Business Days of receipt of such
cash, minus
(z) a reserve for [ * ].
(b) Anything to the contrary in this Section 2.1
notwithstanding, Foothill may (i) reduce the advance rates in the Borrowing Base
without declaring an Event of Default if it determines that there has occurred a
Material Adverse Change; and (ii) establish reserves against the Borrowing Base
as Foothill in its reasonable judgment (from the perspective of an asset-based
lender) shall deem necessary or appropriate on account of amounts owing by
Borrower to any Person to the extent secured by a Lien on, or trust over, any of
the Collateral, which Lien or trust, in the reasonable determination of Foothill
(from the perspective of an asset-based lender), would be likely to have a
priority superior to the Liens of Foothill in and to such item of the
Collateral.
(c) Amounts borrowed pursuant to this Section 2.1 may be repaid
and, subject to the terms and conditions of this Agreement, reborrowed at any
time during the term of this Agreement.
2.2 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Foothill pursuant to Section 2.1 is greater than
either the Dollar or percentage limitations set forth in Section 2.1 (an
"Overadvance"), Borrower, within [ * ] (except as provided to the contrary in
Section 8.1), shall pay to Foothill, in cash, the amount of such excess to be
used by Foothill to repay Advances outstanding under Section 2.1.
2.3 Interest: Rates, Payments, and Calculations
(a) Interest Rate. Except as provided in clause (b) below, all
Obligations shall bear interest on the Daily Balance at a per annum rate equal
to the Reference Rate.
(b) Default Rate. Upon the occurrence and during the
continuation of an Event of Default, at Foothill's election, all Obligations
shall bear interest on the Daily Balance at a per annum rate equal to [ * ].
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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(c) Payments. Interest payable hereunder shall be due and
payable, in arrears, on the first day of each month during the term hereof.
Borrower hereby authorizes Foothill, at its option, without prior notice to
Borrower, to charge such interest, all Foothill Expenses (as and when incurred),
the fees and charges provided for in Section 2.6 (as and when accrued or
incurred), and all payments due under any Loan Document to Borrower's Loan
Account, which amounts thereafter shall accrue interest at the rate then
applicable to Advances hereunder. Any interest not paid when due shall be
compounded and shall thereafter accrue interest at the rate then applicable to
Advances hereunder.
(d) Computation. The Reference Rate as of the date of this
Agreement is 8.00% per annum. In the event the Reference Rate is changed from
time to time hereafter, the applicable rate of interest hereunder automatically
and immediately shall be increased or decreased by an amount equal to such
change in the Reference Rate. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed.
(e) Intent to Limit Charges to Maximum Lawful Rate. In no event
shall the interest rate or rates payable under this Agreement, plus any other
amounts paid in connection herewith, exceed the highest rate permissible under
any law that a court of competent jurisdiction shall, in a final determination,
deem applicable. Borrower and Foothill, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained herein
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto as
of the date of this Agreement, Borrower is and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrower in
excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.
2.4 Designated Account. Foothill is authorized to make the Advances
under this Agreement based upon telephonic or other instructions received from
anyone purporting to be an Authorized Person, or without instructions if
pursuant to Section 2.3(c). Borrower agrees to establish and maintain the
Designated Account with the Designated Account Bank for the purpose of receiving
the proceeds of the Advances requested by Borrower and made by Foothill
hereunder. Unless otherwise agreed by Foothill and Borrower, any Advance
requested by Borrower and made by Foothill hereunder shall be made to the
Designated Account.
2.5 Maintenance of Loan Account; Statements of Obligations. Foothill
shall maintain an account on its books in the name of Borrower (the "Loan
Account") on which Borrower will be charged with all Advances made by Foothill
to Borrower or for Borrower's account, including, accrued interest, Foothill
Expenses, and any other payment Obligations of Borrower. Foothill shall render
statements regarding the Loan Account to Borrower, including principal,
interest, fees, and including an itemization of all charges and expenses
constituting Foothill Expenses owing, and such statements shall be conclusively
presumed to be correct and
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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18
accurate and constitute an account stated between Borrower and Foothill unless,
within 30 days after receipt thereof by Borrower, Borrower shall deliver to
Foothill written objection thereto describing the error or errors contained in
any such statements. Foothill hereby acknowledges that Borrower has previously
provided Foothill with a deposit in the amount of [ * ] that shall be applied to
Foothill Expenses.
