Exhibit 3.1

 

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
AZIYO BIOLOGICS, INC.
a Delaware Corporation

 

(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)

 

Aziyo Biologics, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “DGCL”),

 

DOES HEREBY CERTIFY:

 

1.       That the name of this corporation is Aziyo Biologics, Inc., and that this corporation was originally incorporated pursuant to the DGCL on August 6, 2015.

 

2.       That the Board of Directors duly adopted resolutions proposing to amend and restate the Amended and Restated Certificate of Incorporation of this corporation, as amended, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows:

 

RESOLVED, that the Amended and Restated Certificate of Incorporation of this corporation, as amended, be amended and restated in its entirety to read as follows:

 

ARTICLE I

 

The name of this corporation (the “Corporation”) is Aziyo Biologics, Inc.

 

ARTICLE II

 

The address of the Corporation’s registered office in the State of Delaware is 251 Little Falls Drive, in the City of Wilmington, County of New Castle, Delaware 19808. The Corporation’s registered agent at such address is Corporation Service Company.

 

ARTICLE III

 

The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.

 

 

ARTICLE IV

 

A.                Classes of Stock. The Corporation is authorized to issue shares of Preferred Stock (“Preferred Stock”) and Common Stock (“Common Stock”). The total number of shares that the Company is authorized to issue is 155,274,072. The total number of shares of Preferred Stock that the Corporation shall have authority to issue is 69,889,536, of which 51,505,000 are designated as Series A Preferred Stock (the “Series A Preferred Stock”) and 18,384,536 are designated as Series A-1 Preferred Stock (the “Series A-1 Preferred Stock” and, together with the Series A Preferred Stock, the “Series A/A-1 Preferred Stock”). The total number of shares of Common Stock that the Corporation shall have authority to issue is 85,384,536, of which 67,000,000 are designated as “Class A Common Stock” (the “Class A Common Stock” and 18,384,536 are designated as “Class B Common Stock” (the “Class B Common Stock”). The Preferred Stock shall have a par value of $0.001 per share and the Common Stock shall have a par value of $0.001 per share.

 

Immediately upon the effectiveness of this Amended and Restated Certificate of Incorporation (the “Effective Time”), each share of the Corporation’s Common Stock issued and outstanding or held as treasury stock immediately prior to the Effective Time, shall, automatically and without further action by any stockholder, be reclassified as, and shall become, one share of Class A Common Stock. Any stock certificate that immediately prior to the Effective Time represented shares of the Corporation’s Common Stock shall from and after the Effective Time be deemed to represent shares of Class A Common Stock, without the need for surrender or exchange thereof.

 

B.                 Rights Preferences and Restrictions of Preferred Stock. The rights, preferences, privileges, restrictions and other matters relating to the Preferred Stock are as follows:

 

1.                  Identical Rights.

 

(a)               Except as otherwise provided in this Amended and Restated Certificate of Incorporation or required by applicable law, all shares of Series A/A-1 Preferred Stock shall have the same rights and powers, rank equally (including as to dividends and distributions, and upon any liquidation, dissolution or winding up of the Corporation), share ratably and be identical in all respects as to all matters.

 

(b)               If the Corporation in any manner subdivides (by stock split or otherwise) or combines (by reverse stock split or otherwise) the outstanding shares of Series A Preferred Stock or Series A-1 Preferred Stock, then all outstanding shares of Series A/A-1 Preferred Stock will be subdivided or combined in the same proportion and manner.

 

2.                  Dividends.

 

(a)               Any dividend or other distribution (other than dividends on shares of Common Stock payable solely in the form of shares of Common Stock) that is declared, paid or set aside by the Corporation shall be made in accordance with the preferences and priorities set forth in Section (B)3(a) and Section (B)3(b) as if such dividend or distribution were made in a liquidation of the Corporation.

 

(b)               Without limiting the provisions of Section (B)2(a) of this Article IV, the Corporation shall not declare or pay any dividend or make any other distribution to the holders of Series A/A-1 Preferred Stock unless the same dividend or distribution with the same record date and payment date shall be declared and paid on all shares of Series A/A-1 Preferred Stock; provided, however, that any dividend or other distribution payable in additional shares of Series A/A-1 Preferred Stock or rights to acquire shares of Series A/A-1 Preferred Stock shall be payable on the Series A Preferred Stock in additional shares of Series A Preferred Stock or rights to acquire shares of Series A Preferred Stock and on the Series A-1 Preferred Stock in additional shares of Series A-1 Preferred Stock or rights to acquire shares of Series A-1 Preferred Stock, in each case, at the same rate and with the same record date and payment date.

 

 

3.                  Liquidation Preference.

 

(a)               In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary (including, without limitation, upon any bankruptcy), the holders of Series A/A-1 Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or funds of the Corporation to holders of Common Stock, by reason of their ownership of such stock, for each share of Series A/A-1 Preferred Stock, the sum of (i) $1.00 (as adjusted for any stock dividends, combinations, splits, recapitalizations and similar events with respect to such shares of Series A Preferred Stock, the “Original Series A/A-1 Issue Price”) and (ii) the amount of all declared but unpaid dividends on such share of Series A/A-1 Preferred Stock (such sum, the “Series A/A-1 Preference Amount”). In the event that the assets and funds legally available for distribution to the stockholders of the Corporation are insufficient to pay the Series A/A-1 Preference Amount in respect of each share of Series A/A-1 Preferred Stock as set forth above, then all funds or assets legally available for distribution to the holders of Series A/A-1 Preferred Stock shall be paid to such holders of Series A/A-1 Preferred Stock pro rata based on the dollar amount to which they are otherwise entitled under this Section (B)3(a).

 

(b)               In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary (including, without limitation, upon any bankruptcy), after, and only after, full payment has been made to the holders of the Series A/A-1 Preferred Stock required by Section (B)3(a), the holders of Common Stock and the Series A/A-1 Preferred Stock shall be entitled to share ratably in all remaining assets and funds, if any, based upon the number of shares of Common Stock then held, with each share of Series A/A-1 Preferred Stock treated as the number of shares of Common Stock into which such share of Series A/A-1 Preferred Stock is then convertible.

 

(c)               (i) For purposes of this Section (B)3, unless otherwise agreed to in writing by the holders of at least seventy-five percent (75%) of the then outstanding shares of Series A/A-1 Preferred Stock (the “Required Holders”), a liquidation, dissolution or winding up of the Corporation shall be deemed to be occasioned by, and to include: (A) any transaction or series of related transactions (including, without limitation, any reorganization, share exchange, consolidation or merger of the Corporation with or into any other entity but excluding any sale of capital stock by the Corporation for capital raising purposes) (x) in which the holders of the Corporation’s outstanding capital stock immediately before the first such transaction do not, immediately after any other such transaction, retain stock or other equity interests representing at least fifty percent (50%) of the voting power of the surviving entity of such transaction or (y) in which at least fifty percent (50%) of the Corporation’s outstanding capital stock is transferred (calculated on an as-converted to Common Stock basis); or (B) any sale, conveyance, exclusive license or other disposition of all or substantially all of the assets of the Corporation (any such transaction, a “Sale Transaction”). Unless otherwise agreed to in writing by the Required Holders, no stockholder of the Corporation shall enter into any transaction or series of related transactions resulting in a liquidation, dissolution or winding up of the Corporation pursuant to the terms hereof unless the terms of such transaction or transactions provide that the consideration to be paid to the stockholders of the Corporation is to be allocated in accordance with the preferences and priorities set forth in this Section (B)3.

 

(ii)              In the event of any Sale Transaction, if the consideration received by the Corporation is other than cash, its value will be deemed its fair market value as determined by the Board of Directors of the Corporation (the “Board”) in good faith. Any securities shall be valued as follows:

 

(A)             Securities not subject to investment letter or other similar restrictions on free marketability covered by (B) below:

 

(1)               If such securities are traded on a securities exchange, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the fourteen-day period ending three (3) days prior to the closing; and

 

(2)               If such securities are not traded on a securities exchange, the value shall be the fair market value thereof, as determined by the Board in good faith.

 

 

(B)              The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (A)(1) or (2) to reflect the approximate fair market value thereof, as determined by the Board in good faith.

 

(iii)            Notwithstanding any other provision set forth in this Section (B)3, in the event that any consideration payable to the Corporation or its stockholders in connection with any Sale Transaction is contingent upon the occurrence of any event or the passage of time (including, without limitation, any deferred purchase price payments, installment payments, payments made in respect of any promissory note issued in such transaction, payments from escrow, purchase price adjustment payments or payments in respect of “earnouts” or holdbacks) (the “Contingent Consideration”), such Contingent Consideration shall not be deemed received by the Corporation or its stockholders or available for distribution to such stockholders unless and until the contingencies related to such Contingent Consideration are satisfied and such Contingent Consideration is indefeasibly received by the Corporation or its stockholders in accordance with the terms of such Sale Transaction. The definitive agreement with respect to such Sale Transaction shall provide that (A) the portion of such consideration that is not Contingent Consideration (the “Initial Consideration”) shall be allocated among the stockholders of the Corporation in accordance with Section (B)3 as if the Initial Consideration were the only consideration payable in connection with such Sale Transaction and (B) any Contingent Consideration which becomes payable to the stockholders of the Corporation upon the release from escrow or the satisfaction of the applicable contingencies shall be allocated among the stockholders of the Corporation in accordance with Section (B)3 after taking into account the previous payment of the Initial Consideration as part of the same transaction.

 

(d)               For the avoidance of doubt, subject to Section (B)2(b), any cash, securities or other property paid or payable in respect of shares of Series A/A-1 Preferred Stock (upon the redemption thereof or otherwise) shall be paid pro rata, on an equal priority, pari passu basis, to the holders of each class or series of Series A/A-1 Preferred Stock, unless different treatment of the shares of any such class or series is approved by the affirmative vote of the holders of a majority of each class or series of Series A/A-1 Preferred Stock.

 

4.                  Conversion. The holders of the Series A Preferred Stock shall have conversion rights as follows:

 

(a)               Right to Convert.

 

(i)                 Except as set forth in Section (B)4(a)(ii), each share of Series A/A-1 Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Corporation or any transfer agent for such stock, into fully paid and nonassessable shares of Class A Common Stock of the Corporation. The number of shares of Class A Common Stock into which each share of Series A/A-1 Preferred Stock may be converted shall be determined by dividing the Original Series A/A-1 Issue Price by the Series A/A-1 Conversion Price in effect on the date that the holder thereof elects to convert such share.

 

(ii)              Notwithstanding anything to the contrary contained herein, during the period commencing immediately prior to the effectiveness of any registration of the Class A Common Stock under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and ending immediately following such time after such effectiveness as the Class A Common Stock is not deemed to constitute an “equity security” pursuant to Rule 13d-1(i) under the Exchange Act (an “Exchange Act Registration Period”) or such earlier time as such Exchange Act Registration Period terminates in accordance with this paragraph, shares of Series A-1 Preferred Stock shall not be convertible into Class A Common Stock, but instead each share of Series A-1 Preferred Stock shall be convertible, at the option of the holder thereof, at the office of the Corporation or any transfer agent for such stock, into fully paid and nonassessable shares of Class B Common Stock of the Corporation. The number of shares of Class B Common Stock into which each share of Series A-1 Preferred Stock may be converted shall be determined by dividing the Original Series A/A-1 Issue Price by the Series A/A-1 Conversion Price in effect on the date that the holder thereof elects to convert such share. Notwithstanding anything to the contrary contained herein, any Exchange Act Registration Period shall automatically terminate upon the earliest to occur of (x) 5:00 p.m. (New York City time) on the third (3^rd) Business Day following the commencement of the Exchange Act Registration Period, if the Company shall not prior to such time have entered into an underwriting agreement with respect to a proposed initial underwritten public offering of the Class A Common Stock, (y) the termination of an underwriting agreement entered into in connection with a proposed initial underwritten public offering of the Class A Common Stock, if such initial public offering shall not have been consummated prior to such termination, and (z) 5:00 p.m. (New York City time) on the tenth (10^th) Business Day following the commencement of the Exchange Act Registration Period, if the Company shall not prior to such time have consummated a Qualified IPO (as defined below).

 

 

(iii)            For an initial underwritten public offering of the Corporation’s Class A Common Stock, (A) in addition to the shares of Class A Common Stock otherwise issuable upon conversion of the Series A Preferred Stock pursuant to this Section (B)4 there shall be issued immediately prior to the consummation of the public offering, and in any event prior to any conversion of the Series A Preferred Stock pursuant to Section (B)4(b)(i), to the holders of the Series A Preferred Stock, for each share of Series A Preferred Stock held, the number of shares of Class A Common Stock as is determined by dividing the Series A/A-1 Preference Amount by the price per share of Common Stock in such public offering; and (B) in addition to the shares of Class B Common Stock otherwise issuable upon conversion of the Series A-1 Preferred Stock pursuant to this Section (B)4, there shall be issued immediately prior to the consummation of the public offering, and in any event prior to the conversion of the Series A-1 Preferred Stock pursuant to Section (B)4(b)(i), to the holders of the Series A-1 Preferred Stock, for each share of Series A-1 Preferred Stock held, the number of shares of Class B Common Stock as is determined by dividing the Series A/A-1 Preference Amount by the price per share of Class A Common Stock in such public offering

 

(iv)             The initial Series A/A-1 Conversion Price is the Original Series A/A-1 Issue Price. The Series A/A-1 Conversion Price is subject to adjustment as set forth in this Section (B)4.

 

(b)               Automatic Conversion.

 

(i)                 Initial Public Offering. Each share of Series A Preferred Stock shall automatically be converted into shares of Class A Common Stock and each share of Series A-1 Preferred Stock shall automatically be converted into shares of Class B Common Stock (as set forth in Section (B)4(a)), in each case, upon: (y) the date and time, or the occurrence of an event, specified by written consent of the Required Holders for the conversion of all outstanding shares of Series A/A-1 Preferred Stock; provided, however, that without the consent of the holders of a majority of the then outstanding shares of Series A-1 Preferred Stock, the Series A-1 Preferred Stock shall not be converted pursuant to this clause (y) except during an Exchange Act Registration Period; or (z) immediately prior to the closing of the sale of shares of Class A Common Stock to the public at a price of at least $5.00 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock), in an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), resulting in at least $30,000,000 of gross proceeds to the Corporation (a “Qualified IPO”), provided that such closing occurs during an Exchange Act Registration Period. Such conversions shall be automatic, without need for any further action by the holders of shares of Series A Preferred Stock or Series A-1 Preferred Stock and regardless of whether the certificates representing such shares are surrendered to the Corporation or its transfer agent; provided, however, that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversions unless certificates evidencing such shares of Series A/A-1 Preferred Stock so converted are surrendered to the Corporation or the holder of record of such shares notifies the Corporation that such certificates have been lost, stolen or destroyed and such holder executes an agreement to indemnify the Corporation from any loss incurred by it in connection with such certificates, in each case in accordance with the procedures described in Section (B)4(c) below. Upon the conversion of Series A/A-1 Preferred Stock pursuant to this Section (B)4(b), the Corporation shall promptly send written notice thereof, by registered or certified mail, return receipt requested and postage prepaid, by hand delivery or by overnight delivery, to each holder of record of Series A Preferred Stock at such holder’s address then shown on the records of the Corporation, which notice shall state that certificates evidencing shares of Series A Preferred Stock must be surrendered at the office of the Corporation (or of its transfer agent for the Common Stock, if applicable) in the manner described in Section (B)4(c) below.

 

 

(ii)              Certain Transfers. Upon a transfer of shares of Series A-1 Preferred Stock by a holder to a Person that is neither an Affiliate of a holder nor a Person whose beneficial ownership of Class A Common Stock would be aggregated with such holder’s for purposes of Section 13(d) of the Exchange Act and the applicable regulations of the Commission (as defined below), each share of Series A-1 Preferred Stock so transferred shall automatically upon such transfer, without further action by the transferor or transferee thereof, convert into a share of Series A Preferred Stock.

 

(c)               Mechanics of Conversion. Before any holder of Series A Preferred Stock or Series A-1 Preferred Stock shall be entitled to receive certificates representing shares of Class A Common Stock or Class B Common Stock, as applicable, into which such shares of Series A/A-1 Preferred Stock are converted pursuant to this Section (B)4, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for such Series A/A-1 Preferred Stock (or such holder notifies the Corporation that such certificates have been lost, stolen or destroyed and such holder executes an agreement to indemnify the Corporation from any loss incurred by it in connection with such certificates), and shall give written notice to the Corporation at such office of the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Corporation shall, as soon as practicable and in no event later than ten (10) days after the delivery of said certificates (i) issue and deliver to such holder of Series A/A-1 Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Class A Common Stock issuable upon such conversion of Series A Preferred Stock or a certificate or certificates for the number of full shares of Class B Common Stock issuable upon such conversion of Series A-1 Preferred Stock, in each case, in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Series A Preferred Stock or Series A-1 Preferred Stock, as applicable, represented by the surrendered certificate that were not converted into the applicable class of Common Stock and (ii) pay in cash such amount as provided in Section (B)4(f) in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion. The person or persons entitled to receive the shares of Class A Common Stock or Class B Common Stock issuable upon such conversion pursuant to this Section (B)4 shall be treated for all purposes as the record holder or holders of such shares of Class A Common Stock or Class B Common Stock as of the effective date of such conversion. If the conversion is pursuant to Section (B)4(a) in connection with an underwritten offering of securities registered pursuant to the Securities Act, the conversion may, at the option of any holder tendering Series A Preferred Stock or Series A-1 Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive the Class A Common Stock or Class B Common Stock, as applicable, upon conversion of the Series A/A-1 Preferred Stock shall not be deemed to have converted such Series A/A-1 Preferred Stock until immediately prior to the closing of such sale of securities.

 

(d)               Conversion Price Adjustments for Splits and Combinations. The Series A/A-1 Conversion Price shall be subject to adjustment from time to time as follows:

 

(i)                 In the event that the Corporation should at any time, or from time to time, after the date of this Amended and Restated Certificate of Incorporation, fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (“Common Stock Equivalents”) without payment of any consideration by such holder for the additional shares of Common Stock or Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Series A/A-1 Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion thereof shall be increased in proportion to such increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents.

 

(ii)              If the number of shares of Common Stock outstanding at any time after the date of this Amended and Restated Certificate of Incorporation is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Series A/A-1 Conversion Price shall be appropriately increased so that the number of shares of Common Stock issuable on conversion thereof shall be decreased in proportion to such decrease in outstanding shares.

 

(e)             Reorganizations, Mergers or Consolidations. If, at any time, or from time to time, the Common Stock is converted into other securities, assets or property, whether pursuant to a reorganization, merger, consolidation, sale of all or substantially all of the Corporation’s assets or otherwise (other than a subdivision or combination provided for elsewhere in this Section 4 or a Sale Transaction constituting a deemed liquidation of the Corporation pursuant to Section 3), provision shall be made so that the holders of the Series A/A-1 Preferred Stock shall thereafter be entitled to receive upon conversion of the Series A/A-1 Preferred Stock, the number of shares of stock or other securities, assets or property of the Corporation or otherwise to which a holder of Common Stock deliverable upon conversion would have been entitled in connection with such transaction.

 

 

(f)                No Fractional Shares and Certificate as to Adjustments.

 

(i)                 No fractional shares shall be issued upon the conversion of any share or shares of the Series A/A-1 Preferred Stock and, in lieu of any fractional shares to which such holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then effective fair market value of such share, as determined by the Board in good faith. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of (x) with respect to shares issuable upon the conversion of Series A Preferred Stock, the total number of shares of Series A Preferred Stock the holder is at the time converting into Class A Common Stock and the aggregate number of shares of Class A Common Stock issuable upon such conversion and (y) with respect to shares issuable upon the conversion of Series A-1 Preferred Stock, the total number of shares of Series A-1 Preferred Stock the holder is at the time converting into Class A Common Stock (or Class B Common Stock, as applicable) and the aggregate number of shares of Class A Common Stock (or Class B Common Stock, as applicable) issuable upon such conversion.

 

(ii)              Upon the occurrence of each adjustment or readjustment of the Series A/A-1 Conversion Price pursuant to this Section (B)4, the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series A/A-1 Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series A/A-1 Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Series A/A-1 Conversion Price at the time in effect and (C) the number of shares of Class A Common Stock and/or Class B Common Stock, as applicable, and the amount, if any, of other property which at the time would be received upon the conversion of a share of Series A/A-1 Preferred Stock.

 

(g)               Notices of Record Date. In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of Series A/A-1 Preferred Stock, at least 10 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

 

(h)               Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, (i) solely for the purpose of effecting the conversion of the shares of the Series A/A-1 Preferred Stock, such number of its shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series A/A-1 Preferred Stock and (ii) solely for the purpose of effecting the conversion of the shares of the Series A-1 Preferred Stock, such number of its shares of Class B Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series A-1 Preferred Stock; and if at any time the number of authorized but unissued shares of Class A Common Stock and/or Class B Common Stock, as applicable, shall not be sufficient to effect the conversion of all of the then outstanding shares of Series A Preferred Stock and all of the then outstanding Series A-1 Preferred Stock, in addition to such other remedies as shall be available to the holder of Series A Preferred Stock and/or Series A-1 Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Class A Common Stock and/or Class B Common Stock, as applicable, to such number of shares as shall be sufficient for such purpose, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval of any necessary amendment to this Amended and Restated Certificate of Incorporation.

 

(i)                 Notices. Any notice required by the provisions of this Section (B)4 to be given to the holders of shares of Series A Preferred Stock or Series A-1 Preferred Stock shall be deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the books of the Corporation, or given by electronic communication in compliance with the provisions of the DGCL, and shall be deemed sent upon such mailing or electronic transmission.

 

(j)                 Issue Taxes. The Corporation shall pay any and all issue and other taxes that may be payable in respect of any issue or delivery of shares of Common Stock upon conversion of any shares of Series A/A-1 Preferred Stock; provided, however, that the Corporation shall not be obligated to pay any transfer taxes resulting from any transfer requested by any holder in connection with any such conversion.

 

 

5.                  Voting Rights.

 

(a)               In addition to any special class or series voting rights provided herein, under the DGCL or otherwise, the holder of each share of Series A/A-1 Preferred Stock shall have the right to one vote for each share of Class A Common Stock into which such share of Series A/A-1 Preferred Stock could then be converted, and, with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Class A Common Stock and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the bylaws of the Corporation and shall be entitled to vote, together with holders of Class A Common Stock, with respect to any question upon which holders of Class A Common Stock have the right to vote. Fractional votes shall not, however, be permitted and any fractional voting rights available on an as-converted to Class A Common Stock basis (after aggregating all fractional shares into which shares of Series A/A-1 Preferred Stock held by each holder could be converted) shall be rounded down to the nearest whole share.