2.6 Fees. Borrower shall pay to Foothill the following fees:
(a) Closing Fee. On the Closing Date, a closing fee of [ * ];
(b) Unused Line Fee. On the first day of each month during the
term of this Agreement, an unused line fee in an amount equal to [ * ] per annum
times the Average Unused Portion of the Maximum Amount;
(c) Annual Facility Fee. On first and second anniversaries of
the Closing Date, an annual facility fee in an amount equal to [ * ] of the
Maximum Amount; and
(d) Financial Examination. Foothill's customary fee of [ * ] per
day per examiner, plus reasonable out-of-pocket expenses for each financial
analysis and examination (i.e., audits) of Borrower performed by personnel
employed by Foothill; provided, however, that prior to the occurrence of an
Event of Default, Borrower shall not be obligated to pay the fees and expenses
of more than one such financial analysis and examination in any consecutive 12
month period.
3. CONDITIONS; TERM OF AGREEMENT
3.1 Conditions Precedent to the Initial Advance. The obligation of
Foothill to make the initial Advance is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions on
or before the Closing Date:
(a) the Closing Date shall occur on or before July 31, 1999;
(b) Foothill shall have received searches reflecting the filing
of its financing statements;
(c) Foothill shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
(i) the Security Agreement;
(ii) Borrower's Control Agreement and the Investment
Management Agreement between Borrower and Wells Capital
for the Securities Account;
(iii) the Disbursement Letter;
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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(iv) the Pay-Off Letter, together with UCC termination
statements and other documentation evidencing the
termination by Existing Lender of its Liens in and to the
properties and assets of Borrower; and
(v) the Guaranty, the security agreement between
Foothill and Sequana, the Investment Management Agreement
between Sequana and Wells Capital for its Securities
Account and Sequana's Control Agreement;
(d) Foothill shall have received a certificate from the
Secretary of Borrower attesting to the resolutions of Borrower's Board of
Directors authorizing its execution, delivery, and performance of this Agreement
and the other Loan Documents to which Borrower is a party and authorizing
specific officers of Borrower to execute the same;
(e) Foothill shall have received copies of Borrower's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of Borrower;
(f) Foothill shall have received a certificate of status with
respect to Borrower, dated within 10 days of the Closing Date, such certificate
to be issued by the appropriate officer of the jurisdiction of organization of
Borrower, which certificate shall indicate that Borrower is in good standing in
such jurisdiction;
(g) Foothill shall have received a certificate from the
Secretary of Sequana attesting to the resolutions of Sequana's Board of
Directors authorizing its execution, delivery, and performance of the Guaranty
and the other Loan Documents to which Sequana is a party and authorizing
specific officers of Sequana to execute the same;
(h) Foothill shall have received copies of Sequana's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of Sequana;
(i) Foothill shall have received a certificate of status with
respect to Sequana, dated within 10 days of the Closing Date, such certificate
to be issued by the appropriate officer of the jurisdiction of organization of
Sequana, which certificate shall indicate that Sequana is in good standing in
such jurisdiction;
(j) Foothill shall have received certificates of status with
respect to Borrower, each dated within 15 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions in
which its failure to be duly qualified or licensed would constitute a Material
Adverse Change, which certificates shall indicate that Borrower is in good
standing in such jurisdictions;
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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20
(k) Foothill shall have received an opinion of Borrower's
counsel in form and substance satisfactory to Foothill in its sole discretion;
(l) Foothill shall have received a certificate of an officer of
Borrower confirming that all tax returns required to be filed by Borrower have
been timely filed and all taxes upon Borrower or its properties, assets, income,
and franchises (including real property taxes and payroll taxes) have been paid
prior to delinquency, except such taxes that are the subject of a Permitted
Protest;
(m) Foothill shall have received satisfactory background
searches for Borrower's key executive officers; and
(n) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance satisfactory to Foothill and its
counsel.
3.2 Conditions Precedent to all Advances. The following shall be
conditions precedent to all Advances hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all respects
on and as of the date of such extension of credit, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof; and
(c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any Governmental Authority against
Borrower, Foothill, or any of their Affiliates.
3.3 Condition Subsequent. As a condition subsequent to initial
closing hereunder, Borrower shall perform or cause to be performed the following
(the failure by Borrower to so perform or cause to be performed constituting an
Event of Default):
(a) On or before October 15, 1999, Sequana shall be merged into
Borrower.
3.4 Term. This Agreement shall become effective upon the execution
and delivery hereof by Borrower and Foothill and shall continue in full force
and effect for a term ending on the date (the "Termination Date") that is three
years from the Closing Date, unless sooner terminated pursuant to the terms
hereof. The foregoing notwithstanding, Foothill shall
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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have the right to terminate its obligations under this Agreement immediately and
without notice upon the occurrence and during the continuation of an Event of
Default.
3.5 Effect of Termination. On the date of termination of this
Agreement, all Obligations immediately shall become due and payable without
notice or demand. No termination of this Agreement, however, shall relieve or
discharge Borrower of Borrower's duties, Obligations, or covenants hereunder,
and Foothill's continuing security interests in the Collateral shall remain in
effect until all Obligations have been fully and finally discharged and
Foothill's obligation to provide additional credit hereunder is terminated.
3.6 Early Termination by Borrower. The provisions of Section 3.4
that allow termination of this Agreement by Borrower only on the Termination
Date notwithstanding, Borrower has the option, at any time upon 10 Business days
prior written notice to Foothill, to terminate this Agreement by paying to
Foothill, in cash, the Obligations, in full, together with a premium (the "Early
Termination Premium") equal to (a) [ * ] of the Maximum Amount if such
termination occurs on or before the first anniversary of the Closing Date, (b)
[ * ] of the Maximum Amount if such termination occurs after the first
anniversary of the Closing Date and on or before the second anniversary of the
Closing Date, and (c) [ * ] of the Maximum Amount if such termination occurs at
any time after the second anniversary of the Closing Date and before the
Termination Date. Notwithstanding the foregoing and so long as no Event of
Default exists, no Early Termination Premium shall be due if Borrower repays the
Obligations in full and in cash with proceeds of a public or private issuance
of: (a) equity securities, (b) convertible debt securities or (c) securities (as
defined in the Security Act of 1933, as amended) involving debt with a
substantial equity securities component, in each case in an amount equal to or
greater than the Maximum Amount.
3.7 Termination Upon Event of Default. If Foothill terminates this
Agreement upon the occurrence of an Event of Default, in view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Foothill's
lost profits as a result thereof, Borrower shall pay to Foothill upon the
effective date of such termination, a premium in an amount equal to [ * ]. The
[ * ] shall be presumed to be the amount of damages sustained by Foothill as the
result of the early termination and Borrower agrees that it is reasonable under
the circumstances currently existing. The [ * ] provided for in this Section 3.7
shall be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Pursuant to the Security Agreement
and Sequana's security agreement, Borrower and Sequana has each granted to
Foothill a continuing security interest in all currently existing and hereafter
acquired or arising Collateral in order 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 (or in the case of Sequana to
secure its Guaranty of the Obligations).
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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4.2 Delivery of Additional Documentation Required. At any time upon
the request of Foothill, Borrower shall execute and deliver to Foothill all
financing statements, continuation financing statements, security agreements,
pledges, assignments, control agreements, reports, notices, and all other
documents that Foothill reasonably may request, in form satisfactory to
Foothill, to perfect and continue perfected Foothill's security interests in the
Collateral, and in order to fully consummate all of the transactions
contemplated hereby and under the other the Loan Documents.
4.3 Right to Inspect. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter, during
normal business hours, to inspect Borrower's Books in order to verify the
amount, quality, value, condition of, or any other matter relating to, the
Collateral.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement, Borrower
makes the following representations and warranties which shall be true, correct,
and complete in all respects as of the date hereof, and shall be true, correct,
and complete in all respects as of the Closing Date, and at and as of the date
of the making of each Advance made thereafter, as though made on and as of the
date of such Advance (except, in each case, to the extent that such
representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:
5.1 No Encumbrances. Borrower has good and indefeasible title to the
Collateral, free and clear of Liens except for Permitted Liens.
5.2 Location of Chief Executive Office; FEIN. The chief executive
office of Borrower is located at the address indicated in the preamble to this
Agreement and Borrower's FEIN is 22-2969941.
5.3 Due Organization and Qualification; Subsidiaries.
(a) Borrower is duly organized and existing and in good standing
under the laws of the jurisdiction of its incorporation and qualified and
licensed to do business in, and in good standing in, any state where the failure
to be so licensed or qualified would cause a material adverse change.
(b) Set forth on Schedule 5.3, is a complete and accurate list
of Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their incorporation; (ii) the number of shares of each class of common and
preferred stock authorized for each of such Subsidiaries; and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by Borrower. All of the outstanding capital stock of each such
Subsidiary has been validly issued and is fully paid and non-assessable.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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(c) Except as set forth on Schedule 5.3, no capital stock (or
any securities, instruments, warrants, options, purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for capital stock) of any direct or indirect Subsidiary of
Borrower is subject to the issuance of any security, instrument, warrant,
option, purchase right, conversion or exchange right, call, commitment or claim
of any right, title, or interest therein or thereto.