 

(b)               For the avoidance of doubt, at any time that the shares of Series A-1 Preferred Stock are convertible into shares of Class B Common Stock, except for any special class or series voting rights provided herein or under the DGCL, the Series A-1 Preferred Stock shall have no voting rights and shall not entitle to holders thereof to any vote at any meeting of stockholders, or in connection with any written consent of stockholders, with respect to any matter, and the shares of Series A-1 Preferred Stock shall not be considered present or entitled to vote or otherwise accounted for in connection with any meeting or vote that occurs during such time (including for purposes of determining the presence or absence of a quorum or the minimum vote required to approve any matter), regardless of whether the record date in respect of such meeting or written consent preceded the date that the Series A-1 Preferred Stock became convertible into Class B Common Stock.

 

6.                  Board of Directors.

 

(a)               Subject to Section (B)5(b), the holders of Series A/A-1 Preferred Stock shall be entitled to elect three (3) members of the Board (the “Series A Directors”) at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors, and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors; provided, however, that the holders of shares of Series A-1 Preferred Stock shall not have any such right at any time that the shares of Series A-1 Preferred Stock are convertible into shares of Class B Common Stock

 

(b)               Subject to Section (B)5(b), the holders of Common Stock and Preferred Stock, voting together as a single class, shall be entitled, by vote of the holders of a majority of the then outstanding shares of Class A Common Stock (calculated on an as-converted to Class A Common Stock basis), to elect all remaining members of the Board at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors, and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors; provided, however, that the holders of shares of Series A-1 Preferred Stock shall not have any such right at any time that the shares of Series A-1 Preferred Stock are convertible into shares of Class B Common Stock.

 

(c)               Notwithstanding any other provision set forth herein, each of the Series A Directors shall be entitled to cast two (2) votes on each matter before the Board and each committee thereof and each other director shall be entitled to cast a single vote on each matter before the Board and each committee thereof. For the avoidance of doubt, in the event that this Amended and Restated Certificate of Incorporation, the DGCL, the Corporation’s bylaws or any agreement, instrument or document or any other context requires that a resolution, consent, determination (including, without limitation, for the purpose of determining whether a quorum is present at any meeting of the Board) or other action be approved, executed, made or taken by a majority or other proportion of directors, such requirement shall instead be a majority or other proportion of the votes of the directors, notwithstanding anything to the contrary set forth herein or therein.

 

(d)               Notwithstanding the provisions of Section 223(a)(1) and 223(a)(2) of the DGCL, any vacancy, including newly created directorships resulting from any increase in the authorized number of directors or amendment of the Amended and Restated Certificate of Incorporation, and vacancies created by removal or resignation of a director, may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced; provided, however, that where such vacancy occurs among the directors elected by the holders of a class or series of stock, the holders of shares of such class or series may override the Board’s action to fill such vacancy by (i) voting for their own designee to fill such vacancy at a meeting of this Corporation’s stockholders or (ii) written consent, if the consenting stockholders hold a sufficient number of shares to elect their designee. Any director may be removed during his or her term of office, either with or without cause, by, and only by, the affirmative vote of the holders of the shares of the class or series of stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders, and any vacancy thereby created may be filled by the holders of that class or series of stock represented at the meeting or pursuant to written consent.

 

 

7.                  Protective Provisions.

 

(a)               At any time when shares of Series A/A-1 Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Amended and Restated Certificate of Incorporation) the written consent or affirmative vote of the Required Holders, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:

 

(i)                 liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any merger or consolidation or any other Sale Transaction, or consent to any of the foregoing;

 

(ii)              amend, alter or repeal any provision of the Amended and Restated Certificate of Incorporation or Bylaws of the Corporation in a manner that adversely affects the powers, preferences or rights of the Series A Preferred Stock and/or the Series A-1 Preferred Stock;

 

(iii)            create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock, or increase the authorized number of shares of Series A Preferred Stock and/or Series A-1 Preferred Stock or increase the authorized number of shares of any additional class or series of capital stock;

 

(iv)             (i) reclassify, alter or amend any existing security of the Corporation that is pari passu with the Series A/A-1 Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the Series A Preferred Stock and/or Series A-1 Preferred Stock in respect of any such right, preference, or privilege or (ii) reclassify, alter or amend any existing security of the Corporation that is junior to the Series A/A-1 Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series A Preferred Stock and/or Series A-1 Preferred Stock in respect of any such right, preference or privilege;

 

(v)               purchase or redeem (or permit any subsidiary to purchase or redeem) any shares of capital stock of the Corporation other than (i) redemptions of the Series A/A-1 Preferred Stock as expressly authorized herein or (ii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Corporation or any subsidiary in connection with the cessation of such employment or service at the lower of the original purchase price or the then-current fair market value thereof;

 

(vi)             make, or authorize the making of, any pledge of any assets of the Corporation or of the equity interests of any subsidiary of the Corporation or create, or authorize the creation of, any security interest in any assets of the Corporation or any subsidiary of the Corporation unless such making, creation or authorization is approved by each of the Series A Directors;

 

(vii)          create, or hold capital stock in, any subsidiary that is not wholly owned (either directly or through one or more other subsidiaries) by the Corporation, or sell, transfer or otherwise dispose of any capital stock of any direct or indirect subsidiary of the Corporation, or permit any direct or indirect subsidiary to sell, lease, transfer, exclusively license or otherwise dispose (in a single transaction or series of related transactions) of all or substantially all of the assets of such subsidiary; or

 

(viii)        increase or decrease the authorized number of directors constituting the Board of Directors.

 

 

(b)               At any time when shares of Series A Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly, whether by amendment, or through merger, recapitalization, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation) the written consent or affirmative vote of the holders of a majority of the then outstanding shares of Series A Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:

 

(i)                 amend or repeal, or adopt any provision of this Amended and Restated Certificate of Incorporation if the effect thereof would be to adversely and disproportionately modify the voting, conversion or other rights, powers, preferences, privileges or restrictions of the Class A Common Stock; or

 

(ii)              amend or repeal, or adopt any provision of this Amended and Restated Certificate of Incorporation if the effect thereof would be to adversely and disproportionately modify the voting, conversion or other rights, powers, preferences, privileges or restrictions of the Series A Preferred Stock.

 

(c)               At any time when shares of Series A-1 Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly, whether by amendment, or through merger, recapitalization, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation) the written consent or affirmative vote of the holders of a majority of the then outstanding shares of Series A-1 Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:

 

(i)                 amend or repeal, or adopt any provision of this Amended and Restated Certificate of Incorporation if the effect thereof would be (y) to adversely and disproportionately modify the voting, conversion or other rights, powers, preferences, privileges or restrictions of the Class B Common Stock or (z) modify any of the rights, powers, preferences, privileges, restrictions or provisions of the Class B Common Stock that are not applicable to the Class A Common Stock;

 

(ii)              amend or repeal, or adopt any provision of this Amended and Restated Certificate of Incorporation if the effect thereof would be to modify the voting, conversion or other rights, powers, preferences, privileges or restrictions of the Series A-1 Preferred Stock; or

 

(iii)            set a record date for any special meeting or any other meeting or vote of stockholders (or for purposes of determining stockholders entitled to consent to any matter in writing) as of any date on which outstanding shares of Series A-1 Preferred Stock are convertible into Class B Common Stock, or hold a meeting or vote of stockholders (or solicit written consents with respect to any matter) on any such date.

 

 

8.                  No Reissuance of Preferred Stock. No share or shares of Series A/A-1 Preferred Stock acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be reissued, and all such shares shall be cancelled, retired and eliminated from the shares which the Corporation shall be authorized to issue.

 

C.                 Common Stock.

 

1.                  Identical Rights.

 

(a)               Except as otherwise provided in this Amended and Restated Certificate of Incorporation or required by applicable law, shares of Common Stock shall have the same rights and powers, rank equally (including as to dividends and distributions, and upon any liquidation, dissolution or winding up of the Corporation), share ratably and be identical in all respects as to all matters.

 

(b)               If the Corporation in any manner subdivides (by stock split or otherwise) or combines (by reverse stock split or otherwise) the outstanding shares of Class A Common Stock or Class B Common Stock, then the outstanding shares of all Common Stock will be subdivided or combined in the same proportion and manner.

 

2.                  Dividend Rights.

 

(a)               Subject to the provisions set forth herein and the preferential rights of holders of all classes of stock at the time outstanding having preferential rights as to dividends and distributions, the holders of the Common Stock shall be entitled to receive, when, as and if declared by the Board, out of any assets of the Corporation legally available therefor, such dividends and distributions as may be declared from time to time by the Board; provided that no such dividend or distribution may be declared or paid (other than in the form of shares of Common Stock or other securities and rights convertible into or entitling the holder thereof to receive, directly or indirectly, additional shares of Common Stock) unless a dividend or distribution is simultaneously declared or paid, as the case may be, on the Series A/A-1 Preferred Stock in an amount equal to the amount which would be paid on the Series A/A-1 Preferred Stock if the Series A/A-1 Preferred Stock had been converted into Common Stock immediately prior to the record date for the dividend on the Common Stock.

 

(b)               Without limiting the provisions of Section (C)2(a) of this Article IV, the Corporation shall not declare or pay any dividend or make any other distribution to the holders of Common Stock unless the same dividend or distribution with the same record date and payment date shall be declared and paid on all shares of Common Stock; provided, however, that any dividend or other distribution payable in additional shares of Common Stock or rights to acquire shares of Common Stock shall be payable on the Class A Common Stock in additional shares of Class A Common Stock or rights to acquire shares of Class A Common Stock and on the Class B Common Stock in additional shares of Class B Common Stock or rights to acquire shares of Class B Common Stock, in each case, at the same rate and with the same record date and payment date.

 

 

 

3.             Liquidation Rights. Upon the liquidation, dissolution or winding up of the Corporation, the assets of the Corporation shall be distributed as provided in Section (B)2 of this Article IV.

 

4.             Redemption. The Common Stock is not by its terms redeemable.

 

5.             Voting Rights.

 

(a)            The holders of Class A Common Stock shall have the right to one vote for each share of Class A Common Stock, and the holders of Class A Common Stock shall be entitled to notice of any stockholders’ meeting in accordance with the bylaws of the Corporation, and shall be entitled to vote upon such matters and in such manner as may be provided by law. Except as otherwise restricted herein, the number of authorized shares of Common Stock or any class thereof may be increased or decreased by the affirmative vote of the holders of capital stock having a majority of the voting power of the Corporation (voting together on an as-if-converted to Class A Common Stock basis), irrespective of the provision of Section 242(b)(2) of the DGCL.

 

(b)           Except as otherwise provided herein or as otherwise required by the DGCL, the Class B Common Stock shall have no voting rights and shall not entitle to holders thereof to any vote at any meeting of stockholders, or in connection with any written consent of stockholders, with respect to any matter, and the shares of Class B Common Stock shall not be considered present or entitled to vote or otherwise accounted for in connection with any meeting or vote that occurs during such time (including for purposes of determining the presence or absence of a quorum or the minimum vote required to approve any matter). However, as long as any shares of Class B Common Stock are outstanding, without the affirmative vote or written consent of the holders of a majority of the then outstanding shares of the Class B Common Stock, the Corporation shall not, directly or indirectly, whether by or through any subsidiary and whether by merger, consolidation or otherwise, amend, modify or repeal any provision of the Amended and Restated Certificate of Incorporation if the effect thereof would be to modify the voting, conversion or other rights, powers, preferences, privileges or restrictions of the Class B Common Stock.

 

6.             Conversion of Class B Common Stock.

 

(a)            Conversions at Option of Holder. Each share of Class B Common Stock shall be convertible, at any time and from time to time from and after the date of issuance, at the option of the holder thereof, into one share of Class A Common Stock. A holder of Class B Common Stock shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as Annex A (a “Notice of Conversion”), duly completed by such holder. If the Notice of Conversion is delivered at a time when the Conversion Shares (as defined below) are required to bear a restrictive legend pursuant to Section (C)6(d), on or before the fifth (5th) Business Day following the Conversion Date (as defined below) (the “Restricted Voluntary Conversion Delivery Deadline”), the Corporation shall, or shall cause its transfer agent to, issue and deliver to the address as specified in the Notice of Conversion, a stock certificate, registered in the name of the holder or its designee, for the number of shares of Class A Common Stock to which the holder shall be entitled, and in the case of a Notice of Conversion delivered at a time when the Conversion Shares are not required to bear a restrictive legend pursuant to Section (C)6(d), on or before the second (2nd) Business Day (or, if earlier, the last day of the Standard Settlement Period (as defined below)) following the Conversion Date (the “Unrestricted Voluntary Conversion Delivery Deadline”), cause the Transfer Agent to credit the aggregate number of shares of Class A Common Stock to which the holder shall be entitled to the holder’s or its designee’s balance account with The Depository Trust Corporation (“DTC”) through DTC’s Deposit/Withdrawal at Custodian (DWAC) system. The “Conversion Date,” or the date on which a conversion shall be deemed effective, shall be defined as the Trading Day (as defined below) that the completed Notice of Conversion is sent by electronic mail or facsimile to, and received during regular business hours by, the Corporation. The calculations and entries set forth in the Notice of Conversion shall control in the absence of verifiable or mathematical error. Shares of Class B Common Stock converted into Class A Common Stock in accordance with the terms hereof shall be canceled and shall not be reissued. The holder shall not be required to physically surrender the certificate(s) representing the Class B Common Stock to the Corporation until all shares of Class B Common Stock represented by such certificate(s) have been converted in full, in which case the holder shall surrender such certificate(s) to the Corporation for cancellation within three (3) Trading Days of the date the final Notice of Conversion is delivered to the Corporation. Delivery of a Notice of Conversion with respect to a partial conversion shall have the same effect as cancellation of the original certificate(s) representing such shares of Class B Common Stock and issuance of a certificate representing such remaining shares of Class B Common Stock. In accordance with the preceding sentence, upon the written request of the holder and the surrender of certificate(s) representing Class B Common Stock, the Corporation shall, within three (3) Trading Days of such request, deliver to the holder certificate(s) (as specified by the holder in such request) representing the remaining shares of Class B Common Stock represented by the surrendered certificate(s).

 

 

(b)           Beneficial Ownership Limitation. Notwithstanding anything herein to the contrary, but subject to the last sentence of this Section (C)6(b), the Corporation shall not effect any conversion of the Class B Common Stock, and a holder shall not have the right to convert any portion of the Class B Common Stock, to the extent that, after giving effect to an attempted conversion set forth on the applicable Notice of Conversion, such holder together with such holder’s Affiliates, and any other Person whose beneficial ownership of Class A Common Stock would be aggregated with such holder’s for purposes of Section 13(d) of the Exchange Act and the applicable rules and regulations of the Commission, including any “group” of which the holder is a member would beneficially own a number of shares of Class A Common Stock in excess of 4.9% of the total number of shares of Class A Common Stock then issued and outstanding (the “Beneficial Ownership Limitation”); provided that the Beneficial Ownership Limitation shall not apply to the extent that the Class A Common Stock is not deemed to constitute an “equity security” pursuant to Rule 13d-1(i) under the Exchange Act. Delivery of a Notice of Conversion by a holder in respect of the conversion of Class B Common Stock shall constitute a representation by such holder that the issuance of shares of Class A Common Stock in accordance with such Notice of Conversion will not cause such holder (together with such holder’s Affiliates, and any other Person whose beneficial ownership of Class A Common Stock would be aggregated with such holder’s for purposes of Section 13(d) of the Exchange Act and the applicable regulations of the Commission) to beneficially own a number of shares of Class A Common Stock in excess of the Beneficial Ownership Limitation, as determined in accordance with this Amended and Restated Certificate of Incorporation. For purposes of this Section (C)6(a), the number of shares of Class A Common Stock beneficially owned by such holder and its Affiliates shall include the number of shares of Class A Common Stock issuable upon conversion of the Class B Common Stock subject to the Notice of Conversion with respect to which such determination is being made, but shall exclude the number of shares of Class A Common Stock which are issuable upon (A) conversion of the remaining, unconverted Class B Common Stock beneficially owned by such holder or any of its Affiliates (and any other Person whose beneficial ownership of Class A Common Stock would be aggregated with such holder’s for purposes of Section 13(d) of the Exchange Act and the applicable regulations of the Commission), and (B) exercise, exchange or conversion of the unexercised, unexchanged or unconverted portion of any other securities of the Corporation subject to a limitation on conversion, exchange or exercise analogous to the limitation contained herein (including any class or series of preferred stock and warrants) beneficially owned by such holder or any of its Affiliates (and any other Person whose beneficial ownership of Class A Common Stock would be aggregated with such holder’s for purposes of Section 13(d) of the Exchange Act and the applicable regulations of the Commission). Except as set forth in the preceding sentence, for purposes of this Section (C)6(b), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. In addition, a determination as to any “group” status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 6(b), in determining the number of outstanding shares of Class A Common Stock, a holder may rely on the number of outstanding shares of Class A Common Stock as stated in the Corporation’s most recent quarterly or annual report filed with the Securities and Exchange Commission (the “Commission”), any current report or other filing filed by the Corporation with the Commission subsequent thereto or any confirmation provided by the Corporation in accordance with the next sentence. Upon the written request of a holder (which may be via electronic mail), the Corporation shall within two (2) Trading Days following such request, confirm in writing via electronic mail to such holder the number of shares of Class A Common Stock then outstanding. In any case, the number of outstanding shares of Class A Common Stock shall be determined after giving effect to any actual conversion, exchange or exercise of securities of the Corporation, including Class B Common Stock, by such holder or its Affiliates since the date as of which such number of outstanding shares of Class A Common Stock was last publicly reported.

 

 

(c)            Mechanics of Conversion

 

(i)                 Delivery of Certificate or Electronic Issuance Upon Conversion. Not later than the Restricted Voluntary Conversion Delivery Deadline or the Unrestricted Voluntary Conversion Delivery Deadline, as applicable (as applicable, the “Share Delivery Date”), the Corporation shall (a) deliver, or cause to be delivered, to the converting holder a certificate or certificates representing the number of Conversion Shares being acquired upon the conversion of shares of Class B Common Stock or (b) in the case of a DWAC Delivery, electronically deliver such Conversion Shares by crediting the account of the holder’s prime broker with DTC through its DWAC system. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by or, in the case of a DWAC Delivery, such shares are not electronically delivered to or as directed by, the applicable holder by the Share Delivery Date, the applicable holder shall be entitled to elect to rescind such Notice of Conversion by written notice to the Corporation at any time on or before its receipt of such certificate or certificates for Conversion Shares or electronic receipt of such shares, as applicable, in which event the Corporation shall promptly return to such holder any original Class B Common Stock certificate delivered to the Corporation.

 

 

(ii)                Obligation Absolute. Subject to Section (C)6(b) hereof and subject to holder’s right to rescind a Notice of Conversion pursuant to Section (C)6(c)(i) above, the Corporation’s obligation to issue and deliver the Conversion Shares upon conversion of Class B Common Stock in accordance with the terms hereof is absolute and unconditional, irrespective of any action or inaction by a holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by such holder or any other Person of any obligation to the Corporation or any violation or alleged violation of law by such holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to such holder in connection with the issuance of such Conversion Shares.

 

(iii)               Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. If the Corporation fails to deliver to a holder a certificate or certificates representing Conversion Shares or to effect a DWAC Delivery, as applicable, by the Share Delivery Date pursuant to Section (C)6(c)(i), and if after such Share Delivery Date such holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the holder’s brokerage firm otherwise purchases, shares of Class A Common Stock to deliver in satisfaction of a sale by such holder of the Conversion Shares which such holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then, at the election of such holder, the Corporation shall (A) pay in cash to such holder (in addition to any other remedies available to or elected by such holder) the amount by which (x) such holder’s total purchase price (including any brokerage commissions) for the shares of Class A Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Class A Common Stock that such holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions), and (B) at the option of such holder, either reissue (if surrendered) the shares of Class B Common Stock equal to the number of shares of Class B Common Stock submitted for conversion or deliver to such holder the number of shares of Class A Common Stock that would have been issued if the Corporation had timely complied with its delivery requirements under Section (C)6(c)(i). The holder shall provide the Corporation written notice within five (5) Trading Days after the occurrence of a Buy-In indicating the amounts payable to such holder in respect of the Buy-In together with applicable confirmations and any other evidence reasonably requested by the Corporation related thereto. Nothing herein shall limit a holder’s right to pursue any other remedies available to it hereunder, at law or in equity including a decree of specific performance and/or injunctive relief with respect to the Corporation’s failure to timely deliver shares of Class A Common Stock upon conversion of the shares of Class B Common Stock as required pursuant to the terms hereof.

 

(iv)               Reservation of Shares Issuable Upon Conversion. The Corporation covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Class A Common Stock for the sole purpose of issuance upon conversion of the Class B Common Stock and payment of dividends on the Class B Common Stock, each as herein provided, free from preemptive rights or any other actual contingent purchase rights, not less than such aggregate number of shares of the Class A Common Stock as shall be issuable (without regard to the Beneficial Ownership Limitation) upon the conversion of all outstanding shares of Class B Common Stock. The Corporation covenants that all shares of Class A Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

 

 

(v)                Taxes. The Corporation shall pay any and all issue and other taxes that may be payable in respect of any issue or delivery of shares of Class A Common Stock upon conversion of any shares of Class B Common Stock; provided, however, that the Corporation shall not be obligated to pay any transfer taxes resulting from any transfer requested by any holder in connection with any such conversion.

 

(vi)              Status as Class A Stockholder. Effective as of the delivery by the holder of the Notice of Conversion by the holder by facsimile or electronic mail, as provided herein, (A) the shares of Class B Common Stock being converted shall be deemed converted into shares of Class A Common Stock, (B) the holder shall be deemed the holder or record of such applicable Conversion Shares, and (C) subject to a holder’s right to rescind a Notice of Conversion pursuant to Section (C)6(c)(i), the holder’s rights as a holder of such converted shares of Class B Common Stock shall cease and terminate, excepting only the right to receive certificates evidencing such shares of Class A Common Stock, or electronic delivery of such shares in the case of DWAC Delivery, and to any remedies provided herein or otherwise available at law or in equity to such holder because of a failure by the Corporation to comply with the terms of this Amended and Restated Certificate of Incorporation. In all cases, the holder shall retain all of its rights and remedies for the Corporation’s failure to convert Class B Common Stock.