5.4 Due Authorization; No Conflict.
(a) The execution, delivery, and performance by Borrower of this
Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action.
(b) The execution, delivery, and performance by Borrower of this
Agreement and the Loan Documents to which it is a party do not and will not (i)
violate any material provision of federal, state, or local law or regulation
(including Regulations T, U, and X of the Federal Reserve Board) applicable to
Borrower, the Governing Documents of Borrower, or any order, judgment, or decree
of any court or other Governmental Authority binding on Borrower, (ii) conflict
with, result in a breach of, or constitute (with due notice or lapse of time or
both) a default under any material contractual obligation or material lease of
Borrower, (iii) result in or require the creation or imposition of any Lien of
any nature whatsoever upon any of the Collateral, other than Permitted Liens, or
(iv) require any approval of stockholders or any approval or consent of any
Person under any material contractual obligation of Borrower.
(c) Other than the filing of appropriate financing statements
and disclosure in federal securities law filings, the execution, delivery, and
performance by Borrower of this Agreement and the Loan Documents to which
Borrower is a party do not and will not require any registration with, consent,
or approval of, or notice to, or other action with or by, any federal, state,
foreign, or other Governmental Authority or other Person.
(d) This Agreement and the Loan Documents to which Borrower is a
party, and all other documents contemplated hereby and thereby, when executed
and delivered by Borrower will be the legally valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms, except as enforcement may be limited by equitable principles or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to
or limiting creditors' rights generally.
(e) The Liens granted by Borrower to Foothill in and to the
Collateral pursuant to this Agreement and the other Loan Documents are validly
created, perfected, and first priority Liens, subject only to Permitted Liens.
5.5 Litigation. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency and Borrower does not
have knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims,
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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complaints, actions, or prosecutions involving Borrower, except for: (a) ongoing
collection matters in which Borrower is the plaintiff; (b) matters disclosed on
Schedule 5.5; and (c) matters arising after the date hereof that, if decided
adversely to Borrower, would not cause a material adverse change.
5.6 No Material Adverse Change. All financial statements relating to
Borrower that have been delivered by Borrower to Foothill have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements, for
the lack of footnotes and being subject to year-end audit adjustments) and
fairly present Borrower's financial condition as of the date thereof and
Borrower's results of operations for the period then ended. There has not been a
material adverse change with respect to Borrower since the date of the latest
financial statements submitted to Foothill on or before the Closing Date.
5.7 Solvency. Borrower is Solvent. No transfer of property is being
made by Borrower and no obligation is being incurred by Borrower in connection
with the transactions contemplated by this Agreement or the other Loan Documents
with the intent to hinder, delay, or defraud either present or future creditors
of Borrower.
5.8 Employee Benefits. None of Borrower, any of its Subsidiaries, or
any of their ERISA Affiliates maintains or contributes to any Benefit Plan.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
shall do all of the following:
6.1 Accounting System. Maintain a standard and modern system of
accounting that enables Borrower to produce financial statements in accordance
with GAAP, and maintain records pertaining to the Collateral that contain
information as from time to time may be reasonably requested by Foothill.
6.2 Collateral Reporting. Provide Foothill with the following
documents at the following times in form satisfactory to Foothill: (a) on a
monthly basis and, in any event, by no later than the 10th day of each month
during the term of this Agreement, a detailed calculation of the Borrowing Base
based upon the most recent report received from Wells Capital, and (b) such
other reports as to the Collateral or the financial condition of Borrower as
Foothill may reasonably request from time to time.
6.3 Financial Statements, Reports, Certificates. Deliver to
Foothill: (a) as soon as available, but in any event within 30 days after the
end of each month during each of Borrower's fiscal years, a company prepared
balance sheet, income statement, and statement of cash flow covering Borrower's
operations during such period; and (b) as soon as available, but in any event
within 90 days after the end of each of Borrower's fiscal years, financial
statements of
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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Borrower for each such fiscal year, audited by independent certified public
accountants reasonably acceptable to Foothill and certified, without any
qualifications, by such accountants to have been prepared in accordance with
GAAP. Such audited financial statements shall include a balance sheet, profit
and loss statement, and statement of cash flow and, if prepared, such
accountants' letter to management. If Borrower is a parent company of one or
more consolidated Subsidiaries (according to GAAP), then, in addition to the
financial statements referred to above, Borrower agrees to deliver financial
statements prepared on a consolidating basis so as to present Borrower and each
such related entity separately, and on a consolidated basis.
Together with the above, Borrower also shall deliver to Foothill
Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and Form 8-K
Current Reports, and any other filings made by Borrower with the Securities and
Exchange Commission, if any, as soon as the same are filed, or any other
information that is provided by Borrower to its shareholders, and any other
report reasonably requested by Foothill relating to the financial condition of
Borrower.
Each month, together with the financial statements provided
pursuant to Section 6.3(a), Borrower shall deliver to Foothill a Compliance
Certificate signed by its chief financial officer to the effect that: (i) all
financial statements delivered or caused to be delivered to Foothill hereunder
have been prepared in accordance with GAAP (except, in the case of unaudited
financial statements, for the lack of footnotes and being subject to year-end
audit adjustments) and fairly present the financial condition of Borrower, (ii)
the representations and warranties of Borrower contained in this Agreement and
the other Loan Documents are true and correct in all material respects on and as
of the date of such certificate, as though made on and as of such date (except
to the extent that such representations and warranties relate solely to an
earlier date), and (iii) on the date of delivery of such certificate to Foothill
there does not exist any condition or event that constitutes a Default or Event
of Default (or, in the case of clauses (i) or (ii), to the extent of any
non-compliance, describing such non-compliance as to which he or she may have
knowledge and what action Borrower has taken, is taking, or proposes to take
with respect thereto).
6.4 Tax Returns. Deliver to Foothill copies of each of Borrower's
future federal income tax returns, and any amendments thereto, within 30 days
after the filing thereof with the Internal Revenue Service.
6.5 Taxes. Cause all assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against Borrower or any of its property to be paid in full, before delinquency
or before the expiration of any extension period, except to the extent that the
validity of such assessment or tax shall be the subject of a Permitted Protest.
Borrower shall make due and timely payment or deposit of all such federal,
state, and local taxes, assessments, or contributions required of it by law, and
will execute and deliver to Foothill, on demand, appropriate certificates of an
officer of Borrower attesting to the payment thereof or deposit with respect
thereto. Borrower will make timely payment or deposit of all tax
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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26
payments and withholding taxes required of it by applicable laws, including
those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state,
and federal income taxes, and will, upon request, furnish Foothill with proof
reasonably satisfactory to Foothill indicating that Borrower has made such
payments or deposits.
6.6 Insurance. At its expense, Borrower shall maintain insurance
against loss or damage to assets, business interruption, public liability,
product liability, and property damage insurance relating to Borrower's
ownership and use of its assets.
6.7 No Setoffs or Counterclaims. Make payments hereunder and
under the other Loan Documents by or on behalf of Borrower without setoff or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any federal, state, or local taxes.
6.8 Compliance with Laws. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any Governmental Authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not cause a Material Adverse Change.
6.9 Securities Accounts. Borrower and Sequana shall each maintain
its Securities Account and a Control Agreement with respect thereto; provided,
however, that Sequana's Security Account shall be combined with Borrower's upon
consummation of the merger of Sequana into Borrower.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
will not do any of the following:
7.1 Intentionally Omitted.
7.2 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of the Collateral, or any income
or profits therefrom, except for Permitted Liens.
7.3 Intentionally Omitted.
7.4 Intentionally Omitted.
7.5 Change Name. Without 10 days prior written notice from Borrower
to Foothill, change Borrower's name, FEIN, corporate structure (within the
meaning of Section 9402(7) of the Code) or add any new fictitious name.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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27
7.6 Nature of Business. Make any change in the principal nature of
Borrower's business to any other business than the drug discovery business
relating to human therapeutic pharmaceuticals or suspend such business.
7.7 Change of Control. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.8 Accounting Methods. Materially modify or change its method of
accounting except to maintain conformity with GAAP.
7.9 Intentionally Omitted.
7.10 Intentionally Omitted.
7.11 Use of Proceeds. Use the proceeds of the Advances made
hereunder for any purpose other than (a) on the Closing Date, (i) to repay in
full the outstanding principal, accrued interest, and accrued fees and expenses
owing to Existing Lender, and (ii) to pay to Foothill the closing fee together
with transactional costs and expenses incurred in connection with this
Agreement, and (b) thereafter, consistent with the terms and conditions hereof,
for its lawful and permitted corporate purposes.