 

(vii)              Automatic Conversion Upon Certain Transfers. Upon a transfer of shares of Class B Common Stock by a holder to a Person that is neither an Affiliate of such holder nor a Person whose beneficial ownership of Class A Common Stock would be aggregated with such holder’s for purposes of Section 13(d) of the Exchange Act and the applicable regulations of the Commission, each share of Class B Common Stock so transferred shall automatically, without further action by the transferor or transferee thereof, convert into a share of Class A Common Stock; and upon delivery to the Corporation of written notice of any such transfer, the Corporation shall issue and deliver the shares of Class A Common Stock into which such transferred shares of Class B Common Stock shall have thereby converted, with the same effect as if such notice of transfer were a Notice of Conversion delivered in accordance with Section (C)6.

 

 

(d)           Legends. Certificates evidencing shares of Class B Common Stock, or shares of Class A Common Stock issued upon conversion thereof (“Conversion Shares”), issued or sold pursuant to an effective registration statement under the Securities Act shall not contain any legend restricting the transfer thereof. Certificates evidencing shares of Class B Common Stock or Conversion Shares shall not be required to contain any legend restricting the transfer thereof: (A) while a registration statement covering the sale or resale of such security is effective under the Securities Act; provided that the holder of such security provides a representation reasonably satisfactory to counsel to the Corporation that such holder will not sell or resell such security at any time that such registration statement is not effective or such registration statement is otherwise not available for the sale or resale of such security, except pursuant to a sale that is exempt from the registration requirements of the Securities Act pursuant to Rule 144 thereunder, or (B) if the holder thereof provides customary good-faith representations to the effect that it has sold such shares pursuant to Rule 144, or (C) if such shares of Class B Common Stock or Conversion Shares, as the case may be, are eligible for sale under Rule 144(b)(1) as set forth in customary non-affiliate good-faith representations provided by the holder thereof, or (D) at any time on or after the date hereof that the applicable holder certifies in good faith that it is not an Affiliate of the Corporation and that such holder’s holding period for purposes of Rule 144 and, in the case of the Conversion Shares, subsection (d)(3)(ii) thereof with respect to such shares of Class B Common Stock and/or Conversion Shares is at least twelve (12) months (or six (6) months if the Corporation is, and shall have been for a period of at least ninety (90) days, subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act), or (E) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the SEC) as determined in good faith by counsel to the Corporation or set forth in a legal opinion delivered by counsel to the Corporation (clauses (A) through (E) collectively with the first sentence of this paragraph, the “Unrestricted Conditions”). The Corporation shall use its reasonable best efforts to cause its counsel to issue a legal opinion to the Transfer Agent at such time as any of the Unrestricted Conditions has been satisfied, if required by the Corporation’s Transfer Agent to effect the issuance of shares of Class B Common Stock or the Conversion Shares, as applicable, without a restrictive legend or removal of the legend hereunder. If any of the Unrestricted Condition is met at the time of issuance of shares of Class B Common Stock or at the time of issuance of Conversion Shares, then such shares of Class B Common Stock or Conversion Shares, as applicable, shall be issued free of all legends. The Corporation agrees that at such time as such legend is no longer required under this Section (C)6(d), it will, no later than two (2) Trading Days (or, if less, the number of days comprising the Standard Settlement Period) following the delivery by the applicable holder to the Corporation or the Transfer Agent of a certificate representing shares of Class B Common Stock or Conversion Shares, as applicable, issued with a restrictive legend, deliver or cause to be delivered to such Holder this Note and/or a certificate (or electronic transfer) representing such shares that is free from all restrictive and other legends.

 

7.             Certain Defined Terms. For the purposes hereof, the following terms shall have the following meanings:

 

(a)            “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Securities Act. For this purpose, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise. With respect to a holder of capital stock, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such holder will be deemed to be an Affiliate of such holder.

 

(b)           “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the laws of, or are in fact closed in, New York, New York.

 

(c)           “Person” means any individual, sole proprietorship, partnership (general or limited), limited liability company, joint venture, company, trust (statutory or common law), unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or governmental or regulatory agency.

 

 

(d)           “Standard Settlement Period” means the standard settlement period for equity trades effected by U.S. broker-dealers, expressed in a number of Trading Days, as in effect on the applicable date (which, as of the date hereof, is two (2) Trading Days).

 

(e)            “Trading Day” means a day on which the Class A Common Stock is traded for any period on the principal securities exchange or other securities market on which the Class A Common Stock is then being traded.

 

ARTICLE V

 

A director of the Corporation shall, to the fullest extent permitted by the DGCL as it now exists or as it may hereafter be amended, not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (a) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the DGCL or (d) for any transaction from which the director derived any improper personal benefit. If the DGCL is amended, after approval by the stockholders of this Article V, to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended.

 

Any amendment, repeal or modification of this Article V, or the adoption of any provision of this Amended and Restated Certificate of Incorporation inconsistent with this Article V by the stockholders of the Corporation shall not apply to or adversely affect any right or protection of a director of the Corporation occurring prior to the time of such amendment, repeal, modification or adoption.

 

ARTICLE VI

 

The Corporation shall indemnify its directors, and shall provide for advancement of the expenses of such persons, to the fullest extent provided by Section 145 of the DGCL. To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) officers and agents of the Corporation (and any other persons to which the DGCL permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such officer, agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the DGCL, subject only to limits created by applicable law (statutory or non-statutory), with respect to actions for breach of duty to the Corporation, its stockholders and others.

 

Any amendment, repeal or modification of the foregoing provision of this Article VI shall not adversely affect any right or protection of a director, officer, agent, or other person existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director, officer or agent occurring prior to, such amendment, repeal, modification or adoption.

 

 

ARTICLE VII

 

The Board may from time to time adopt, amend, alter, supplement, rescind or repeal any or all of the Bylaws of the Corporation without any action on the part of the stockholders; provided, however, that the stockholders may adopt, amend or repeal any Bylaw adopted by the Board, and no amendment or supplement to the Bylaws adopted by the Board shall vary or conflict with any amendment or supplement adopted by the stockholders.

 

ARTICLE VIII

 

Subject to any additional vote required by this Amended and Restated Certificate of Incorporation, the number of directors of the Corporation shall be set from time to time by resolution of the Board.

 

ARTICLE IX

 

Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

 

ARTICLE X

 

Meetings of stockholders may be held within or outside of the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any statutory requirements) outside the State of Delaware at such place or places as may be designated from time to time by the Board or in the Bylaws of the Corporation.

 

ARTICLE XI

 

Pursuant to Section 122(17) of the DGCL, the Corporation hereby renounces any interest or expectancy of the Corporation or any subsidiary of the Corporation in, or in being offered an opportunity to participate in, any and all business opportunities that are presented to the holders of Series A/A-1 Preferred Stock or their affiliates other than holders who are employees of the Corporation (including, without limitation, any representative or affiliate of such holders of Series A/A-1 Preferred Stock serving on the Board or the board of directors or other governing body of any subsidiary of the Corporation (each a “Board of Directors”)) (collectively, the “Series A Investor Parties”). Without limiting the foregoing renunciation, the Corporation on behalf of itself and its subsidiaries (a) acknowledges that the Series A Investor Parties are in the business of making investments in, and have or may have investments in, other businesses similar to and that may compete with the businesses of the Corporation and its subsidiaries (“Competing Businesses”) and (b) agrees that the Series A Investor Parties shall have the unfettered right to make investments in or have relationships with other Competing Businesses independent of their investments in the Corporation. By virtue of a Series A Investor Party holding capital stock of the Corporation or by having persons designated by or affiliated with such Series A Investor Party serving on or observing at meetings of any Board of Directors or otherwise, no Series A Investor Party shall have any obligation to the Corporation, any of its subsidiaries or any other holder of capital stock or securities of the Corporation to refrain from competing with the Corporation and any of its subsidiaries, making investments in or having relationships with Competing Businesses, or otherwise engaging in any commercial activity and none of the Corporation, any of its subsidiaries or any other holder of capital stock or securities of the Corporation shall have any right with respect to any investment or activities undertaken by such Series A Investor Party.

 

 

Without limitation of the foregoing, each Series A Investor Party may engage in or possess any interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Corporation or any of its subsidiaries, and none of the Corporation, any of its subsidiaries or any other holder of capital stock or securities of the Corporation shall have any rights or expectancy by virtue of such Series A Investor Parties’ relationships with the Corporation, or otherwise in and to such independent ventures or the income or profits derived therefrom; and the pursuit of any such ventures, even if such investment is in a Competing Business, shall not for any purpose be deemed wrongful or improper. No Series A Investor Party shall be obligated to present any particular investment opportunity to the Corporation or its subsidiaries even if such opportunity is of a character that, if presented to the Corporation or such subsidiary, could be taken by the Corporation or such subsidiary, and each Series A Investor Party shall continue to have the right for its own respective account or to recommend to others any such particular investment opportunity.

 

ARTICLE XII

 

For purposes of Section 500 of the California Corporations Code (to the extent applicable), in connection with any repurchase of shares of Common Stock permitted under this Amended and Restated Certificate of Incorporation from employees, officers, directors or consultants of the Company in connection with a termination of employment or services pursuant to agreements or arrangements approved by the Board (in addition to any other consent required under this Amended and Restated Certificate of Incorporation), such repurchase may be made without regard to any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined in Section 500 of the California Corporations Code). Accordingly, for purposes of making any calculation under California Corporations Code Section 500 in connection with such repurchase, the amount of any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined therein) shall be deemed to be zero (0).

 

ARTICLE XIII

 

The foregoing amendment and restatement was approved by the holders of the requisite number of shares of this Corporation in accordance with Section 228 of the DGCL.

 

ARTICLE XIV

 

This Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this Corporation’s Certificate of Incorporation dated August 6, 2015, has been duly adopted in accordance with Sections 242 and 245 of the DGCL.

 

 

IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 14th day of September, 2020.

 

By:

/s/ Ronald Lloyd

	Name:	Ronald Lloyd
	Title:	President and Chief Executive Officer

 

 

ANNEX A

 

NOTICE OF CONVERSION

 

(To be executed by the Registered Holder in order to convert shares of class b common Stock)

 

Reference is made to the Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”). In accordance with and pursuant to the Certificate of Incorporation, the undersigned hereby elects to convert the number of shares of Class B Common Stock, par value $0.001 per share (the “Class B Common Stock”), of Aziyo Biologics, Inc., a Delaware corporation (the “Corporation”), indicated below into shares of Class A Common Stock, par value $0.001 per share (the “Class A Common Stock”), of the Corporation, as of the date specified below.

 

Date of Conversion:

 

Number of shares of Class B Common Stock to be converted:

 

Please confirm the following information:

 

Number of shares of Class A Common Stock to be issued:

 

Please issue the shares of Common Stock in accordance with the terms of the Certificate of Incorporation as follows:

 

Issue to:

 

E-mail:

 

DTC Participant Number and Name:

 

Account Number:

 

 

 

Exhibit 3.2

 

BYLAWS OF

 

AZIYO BIOLOGICS, INC.

 

Adopted 6, 2015

 

 

TABLE OF CONTENTS

 

			Page
ARTICLE I — MEETINGS OF STOCKHOLDERS			1
	1.1	Place of Meetings	1
	1.2	Annual Meeting	1
	1.3	Special Meeting	1
	1.4	Notice of Stockholders’ Meetings	2
	1.5	Quorum	2
	1.6	Adjourned Meeting; Notice	2
	1.7	Conduct of Business	3
	1.8	Voting	3
	1.9	Stockholder Action by Written Consent Without a Meeting	3
	1.10	Record Date for Stockholder Notice; Voting; Giving Consents	4
	1.11	Proxies	5
	1.12	List of Stockholders Entitled to Vote	5
ARTICLE II — DIRECTORS			6
	2.1	Powers	6
	2.2	Number of Directors	6
	2.3	Election, Qualification and Term of Office of Directors	6
	2.4	Resignation and Vacancies	6
	2.5	Place of Meetings; Meetings by Telephone	7
	2.6	Conduct of Business	7
	2.7	Regular Meetings	8
	2.8	Special Meetings; Notice	8
	2.9	Quorum; Voting	8
	2.10	Board Action by Written Consent Without a Meeting	8
	2.11	Fees and Compensation of Directors	9
	2.12	Removal of Directors	9
ARTICLE III — COMMITTEES			9
	3.1	Committees of Directors	9
	3.2	Committee Minutes	9
	3.3	Meetings and Actions of Committees	9
	3.4	Subcommittees	10
ARTICLE IV — OFFICERS			10
	4.1	Officers	10
	4.2	Appointment of Officers	10
	4.3	Subordinate Officers	10
	4.4	Removal and Resignation of Officers	11
	4.5	Vacancies in Offices	11
	4.6	Representation of Shares of Other Corporations	11
	4.7	Authority and Duties of Officers	11

 

 

TABLE OF CONTENTS

(Continued)

 

			Page
ARTICLE V — INDEMNIFICATION			11
	5.1	Indemnification of Directors and Officers in Third Party Proceedings	11
	5.2	Indemnification of Directors and Officers in Actions by or in the Right of the Company	12
	5.3	Successful Defense	12
	5.4	Indemnification of Others	12
	5.5	Advanced Payment of Expenses	13
	5.6	Limitation on Indemnification	13
	5.7	Determination; Claim	14
	5.8	Non-Exclusivity of Rights	14
	5.9	Insurance	14
	5.10	Survival	14
	5.11	Effect of Repeal or Modification	14
	5.12	Certain Definitions	15
ARTICLE VI — STOCK			15
	6.1	Stock Certificates; Partly Paid Shares	15
	6.2	Special Designation on Certificates	16
	6.3	Lost Certificates	16
	6.4	Dividends	16
	6.5	Stock Transfer Agreements	16
	6.6	Registered Stockholders	16
	6.7	Transfers	17
ARTICLE VII — MANNER OF GIVING NOTICE AND WAIVER			17
	7.1	Notice of Stockholder Meetings	17
	7.2	Notice by Electronic Transmission	17
	7.3	Notice to Stockholders Sharing an Address	18
	7.4	Notice to Person with Whom Communication is Unlawful	18
	7.5	Waiver of Notice	18
ARTICLE VIII — GENERAL MATTERS			19
	8.1	Fiscal Year	19
	8.2	Seal	19
	8.3	Annual Report	19
	8.4	Construction; Definitions	19
ARTICLE IX — AMENDMENTS			19

 

 

 

BYLAWS OF AZIYO BIOLOGICS, INC.

 

ARTICLE I — MEETINGS OF STOCKHOLDERS

 

1.1       Place of Meetings. Meetings of stockholders of Aziyo Biologies, Inc. (the “Company”) shall be held at any place, within or outside the State of Delaware, determined by the Company’s board of directors (the “Board”). The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the Delaware General Corporation Law (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the Company’s principal executive office.

 

1.2       Annual Meeting. An annual meeting of stockholders may be held for the election of directors at such date and time as may be designated by resolution of the Board from time to time. Any other proper business may be transacted at the annual meeting. The Company shall not be required to hold an annual meeting of stockholders, provided that (i) the stockholders are permitted to act by written consent under the Company’s certificate of incorporation and these bylaws, (ii) the stockholders take action by written consent to elect directors and (iii) the stockholders unanimously consent to such action or, if such consent is less than unanimous, all of the directorships to which directors could be elected at an annual meeting held at the effective time of such action are vacant and are filled by such action.

 

1.3       Special Meeting. A special meeting of the stockholders may be called at any time by the Board, Chairperson of the Board or President or by one or more stockholders holding shares in the aggregate entitled to cast greater than 25% of the votes at that meeting.

 

If any person(s) other than the Board calls a special meeting, the request shall:

 

(i)       be in writing;

 

(ii)       specify the time of such meeting and the general nature of the business proposed to be transacted; and

 

(iii)       be delivered personally or sent by registered mail or by facsimile transmission to the Chairperson of the Board, the President or the Secretary of the Company.

 

The officer(s) receiving the request shall cause notice to be promptly given to the stockholders entitled to vote at such meeting, in accordance with these bylaws, that a meeting will be held at the time requested by the person or persons calling the meeting. No business may be transacted at such special meeting other than the business specified in such notice to stockholders. Nothing contained in this paragraph of this section 1.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board may be held.

 

 

1.4       Notice of Stockholders’ Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Except as otherwise provided in the DGCL, the certificate of incorporation or these bylaws, the written notice of any meeting of stockholders shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting.

 

1.5       Quorum. Except as otherwise provided by law, the certificate of incorporation or these bylaws, at each meeting of stockholders the presence in person or by proxy of the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum. Where a separate vote by a class or series or classes or series is required, a majority of the outstanding shares of such class or series or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter, except as otherwise provided by law, the certificate of incorporation or these bylaws.

 

If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the meeting, or (ii) the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, in the manner provided in section 1.6, until a quorum is present or represented.

 

1.6       Adjourned Meeting; Notice. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Company may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

 

 

1.7       Conduct of Business. Meetings of stockholders shall be presided over by the Chairperson of the Board, if any, or in his or her absence by the Vice Chairperson of the Board, if any, or in the absence of the foregoing persons by the Chief Executive Officer, or in the absence of the foregoing persons by the President, or in the absence of the foregoing persons by a Vice President, or in the absence of the foregoing persons by a chairperson designated by the Board, or in the absence of such designation by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairperson of the meeting may appoint any person to act as secretary of the meeting. The chairperson of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business.

 

1.8       Voting. The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of section 1.10 of these bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the DGCL.

 

Except as may be otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of capital stock held by such stockholder which has voting power upon the matter in question. Voting at meetings of stockholders need not be by written ballot and, unless otherwise required by law, need not be conducted by inspectors of election unless so determined by the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or by proxy at such meeting. If authorized by the Board, such requirement of a written ballot shall be satisfied by a ballot submitted by electronic transmission (as defined in section 7.2 of these bylaws), provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder or proxy holder.

 

Except as otherwise required by law, the certificate of incorporation or these bylaws, in all matters other than the election of directors, the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Except as otherwise required by law, the certificate of incorporation or these bylaws, directors shall be elected by a plurality of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Where a separate vote by a class or series or classes or series is required, in all matters other than the election of directors, the affirmative vote of the majority of shares of such class or series or classes or series present in person or represented by proxy at the meeting shall be the act of such class or series or classes or series, except as otherwise provided by law, the certificate of incorporation or these bylaws.

 

1.9       Stockholder Action by Written Consent Without a Meeting. Unless otherwise provided in the certificate of incorporation, any action required by the DGCL to be taken at any annual or special meeting of stockholders of a corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

 

 

An electronic transmission (as defined in section 7.2) consenting to an action to be taken and transmitted by a stockholder or proxy holder, or by a person or persons authorized to act for a stockholder or proxy holder, shall be deemed to be written, signed and dated for purposes of this section, provided that any such electronic transmission sets forth or is delivered with information from which the Company can determine (i) that the electronic transmission was transmitted by the stockholder or proxy holder or by a person or persons authorized to act for the stockholder or proxy holder and (ii) the date on which such stockholder or proxy holder or authorized person or persons transmitted such electronic transmission.

 

In the event that the Board shall have instructed the officers of the Company to solicit the vote or written consent of the stockholders of the Company, an electronic transmission of a stockholder written consent given pursuant to such solicitation may be delivered to the Secretary or the President of the Company or to a person designated by the Secretary or the President. The Secretary or the President of the Company or a designee of the Secretary or the President shall cause any such written consent by electronic transmission to be reproduced in paper form and inserted into the corporate records.

 

The Company shall provide prompt notice of the taking of a corporate action without a meeting by less than unanimous written consent to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Company as provided in Section 228 of the DGCL. In the event that the action which is consented to is such as would have required the filing of a certificate under any provision of the DGCL, if such action had been voted on by stockholders at a meeting thereof, the certificate filed under such provision shall state, in lieu of any statement required by such provision concerning any vote of stockholders, that written consent has been given in accordance with Section 228 of the DGCL.

 

1.10       Record Date for Stockholder Notice; Voting; Giving Consents. In order that the Company may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which record date:

 

(i)       in the case of determination of stockholders entitled to notice of or to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, not be more than sixty nor less than ten days before the date of such meeting;

 

 

(ii)       in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board; and

 

(iii)       in the case of determination of stockholders for any other action, shall not be more than 60 days prior to such other action.

 

If no record date is fixed by the Board:

 

(i)       the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held;

 

(ii)       the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting when no prior action of the Board is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Company in accordance with applicable law, or, if prior action by the Board is required by law, shall be at the close of business on the day on which the Board adopts the resolution taking such prior action; and

 

(iii)       the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

 

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, provided that the Board may fix a new record date for the adjourned meeting.

 

1.11       Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express. consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL.

 

1.12       List of Stockholders Entitled to Vote. The officer who has charge of the stock ledger of the Company shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Company shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the Company’s principal place of business. In the event that the Company determines to make the list available on an electronic network, the Company may take reasonable steps to ensure that such information is available only to stockholders of the Company. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

 

 

ARTICLE II — DIRECTORS

 

2.1       Powers. The business and affairs of the Company shall be managed by or under the direction of the Board, except as may be otherwise provided in the DGCL or the certificate of incorporation.

 

2.2       Number of Directors, The Board shall consist of one or more members, each of whom shall be a natural person. Unless the certificate of incorporation fixes the number of directors, the number of directors shall be determined from time to time by resolution of the Board. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

 

2.3       Election, Qualification and Term of Office of Directors. Except as provided in section 2.4 of these bylaws, and subject to sections 1.2 and 1.9 of these bylaws, directors shall be elected at each annual meeting of stockholders. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws. The certificate of incorporation or these bylaws may prescribe other qualifications for directors. Each director shall hold office until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal.

 

2.4       Resignation and Vacancies. Any director may resign at any time upon notice given in writing or by electronic transmission to the Company. A resignation is effective when the resignation is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events. A resignation which is conditioned upon the director failing to receive a specified vote for reelection as a director may provide that it is irrevocable. Unless otherwise provided in the certificate of incorporation or these bylaws, when one or more directors resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.

 

Unless otherwise provided in the certificate of incorporation or these bylaws:

 

(i)       Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.

 

 

(ii)       Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected.

 

If at any time, by reason of death or resignation or other cause, the Company should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the DGCL.

 

If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding more than 25% of the voting stock at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the DGCL as far as applicable.

 

A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office and until such director’s successor is elected and qualified, or until such director’s earlier death, resignation or removal.

 

2.5       Place of Meetings; Meetings by Telephone. The Board may hold meetings, both regular and special, either within or outside the State of Delaware.

 

Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

 

2.6       Conduct of Business. Meetings of the Board shall be presided over by the Chairperson of the Board, if any, or in his or her absence by the Vice Chairperson of the Board, if any, or in the absence of the foregoing persons by a chairperson designated by the Board, or in the absence of such designation by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.