7.12 Change in Location of Chief Executive Office. Relocate its
chief executive office to a new location without providing 30 days prior written
notification thereof to Foothill and so long as, at the time of such written
notification, Borrower provides any financing statements necessary to perfect
and continue perfected Foothill's security interests.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when declared
due and payable, any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees and charges due Foothill,
reimbursement of Foothill Expenses, or other amounts constituting Obligations);
provided, however, if an Overadvance results from Foothill charging interest,
fees or Foothill Expenses to Borrower's Loan Account, then such Overadvance
shall not constitute an Event of Default unless and until Borrower fails to
repay such Overadvance in full within [ * ] of the date thereof;
8.2 If Borrower fails to perform, keep, or observe: (a) any term,
provision, condition, covenant, or agreement contained in Section 6.2 and such
failure continues for a period of [ * ] after the date of such failure; (b) any
term, provision, condition, covenant, or
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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28
agreement contained in Section 6.3, Section 6.4 and Section 6.5 and such failure
continues for a period of [ * ] after the date of such failure; or (c) any other
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between Borrower and Foothill;
8.3 If there is a Material Adverse Change;
8.4 If all or any portion of the Collateral is attached, seized,
subjected to a writ or distress warrant, or is levied upon, or comes into the
possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower and
any of the following events occur: (a) Borrower consents to the institution of
the Insolvency Proceeding against it; (b) the petition commencing the Insolvency
Proceeding is not timely controverted; (c) the petition commencing the
Insolvency Proceeding is not dismissed within [ * ] of the date of the filing
thereof; provided, however, that, during the pendency of such period, Foothill
shall be relieved of its obligation to extend credit hereunder; (d) an interim
trustee is appointed to take possession of all or a substantial portion of the
properties or assets of, or to operate all or any substantial portion of the
business of, Borrower; or (e) an order for relief shall have been issued or
entered therein;
8.7 If Borrower is enjoined, restrained, or in any way prevented by
court order (other than by virtue of a temporary restraining order) from
continuing to conduct all or any material part of its drug discovery business
for a period in excess of [ * ];
8.8 If a notice of Lien, levy, or assessment is filed of record with
respect to any of the Collateral by the United States Government, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a Lien, whether choate or
otherwise, upon any of the Collateral and the same is not paid on the payment
date thereof;
8.9 If a judgment or other claim becomes a Lien or encumbrance upon
any of the Collateral; or
8.10 If any material misstatement or misrepresentation exists at the
time made in any written warranty, representation, statement, or report made to
Foothill on or before the Closing Date (or any written or oral warranty,
representation, statement or report made to Foothill at any time after the
Closing Date) by Borrower or any officer, employee, agent, or director of
Borrower, or if any such warranty or representation is withdrawn.
9. FOOTHILL'S RIGHTS AND REMEDIES.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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29
9.1 Rights and Remedies. Upon the occurrence, and during the
continuation, of an Event of Default Foothill 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;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other Loan Documents
as to any future liability or obligation of Foothill, but without affecting
Foothill's rights and security interests in the Collateral and without affecting
the Obligations; and
(d) Exercise any and all rights under the Security Agreement.
9.2 Remedies Cumulative. Foothill's rights and remedies under this
Agreement, the Loan Documents (including the Security Agreement), and all other
agreements shall be cumulative. Foothill shall have all other rights and
remedies not inconsistent herewith as provided under the Code, by law, or in
equity. No exercise by Foothill of one right or remedy shall be deemed an
election, and no waiver by Foothill of any Event of Default shall be deemed a
continuing waiver. No delay by Foothill shall constitute a waiver, election, or
acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Foothill
reasonably determines that such failure by Borrower would result in a Material
Adverse Change, in its discretion and without prior notice to Borrower, Foothill
may do any or all of the following: (a) make payment of the same or any part
thereof; or (b) set up such reserves in Borrower's Loan Account as Foothill
deems necessary to protect Foothill from the exposure created by such failure.
Any such amounts paid by Foothill shall constitute Foothill Expenses. Any such
payments made by Foothill shall not constitute an agreement by Foothill to make
similar payments in the future or a waiver by Foothill of any Event of Default
under this Agreement. Foothill need not inquire as to, or contest the validity
of, any such expense, tax, or Lien and the receipt of the usual official notice
for the payment thereof shall be conclusive evidence that the same was validly
due and owing.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc. Borrower waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by Foothill on which Borrower may in any way be liable.
11.2 Foothill's Liability for Collateral. So long as Foothill
complies with its obligations, if any, under Section 9207 of the Code, Foothill
shall not in any way or manner be liable or responsible for: (a) the safekeeping
of the Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other Person. All risk of loss, damage, or destruction of the Collateral
shall be borne by Borrower.