 

 

2.7       Regular Meetings. Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board.

 

2.8       Special Meetings; Notice. Special meetings of the Board for any purpose or purposes may be called at any time by the Chairperson of the Board, the President or any two directors.

 

Notice of the time and place of special meetings shall be:

 

(i)       delivered personally by hand, by courier or by telephone;

 

(ii)       sent by United States first-class mail, postage prepaid;

 

(iii)       sent by facsimile; or

 

(iv)       sent by electronic mail,

 

directed to each director at that director’s address, telephone number, facsimile number or electronic mail address, as the case may be, as shown on the Company’s records.

 

If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or (iii) sent by electronic mail, it shall be delivered or sent at least 48 hours before the time of the holding of the meeting. If the notice is sent by United States mail, it shall be deposited in the United States mail at least four days before the time of the holding of the meeting. Any oral notice may be communicated to the director. The notice need not specify the place of the meeting (if the meeting is to be held at the Company’s principal executive office) nor the purpose of the meeting.

 

2.9       Quorum; Voting. At all meetings of the Board, a majority of the total number of acting directors shall constitute a quorum for the transaction of business. If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

 

The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by statute, the certificate of incorporation or these bylaws,

 

If the certificate of incorporation provides that one or more directors shall have more or less than one vote per director on any matter, every reference in these bylaws to a majority or other proportion of the directors (including, without limitation, for the purpose of determining whether a quorum is present at any meeting of the Board) shall refer to a majority or other proportion of the votes of the directors.

 

2.10       Board Action by Written Consent Without a Meeting. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

 

 

2.11       Fees and Compensation of Directors. Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board shall have the authority to fix the compensation of directors.

 

2.12       Removal of Directors. Unless otherwise restricted by statute, the certificate of incorporation or these bylaws, any director or the entire Board may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors.

 

No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.

 

2.13       Stockholder Agreements. Nothing herein shall be deemed to prohibit or limit the ability of 2 or more stockholders of the Company to enter into agreements regarding the exercise of voting rights, including without limitation, the election and/or removal directors.

 

ARTICLE III — COMMITTEES

 

3.1       Committees of Directors. The Board may designate one or more committees, each committee to consist of one or more of the directors of the Company. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company, and may authorize the seal of the Company to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaw of the Company.

 

3.2       Committee Minutes. Each committee shall keep regular minutes of its meetings and report the same to the Board when required.

 

3.3       Meetings and Actions of Committees. Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:

 

(i)       section 2.5 (Place of Meetings; Meetings by Telephone);

 

(ii)       section 2.7 (Regular Meetings);

 

 

(iii)       section 2.8 (Special Meetings; Notice);

 

(iv)       section 2.9 (Quorum; Voting);

 

(v)       section 2.10 (Board Action by Written Consent Without a Meeting); and

 

(vi)       section 7.5 (Waiver of Notice)

 

with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board and its members. However:

 

(i)         the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee;

 

(ii)        special meetings of committees may also be called by resolution of the Board; and

 

(iii)       notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.

 

Any provision in the certificate of incorporation providing that one or more directors shall have more or less than one vote per director on any matter shall apply to voting in any committee or subcommittee, unless otherwise provided in the certificate of incorporation or these bylaws.

 

3.4       Subcommittees. Unless otherwise provided in the certificate of incorporation, these bylaws or the resolutions of the Board designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.

 

ARTICLE IV — OFFICERS

 

4.1       Officers. The officers of the Company shall be a President and a Secretary. The Company may also have, at the discretion of the Board, a Chairperson of the Board, a Vice Chairperson of the Board, a Chief Executive Officer, one or more Vice Presidents, a Chief Financial Officer, a Treasurer, one or more Assistant Treasurers, one or more Assistant Secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person.

 

4.2       Appointment of Officers. The Board shall appoint the officers of the Company, except such officers as may be appointed in accordance with the provisions of section 4.3 of these bylaws.

 

4.3       Subordinate Officers. The Board may appoint, or empower the Chief Executive Officer or, in the absence of a Chief Executive Officer, the President, to appoint, such other officers and agents as the business of the Company may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board may from time to time determine.

 

 

 

4.4       Removal and Resignation of Officers. Any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.

 

Any officer may resign at any time by giving written notice to the Company. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Company under any contract to which the officer is a party.

 

4.5       Vacancies in Offices. Any vacancy occurring in any office of the Company shall be filled by the Board or as provided in section 4.3.

 

4.6       Representation of Shares of Other Corporations. Unless otherwise directed by the Board, the President or any other person authorized by the Board or the President is authorized to vote, represent and exercise on behalf of the Company all rights incident to any and all shares of any other corporation or corporations standing in the name of the Company. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

 

4.7       Authority and Duties of Officers. Except as otherwise provided in these bylaws, the officers of the Company shall have such powers and duties in the management of the Company as may be designated from time to time by the Board and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.

 

ARTICLE V — INDEMNIFICATION

 

5.1       Indemnification of Directors and Officers in Third Party Proceedings. Subject to the other provisions of this Article V, the Company shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) (other than an action by or in the right of the Company) by reason of the fact that such person is or was a director or officer of the Company, or is or was a director or officer of the Company serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.

 

 

5.2       Indemnification of Directors and Officers in Actions by or in the Right of the Company. Subject to the other provisions of this Article V, the Company shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Company, or is or was a director or officer of the Company serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Company unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

 

5.3       Successful Defense. To the extent that a present or former director or officer of the Company has been successful on the merits or otherwise in defense of any action, suit or proceeding described in section 5.1 or section 5.2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

 

5.4       Indemnification of Others. Subject to the other provisions of this Article V, the Company shall have power to indemnify its employees and agents to the extent not prohibited by the DGCL or other applicable law. The Board shall have the power to delegate to such person or persons the determination of whether employees or agents shall be indemnified.

 

 

5.5       Advanced Payment of Expenses. Expenses (including attorneys’ fees) incurred by an officer or director of the Company in defending any Proceeding shall be paid by the Company in advance of the final disposition of such Proceeding upon receipt of a written request therefor (together with documentation reasonably evidencing such expenses) and an undertaking by or on behalf of the person to repay such amounts if it shall ultimately be determined that the person is not entitled to be indemnified under this Article V or the DGCL. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the Company deems appropriate. The right to advancement of expenses shall not apply to any claim for which indemnity is excluded pursuant to these bylaws.

 

Notwithstanding the foregoing, unless otherwise determined pursuant to section 5.8, no advance shall be made by the Company to an officer of the Company (except by reason of the fact that such officer is or was a director of the Company, in which event this paragraph shall not apply) in any Proceeding if a determination is reasonably and promptly made (i) by a majority vote of the directors who are not parties to such Proceeding, even though less than a quorum, or (ii) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, that facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the Company.

 

5.6       Limitation on Indemnification. Subject to the requirements in section 5.3 and the DGCL, the Company shall not be obligated to indemnify any person pursuant to this Article V in connection with any Proceeding (or any part of any Proceeding):

 

(i)       for which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid;

 

(ii)      for an accounting or disgorgement of profits pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of federal, state or local statutory law or common law, if such person is held liable therefor (including pursuant to any settlement arrangements);

 

(iii)     for any reimbursement of the Company by such person of any bonus or other incentive-based or equity-based compensation or of any profits realized by such person from the sale of securities of the Company, as required in each case under the Securities Exchange Act of 1934, as amended (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) or the payment to the Company of profits arising from the purchase and sale by such person of securities in violation of Section 306 of the Sarbanes-Oxley Act), if such person is held liable therefor (including pursuant to any settlement arrangements);

 

 

(iv)       initiated by such person, including any Proceeding (or any part of any Proceeding) initiated by such person against the Company or its directors, officers, employees, agents or other indemnitees, unless (a) the Board authorized the Proceeding (or the relevant part of the Proceeding) prior to its initiation, (b) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law, (c) otherwise required to be made under section 5.7 or (d) otherwise required by applicable law; or

 

(v)       if prohibited by applicable law.

 

5.7       Determination; Claim. If a claim for indemnification or advancement of expenses under this Article V is not paid in full within 90 days after receipt by the Company of the written request therefor, the claimant shall be entitled to an adjudication by a court of competent jurisdiction of his or her entitlement to such indemnification or advancement of expenses. The Company shall indemnify such person against any and all expenses that are incurred by such person in connection with any action for indemnification or advancement of expenses from the Company under this Article V, to the extent such person is successful in such action, and to the extent not prohibited by law. In any such suit, the Company shall, to the fullest extent not prohibited by law, have the burden of proving that the claimant is not entitled to the requested indemnification or advancement of expenses.

 

5.8       Non-Exclusivity of Rights. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article V shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the certificate of incorporation or any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. The Company is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advancement of expenses, to the fullest extent not prohibited by the DGCL or other applicable law.

 

5.9       Insurance. The Company may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Company would have the power to indemnify such person against such liability under the provisions of the DGCL.

 

5.10       Survival. The rights to indemnification and advancement of expenses conferred by this Article V shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

 

5.11       Effect of Repeal or Modification. Any amendment, alteration or repeal of this Article V shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to such amendment, alteration or repeal.

 

 

5.12       Certain Definitions. For purposes of this Article V, references to the “Company” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enteiprise, shall stand in the same position under the provisions of this Article V with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article V, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Article V.

 

ARTICLE VI — STOCK

 

6.1       Stock Certificates; Partly Paid Shares. The shares of the Company shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Company. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the Company by the Chairperson of the Board or Vice-Chairperson of the Board, or the President or a Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Company representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Company with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The Company shall not have power to issue a certificate in bearer form.

 

The Company may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, or upon the books and records of the Company in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Company shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

 

 

6.2       Special Designation on Certificates. If the Company is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Company shall issue to represent such class or series of stock; provided that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the Company shall issue to represent such class or series of stock, a statement that the Company will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the Company shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this section 6.2 or Sections 156, 202(a) or 218(a) of the DGCL or with respect to this section 6.2 a statement that the Company will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated stock and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.

 

6.3       Lost Certificates. Except as provided in this section 6.3, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Company and cancelled at the same time. The Company may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Company may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Company a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

 

6.4       Dividends. The Board, subject to any restrictions contained in the certificate of incorporation or applicable law, may declare and pay dividends upon the shares of the Company’s capital stock. Dividends may be paid in cash, in property, or in shares of the Company’s capital stock, subject to the provisions of the certificate of incorporation.

 

The Board may set apart out of any of the funds of the Company available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.

 

6.5       Stock Transfer Agreements. The Company shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Company to restrict the transfer of shares of stock of the Company of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

 

6.6       Registered Stockholders. The Company:

 

 

(i)       shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner;

 

(ii)      shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares; and

 

(iii)     shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

 

6.7       Transfers. Transfers of record of shares of stock of the Company shall be made only upon its books by the holders thereof, in person or by an attorney duly authorized, and, if such stock is certificated, upon the surrender of a certificate or certificates for a like number of shares, properly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer.

 

ARTICLE VII — MANNER OF GIVING NOTICE AND WAIVER

 

7.1       Notice of Stockholder Meetings. Notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the Company’s records. An affidavit of the Secretary or an Assistant Secretary of the Company or of the transfer agent or other agent of the Company that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

 

7.2       Notice by Electronic Transmission. Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the certificate of incorporation or these bylaws, any notice to stockholders given by the Company under any provision of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Company. Any such consent shall be deemed revoked if:

 

(i)       the Company is unable to deliver by electronic transmission two consecutive notices given by the Company in accordance with such consent; and

 

(ii)       such inability becomes known to the Secretary or an Assistant Secretary of the Company or to the transfer agent, or other person responsible for the giving of notice.

 

However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

 

Any notice given pursuant to the preceding paragraph shall be deemed given:

 

(i)       if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;

 

 

(ii)       if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;

 

(iii)       if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and

 

(iv)       if by any other form of electronic transmission, when directed to the stockholder.

 

An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Company that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

 

An “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

 

Notice by a form of electronic transmission shall not apply to Sections 164, 296, 311, 312 or 324 of the DGCL.

 

7.3       Notice to Stockholders Sharing an Address. Except as otherwise prohibited under the DGCL, without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Company under the provisions of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Any such consent shall be revocable by the stockholder by written notice to the Company. Any stockholder who fails to object in writing to the Company, within 60 days of having been given written notice by the Company of its intention to send the single notice, shall be deemed to have consented to receiving such single written notice.

 

7.4       Notice to Person with Whom Communication is Unlawful. Whenever notice is required to be given, under the DGCL, the certificate of incorporation or these bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Company is such as to require the filing of a certificate under the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

 

7.5       Waiver of Notice. Whenever notice is required to be given under any provision of the DGCL, the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws.

 

 

ARTICLE VIII — GENERAL MATTERS

 

8.1       Fiscal Year. The fiscal year of the Company shall be fixed by resolution of the Board and may be changed by the Board.

 

8.2       Seal. The Company may adopt a corporate seal, which shall be in such form as may be approved from time to time by the Board. The Company may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

 

8.3       Annual Report. The Company shall cause an annual report to be sent to the stockholders of the Company to the extent required by applicable law. If and so long as there are fewer than 100 holders of record of the Company’s shares, the requirement of sending an annual report to the stockholders of the Company is expressly waived (to the extent permitted under applicable law).

 

8.4       Construction; Definitions. Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

 

ARTICLE IX — AMENDMENTS

 

Except as otherwise provided in the Company’s certificate of incorporation, these bylaws may be altered, amended or repealed, or new bylaws may be adopted, by the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote thereon or by the Board, when such power is conferred upon the Board by the certificate of incorporation. If the power to adopt, amend or repeal bylaws is conferred upon the Board by the Company’s certificate of incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal bylaws.

 

 

Exhibit 4.1

 

 

Aziyo Biologics, Inc.

 

 

SECOND AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT

 

 

Dated as of September 14, 2020

 

 

 

SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

 

SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (this “Agreement”), dated as of September 14, 2020, by and among Aziyo Biologics, Inc., a Delaware corporation (the “Company”), the holders of Preferred Stock (as defined below) set forth on Schedule A attached hereto and the persons and entities set forth on Schedule B attached hereto (collectively, the “Junior Holders” and each, a “Junior Holder”).

 

WHEREAS, the Investors (as defined below) and the Junior Holders (the “Existing Investors”) hold shares of the Company’s Preferred Stock, shares of Common Stock (as defined below) issued upon conversion thereof and/or other shares of Common Stock and possess registration rights, information rights, rights of first offer, and/or other rights pursuant to the Amended and Restated Investors’ Rights Agreement dated as of July 13, 2017, between the Company and such Existing Investors (the “Prior Agreement”); and

 

WHEREAS, the Existing Investors are holders of at least 75% of the shares of the Series A Preferred Stock held by all Investors other than TBI and its successors and assigns, desire to amend and restate the Prior Agreement in its entirety and to accept the rights created pursuant to this Agreement in lieu of the rights granted to them under the Prior Agreement and constitute parties required to effect such amendment and restatement pursuant to Section 7.9 of the Prior Agreement.

 

NOW, THEREFORE, the Company and the Existing Investors hereby agree that the Prior Agreement shall be superseded and replaced in its entirety by this Agreement, and the parties to this Agreement further agree as follows:

 

1.            Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings:

 

“Affiliate” means, as applied to the Company or any other specified Person, any Person directly or indirectly controlling, controlled by or under direct or indirect common control with the Company or such other specified Person and shall also include, in the case of a specified Person who is an individual, any Family Member of such Person.

 

“Board” means the Company’s Board of Directors.

 

“Certificate of Incorporation” means the Company’s Amended and Restated Certificate of Incorporation, as amended from time to time in accordance with the terms thereof.

 

“Class A Common Stock” means the Company’s Class A Common Stock, $0.001 par value per share.

 

“Class B Common Stock” means the Company’s Class B Common Stock, $0.001 par value per share.

 

“Commission” means the Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act.

 

 

“Common Stock” means, collectively, the Company’s Class A Common Stock and Class B Common Stock.

 

“Company Stock” means all shares of Common Stock and Preferred Stock and all other shares of the Company’s capital stock, including all classes of common, preferred, voting and nonvoting capital stock.

 

“Convertible Securities” means securities or obligations that are exercisable for, convertible into or exchangeable for shares of Company Stock. The term includes shares of the Preferred Stock and Class B Common Stock, options, warrants or other rights to subscribe for or purchase Company Stock or obligations that are, directly or indirectly, exercisable for, convertible into or exchangeable for Company Stock.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Family Member” means, with respect to any individual, such individual’s parents, spouse and descendants (whether natural or adopted) and any trust or other vehicle formed solely for the benefit of, and controlled by, such individual and/or any one or more of them.

 

“Fully-Diluted Basis” means, at the relevant time of determination, the number of shares of Common Stock assuming the conversion and exchange of all outstanding convertible and exchangeable securities (including the conversion of the Preferred Stock into Common Stock) and the exercise of all then outstanding warrants, options or other rights to subscribe for or purchase any shares of Common Stock; provided that this determination under Section 4.1(b)(iii) and Section 5.11 of this Agreement shall exclude and not take into account any and all then outstanding Management Securities.

 

“Investor” means each of the Persons set forth on Schedule A attached hereto and, solely for purposes of Section 6, TBI.

 

“IPO” means an underwritten public offering of the Class A Common Stock registered under the Securities Act and after giving effect to which the Class A Common Stock is listed on a United States national securities exchange.

 

“Management Securities” means all shares of Common Stock, and all securities convertible or exchangeable into Common Stock, including options and warrants, issued to employees or directors of, or consultants or advisors to, the Company or any of its subsidiaries after the date of this Agreement pursuant to a plan, agreement or arrangement approved by the Board; provided that Management Securities shall exclude all shares of the Company’s preferred stock (whether or not currently authorized) and all securities convertible or exchangeable into the Company’s preferred stock (whether or not currently authorized), including options and warrants.

 

 

“Offered Securities” means any Company Stock or Convertible Securities, provided, however, that “Offered Securities” does not include (a) shares of Company Stock or Convertible Securities actually issued upon the exercise of options or shares of Company Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to the terms of such option or Convertible Security; (b) shares of Common Stock or Preferred Stock issued in connection with a split or subdivision of, or a dividend or other distribution on, the outstanding shares of Common Stock or Preferred Stock; (c) Management Securities; (d) shares of Common Stock issued in an underwritten public offering registered under the Securities Act; (e) shares of Common Stock, options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction that is approved by the Board; (f) shares of Common Stock, options or Convertible Securities issued pursuant to an acquisition by the Company or a joint venture that is approved by the Board; and (g) shares of Common Stock, options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, marketing or other similar agreements or strategic partnerships that are approved by the Board.

 

“Person” means natural persons, corporations, limited partnerships, general partnerships, limited liability companies, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof.

 

“Preferred Stock” means, collectively, the Series A Preferred Stock and Series A-1 Preferred Stock.

 

“Registrable Shares” means (a) the shares of Class A Common Stock into which each share of Preferred Stock or share of Class B Common Stock held by any Investor has been converted or is then convertible (directly or indirectly, including, for the avoidance of doubt, shares of Class A Common Stock issuable upon conversion of shares of Class B Common Stock issuable upon conversion of Series A-1 Preferred Stock); (b) any other shares of Class A Common Stock acquired by any Investor prior to the closing of the IPO; (c) the shares of Class A Common Stock acquired by TBI prior to the closing of the IPO; and (d) any other shares of Class A Common Stock of the Company issued in respect of the shares described in clauses (a), (b) and (c) above because of stock splits, stock dividends, reclassifications, recapitalizations, reorganizations or other similar events; provided, however, that shares of Class A Common Stock that are Registrable Shares shall cease to be Registrable Shares (1) if the registration rights thereof have terminated pursuant to Section 7.9 of this Agreement or (2) upon any sale by the holders thereof pursuant to a registration statement or Rule 144 under the Securities Act. Wherever reference is made in this Agreement to a request or consent of holders of a certain percentage of Registrable Shares, the determination of such percentage shall include shares of Class A Common Stock issuable upon conversion of (x) the Preferred Stock (directly or indirectly, including, for the avoidance of doubt, shares of Class A Common Stock issuable upon conversion of shares of Class B Common Stock issuable upon conversion of shares of Series A-1 Preferred Stock) or (y) the Class B Common Stock issued upon conversion of shares of Series A-1 Preferred Stock, even if such conversion has not yet been effected and shall be determined without regard to the Beneficial Ownership Limitation (as defined in the Certificate of Incorporation).

 

“Registration Statement” means a registration statement filed by the Company with the Commission for a public offering and sale of securities of the Company (other than a (i) a registration relating to the sale or grant of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, equity incentive or similar plan; (ii) a registration relating to an SEC Rule 145 transaction; (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Shares; (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered; or (v) a registration relating to the IPO).

 

 

“Required Holders” means, (x) at any time prior to the closing of the IPO, those Investors other than TBI and its successors and assigns holding at least seventy-five percent (75%) of the shares of the Preferred Stock then held by all Investors other than TBI and its successors and assigns and (y) at any time after the closing of the IPO, those Investors other than TBI and its successors and assigns holding at least seventy-five percent (75%) of the Registrable Shares held by all Investors other than TBI and its successors and assigns (determined in accordance with the last sentence of the definition of “Registrable Shares”).

 

“Sale Transaction” shall have the meaning ascribed to such term in the Certificate of Incorporation.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Series A Preferred Stock” means the Company’s Series A Preferred Stock, $0.001 par value per share.

 

“Series A-1 Preferred Stock” means the Company’s Series A-1 Preferred Stock, $0.001 par value per share.

 

“Stockholders” means the Investors and the Junior Holders.

 

“TBI” means KeraLink International, Inc. (f/ka Tissue Banks International, Inc.), a Maryland nonprofit corporation.

 

2.            Preemptive Rights.

 

2.1          Offered Securities. Each of TBI and each Investor, in each case, as long as it is an “accredited investor” within the meaning of Regulation D as promulgated under the Securities Act (each, a “Qualified Investor”) shall have the right to purchase up to its Pro Rata Share (as defined in Section 2.2) of all Offered Securities (together with a right of over-subscription as set forth in Section 2.4) that the Company may, from time to time, propose to sell or issue after the date of this Agreement. The Company shall issue Offered Securities only in accordance with the provisions of this Section 2.

 

2.2          Qualified Investors’ Pro Rata Share. The term “Pro Rata Share” means, with respect to each Qualified Investor, the ratio of (a) the number of shares of Common Stock owned by such Qualified Investor, calculated on a Fully-Diluted Basis, immediately prior to the issuance of the Offered Securities to (b) the total number of shares of Common Stock outstanding, calculated on a Fully-Diluted Basis, immediately prior to the issuance of the Offered Securities.

 

 

2.3          Exercise of Rights. If the Company proposes to issue any Offered Securities, it shall first give each Qualified Investor written notice of its intention, describing the Offered Securities, the price, the terms and the conditions upon which the Company proposes to issue the same and, if applicable, the identity of the Persons to which the Offered Securities are intended to be offered (the “Notice”). Each Qualified Investor shall have fifteen (15) business days from the delivery of the Notice to decide whether to purchase its Pro Rata Share of the Offered Securities for the price specified in the Notice by giving written notice to the Company and stating therein the quantity of Offered Securities, if any, that it elects to purchase (the “Election Notice”). If the consideration to be paid by others for the Offered Securities is not cash, the fair market value of the consideration shall be determined in good faith by the Board and a reasonably detailed explanation of the Board’s determination of such value shall be included in the Notice. All Qualified Investors electing to participate in the offering of such Offered Securities shall pay the cash equivalent thereof as so determined.

 

2.4          Allocation of Undersubscriptions. If less than all of the Qualified Investors elect to purchase their full Pro Rata Share of the Offered Securities, then the Company shall promptly notify in writing the Electing Investors that elected to purchase their full Pro Rata Share of the Offered Securities (the “Fully Participating Investors”) and shall offer such Fully Participating Investors the right to acquire the remaining Offered Securities (the “Unsubscribed Shares”). Each of the Fully Participating Investors shall have five (5) business days (the “Oversubscription Election Period”) after receipt of such notice to notify the Company of its election to purchase all or a portion of the Unsubscribed Shares (each such Fully Participating Investor, an “Oversubscribing Investor”). If, as a result thereof, the Oversubscribing Investors’ oversubscription exceeds the total number of Unsubscribed Shares available to be purchased, the Unsubscribed Shares shall be allocated among the Oversubscribing Investors on a pro rata basis in accordance with their relative holdings of shares of Common Stock and Preferred Stock (calculated on an as-converted to Common Stock basis), immediately prior to the issuance of the Offered Securities, or as they otherwise agree among themselves.

 

2.5          Third Party Sales of Offered Securities. If, following the Company’s compliance with this Section 2, all Offered Securities are not elected to be purchased or acquired as provided in Sections 2.3 and 2.4, the Company shall have 90 days after the expiration of the periods provided in Sections 2.3 and 2.4 to sell the remaining unsubscribed portion of such Offered Securities at a price and upon terms and conditions no more favorable to the purchasers thereof than specified in the Notice. If the Company has not sold such Offered Securities within such 90-day period, the Company shall not thereafter issue or sell any Offered Securities without first offering such securities to the Qualified Investors in the manner provided in this Section 2.

 

2.6          Waiver. Notwithstanding any other provision set forth herein, any and all rights arising under this Section 2 with respect to the issuance of any Offered Securities in any transaction or series of related transactions may be waived, either prospectively or retrospectively, by the Required Holders and any such waiver shall be effective as to all Qualified Investors with such rights under this Section 2; provided that to the extent that such waiver would result in the quotient of (a) the total number of such Offered Securities being offered by the Company to TBI divided by (b) the total number of such Offered Securities being offered by the Company to HighCape and its Affiliates (other than any Affiliates that are officers, directors or employees of the Company) being less than the quotient of (i) the Pro Rata Share of TBI immediately prior to the issuance of any such Offered Securities divided by (ii) the aggregate Pro Rata Shares of HighCape and its Affiliates (other than any Affiliates that are officers, directors or employees of the Company) immediately prior to the issuance of any such Offered Securities, then such waiver shall require the written consent of TBI.

 

 

3.            Right to Force Sale.

 

3.1          Right to Force Sale. In the event that (a) the Required Holders and the Board or (b) at any time after the fifth anniversary of the date of this Agreement, solely the Required Holders, in either such case, elect to initiate and consummate a Sale Transaction (an “Approved Sale”), then all Investors and all Junior Holders, in each case, to the extent entitled to vote, shall vote in favor of, consent to and raise no objections against the Approved Sale and, if such Approved Sale is a stock sale, if requested by the Required Holders, all Investors and Junior Holders shall sell the same proportion of their Company Stock and Convertible Securities as is being sold by the Required Holders to the Person to whom the Required Holders propose to sell their Company Stock and Convertible Securities. The Investors and Junior Holders shall take all actions which are reasonably requested by the Required Holders in connection with the consummation of the Approved Sale (in each such case, whether before or after the consummation of the Approved Sale) including, without limitation, attendance at stockholders’ meetings in person or by proxy for the purposes of obtaining a quorum and the execution of written consents in lieu of meetings, execution of such agreements and instruments such that any proposal or resolution reasonably requested by the Required Holders in connection therewith shall be implemented by the Company and if the Company’s stockholders are entitled to vote on any such matter, all of the voting Company Stock and voting Convertible Securities over which such Junior Holder and/or Investor has voting control shall be voted in favor of the proposal or resolution in connection with such transaction, together with such other actions as are reasonably requested by the Required Holders to effect the allocation and distribution of the aggregate consideration received upon the consummation of the Approved Sale in accordance with the terms of the Certificate of Incorporation.

 

3.2          Obligations in Connection with Stock Sale. Within ten (10) days following the affirmative vote or written consent in favor of an Approved Sale in the form of a transfer of the outstanding shares of the Company’s capital stock or a merger (the “Tender Period”), each Investor and Junior Holder will tender all certificates representing his, her or its shares of Company Stock with the Secretary of the Company (the “Secretary”). The Secretary shall hold such certificates in trust pending the consummation of the Approved Sale and, upon the Company’s receipt of the cash purchase price or other consideration given by an acquiror in such Approved Sale (the “Purchase Consideration”), the Company shall deliver to each Investor and Junior Holder the portion of such Purchase Consideration payable to such Investor or Junior Holder in respect of his or its shares of Company Stock in accordance with the terms of the Certificate of Incorporation. In the event that any Investor or Junior Holder does not comply with the requirements of this Section 3.2 and/or fails to tender his or its stock certificate(s) with the Secretary within the Tender Period: (a) any Purchase Consideration to be paid in respect of shares of Company Stock held by such non-tendering Investor or Junior Holder (a “Non-Tendering Investor”) shall be held in trust for the benefit of such Non-Tendering Investor until such time as such Non-Tendering Investor delivers all of his or its non-tendered stock certificates to the acquiror in the Approved Sale; and (b) any non-tendered stock certificate(s) held by such Non-Tendering Investor shall, automatically and without further action, be deemed to be “tendered” and all shares of Company Stock represented by such non-tendered stock certificate(s) shall be deemed transferred to the acquiror upon the consummation of the Approved Sale and canceled.

 

 

3.3          Waiver of Appraisal Rights; Further Actions. Each Junior Holder and Investor hereby waives any and all dissenters and appraisal rights he or it may have under applicable law in connection with an Approved Sale and shall take any and all further actions reasonably requested by the Required Holders or otherwise required to effectuate the Approved Sale and to waive any and all dissenters and appraisal rights he or it may have under applicable law in connection with an Approved Sale (in each such case, whether before or after the consummation of the Approved Sale). No Junior Holder or Investor shall deposit, or permit their Affiliates to deposit, except as required by the Required Holders under this Section 3, any Company Stock or Convertible Securities owned by such party or Affiliate in a voting trust or subject any Company Stock and Convertible Securities to any arrangement or agreement with respect to the voting of such their Company Stock and Convertible Securities, unless specifically requested to do so by the Required Holders in connection with the Approved Sale. No Junior Holder or Investor shall exercise any dissenters’ rights or rights of appraisal under applicable law with respect to an Approved Sale or initiate or participate in any objection to, or proceeding (in law or in equity) against, the consummation of an Approved Sale in each such case, at any time, whether before or after the consummation of such Approved Sale.

 

3.4          Irrevocable Proxy and Power of Attorney. SOLELY IN CONNECTION WITH THE EFFECTUATION OF THE TRANSACTIONS CONTEMPLATED BY THIS SECTION 3, EACH JUNIOR HOLDER AND INVESTOR HEREBY EXPRESSLY AND IRREVOCABLY APPOINTS THE COMPANY’S PRESIDENT AS SUCH JUNIOR HOLDER’S AND INVESTOR’S PROXY AND ATTORNEY-IN-FACT TO VOTE SUCH JUNIOR HOLDER’S AND INVESTOR’S VOTING COMMON STOCK, VOTING PREFERRED STOCK AND OTHER VOTING CAPITAL SECURITIES OF THE COMPANY AND TAKE ANY AND ALL SUCH OTHER ACTION WITH RESPECT TO SUCH COMMON STOCK, PREFERRED STOCK, OPTIONS, WARRANTS AND OTHER CAPITAL SECURITIES OF THE COMPANY AS THE REQUIRED HOLDERS MAY DIRECT SOLELY IN CONNECTION WITH A TRANSACTION EFFECTED IN ACCORDANCE WITH SECTION 3 ABOVE. THIS PROXY IS COUPLED WITH AN INTEREST AND IS VALID FOR A PERIOD OF TEN (10) YEARS FROM THE DATE OF THIS AGREEMENT.

 

3.5          Legend. All certificates representing shares of Company Stock and Convertible Securities owned or hereafter acquired by the Stockholders or any transferee bound by this Agreement shall have affixed thereto a legend substantially in the following form:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN OBLIGATIONS, RESTRICTIONS, PROXIES AND VOTING AGREEMENTS AS SET FORTH IN A CERTAIN AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT, AS AMENDED FROM TIME TO TIME, BY AND AMONG THE STOCKHOLDER, THE COMPANY AND CERTAIN OTHER STOCKHOLDERS, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY”

 

3.6          Exceptions. Notwithstanding the foregoing, no Investors or Junior Holders will be required to comply with Section 3.1, 3.2 or 3.3 above in connection with any proposed Approved Sale (the “Proposed Sale”), unless:

 

 

(a)           the Investor or Junior Holder shall not be liable for the inaccuracy of any representation or warranty made by any other Person in connection with the Proposed Sale, other than the Company (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any stockholder of any of identical representations, warranties and covenants provided by all stockholders);

 

(b)          absent fraud, the liability for indemnification of such Investor or Junior Holder in the Proposed Sale and for the inaccuracy of any representations and warranties made by the Company or its stockholders in connection with such Proposed Sale does not exceed the amount of consideration paid to such Investor or Junior Holder in connection with such Proposed Sale; and

 

(c)           upon the consummation of the Proposed Sale (i) each holder of a series of Preferred Stock will receive the same amount of consideration per share of such series of Preferred Stock as is received by other holders in respect of their shares of such same series, (ii) each holder of Common Stock will receive the same amount of consideration per share of Common Stock as is received by other holders in respect of their shares of Common Stock, and (iii) unless the Required Holders elect to receive a lesser amount by written notice given to the Company prior to the effective date of any such Proposed Sale, the aggregate consideration receivable by all holders of the Preferred Stock and Common Stock shall be allocated among the holders of Preferred Stock and Common Stock in accordance with the Company’s Certificate of Incorporation in effect immediately prior to the Proposed Sale.

 

4.            Voting Rights.

 

4.1          Election of Directors. The Junior Holders and the Investors agree to vote all voting Company Stock and voting Convertible Securities over which such Person has voting control, whether now owned or acquired hereafter and shall take all other necessary or desirable actions within his, her or its control and the Company shall take all necessary or desirable actions within its control (including, without limitation, calling special Board and stockholder meetings), so as to cause:

 

(a)           The authorized number of directors on the Board to be established at six (6) members;

 

(b)          The following individuals to be elected to the Board at each meeting to elect, and pursuant to each consent executed for the purpose of electing, the members of the Board:

 

(i)             two (2) individuals designated by HighCape Partners, L.P. (“HighCape”), who initially shall be Kevin Rakin and Matthew Zuga, for so long as HighCape and its Affiliates continue to own beneficially at least 1,000,000 shares of Common Stock of the Company (including shares of Common Stock issued or issuable upon conversion of Preferred Stock), which number is subject to appropriate adjustment for all stock splits, dividends, combinations, recapitalizations and the like (collectively, the “HighCape Directors”);

 

 

(ii)            one (1) individual designated by Deerfield Private Design Fund III, L.P. (“Deerfield”), who initially shall be Maybelle Jordan, for so long as Deerfield and its Affiliates continue to own beneficially at least 1,000,000 shares of Common Stock of the Company (including shares of Common Stock issued or issuable upon conversion of Preferred Stock), which number is subject to appropriate adjustment for all stock splits, dividends, combinations, recapitalizations and the like (the “Deerfield Director” and, together with the HighCape Directors, the “Series A Directors” under, and as defined by, the Certificate of Incorporation (the “Series A Directors”));

 

(iii)           one (1) individual designated by the Stockholders that hold a majority of the then outstanding voting shares of Common Stock and Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, who shall be designated by TBI until TBI and its Affiliates together hold shares of Common Stock that represent less than ten percent (10%) of the total number of shares of Common Stock then outstanding, calculated on a Fully-Diluted Basis (the “TBI Trigger Event”), and who initially shall be C. Randal Mills (the “Common Director”);

 

(iv)           one (1) individual who is the Chief Executive Officer of the Company (the “CEO Director”), who shall initially be Ronald Lloyd;

 

(v)            one (1) individual designated by the holders of a majority of the outstanding voting shares of Common Stock and Preferred Stock, voting together as a single class, who shall initially be Brigid A. Makes (the “Independent Director”); and

 

(c)           In the event of any vacancy on the Board, to fill such vacancy with a representative designated in the same manner as the person who held the directorship so vacated as set forth above.

 

All Stockholders agree to execute any written consents required to perform their obligations under this Agreement, and the Company agrees at the request of any party entitled to designate directors to call a special meeting of stockholders for the purpose of electing directors.

 

Each of the Series A Directors shall be entitled to cast two (2) votes on each matter before the Board and each committee thereof and each other director shall be entitled to cast a single vote on each matter before the Board and each committee thereof. For the avoidance of doubt, in the event that this Agreement, the Certificate of Incorporation, the State of Delaware General Corporation Law, any other agreement, instrument or document or any other context requires that a resolution, consent, determination (including, without limitation, for the purpose of determining whether a quorum is present at any meeting of the Board) or other action be approved, executed, made or taken by a majority or other proportion of directors, such requirement shall instead be a majority or other proportion of the votes of the directors, notwithstanding anything to the contrary set forth herein or therein.

 

 

4.2          Removal. If (i) HighCape requests that a HighCape Director be removed (with or without cause) by written notice to the Company and the other Stockholders, (ii) Deerfield requests that a Deerfield Director be removed (with or without cause) by written notice to the Company and the other Stockholders, (iii) at any time prior to the TBI Trigger Event, TBI requests that the Common Director be removed (with or without cause) by written notice to the Company and the other Stockholders, (iv) at any time after the TBI Trigger Event, the Stockholders that hold a majority of the then outstanding voting shares of Common Stock and Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, request that the Common Director be removed (with or without cause) by written notice to the Company and the other Stockholders, (v) the CEO Director resigns or is otherwise removed from his or her position as the Chief Executive Officer of the Company or (vi) the holders of a majority of the outstanding voting shares of Common Stock and Preferred Stock request that the Independent Director be removed (with or without cause) by written notice to the Company and the other Stockholders, then, in each such case, such director shall be removed from the Board and each Stockholder hereby agrees to vote all voting shares of Common Stock, Preferred Stock and all other voting securities of the Company over which such Stockholder has voting control to effect such removal or to consent in writing to effect such removal upon such request.

 

4.3          Subsidiary Boards. The Company shall cause the composition of the board of directors of each subsidiary of the Company and of each committee thereof to, where the appropriate persons are willing to serve, be consistent with the composition of the Board and each corresponding committee thereof.

 

4.4          Irrevocable Proxy. SOLELY IN CONNECTION WITH THE MATTERS CONTEMPLATED BY THIS SECTION 4, EACH STOCKHOLDER HEREBY EXPRESSLY AND IRREVOCABLY APPOINTS THE COMPANY’S PRESIDENT AS SUCH STOCKHOLDER’S PROXY AND ATTORNEY-IN-FACT TO VOTE SUCH STOCKHOLDER’S COMMON STOCK, PREFERRED STOCK AND OTHER VOTING CAPITAL SECURITIES OF THE COMPANY AND TAKE ANY AND ALL SUCH OTHER ACTION WITH RESPECT TO SUCH COMMON STOCK, PREFERRED STOCK, OPTIONS, WARRANTS AND OTHER CAPITAL SECURITIES OF THE COMPANY AS MAY BE NECESSARY TO EFFECT THE ELECTION OF ANY MEMBER TO, OR REMOVAL OF ANY MEMBER OF THE BOARD FROM, THE BOARD IN ACCORDANCE WITH SECTION 4 ABOVE. THIS PROXY IS COUPLED WITH AN INTEREST.

 

4.5          No Liability for Election of Recommended Directors. No Stockholder, nor any Affiliate of any such Stockholder, shall have any liability solely as a result of designating a person for election as a director in accordance with the provisions of this Agreement for any act or omission by such designated person in his or her capacity as a director of the Company, nor shall any Stockholder have any liability solely as a result of voting for any such designee in accordance with the provisions of this Agreement.

 

5.            Information Rights and Other Covenants.

 

5.1          Inspection. The Company shall permit each Investor that holds at least 1,000,000 shares of Preferred Stock (as adjusted for stock splits, dividends, recapitalizations and the like effected with respect to the Preferred Stock after the date hereof) (a “Major Investor”), or any authorized representative of a Major Investor, to visit and inspect the properties of the Company and its subsidiaries including its corporate and financial records and to discuss its business and finances with officers of the Company and its subsidiaries, during normal business hours following reasonable notice, as often as may be reasonably requested.

 

 

5.2          Directors’ Expenses. The Company shall reimburse the directors on the Board for all reasonable out-of-pocket expenses incurred by them in connection with attendance at all meetings of the Board (including any meetings of committees of the Board) and the board of directors of each of the Company’s subsidiaries (including any meetings of committees thereof) or attending to other matters requested by the Company.

 

5.3          Financial Statements and Other Information. The Company and its subsidiaries shall maintain true books and records of account in which full and correct entries shall be made of all its business transactions pursuant to a system of accounting established and administered in accordance with United States generally accepted accounting principles consistently applied, and shall set aside on its books all such proper accruals and reserves as shall be required under United States generally accepted accounting principles consistently applied.

 

(a)           The Company shall deliver to TBI, until the TBI Trigger Event, and to each Major Investor:

 

(i)             within 30 days following the end of each calendar month, unaudited Financial Statements (as defined below) for such calendar month and for the then current fiscal year to date;

 

(ii)            within 45 days following the end of each calendar quarter, (A) unaudited Financial Statements for such calendar quarter and for the then current fiscal year to date and (B) the Company’s capitalization table (shown on a Fully-Diluted Basis);

 

(iii)           as soon as reasonably possible after the end of each fiscal year, but in any event within 120 days following the end of such fiscal year, unaudited Financial Statements for such fiscal year; provided that if the Board has authorized an audit of the Company’s Financial Statements and audited Financial Statements are prepared, the Company shall deliver such audited Financial Statements within a reasonable time after they have been prepared; and

 

(iv)           at least 30 days prior to the beginning of each fiscal year, an annual operating plan and budget for the Company and its subsidiaries (the “Annual Budget”), prepared on a monthly basis for the ensuing fiscal year, and on a basis consistent with prior periods and representing the best estimate of the Company based upon available information.

 

(b)          The Company’s “Financial Statements” shall include a balance sheet, statement of earnings, stockholders’ equity and cash flows for the Company and its subsidiaries for the applicable periods, setting forth in each case in comparative form the figures from the previous period with variances delineated, prepared in accordance with United States generally accepted accounting principles consistently applied, with the exception that unaudited financial statements need not have notes attached and are subject to year-end audit adjustments.

 

5.4          Insurance. Each of the Company and its subsidiaries shall obtain a general liability and directors’ and officers’ liability insurance policies, in each such case on terms and conditions that are acceptable to the Required Holders and the Board. The Company (and its subsidiaries, to the extent that such subsidiaries obtain such policies) shall maintain such policies in full force and effect at all times.

 

 

5.5          Reservation of Common Stock. The Company shall at all times reserve and keep available, solely for issuance and delivery upon the conversion of the Preferred Stock, all Common Stock issuable from time to time upon such conversion.

 

5.6          Directors’ Liability and Indemnification. The Company’s and each of its subsidiaries’ certificate of incorporation, bylaws, articles of association and other organizational documents shall provide (a) for elimination of the liability of directors to the maximum extent permitted by law and (b) for indemnification of directors for acts on behalf of the Company and its subsidiaries to the maximum extent permitted by law.

 

5.7           Qualified Small Business Stock. The Company will use commercially reasonable efforts to cause the Preferred Stock to qualify as “Qualified Small Business Stock” under Section 1202 of the Internal Revenue Code of 1986, as amended. The Company will use commercially reasonable efforts to comply with the reporting and record keeping requirements of Section 1202 of the Internal Revenue Code of 1986, as amended, any regulations promulgated thereunder and all applicable similar state laws and regulations and to not repurchase any stock of the Company if such repurchase would cause such shares not to so qualify as “Qualified Small Business Stock.”

 

5.8          Board of Director Approval. The Company shall not, and shall not permit any subsidiary to, without the approval of the Board (or the committee of the Board duly authorized to approve such matter): (a) incur indebtedness in excess of $250,000 in the aggregate, (b) make any loan or advance to an employee, except in the ordinary course of business as part of travel advances or similar expense advances, (c) guarantee any indebtedness or obligation of any other party, (d) own any stock or other securities of any subsidiary or other corporation, partnership or entity unless it is wholly-owned by the Company, (e) make any material change in the nature of its business as presently conducted or presently contemplated to be conducted, (f) purchase or lease real estate property, (g) approve any stock option, incentive stock grant or purchase or other equity incentive grant or award, (h) issue any Company Stock or Convertible Securities or other debt or equity interests or securities (including options, warrants and other securities convertible, exercisable or exchangeable into or for equity securities), (i) authorize, create or amend any employee benefit plan (including any equity incentive plan), (j) commence or settle any litigation or any other dispute in excess of $250,000, (k) make any material asset or equity interest acquisition outside of the ordinary course of business, (l) file bankruptcy or liquidate, dissolve, wind-up, recapitalize or reorganize, (m) approve or pay any (i) discretionary or performance bonus or award to any employee, consultant or advisor of the Company or any subsidiary thereof or (ii) severance or other similar payment upon termination of any relationship with the Company or any subsidiary thereof to any employee, consultant or advisor of the Company or any subsidiary thereof, (n) hire any Chief Executive Officer or President or any other employee that would have annual compensation in excess of $150,000, (o) enter into any obligation or commitment in excess of $250,000 or (p) approve or amend any budget.