11.3 Indemnification. Borrower shall pay, indemnify, defend, and
hold Foothill and each of its officers, directors, employees, counsel, agents,
and attorneys-in-fact (each, an "Indemnified Person") harmless (to the fullest
extent permitted by law) from and against any and all claims, demands, suits,
actions, investigations, proceedings, and damages, and all reasonable attorneys
fees and disbursements and other costs and expenses actually incurred in
connection therewith (as and when they are incurred and irrespective of whether
suit is brought), at any time asserted against, imposed upon, or incurred by any
of them in connection with or as a result of or related to the execution,
delivery, enforcement, performance, and administration of this Agreement and any
other Loan Documents or the transactions contemplated herein, and with respect
to any investigation, litigation, or proceeding related to this Agreement, any
other Loan Document, or the use of the proceeds of the credit provided hereunder
(irrespective of whether any Indemnified Person is a party thereto), or any act,
omission, event or circumstance in any manner related thereto (all the
foregoing, collectively, the "Indemnified Liabilities"). Borrower shall have no
obligation to any Indemnified Person under this Section 11.3 with respect to any
Indemnified Liability that a court of competent jurisdiction finally determines
to have resulted from the gross negligence or willful misconduct of such
Indemnified Person. This provision shall survive the termination of this
Agreement and the repayment of the Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other Loan Document 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 registered or certified mail (postage prepaid, return
receipt requested), overnight courier, or telefacsimile to Borrower or to
Foothill, as the case may be, at its address set forth below:
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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If to Borrower: AXYS PHARMACEUTICALS, INC.
180 Kimball Way
South San Francisco, California 94080
Attn: Chief Financial Officer
Fax No. 650.829.1067
with copies to: AXYS PHARMACEUTICALS, INC.
180 Kimball Way
South San Francisco, California 94080
Attn: General Counsel
Fax No. 650.829.1067
COOLEY GODWARD, LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306-2155
Attn: Pamela Martinson, Esq.
Fax No. 650.857.0663
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
Fax No. 310.478.9788
with copies to: BUCHALTER, NEMER, FIELDS & YOUNGER
601 South Figueroa Street
Suite 2400
Los Angeles, California 90017
Attn: Robert C. Colton, Esq.
Fax No. 213.896.0400
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. All notices or demands sent in accordance with this Section 12, other
than notices by Foothill in connection with Sections 9504 or 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or three
days after the deposit thereof in the mail. Borrower acknowledges and agrees
that notices sent by Foothill in connection with Sections 9504 or 9505 of the
Code shall be deemed sent when deposited in the mail or personally delivered,
or, where permitted by law, transmitted by telefacsimile or other similar method
set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT), THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN SAN
FRANCISCO, CALIFORNIA IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE
PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY. EACH OF BORROWER AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 13. BORROWER AND FOOTHILL HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH OF BORROWER AND FOOTHILL REPRESENTS
THAT IT HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, agings, or other papers delivered to
Foothill may be destroyed or otherwise disposed of by Foothill four months after
they are delivered to or received by Foothill, unless Borrower requests, in
writing, the return of said documents, schedules, or other papers and makes
arrangements, at Borrower's expense, for their return.
15. GENERAL PROVISIONS.
15.1 Effectiveness. This Agreement shall be binding and deemed
effective when executed by Borrower and Foothill.
15.2 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and assigns of each of the parties;
provided, however, that Borrower may not assign this Agreement or any rights or
duties hereunder without Foothill's
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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prior written consent and any prohibited assignment shall be absolutely void. No
consent to an assignment by Foothill shall release Borrower from its
Obligations. Foothill may assign this Agreement and its rights and duties
hereunder and no consent or approval by Borrower is required in connection with
any such assignment to an Affiliate of Foothill or if such assignment is made in
conjunction with the sale of a substantial portion of Foothill's loan portfolio.
Any other assignment by Foothill shall be subject to Borrower's consent which
consent shall not be unreasonably withheld. Foothill reserves the right to sell,
assign, transfer, negotiate, or grant participations in all or any part of, or
any interest in Foothill's rights and benefits hereunder. In connection with any
such assignment or participation, Foothill may disclose all documents and
information which Foothill now or hereafter may have relating to Borrower or
Borrower's business to a Person so long as such Person agrees to be bound by the
provisions of Section 15.10. To the extent that Foothill assigns its rights and
obligations hereunder to a third Person, Foothill thereafter shall be released
from such assigned obligations to Borrower and such assignment shall effect a
novation between Borrower and such third Person.
15.3 Section Headings. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
15.4 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Foothill or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
15.5 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.
15.6 Amendments in Writing. This Agreement can only be amended by a
writing signed by both Foothill and Borrower.