 

5.9          Subsidiaries. The Company will not, without the approval of a majority of the Board: (a) organize or acquire any entity that is a subsidiary unless such subsidiary is wholly-owned by the Company, (b) permit any subsidiary to consolidate or merge into or with any entity or sell or transfer all or substantially all its assets, except that the Company may permit a subsidiary to consolidate or merge into or with or sell or transfer assets to any other subsidiary or (c) sell or otherwise transfer any shares of capital stock of any subsidiary or other equity securities of any entity, except to the Company or another subsidiary, or permit any subsidiary to issue, sell or otherwise transfer any shares of its capital stock or the capital stock of any subsidiary or other equity securities of any entity or to sell all or substantially all of such subsidiary’s assets, except to the Company or another subsidiary.

 

 

5.10        Convertible Securities. All Convertible Securities issued or sold by the Company, other than shares of the Company’s Preferred Stock, shall, by their terms, terminate in their entirety at the time of a Sale Transaction if not exercised, converted or exchanged into shares of the Company’s capital stock immediately prior to a Sale Transaction.

 

5.11        Transactions with HighCape. Until such time as (x) TBI and its Affiliates together hold shares of Common Stock that represent less than fifteen percent (15%) of the total number of shares of Common Stock then outstanding, calculated on a Fully-Diluted Basis or (y) Deerfield and its Affiliates together hold shares of Preferred Stock that represent less than fifteen percent (15%) of the total number of shares of Preferred Stock then outstanding, then, in each case, the Company shall not, without first obtaining the approval (by affirmative vote or written consent) of either (a) a majority of the disinterested members of the Board or (b) the holders, other than HighCape and its Affiliates, of a majority of the then outstanding shares of Common Stock and Preferred Stock (calculated on an as-converted to Common Stock basis) other than the shares of Common Stock and Preferred Stock held by HighCape and its Affiliates: (i) consummate any merger or consolidation transaction in which HighCape or any of its Affiliates acquires all of the outstanding shares of the Company’s capital stock, (ii) sell or convey all or substantially all of its assets to HighCape or any of its Affiliates or (iii) enter into any management services agreement or other agreement with HighCape, its general partner or any of its Affiliates that obligates the Company to pay more than, or sell assets valued at more than, $250,000 in the aggregate in any year unless such agreement is on arm’s length and commercially reasonable terms.

 

5.12         Confidentiality. Each Investor and TBI agrees that it will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company or to enforce its rights against the Company or the other stockholders of the Company under applicable contracts or law) any confidential information obtained from the Company pursuant to the terms of this Agreement (including notice of the Company’s intention to file a registration statement or any information provided in connection with a request for a waiver under or an amendment of any term of this Agreement), unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Section 5.12 by such Person), (b) is or has been independently developed or conceived by such Person without use of the Company’s confidential information, or (c) is or has been made known or disclosed to such Person by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Investor or TBI may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company or to enforce its rights against the Company or the other stockholders of the Company under applicable contracts or law; (ii) to any prospective purchaser of any Registrable Shares from such Investor or TBI, if such prospective purchaser agrees to be bound by the provisions of this Section 5.12; (iii) to any Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Investor or TBI in the ordinary course of business, provided that such Investor or TBI informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; or (iv) as may otherwise be required by law, provided that, to the extent permitted by applicable law, the Investor or TBI promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.

 

 

6.            Registration Rights.

 

6.1          Required Registrations.

 

(a)           At any time after six (6) months after the effective date of the IPO, the Required Holders may request, in writing, on up to two (2) separate occasions, that the Company effect a registration on Form S-1 (or any successor form) of Registrable Shares. If the Required Holders intend to distribute the Registrable Shares by means of an underwriting, they shall so advise the Company in their request. In the event such registration is underwritten, the right of other Investors to participate in such registration shall be conditioned on such Investors’ participation in such underwriting. Upon receipt of any such request from the Required Holders, the Company shall promptly give written notice of such proposed registration to all other Investors. Such other Investors shall have the right, by giving written notice to the Company within thirty (30) days after the Company provides its notice, to elect to have included in such registration such of their Registrable Shares as such Investors may request in such notice of election. All Investors proposing to distribute their Registrable Shares through such underwriting shall enter into an underwriting agreement in customary form with an underwriter or underwriters that is mutually agreeable to the Company and the Investors holding a majority-in-interest of the Registrable Shares that the Investors requested for inclusion in such registration. The Company shall, at its own expense and as expeditiously as possible, use commercially reasonable efforts to effect the registration, on Form S-1 (or any successor form), of all Registrable Shares that the Company has been requested to so register. If the underwriter advises the Company that, in its good faith view, marketing factors require a limitation of the number of shares to be underwritten, then the Company shall exclude from such registration (i) first, securities held by any Person who does not have any contractual rights to cause the Company to register such securities, (ii) second, securities held by any Person with such contractual rights other than those granted under this Agreement and (iii) third, Registrable Shares held by the Investors pro rata among such Investors on the basis of the respective number of Registrable Shares requested to be included in such registration. If any registration statement requested pursuant to this Section 6.1(a) does not become effective or, after any registration statement requested pursuant to this Section 6.1(a) becomes effective, less than fifty percent (50%) of the Registrable Shares requested to be included in such registration have been sold thereunder, the request for such registration shall not be included as one of the registrations that may be requested pursuant to this Section 6.1(a) and shall be at the sole expense of the Company.

 

(b)          At any time after the Company becomes eligible to file a Registration Statement on Form S-3 (or any successor form relating to secondary offerings, hereinafter, “Form S-3”), the Investors will have the right to require the Company to effect Registration Statements on Form S-3 of Registrable Shares having a minimum gross proceeds in each registration on Form S-3 of at least $2,500,000. Upon receipt of any such request, the Company shall promptly give written notice of such proposed registration to all other Investors. Such other Investors shall have the right, by giving written notice to the Company within thirty (30) days after the Company provides its notice, to elect to have included in such registration such of their Registrable Shares as such Investors may request in such notice of election. Thereupon, the Company shall, as expeditiously as possible, use commercially reasonable efforts to effect the registration on Form S-3 of all Registrable Shares that the Company has been requested to so register.

 

 

 

(c)               Notwithstanding the foregoing obligations, if the Company furnishes to Investors requesting a registration pursuant to this Section 6.1 a certificate signed by the Company’s President stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement would otherwise be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than one hundred twenty (120) days after the request of the Investors is given; provided, however, that the Company may not invoke this right more than once in any twelve (12) month period.

 

6.2           Company Registration.

 

(a)               Subject to Section 6.2(b), if the Company proposes to file a Registration Statement at any time and from time to time, it will, prior to such filing, promptly give written notice to all Investors of its intention to do so and, if the Company receives the written request of any Investor holding Registrable Shares within twenty (20) days after the Company provides such notice, the Company shall use commercially reasonable efforts to cause all Registrable Shares that the Company has been requested by such Investor or Investors to be registered under the Securities Act to the extent necessary to permit their sale or other disposition; provided, however, that the rights set forth in this Section 6.2 shall not apply to Registration Statements to be filed pursuant to Section 6.1 hereof; and provided further that the Company shall have the right to postpone or withdraw any registration effected pursuant to this Section 6.2 without obligation to any Investor.

 

(b)               In connection with any offering under this Section 6.2 involving an underwriting, the Company shall not be required to include any Registrable Shares in such underwriting unless the holders thereof accept the terms of the underwriting as reasonably agreed upon between the Company and the underwriters selected by it. If the underwriter advises the Company that, in its good faith view, marketing factors require a limitation of the number of shares to be underwritten, then the Company shall exclude from such registration (i) first, securities held by any Person who does not have any contractual rights to cause the Company to register such securities, (ii) second, securities held by any Person with such contractual rights other than those granted under this Agreement, (iii) third, shares held by the holders of Registrable Shares pro rata among such holders on the basis of the respective number of shares of Common Stock requested to be included in such registration and (iv) fourth, shares held by the Company; provided, however, that in no event shall the amount of Registrable Shares included in the offering pursuant to this clause (iv) be reduced below thirty percent (30%) of the total amount of securities included in such offering unless such offering is the initial public offering of the Company’s securities and no other stockholder has included shares in such registration.

 

 

6.3           Registration Procedures. If and whenever the Company is required by the provisions of this Agreement to effect the registration of any of the Registrable Shares under the Securities Act, the Company shall:

 

(a)               Prepare and file with the Commission a Registration Statement with respect to such Registrable Shares and use commercially reasonable efforts to cause that Registration Statement to become and remain effective until the completion of the distribution;

 

(b)               Promptly prepare and file with the Commission any amendments and supplements to the Registration Statement and the prospectus included in the Registration Statement as may be necessary to keep the Registration Statement effective, and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement;

 

(c)               Promptly furnish to each selling Investor such reasonable numbers of copies of the Registration Statement, each amendment and supplement thereto, prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as the selling Investor may reasonably request in order to facilitate the public sale or other disposition of the Registrable Shares owned by the selling Investor;

 

(d)               Use commercially reasonable efforts to register or qualify the Registrable Shares covered by the Registration Statement under the securities or Blue Sky laws of such states as the selling Investors shall reasonably request, and do any and all other acts and things that may be necessary or desirable to enable the selling Investors to consummate the public sale or other disposition in such states of the Registrable Shares owned by the selling Investor; provided, however, that the Company shall not be required in connection with this Section 6.3(d) to qualify as a foreign corporation or execute a general consent to service of process in any jurisdiction where it is not conducting business;

 

(e)               In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering. Each Investor participating in such underwriting shall also enter into and perform its obligations under such an agreement;

 

(f)                Promptly notify each selling Investor of Registrable Shares covered by such Registration Statement, and each underwriter, if any, after it shall receive notice thereof, of the time when such Registration Statement has become effective or such supplement to any prospectus forming a part of such Registration Statement has been filed;

 

(g)               Promptly notify each selling Investor of Registrable Shares covered by such Registration Statement, and each underwriter, if any, of any request by the Commission for the amending or supplementing of such Registration Statement or prospectus or for additional information;

 

(h)               Prepare and promptly file with the Commission, and promptly notify each selling Investor of Registrable Shares covered by such Registration Statement, and each underwriter, if any, of such amendment or supplement to such Registration Statement or prospectus, as then in effect, as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to such securities is required to be delivered under the Securities Act, any event has occurred as the result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances in which they were made;

 

 

(i)              Promptly notify each selling Investor of Registrable Shares covered by such Registration Statement, and each underwriter, if any, after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for that purpose and promptly use commercially reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued;

 

(j)                 [Reserved];

 

(k)               Use commercially reasonable efforts to furnish, on the date that such Registrable Shares are delivered to the underwriters for sale, if such securities are being sold through underwriters, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) a letter dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering addressed to the underwriters;

 

(l)                 If the Company has delivered preliminary or final prospectuses to the selling Investors and after having done so the prospectus is amended to comply with the requirements of the Securities Act, the Company shall promptly notify the selling Investors and, if requested, the selling Investors shall immediately cease making offers of Registrable Shares and return all prospectuses to the Company. The Company shall promptly provide the selling Investors with revised prospectuses and, following receipt of the revised prospectuses, the selling Investors shall be free to resume making offers of the Registrable Shares; and

 

(m)             Cause all such Registrable Shares to be listed on or included in each securities exchange or quotation system on which similar securities issued by the Company are then listed.

 

6.4         Allocation of Expenses. The Company will pay all Registration Expenses (as defined below) of all registrations under this Agreement; provided, however, that if a registration under Section 6.1(a) is withdrawn at the request of the Investors requesting such registration (other than as a result of information concerning the business or financial condition of the Company that is made known in writing to the Investors requesting registration after the date on which such registration was requested) and if the requesting Investors elect not to have such registration counted as a registration requested under Section 6.1(a), the requesting Investors shall pay the Registration Expenses of such registration pro rata in accordance with the number of their Registrable Shares requested to be included in such registration. The term “Registration Expenses” shall mean all expenses incurred in complying with this Section 6 including, without limitation, all registration and filing fees, exchange listing fees, printing expenses, fees and disbursements of counsel for the Company and the reasonable fees and expenses of one (1) counsel selected by the selling Investors to represent the selling Investors (the “Selling Investor Counsel”), state Blue Sky fees and expenses, and the expense of any special audits or “cold comfort” letters incident to or required by any such registration, but excluding all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Shares, and fees and disbursements of counsel for any Investor, other than the fees and disbursements of the Selling Investor Counsel borne and paid by the Company as provided above.

 

 

6.5          Indemnification and Contribution.

 

(a)               In the event of any registration of any of the Registrable Shares under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless each selling Investor (including each member, manager, partner, officer and director thereof and legal counsel and independent accountant thereto), each underwriter of such seller of such Registrable Shares, and each other person, if any, who controls such seller or underwriter within the meaning of the Securities Act or the Exchange Act (each, an “Investor Indemnified Party”) against any expenses, losses, claims, damages or liabilities, joint or several, to which such Investor Indemnified Party may become subject under the Securities Act, the Exchange Act, state securities or Blue Sky laws or otherwise, including any of the foregoing incurred in connection with the settlement of any commenced or threatened litigation, insofar as such expenses, losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in (i) any Registration Statement under which such Registrable Shares were registered under the Securities Act, (ii) any preliminary prospectus or final prospectus contained in the Registration Statement or (iii) any amendment or supplement to such Registration Statement, or arise out of or are based upon the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading or any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities laws or otherwise in connection with the offering covered by such Registration Statement; and the Company will reimburse such Investor Indemnified Party for any legal or any other expenses reasonably incurred by such Investor Indemnified Party in connection with investigating or defending any such expense, loss, claim, damage, liability or action; provided, however, that the Company will not be liable to any Investor Indemnified Party in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any untrue statement or omission made in such Registration Statement, final prospectus, or any such amendment or supplement, in reasonable reliance upon and in conformity with information furnished (or not furnished in the case of an omission or alleged omission) to the Company, in writing, by or on behalf of such Investor Indemnified Party specifically for use in the preparation thereof.

 

 

(b)               In the event of any registration of any of the Registrable Shares under the Securities Act pursuant to this Agreement, each selling Investor, severally and not jointly, will indemnify and hold harmless the Company, each of the Company’s directors, each of its officers who has signed the registration statement, each underwriter, if any, each person, if any, who controls the Company or any such underwriter within the meaning of the Securities Act or the Exchange Act, any other seller of Registrable Shares or any such seller’s members, managers, partners, officers and directors, and each person, if any, who controls such seller within the meaning of the Securities Act and the Exchange Act (each, a “Company Indemnified Party”; and together with the Investor Indemnified Parties, the “Indemnified Parties”) against any expenses, losses, claims, damages or liabilities, joint or several, to which the Company Indemnified Party may become subject under the Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise, including any of the foregoing incurred in connection with the settlement of any commenced or threatened litigation, insofar as such expenses, losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in (i) any Registration Statement under which such Registrable Shares were registered under the Securities Act, (ii) any preliminary prospectus or final prospectus contained in the Registration Statement, or (iii) any amendment or supplement to the Registration Statement, or arise out of or are based upon any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and each such seller of Registrable Shares will reimburse the Company and each Indemnified Party for any legal or any other expenses reasonably incurred by the Company and each such Indemnified Party entitled to indemnification in connection with investigating or defending any such loss, claim, damage, liability or action if the statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of such seller, specifically for use in connection with the preparation of such Registration Statement, prospectus, amendment or supplement; provided, however, that the obligations of each such Investor hereunder shall be limited to an amount equal to the net proceeds received by such Investor in connection with such offering of such Registrable Shares; provided, further, however, that no such Investor will be liable for any amount paid in settlement of any such claim, loss, damage, liability or action if such settlement is effected without the consent of such Investor, which consent shall not be unreasonably withheld, conditioned or delayed.

 

(c)               Each Indemnified Party entitled to indemnification under this Section 6.5 shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided, however, that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party, whose approval shall not be unreasonably withheld; provided, further, that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement, except to the extent that the Indemnifying Party’s ability to defend against such claim or litigation is materially impaired as a result of such failure to give notice; and provided, further, that prior to assuming control of such defense, the Indemnifying Party must (i) acknowledge that, if the facts as alleged by the claimant in such claim are true, it would have an indemnity obligation for the expenses, losses, claims, damages and liabilities resulting from such claim as provided hereunder and (ii) must furnish the Indemnified Party with reasonable evidence that the indemnifying party has adequate resources to defend such claim and fulfill its indemnity obligations hereunder. The Indemnifying Party shall not be entitled to assume or maintain control of the defense of any claim and shall pay the fees and expenses of one counsel retained by the Indemnified Party if (A) the Indemnifying Party does not deliver the acknowledgment referred to in clause (i) above within thirty (30) days of receipt of notice of the claim, (B) the claim relates to or arises in connection with any criminal proceeding, action, indictment or allegation, (C) the Indemnified Party reasonably believes an adverse determination with respect to the claim would be detrimental to the reputation or future business prospects of the Indemnified Party or any of its affiliates, (D) the claim seeks an injunction or equitable relief against the Indemnified Party or any of its affiliates or (E) the Indemnifying Party has failed or is failing to prosecute or defend vigorously the claim. The Indemnified Party may participate in such defense at such party’s expense; provided, however, that the Indemnifying Party shall pay such expense if representation of such Indemnified Party by the counsel retained by the Indemnifying Party would be inappropriate due to actual or potential conflicts of interests between the Indemnified Party and any other party represented by such counsel in such proceeding. No Indemnifying Party in the defense of any such claim or litigation shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect of such claim or litigation, and no Indemnified Party shall consent to entry of any judgment or settle such claim or litigation without the prior written consent of the Indemnifying Party. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom.

 

 

(d)               In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in this Section 6.5 is due in accordance with its terms but for any reason is held to be unavailable to an Indemnified Party in respect to any expenses, losses, claims, damages and liabilities referred to herein, then the Indemnifying Party shall, in lieu of indemnifying such Indemnified Party, contribute to the amount paid or payable by such Indemnified Party as a result of such expenses, losses, claims, damages or liabilities to which such party may be subject in proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and the Indemnified Party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of material fact related to information supplied by the Indemnifying Party or the Indemnified Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Investors agree that it would not be just and equitable if contribution pursuant to this Section 6.5 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph of Section 6.5, (i) in no case shall any one Investor be liable or responsible for any amount in excess of the net proceeds received by such Investor from the offering of Registrable Shares and (ii) the Company shall be liable and responsible for any amount in excess of such proceeds; provided, however, that no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution for any person who was not guilty of such fraudulent misrepresentation. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party or parties under this Section, notify such party or parties from whom such contribution may be sought, but the omission so to notify such party or parties from contribution may be sought shall not relieve such party from any other obligation it or they may have thereunder or otherwise under this Section. No party shall be liable for contribution with respect to any action, suit, proceeding or claim settled without its prior written consent, which consent shall not be unreasonably withheld.

 

 

(e)               The obligations of the Company and the Investors under this Section 6.5 shall survive completion of any offering of Registrable Shares in any Registration Statement and the termination of this Agreement.

 

6.6           Indemnification with Respect to Underwritten Offering. In the event that Registrable Shares are sold pursuant to a Registration Statement in an underwritten offering pursuant to Section 6.1, the Company agrees to enter into an underwriting agreement containing customary representations and warranties with respect to the business and operations of an issuer of the securities being registered and customary covenants and agreements to be performed by such issuer, including without limitation customary provisions with respect to indemnification by the Company of the underwriters of such offering.

 

6.7           Information by Holder. As a condition to be included in any registration statement, each holder of Registrable Shares included in any registration shall furnish to the Company such information regarding such holder and the distribution proposed by such holder as the Company may reasonably request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Agreement.

 

6.8           Market Stand-Off Agreement. In connection with the IPO, each Stockholder, without the prior written consent of the Company and the underwriters managing such IPO, agrees not to sell or otherwise transfer or dispose of any Registrable Shares or other securities of the Company held by such Stockholder (other than those Registrable Shares included in the IPO) for a specified period of time determined by the Company and the underwriters following the effective date of the registration statement relating to the IPO; provided, however, that:

 

(a)               such agreement shall not exceed 180 days from the effective date of such registration (or such additional period as may be requested by the Company or an underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in the Financial Industry Regulatory Authority, Inc. Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto but in no event shall the total period exceed two hundred ten (210) days following the effective date of such registration);

 

(b)               all officers and directors of the Company and all holders individually owning more than one percent (1%) of the Company’s outstanding Common Stock (including shares of Common Stock issuable upon the conversion of the Preferred Stock or other Convertible Securities, or upon the exercise of any Convertible Securities) enter into similar agreements; and

 

(c)               such agreement shall only apply to the first such Registration Statement covering Common Stock of the Company to be sold on its behalf to the public in an underwritten offering.

 

Such agreement shall be in writing in a form reasonably satisfactory to the Company and such underwriter. The Company may impose stop-transfer instructions with respect to the Registrable Shares or other securities subject to the foregoing restriction until the end of the stand-off period.

 

 

6.9           Limitations on Subsequent Registration Rights. The Company shall not, without the prior written consent of the Required Holders, enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder to (a) include securities of the Company in any registration filed under Section 6.1(a) or Section 6.1(b) make a demand registration that could result in such registration statement being declared effective prior to twelve (12) months after the initial underwritten public offering of the Common Stock or (c) have registration rights that are pari passu with or superior to the rights granted to the Investors under this Section 6. The Company will not hereafter enter into any agreement with respect to its securities that is inconsistent with, grants any rights equal or superior to, or violates the rights granted to the holders of Registrable Shares in this Section 6 without first obtaining the prior written consent of the Required Holders.

 

6.10         Rule 144 Requirements. After the earliest of (a) the closing of the sale of securities of the Company pursuant to a Registration Statement, (b) the registration by the Company of a class of securities under Section 12 of the Exchange Act or (c) the issuance by the Company of an offering circular pursuant to Regulation A under the Securities Act, the Company agrees to: (i) comply with the requirements of Rule 144(c) under the Securities Act with respect to making and keeping available current public information about the Company; (ii) use commercially reasonable efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements); and (iii) furnish to any holder of Registrable Shares promptly after receipt of a written request (A) a written statement by the Company as to its compliance with the requirements of said Rule 144(c), and the reporting requirements of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), (B) a copy of the most recent annual or quarterly report of the Company and (C) such other reports and documents of the Company as such holder may reasonably request to avail itself of any similar rule or regulation of the Commission allowing it to sell any such securities without registration including, without limitation, Rules 144 and 144A.

 

6.11         Selection of Underwriter. The Company shall have the right to designate the managing underwriter in any underwritten offering, except for any registration effected pursuant to Section 6.1(a), which designation shall be subject to the approval of the Investors holding a majority of the Registrable Shares that all Investors requested to be included in such offering, and which approval shall not be unreasonably withheld.

 

7.            General.

 

7.1           Severability. If any term or provision of this Agreement is determined to be illegal, unenforceable or invalid in whole or in part for any reason, such illegal, unenforceable or invalid provisions or part thereof shall be stricken from this Agreement, and such provision shall not affect the legality, enforceability or validity of the remainder of this Agreement. If any provision or part thereof of this Agreement is stricken in accordance with the provisions of this Section 7.1, then such stricken provision shall be replaced, to extent possible, with a legal, enforceable and valid provision that is as similar in tenor to the stricken provision as is legally possible.

 

7.2           Specific Performance. In addition to any and all other remedies that may be available under this Agreement and applicable law, in the event of any breach of this Agreement, each Investor shall be entitled to specific performance of the agreements and obligations of the Company hereunder and to such other injunctive or other equitable relief as may be granted by a court of competent jurisdiction.

 

 

7.3           Remedies Cumulative. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity.

 

7.4           Jury Trial Waiver. To the fullest extent permitted by law, and as separately bargained-for-consideration, each party hereby waives any right to trial by jury in any action, suit, proceeding or counterclaim of any kind arising out of or relating to this Agreement.

 

7.5           Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Delaware, as applicable to contracts executed and delivered in Delaware between Delaware residents and which are to be performed wholly within Delaware, without regard to principles of conflicts of law except with respect to matters of law concerning the internal corporate affairs of any corporation which is a party to or the subject of this Agreement, which matters shall be governed by the law of the jurisdiction under which such corporation derives its powers.

 

7.6           Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address as set forth on the signature page hereof, to an Investor at such Investor’s address set forth on Schedule A attached hereto and to a Junior Holder at such Junior Holder’s address set forth on Schedule B attached hereto or at such other address as the Company, an Investor or Junior Holder may designate by ten (10) days advance written notice to the other parties hereto.

 

7.7           Transfer of Rights. The rights of each Investor under this Agreement including, but not limited to, the preemptive rights granted to the Investors under Section 2 hereof, may be transferred to a transferee or assignee of shares of the Preferred Stock or any shares of Common Stock issued or issuable upon conversion of the Preferred Stock; provided that the Investor shall, within ten (10) business days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the number of shares with respect to which such rights are being assigned. The transferee or assignee of an Investor’s rights and obligations hereunder shall be deemed an “Investor” for purposes of this Agreement.

 

 

7.8           Amendments and Waivers. Any term of this Agreement may be amended or terminated and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Required Holders; provided that (a) any amendment to, or termination or waiver of, Section 4.1 or Section 4.2 that would adversely affect the rights of HighCape to designate or remove the HighCape Directors shall also require the prior written consent of HighCape, (b) any amendment to, or termination or waiver of, (i) Section 4.1 or Section 4.2 that would adversely affect the rights of Deerfield to designate or remove the Deerfield Director shall also require the prior written consent of Deerfield or (ii) Section 5.11 or this Section 7.8, or the definitions relating to such sections, that would adversely affect the rights of Deerfield thereunder shall also require the prior written consent of Deerfield, (c) at any time prior to the TBI Trigger Event, any amendment to, or termination or waiver of, (i) Section 4.1 or Section 4.2 that would adversely affect the rights of TBI to designate or remove the Common Director shall also require the prior written consent of TBI or (ii) Section 2, Section 3, Section 5.11 or this Section 7.8, or the definitions relating to such sections, that would materially adversely affect the rights of TBI thereunder in a manner disproportionate to any adverse effect such amendment or waiver would have on the rights of the Investors shall also require the prior written consent of TBI, except to the extent that such amendment, termination or waiver is executed or provided in connection with any bona fide financing transaction entered into by, or for the benefit of, the Company that includes a party that provides at least $250,000 of financing to the Company in such transaction and is not a Stockholder or an Affiliate of a Stockholder on the date hereof and (d) at any time after the TBI Trigger Event, any amendment to, or termination or waiver of, Section 4.1 or Section 4.2 that would adversely affect the rights of the Stockholders that hold a majority of the then outstanding voting shares of Common Stock and Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, to designate or remove the Common Director shall also require the prior written consent of the Stockholders that hold a majority of the then outstanding voting shares of Common Stock and Preferred Stock, voting together as a single class on an as-converted to Common Stock basis. Any amendment or waiver effected in accordance with this Section 7.8 shall be binding upon the Company and each of the Investors and Junior Holders and their respective successors and assigns.

 

7.9           Termination. The rights set forth in Sections 2, 3, 4 and 5 of this Agreement shall terminate upon the earlier to occur of (a) the effective date of the registration statement relating to the IPO and (b) immediately before the consummation of a Sale Transaction. The right of any Investor to request registration or inclusion of Registrable Shares in any registration pursuant to Section 6 shall terminate upon the earliest to occur of (i) immediately before the consummation of a Sale Transaction, (ii) such time after the date that is six (6) months following consummation of the IPO as SEC Rule 144 or another similar exemption under the Securities Act is available for the public sale of all of such Investor’s shares without limitation during a three-month period without registration (the “Rule 144 Termination Date”); provided, that the Company shall have taken all necessary action, including delivery of a legal opinion and irrevocable instructions to its transfer agent, to enable the holder thereof to have any legend restricting the transfer thereof removed from the stock certificates representing all such shares ,and (iii) the third (3rd) anniversary of the effective date of the registration statement relating to the IPO. Notwithstanding anything to the contrary contained herein, the Company’s obligations to any Investor under Section 6.10 (Rule 144 Requirements) shall not terminate at any time prior to the one-year anniversary of the earlier to occur of (A) the Rule 144 Termination Date and (B) the closing of the IPO.

 

7.10        No Waiver. No waiver of any provision or consent to any action shall constitute a waiver of any other provision or consent to any other action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver in the future except to the extent specifically set forth in writing.

 

 

7.11         Entire Agreement. This Agreement and the schedules referred to herein constitute the entire agreement among the parties and supersede all prior communications, representations, understandings and agreements of the parties with respect to the subject matter hereof. All schedules hereto are hereby incorporated herein by reference. Nothing in this Agreement is intended to confer upon any third party any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. Upon the effectiveness of this Agreement, the Prior Agreement shall be deemed amended and restated and superseded and replaced in its entirety by this Agreement, and shall be of no further force or effect.

 

7.12         Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neutral forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.

 

7.13         Counterparts; Electronic Signatures. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same document. This Agreement may be executed by facsimile or other electronic signatures.

 

7.14         Section Headings. The section headings are for the convenience of the parties and in no way alter, modify, amend, limit or restrict the contractual obligations of the parties.

 

7.15         Joinder. The Company shall require any Person that acquires, at any time prior to the IPO, Company Stock or Convertible Securities representing more than one percent (1%) of the shares of Common Stock then outstanding, calculated on a Fully-Diluted Basis, to, upon and as a condition to such acquisition, execute a joinder pursuant to which such Person agrees to become subject to the obligations and restrictions applicable to a Junior Holder pursuant to the terms of this Agreement, except if such Person purchases shares of Preferred Stock, in which case such Person shall be deemed an Investor pursuant to the terms of this Agreement.

 

7.16         General Interpretation. The terms of this Agreement have been negotiated by the parties hereto and the language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent. This Agreement shall be construed without regard to any presumption or rule requiring construction against the party causing such instrument or any portion thereof to be drafted, or in favor of the party receiving a particular benefit under this Agreement. No rule of strict construction will be applied against any Person.

 

7.17          Aggregation of Stock. For the purpose of determining the availability of any rights under this Agreement that may be based upon the number of shares of Company Stock held by a party hereto, all shares of Company Stock held by such Person together with all shares of Company Stock held by Affiliates of such Person shall be aggregated together in all such required calculations.

 

7.18         Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by the Company. Any attempted assignment made in contravention of this Agreement shall be null and void and of no force or effect.

 

 

7.19          Expenses. The Company shall pay, and hold the Investors harmless against liability for the payment of the reasonable fees and expenses incurred with respect to the enforcement of the rights granted under, or any amendments or waivers to, this Agreement.

 

[Signatures on following pages]

 

 

 

 

IN WITNESS WHEREOF, the parties have executed this Amended and Restated Investor Rights Agreement as of the date first above written.

 

	COMPANY:
	AZIYO BIOLOGICS, INC.
	By:	/s/ Ronald Lloyd
		Name: Ronald Lloyd
		Title: President and Chief Executive Officer
	Address:	12510 Prosperity Drive, Suite 370 Silver Spring, MD 20904 Attention: Chief Executive Officer

 

[Signature Page to Second Amended and Restated Investor Rights Agreement]

 

 

	JUNIOR HOLDERS:
	KERALINK INTERNATIONAL, INC. (F/K/A/ TISSUE BANKS INTERRNATIONAL, INC.)
	By:	/s/ Douglas Furlong
		Name: Douglas Furlong
		Title: CEO, KeraLink International
	CORMATRIX CARDIVASCULAR, INC.
	By:
		Name:
		Title:

 

[Signature Page to Second Amended and Restated Investor Rights Agreement]

 

 

	INVESTORS:
	HIGHCAPE PARTNERS QP, LP
	By:	HighCape Partners GP, L.P.,
		its general partner
	By:	HighCape Partner GP, LLC,
		its general partner
	By:	/s/ William Matthew Zuga
		Name: William Matthew Zuga
		Title: Managing Director
	HIGHCAPE CO-INVESTMENT VEHICLE I, LLC
	By:	HighCape Partners GP, L.P.,
		its Manager
	By:	HighCape Partners GP, LLC,
		its general partner
	By:	/s/ William Matthew Zuga
		Name: William Matthew Zuga
		Title: Managing Partner
	HIGHCAPE PARTNERS, LP
	By:	HighCape Partners GP, L.P.,
		Its general partner
	By:	HighCape Partners GP, LLC,
		Its general Partner
	By:	/s/ William Matthew Zuga
		Name: William Matthew Zuga
		Title: Managing Director

 

[Signature Page to Second Amended and Restated Investor Rights Agreement]

 

 

	HIGHCAPE CO-INVESTMENT VEHICLE II, LLC
	By:	HighCape Partners GP, L.P., its Manager
	By:	HighCape Partners GP, LLC, its general partner
	By:	/s/ William Matthew Zuga
		Name: William Matthew Zuga
		Title: Managing Partner
	HIGHCAPE CAPITAL, L.P.
	By:	HighCape Capital, LLC, its general partner
	By:	/s/ William Matthew Zuga
		Name: William Matthew Zuga
		Title: Managing Partner

 

[Signature Page to Second Amended and Restated Investor Rights Agreement]

 

 

 

 

	MIDCAP FUNDING XXVII TRUST
		By: Apollo Capital Management, L.P.,
		its investment manager
		By: Apollo Capital Management GP, LLC, its general partner
	By:
		Name: Maurice Amsellem Title: Authorized Signatory

 

[Signature Page to Second Amended and Restated Investor Rights Agreement]

 

 

 

 

	DEERFIELD PRIVATE DESIGN FUND III, L.P.
	By:	Deefield Mgmt III, L.P.
		General Partner
	By:	J.E. Flynn Capital III, LLC
		General Partner
	By:	/s/ David J. Clark
		Name: David J. Clark
		Title: Authorized Signatory

 

[Signature Page to Second Amended and Restated Investor Rights Agreement]

 

 

SCHEDULE A
LIST OF INVESTORS

 

HighCape Partners, L.P.

10751 Falls Road

Suite 300

Baltimore, MD 21093

Attention: [XXX]

 

HighCape Partners QP, L.P.

10751 Falls Road

Suite 300

Baltimore, MD 21093

Attention: [XXX]

 

HighCape Partners Co-Investment Vehicle I, LLC

10751 Falls Road

Suite 300

Baltimore, MD 21093

Attention: [XXX]

 

HighCape Partners Co-Investment Vehicle II, LLC

10751 Falls Road

Suite 300

Baltimore, MD 21093

Attention: [XXX]

 

HighCape Capital, L.P.

10751 Falls Road

Suite 300

Baltimore, MD 21093

Attention: [XXX]

 

Deerfield Private Design Fund III, L.P.

780 Third Avenue, 37^th Floor

New York, NY 20017

Attn: [XXX]

 

MidCap Funding XXVII Trust

c/o MidCap Financial Services, LLC, as servicer

7255 Woodmont Avenue, Suite 200

Bethesda, MD 20814

Attn: Portfolio Management – Aziyo transaction

Facsimile: (301) 941-1450

E-mail: notices@midcapfinancial.com

 

 

SCHEDULE B
LIST OF JUNIOR HOLDERS

 

KeraLink International

(f/k/a Tissue Banks International, Inc.)

815 Park Avenue

Baltimore, Maryland 21201

Attention: Chief Executive Officer

Telecopier No.: 410-545-4457

 

CorMatrix Cardiovascular, Inc.

1100 Old Ellis Road

Roswell, GA 30076

Attention: [XXX]

Email: [XXX]

 

Glenn Hanner

[XXX]

[XXX]

 

Patrick Ryan Ferguson

[XXX]

[XXX]

 

Debradandere 2019 Trust u/a Dated March 12, 2019

Robert Schweiger, Trustee and Peak Trust Company-NV, Administrative Trustee

[XXX]

[XXX]

 

Kevin L. Rakin Irrevocable Trust

Lloyd A. Hoffman, MD, Trustee

[XXX]

[XXX]

 

 

 

Exhibit 4.2

 

Aziyo Biologics, Inc. CLASS A COMMON STOCK INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE CLASS A COMMON STOCK THIS CERTIFIES THAT BY: FULLY PAID AND NON-ASSESSABLE SHARES OF CLASS A COMMON STOCK OF THE PAR VALUE OF $0.001 PER SHARE OF AZIYO BIOLOGICS, INC. transferable on the books of the Corporation by the holder hereof in person or by duly authorized Attorney, upon surrender of this Certificate properly endorsed. This Certificate is not valid until countersigned and registered by the Transfer Agent and Registrar. WITNESS the signatures of the Corporation’s duly authorized officers. AUTHORIZED SIGNATURE COUNTERSIGNED AND REGISTERED: AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC (BROOKLYN, NY) TRANSFER AGENT AND REGISTRAR TREASURER

 

 

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM— as tenants in common TEN ENT — as tenants by the entireties JT TEN— as joint tenants with right of survivorship and not as tenants in commom UNIF GIFT MIN ACT –– Custodian (Cust)(Minor) under Uniform Gifts to Minors Act (State) Additional abbreviations may also be used though not in the above list. FOR VALUE RECEIVED, hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) Shares of the Class A Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney to transfer the said stock on the books of the within-named Corporation, with full power of substitution in the premises. Dated NOTICE: Signature(s) Guaranteed: THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. 711 ARMSTRONG LANE COLUMBIA, TN 38401 PROOF OF: SEPTEMBER 10, 2020 AZIYO BIOLOGICS, INC. (931) 388-3003 PRODUCTION COORDINATOR: NICKY DECKARD 931-305-2907 WO - 20000308 BACK NEW OPERATOR: DKS PLEASE INITIAL THE APPROPRIATE SELECTION FOR THIS PROOF: OK AS IS OK WITH CHANGES MAKE CHANGES AND SEND ANOTHER PROOF

 

 

 

Exhibit 4.4

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER SUCH ACT AND ALL SUCH APPLICABLE LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

 

THE SHARES OF CAPITAL STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO CERTAIN OBLIGATIONS, RESTRICTIONS, PROXIES AND VOTING AGREEMENTS AS SET FORTH IN A CERTAIN INVESTOR RIGHTS AGREEMENT, AS AMENDED FROM TIME TO TIME, BY AND AMONG THE STOCKHOLDER, THE COMPANY AND CERTAIN OTHER STOCKHOLDERS, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

 

Warrant No. 2017-1

March 27, 2017

 

AZIYO BIOLOGICS, INC.

 

WARRANT TO PURCHASE SHARES

 

This Warrant to Purchase Shares (this “Warrant”) is issued to HighCape Partners QP, L.P. (“Holder”) or its registered assigns by Aziyo Biologics, Inc., a Delaware corporation (the “Company”) as partial consideration for providing credit enhancement for the Company's loan from Alostar Bank of Commerce.

 

1.            Purchase of Shares. Subject to the terms and conditions hereinafter set forth, the Holder is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the holder hereof in writing), to purchase from the Company up to the number of fully paid and nonassessable shares of the Company’s Common Stock, par value $0.001 per share (the “Shares”), that equals the product of (a) 1,923,077 and (b) the quotient of (i) the lesser of (A) thirty-six (36) and (B) the number of calendar months that have ended between the date of this Warrant and the date that the letter of credit issued by Silicon Valley Bank for the account of the Holder and for the benefit of Alostar Bank of Commerce in the amount of up to $5,000,000 (the “Letter of Credit”) is terminated or expires without being drawn upon and (ii) thirty-six (36) (such product shall be referred to herein as the “Share Number”), as such Share Number may be adjusted from time to time in accordance with the terms hereof; provided, however, that if the Letter of Credit is partially or fully drawn upon, then, contemporaneously with such event, the Share Number shall be equal to 1,923,077, as such Share Number may be adjusted from time to time in accordance with the terms hereof.

 

 

2.            Exercise Price and Exercise Period.

 

(a)            Exercise Price. The exercise price for each Share shall be equal to $0.39 (as adjusted from time to time in accordance with the terms hereof, the “Exercise Price”).

 

(b)            Exercise Period. This Warrant shall be exercisable, in whole or in part, during the term commencing on the date hereof and ending on the expiration of this Warrant pursuant to Section 12 hereof.

 

3.            Method of Exercise. While this Warrant remains outstanding and exercisable in accordance with Section 2 above, the Holder may exercise, in whole or in part, the purchase rights evidenced hereby. Such exercise shall be effected by:

 

(a)            the surrender of the Warrant, together with a notice of exercise to the President or Secretary of the Company at its principal offices substantially in the form attached hereto as Exhibit 1; and

 

(b)            the payment to the Company, in cash, of an amount equal to the aggregate Exercise Price for the number of Shares being purchased.

 

4.            Net Exercise. In lieu of cash exercising this Warrant, the holder of this Warrant may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant to the President or Secretary of the Company at the principal office of the Company together with notice of such election, in which event the Company shall issue to the holder hereof a number of Shares computed using the following formula:

 

Y (A - B)

X=                 A

 

Where

 

X -- The number of Shares to be issued to the holder of this Warrant.

 

Y -- The number of Shares purchasable under this Warrant.

 

A -- The fair market value of one Share.

 

B -- The Exercise Price (as adjusted to the date of such calculations).

 

For purposes of this Section 4, the fair market value of a Share as determined in good faith by the Company's Board of Directors.

 

5.            Certificates for Shares. Upon the exercise of the purchase rights evidenced by this Warrant, one or more certificates shall be issued representing the number of Shares so purchased, and a copy of such certificate or certificates shall be delivered to the registered holder thereof, as soon thereafter as reasonably practicable, and in any event within five (5) days of the delivery of the exercise notice and payment therefor.

 

 

6.            Issuance of Shares. The Company covenants that the Shares, when issued pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issuance thereof.

 

7.            Adjustment of Exercise Price and Number of Shares. The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows:

 

(a)            Subdivisions, Combinations and Other Issuances. If the Company shall at any time prior to the expiration of this Warrant subdivide the Shares, by split-up or otherwise, or combine its Shares, or issue additional Shares as a dividend, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the Exercise Price payable per Share, but the aggregate Exercise Price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 7(a) shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

 

(b)            Reclassification, Reorganization and Consolidation. In the event of any reclassification, capital reorganization, or change in the capital stock of the Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 7(a) above), then the holder of this Warrant shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of Shares as were purchasable by the holder of this Warrant immediately prior to such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the holder of this Warrant so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the Exercise Price per Share payable hereunder, provided the aggregate Exercise Price shall remain the same.

 

(c)            Notice of Adjustment. When any adjustment is required to be made in the number or kind of shares purchasable upon exercise of this Warrant, or in the Exercise Price, the Company shall promptly notify the Holder of such event and of the number of Shares or other securities or property thereafter purchasable upon exercise of this Warrant.

 

(d)            Other Action Affecting Shares. In the event that the Company shall make a distribution in respect of the Shares that is not elsewhere described in this Section 7, the Holder shall be entitled, upon exercise of this Warrant, to receive from the Company its pro rata share of any such distribution such that the Holder receives, upon exercise of this Warrant, the same type and amount of property which such Holder would have received if such Holder had exercised this Warrant immediately prior to such distribution or the date the Company shall take a record of the holders of its shares for purposes of such distribution, as applicable, and, from and after the date of such distribution, the Company shalt hold and set aside (or cause to be held and set aside in a commercially reasonable manner) an amount of such property equal to the Holder's pro rata portion thereof for distribution to the Holder pursuant hereto.

 

 

8.             No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor on the basis of the fair market value thereof then in effect.

 

9.             Restrictive Legend.

 

The Shares issuable upon exercise of this Warrant (unless registered under the Securities Act of 1933, as amended (the “Securities Act”)) shall be stamped or imprinted with a legend in substantially the following form:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER SUCH ACT AND ALL SUCH APPLICABLE LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

 

THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL, OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AUTHORIZED TO BE ISSUED BY THE COMPANY AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. ANY SUCH REQUEST MAY BE MADE TO THE SECRETARY OF THE COMPANY.

 

10.           Warrants Transferable. Subject to compliance with the terms and conditions of this Section 10, this Warrant and all rights hereunder are transferable, in whole or in part, without charge to the holder hereof (except for transfer taxes), upon surrender of this Warrant properly endorsed or accompanied by a written instruction of transfer substantially in the form attached hereto as Exhibit 2; provided that the transferee consents in writing to be bound by the terms hereunder. With respect to any offer, sale or other disposition of this Warrant prior to registration of such Warrant, the holder hereof agrees to give written notice to the Company prior thereto, describing briefly the manner thereof and indicating whether or not under the Securities Act certificates for this Warrant require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with such law. Upon receiving such written notice and the written consent of the proposed transferee agreeing to be bound by the terms hereunder, the Company, as promptly as practicable, shall notify the Holder that it may sell or otherwise dispose of this Warrant, all in accordance with the terms of the notice delivered to the Company. Each certificate representing this Warrant transferred in accordance with this Section 10 shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless such legend is not required in order to ensure compliance with such laws. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.