15.7 Counterparts; Telefacsimile Execution. Execution. 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. Delivery of an executed counterpart
of this Agreement by telefacsimile shall be equally as effective as delivery of
an original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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15.8 Revival and Reinstatement of Obligations. If the incurrence or
payment of the Obligations by Borrower or the transfer by Borrower to Foothill
of any property of Borrower should for any reason subsequently be declared to be
void or voidable under any state or federal law relating to creditors' rights,
including provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, and other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if Foothill is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Foothill is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of
Foothill related thereto, the liability of Borrower automatically shall be
revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.
15.9 Integration. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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15.10 Confidentiality. Foothill agrees to use commercially
reasonable efforts to maintain as confidential all information provided to it by
Borrower that is not public information at the time given, except that Foothill
may disclose such information (a) to Persons employed or engaged by Foothill in
evaluating, approving, structuring or administering this Agreement; (b) to any
bona fide assignee or participant or potential assignee or participant that has
agreed in writing to comply with this Section 15.10; and (c) as required or
requested by any Governmental Authority or reasonably believed by Foothill to be
compelled by any court decree, subpoena or legal or administrative order or
process with notice to Borrower unless Foothill is prohibited from providing
such notice; provided, however, that Foothill's failure to provide such notice
shall not create any liability for Foothill, and shall not impair the
Obligations, the Collateral or Foothill's rights under the Loan Documents.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in Los Angeles, California.
AXYS PHARMACEUTICALS, INC.,
a Delaware corporation
By /s/ William J. Newell
Title: Senior Vice President
FOOTHILL CAPITAL CORPORATION,
a California corporation
By /s/ Rhonda R. Foreman
Title: Senior Vice President
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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AXYS PHARMACEUTICALS, INC.
SCHEDULE 5.3
LIST OF SUBSIDIARIES
- --------------------------------------------------------------------------------
% OF
NUMBER NUMBER NUMBER OUTSTANDING
OF OF SHARES SHARES
JURISDICTION COMMON PREFERRED OWNED OWNED
OF SHARES SHARES BY THE BY THE
NAME INCORPORATION AUTHORIZED AUTHORIZED COMPANY COMPANY
- ----------------------------------------------------------------------------------------------------------------------------
1 Sequana Therapeutics, Inc. California 50,000,000 5,000,000 100 100.0%
2 Xyris Corporation California 10,000,000 8,200,000 5,000,000 52.4%
3 PPGx, Inc. Delaware 15,000,000 10,000,000 8,200,000 82.0%
3(a) Intek Labs, Inc. North Carolina 100,000 N/A 10 100.0%
3(b) INTEK LABS LTD. England 50,000 N/A 1,500 100.0%
(ordinary shares) (ordinary)
4 Arris Pharmaceuticals Canada, Inc. Quebec N/A 2,528,844 2,525,844 100.0%
5 Axys Advanced Technologies, Inc. Delaware 100 N/A 100 100.0%
Xyris Corporation: Pursuant to an Amended and Restated Stockholders Agreement,
there are rights of first refusal on the issuance of new securities by Xyris
Corporation and rights of co-sale. In addition, under the By-laws of Xyris
Corporation, there are rights of first refusal on the sale of Xyris shares by
any shareholder. Further, under a Common Stock Purchase Agreement, there are
rights of first refusal on the sale of shares by an officer of Xyris
Corporation. Finally, under certain Restricted Stock Award Agreements, there are
rights of repurchase.
PPGx, Inc.: Pursuant to an Investors' Rights Agreement, there are buy-sell
rights between the shareholders of PPGx, as well as put and call rights between
the shareholders in PPGx.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.
37
SCHEDULE 5.5
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
38
COMPLIANCE CERTIFICATE SAMPLE COPY
(Loan Agreement Section 6.3)
Date _______________
FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard, Suite 1500
Santa Monica, California 90025-3333
Attention: ____________________________
RE: Loan Agreement, dated as of July 26, 1999 (the "Agreement") by and
between FOOTHILL CAPITAL CORPORATION ("Foothill") and
AXYS PHARMACEUTICALS, INC. ("Borrower").
Dear _______________:
In accordance with Section 6.3 of the Agreement, this letter shall serve as
certification to Foothill that to the best of my knowledge: (i) all financial
statements have been prepared in accordance with GAAP (except, in the case of
unaudited financial statements, for the lack of footnotes and being subject to
year-end audit adjustments) and fairly represent the financial condition of
Borrower, (ii) the representations and warranties of Borrower set forth in the
Agreement and other Loan Documents are true and correct in all material respects
on and as of the date of this certification (except to the extent such
representations and warranties relate solely to an earlier date), and (iii)
there does not exist any condition or event that constitutes an Event of
Default. Such certification is made as of the fiscal month ending
______________, 199___.
Sincerely,
Chief Financial Officer
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
Exhibit C-1