 

 

11.          Rights of Stockholders. Except as expressly set forth in Section 7 hereof, no holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be deemed the holder of the Shares or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights until the Warrant shall have been exercised.

 

12.          Expiration of Warrant; Notice of Certain Events Terminating This Warrant.

 

(a)            This Warrant shall expire and shall no longer be exercisable upon the earliest to occur of:

 

(i)            5:00 p.m. (Eastern time) on March 1, 2027;

 

(ii)            the consummation of a Sale Transaction (as such term is defined in the Company's Certificate of Incorporation as in effect from time to time); and

 

(iii)            the consummation of an underwritten public offering of the Company's Common Stock registered under the Securities Act, after which such Common Stock is listed for trading on a United States national securities exchange.

 

(b)            The Company shall provide at least ten (10) days prior written notice to the Holder of any event set forth in Section 12(a)(ii) or (iii).

 

13.          Notices. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to the Holder, 10751 Falls Road, Suite 300, Baltimore, MD 21093 and (ii) if to the Company, at the address of its principal corporate offices (attention: President) or at such other address as a party may designate by ten days advance written notice to the other party pursuant to the provisions above.

 

 

14.          Governing Law. This Warrant and all actions arising out of or in connection with this Warrant shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law provisions of the State of Delaware or of any other state.

 

15.          Rights and Obligations Survive Exercise of Warrant. Unless otherwise provided herein, the rights and obligations of the Company and of the holder of this Warrant shall survive the exercise of this Warrant.

 

16.          Counterparts; Electronic Signatures. This Warrant may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same document. This Warrant may be executed by facsimile signatures.

 

17.          Amendments. Except as otherwise expressly set forth in this Warrant, any term of this Warrant may be amended or waived (either retroactively or prospectively) only with the written consent of the Company and the Holder.

 

18.          No Waiver. No waiver of any provision or consent to any action shall constitute a waiver of any other provision or consent to any other action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver in the future except to the extent specifically set forth in writing.

 

[Signature page follows]

 

 

IN WITNESS WHEREOF_; the parties hereto have caused this Warrant to be duly executed and delivered by their proper and duly authorized officers as of the date first written above.

 

 

		COMPANY:
		AZIYO BIOLOGICS, INC.
		By:		/s/ Jeffrey Hamet
				Name: Jeffrey Hamet
				Title:  Vice President of Finance
		Address:		12510 Prosperity Drive, Suite 370
				Silver Spring. MD 20904

 

Signature Page to Aziyo Biologics, Inc.

Warrant to Purchase Shares

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be duly executed and delivered by their proper and duly authorized officers as of the date first written above.

 

 

		HOLDER:
		HIGHCAPE PARTNERS QP, L.P.
		By:		HighCape Partners GP, L.P.,
				its general partner
		By:		HighCape Partners GP, LLC,
				its general partner
		By:		/s/ William Matthew Zuga
				Name: William Matthew Zuga
				Title:   Managing Member

 

Signature Page to Aziyo Biologics, Inc.

Warrant to Purchase Shares

 

 

EXHIBIT 1

 

NOTICE OF EXERCISE 

 

TO:

Aziyo Biologics, Inc. 12510 Prosperity Drive, Suite 370 Silver Spring, MD 20904 Attention: President

 

1.

The undersigned hereby elects to purchase _________ shares of Common Stock pursuant to the terms of the attached Warrant.

 

2.

Method of Exercise (Please check the applicable blank):

 

___

The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full for the purchase price of the shares being purchased, together with all applicable transfer taxes, if any.

 

___

The undersigned elects to exercise the attached Warrant by means of the net exercise provisions of Section 4 of the Warrant.

 

3.

Please issue a certificate or certificates representing said Shares in the name of the undersigned or in such other name as is specified below:

 

 

	(Name)
	(Address)

 

		(Signature)
		(Name)
(Date)		(Title)

 

 

EXHIBIT 2

 

FORM OF TRANSFER
(To be signed only upon transfer of Warrant)

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________________ the right represented by the attached Warrant to purchase _______________ shares of Common Stock of Aziyo Biologics, Inc., a Delaware corporation, to which the attached Warrant relates, and appoints ___________________ Attorney to transfer such right on the books of _____________, with full power of substitution in the premises.

 

 

Dated: ________________

 

 

		(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)
		Address:

 

 

Signed in the presence of:

 

_________________________ 

 

 

Exhibit 4.5

 

EXECUTION VERSION

 

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW, OR SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION CAN BE MADE IN COMPLIANCE WITH RULE 144 OF THE ACT, OR IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

 

WARRANT TO PURCHASE STOCK

 

Company:		Aziyo Biologics, Inc., a Delaware corporation
Number of Shares:		25,500 (Subject to adjustment as hereinafter provided)
Class of Stock:		Series A Preferred Stock (Subject to Section 1.7)
Warrant Price:		$1.00 per Share (Subject to adjustment as hereinafter provided)
Issue Date:		May 31, 2017
Expiration Date:		The earlier to occur of the (i) expiration of this Warrant pursuant to Section 1.6 hereof or (ii) 10th anniversary of the Issue Date
Credit Facility:		This Warrant is issued in connection with the Credit and Security Agreement (Term Loan), dated as of May 31, 2017, among the Company, the other Borrowers (as defined therein) from time to time party thereto, MidCap Financial Trust, a Delaware statutory trust, as Agent and the lenders from time to time party thereto (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”).

 

THIS WARRANT TO PURCHASE STOCK (this “Warrant”) CERTIFIES THAT, for good and valuable consideration, including without limitation the mutual promises contained in the Credit Agreement (defined above), Flexpoint MCLS Holdings LLC (together with any registered holder from time to time of this Warrant or any holder of the Shares issuable or issued upon the exercise or conversion of this Warrant, "Holder") is entitled to purchase such aggregate number of fully paid and nonassessable shares of the class and series of capital stock of the Company equal to the Number of Shares (as set forth above), at the Warrant Price per Share, all as set forth above or herein below and as adjusted pursuant to the terms of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. As used herein, “Share” or “Shares” shall refer to either (i) the shares of stock issuable upon the exercise or conversion of this Warrant and any shares of capital stock into which such shares may be converted or exchanged, or (ii) the authorized or issued and outstanding shares of capital stock of the Company which are of the same class and series as the shares of stock issuable upon the exercise or conversion of this Warrant, in either case as the specific provisions of this Warrant or the context may require.

 

ARTICLE 1.

EXERCISE.

 

1.1       Method of Exercise. Holder may at any time and from time to time prior to the Expiration Date exercise this Warrant, in whole or in part, by delivering a duly completed and executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Section 1.2, Holder shall also deliver to the Company a check, wire transfer (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.

 

 

1.2       Conversion Right. In lieu of exercising this Warrant as specified in Section 1.1, Holder may at any time and from time to time after the Issue Date but prior to the Expiration Date convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate Fair Market Value of the number of Shares or the securities otherwise issuable upon exercise of this Warrant with respect to which Holder elects to convert this Warrant minus the aggregate Warrant Price of such Shares by (b) the Fair Market Value of one Share, and by delivering a duly completed and executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. The “Fair Market Value” of Share shall be determined pursuant to Section 1.3.

 

1.3       Fair Market Value. If the Company’s common stock is traded on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “Trading Market”) and the Shares are common stock, the Fair Market Value of each Share shall be the closing price of a Share reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company’s initial public offering of its common stock (“IPO”), the “price to public” per share specified in the final prospectus relating to such offering). If the Company’s common stock is traded in a Trading Market and the Shares are preferred stock, the Fair Market Value of each Share shall be the closing price of such common stock reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or in the instance where the Warrant is exercised immediately prior to the effectiveness of an IPO, the initial “price to public” per share specified in the final prospectus relating to the IPO), in either case, multiplied by the number of shares of the Company’s common stock into which a Share is then convertible. In the event of an exercise in connection with an Acquisition, the Fair Market Value of a Share shall be the value to be received per Share by all holders of such Shares in such transaction. If the Company’s common stock is not traded in a Trading Market and other than in the event of an exercise in connection with an IPO or Acquisition, the Board of Directors of the Company shall determine the Fair Market Value in its reasonable good faith judgment.

 

1.4       Delivery of Certificate and New Warrant. Promptly after Holder exercises or converts this Warrant pursuant to Section 1.1 or 1.2, respectively, and, if applicable, the Company receives payment of the aggregate Warrant Price, the Company shall promptly deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant of like tenor representing the Shares not so acquired or used in a conversion. This Warrant shall be deemed to have been exercised and such certificates deemed issued, and Holder shall become the holder of record of the Shares for all purposes, as of the date of Holder’s delivery of the exercise notice pursuant to Section 1.1 or 1.2 and payment of the Warrant Price, if applicable. If an exercise or conversion is to be made in connection with an IPO or Acquisition, such exercise may at the election of Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

 

1.5       Replacement of Warrants. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation on surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

 

 

1.6       Treatment of Warrant Upon Acquisition or IPO. This Warrant shall terminate, and shall no longer be exercisable, upon the earlier to occur of: (a) the consummation of a Sale Transaction (as such term is defined in the Certificate) and (b) the consummation of an IPO. The Company shall provide at least ten (10) days prior written notice to the Holder of any Sale Transaction or IPO.

 

ARTICLE 2.

ADJUSTMENTS TO THE SHARES.

 

2.1       Stock Dividends, Subdivisions and Combinations. If the Company declares or pays a dividend on the Shares payable in common stock or other securities, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend occurred. If the Company subdivides the Shares by reclassification, stock split, split-up or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

 

2.2       Reclassification, Exchange, Combination or Substitution. Subject to Section 1.6, upon any reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event that results in a change of the number and/or class of the Shares, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number, amount and kind of securities, money and property that Holder would have ultimately received upon the completion of such reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event if this Warrant had been exercised immediately before such reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event. Such an event shall include any automatic conversion of the Shares to common stock pursuant to the terms of the Company’s Amended and Restated Certificate of Incorporation, as amended from time to time (the “Certificate”). Subject to Section 1.6, the Company or its successor shall promptly issue to Holder an amendment to this Warrant setting forth the number and kind of such new securities or other property issuable upon exercise or conversion of this Warrant as a result of such reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event that results in a change of the number and/or class of securities issuable upon exercise or conversion of this Warrant. The amendment to this Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the amended Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations, substitutions, reorganizations, mergers, consolidations or other events.

 

2.3       Adjustments for Diluting Issuances. The number of shares of common stock or other securities issuable upon conversion of the Shares shall be subject to adjustment, from time to time in the manner set forth in the Certificate as if the Shares were issued and outstanding on and as of the date of any such required adjustment. The provisions set forth for the Shares in the Certificate relating to the above in effect as of the Issue Date may not be amended, modified or waived, without the prior written consent of Holder unless such amendment, modification or waiver affects the rights associated with the Shares in the same manner as such amendment, modification or waiver affects the rights associated with all other Shares.

 

 

2.4       Fractional Shares. No fractional Shares shall be issuable upon exercise or conversion of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the Fair Market Value of a full Share.

 

2.5       Certificate as to Adjustments. Upon each adjustment of the Warrant Price or the kind or number of securities issuable under this Warrant pursuant to this Article 2, the Company shall promptly notify Holder in writing, and, at the Company’s expense, promptly compute such adjustment, and furnish Holder with a certificate of its Chief Executive Officer, Corporate Secretary or a senior financial officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price and the number and kind of securities issuable under this Warrant in effect upon the date thereof and the series of adjustments leading to such Warrant Price and such number and kind of securities.

 

ARTICLE 3.

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.

 

3.1       Representations and Warranties. The Company represents and warrants and covenants to Holder as of the Issue Date as follows:

 

    (a)    The Company has all requisite legal and corporate power and authority, and has taken all corporate action on the part of itself, its officers, directors and stockholders necessary, to execute, issue and deliver this Warrant, to issue the Shares issuable upon exercise or conversion of this Warrant and the securities issuable upon conversion of the Shares, and to carry out and perform its obligations under this Warrant, and this Warrant constitutes the legally binding and valid obligation of the Company enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights, or to principles of equity.

 

    (b)    This Warrant has been validly issued and is free of restrictions on transfer other than restrictions on transfer set forth herein and under applicable state and federal securities laws. All Shares which may be issued upon the exercise of the purchase or conversion right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances (including preemptive or other similar rights) except for restrictions on transfer provided for herein and under applicable federal and state securities laws and the restrictions set forth in the Stockholders Agreements.

 

    (c)    The execution, delivery, and performance of this Warrant will not result in a violation of, be in conflict with, or constitute a default under, with or without the passage of time or giving of notice, any provision of the Certificate, the Stockholders Agreements or the Company’s by-laws, any provision of any judgment, decree, or order to which the Company is a party, by which it is bound, or to which any of its material assets are subject, any contract, obligation, or commitment to which the Company is a party or by which it is bound, or any statute, rule, or governmental regulation applicable to the Company, or the creation of any lien, charge, or encumbrance upon any assets of the Company.

 

 

    (d)    The Company has provided Holder with a capitalization table of the Company, and such capitalization table is complete and accurate as of the date hereof and reflects all outstanding capital stock of the Company and all outstanding warrants, options, and other agreements (other than pursuant to the Stockholders Agreements) to purchase or otherwise acquire any equity or convertible securities of the Company. The Company has reserved a sufficient number of Shares for issuance upon the exercise of this Warrant and a sufficient number of shares of common stock issuable upon conversion of the Shares.

 

    (e)    The Warrant Price is no greater than the lowest price at which the Company has issued Series A Preferred Stock

 

3.2       Notice of Certain Events; Information. If the Company proposes at any time (a) to declare any dividend or distribution upon the Shares, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to effect any reclassification or recapitalization of the Shares; (c) to merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, (d) to approve or participate in any Acquisition or an IPO or, (e) to liquidate, dissolve or wind up or approve or consummate any Sale Transaction (as defined in the Certificate), then, in connection with each such event, the Company shall give Holder: (1) at least ten (10) business days prior written notice of the date on which a record will be taken for such dividend or distribution (and specifying the date on which the holders of stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) above; and (2) in the case of the matters referred to in (b), (c), (d) or (e) above, at least ten (10) business days prior written notice of the date when the same will take place (and, if applicable, specifying the date on which the holders of stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event). The Company will also provide such information in its possession as is requested by Holder and as is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements, including without limitation, a capitalization table, to be provided to Holder within thirty (30) days after the end of each fiscal quarter of the Company, including the per share price of the Company’s equity securities most recently issued prior to the date such capitalization table and indication are so provided; provided, that the Company’s obligations set forth in this sentence shall terminate immediately prior to the earlier of the Company’s IPO, the exercise of this Warrant in full or the termination of this Warrant.

 

 

3.3       Stockholders Agreements; No Other Stockholder Rights. Holder will not have any rights as a stockholder of the Company until the exercise of this Warrant. Effective upon any exercise or conversion of this Warrant, Holder and any permitted transferee of the Warrant or the Shares shall be entitled to all of the rights and benefits provided to all other holders of the Shares pursuant to, and the Company and Holder agree that Holder (and any permitted transferee of the Warrant or the Shares) will execute a counterpart signature page and become a party to (a) the Investor Rights Agreement dated as of November 4, 2015 and the Right of First Refusal and Co-Sale Agreement, dated as of November 4, 2015, in each case by and among the Company and certain of its stockholders (as hereafter amended or restated, together, the “Stockholders Agreements”), provided that no such amendment or restatement shall in any respect restrict Holder’s or such permitted transferee’s right and ability to transfer this Warrant or the Shares to any affiliate and (b) any agreement reasonably acceptable to Holder to which holders of the Shares may hereafter become parties and the Shares may become bound (including, without limitation, any stockholders, investor rights, registration rights, right of refusal, voting and co-sale rights or similar agreement); and provided, that (v) Holder and any permitted transferee shall have all of the rights of each other holder of Shares under all such agreements (subject to any applicable minimum share ownership or other requirement on which such rights are conditioned), (w) with respect to Holder and its permitted transferees and assigns, notwithstanding any term or restriction on transfer contained in the Stockholders Agreements, Holder and its permitted transferees shall have the unrestricted right to transfer all or any portion of the Shares to any assignee of or purchaser from Holder or its affiliate of their rights under the Credit Agreement (to the extent permitted by the Credit Agreement) or any interest or participation therein, and, in connection with such transfer, Holder and its permitted transferees may transfer its rights under the Stockholders Agreements to any affiliate of Holder or any assignee of or purchaser from Holder or its affiliates of their rights under the Credit Agreement (to the extent permitted by the Credit Agreement) or any interest or participation therein, and (y) in the event any term, restriction or condition of the Stockholders Agreements or any such agreement conflicts with, is inconsistent with or would otherwise prohibit or restrict the exercise of any right of Holder under this Warrant, the terms of this Warrant shall control and this Warrant and Holder shall not be subject to such term, restriction or condition. As an illustration and not by way of limitation as to the purpose and intent of this Section 3.3, the Company shall grant registration rights to Holder for any Shares acquired by Holder upon exercise or conversion of this Warrant or conversion of such Shares in parity to the registration rights granted to any other holder of the Shares.

 

ARTICLE 4.

REPRESENTATIONS AND WARRANTIES OF HOLDER. Holder represents and warrants to the Company as follows:

 

4.1       Purchase for Own Account. This Warrant and the securities to be acquired upon exercise of this Warrant by Holder will be acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act and Holder has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption or any transfer contemplated by or permitted under Section 3.3. Holder also represents that Holder has not been formed for the specific purpose of acquiring this Warrant or the Shares.

 

4.2       Disclosure of Information. Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

 

4.3       Investment Experience. Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

 

 

4.4       Accredited Investor Status. Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

 

4.5       The Act. Holder understands that this Warrant and the Shares issuable upon exercise or conversion hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise or conversion hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.

 

4.6       Market Stand-Off. Holder hereby agrees that, in connection with the Company’s IPO it shall not to the extent requested by the Company’s underwriter(s) sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company (other than any permitted to be disposed of in the registration for up to one hundred eighty (180) days from the effective date of the registration statement filed in connection with the IPO; provided, however, that such one hundred eighty (180) day period may be extended to the extent necessary to permit any managing underwriter to comply with applicable law; provided further, however, that Holder shall not be bound by the restrictions set forth in this Section 4.6 unless all five percent (5%) or greater (in terms of ownership of the issued and outstanding capital stock of the Company) stockholders of the Company also agree to such restrictions; and provided, further, that any discretionary waiver or termination of the foregoing restrictions by the Company or the underwriters shall apply to all holders of the Company’s equity securities subject to such restrictions pro rata based on the number of shares subject to such restrictions. Holder agrees to enter into the form of lock-up agreement as reasonably requested by the underwriter(s) in connection with this Section 4.6.

 

ARTICLE 5.

MISCELLANEOUS.

 

5.1       Term. This Warrant is exercisable in whole or in part at any time and from time to time on or before the Expiration Date. The conditions under which the Warrant shall automatically convert on the Expiration Date are set forth in Section 5.8 below.

 

5.2

Legends.

 

    (a) This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

 

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT PURSUANT TO THE PROVISIONS OF ARTICLE 5 OF THIS WARRANT, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW, OR UNLESS SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION CAN BE MADE IN COMPLIANCE WITH RULE 144 OF THE ACT, OR UNLESS, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

 

 

THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE, INCLUDING A MARKET STAND-OFF PERIOD OF UP TO 180 DAYS IN THE EVENT OF A PUBLIC OFFERING, OR FOR A LONGER PERIOD IF THE ISSUER’S TRANSFER AGENT IS NOTIFIED BY THE ISSUER OR THE ISSUER’S COUNSEL THAT THIS MARKET STAND-OFF RESTRICTION HAS BEEN EXTENDED FOR THE PURPOSE OF COMPLYING WITH APPLICABLE LAW.

 

    (b) Notwithstanding the foregoing, neither this Warrant nor any certificate or instrument evidencing this Warrant or the Shares shall bear, and the Company hereby agrees to remove, within ten (10) days of any written request (together with such evidence or documentation described in the following provisions) by Holder, pursuant to the following provisions of this Section 5.2(b), or not to affix, as applicable, any restrictive or other legend, notice or provision restricting the sale or transfer of this Warrant or the Shares, in each case provided that Holder has provided reasonable evidence to the Company (including any customary broker’s or transferring stockholder’s letters but expressly excluding an opinion of counsel other than with respect to clause (C) below) that: (A) a transfer of this Warrant or the Shares, as applicable, has been made pursuant to SEC Rule 144 (assuming the transferor is not an “affiliate” (as defined in SEC Rule 144) of the Company); (B) the Warrant or the Shares, as applicable, are then eligible for transfer pursuant to SEC Rule 144; or (C) in connection with any other sale or transfer, provided that such Holder provides the Company with an opinion of counsel to such Holder, in a reasonably acceptable form to the Company, to the effect that such sale or transfer may be made without registration under the applicable requirements of the Act and that such a legend, notice or provision is not required by, and is not required in order to establish compliance with any provisions of, the Act.

 

5.3       Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of Rule 144.

 

5.4       Transfer Procedure. Subject to the provisions of Section 5.3 and upon and effective immediately as of providing Company with written notice substantially in the form attached as Appendix 2, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the Shares issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, provided, however, in connection with any such transfer, Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder promptly thereafter surrenders this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable). The Company may refuse to transfer this Warrant or the Shares to any person who directly competes with the Company, unless, in either case, the stock of the Company is publicly traded.

 

 

5.5       Notices. All notices, requests, documents and other communications (collectively, “Notices”) from the Company to Holder, or vice versa, shall be in writing and deemed validly delivered effective as of the earliest to occur of (a) when actually received, (b) when transmitted by facsimile or electronic mail (PDF), (c) the first business day after mailing by first-class registered or certified mail, postage prepaid, or after deposit with a reputable overnight courier with all charges paid, in each case other than actual receipt at such mailing, facsimile or electronic mail address as may have been furnished to the Company or Holder, as the case may be. As used in this Warrant, “business days” shall refer to all days other than any Saturday, Sunday or day on which the Company’s primary depository bank is closed. All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:

 

    Flexpoint MCLS Holdings LLC

    c/o MidCap Financial Services, LLC, as servicer

    7255 Woodmont Avenue, Suite 200

    Bethesda, MD 20814

    Attention: Portfolio Management – Aziyo transaction

    Facsimile: (301) 941-1450

    E-mail: notices@midcapfinancial.com

 

    with a copy to:

 

    Flexpoint MCLS Holdings LLC

    7255 Woodmont Avenue, Suite 200

    Bethesda, Maryland 20814

    Attn: General Counsel

    Facsimile: 301-941-1450

    E-mail: legalnotices@midcapfinancial.com

 

Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:

 

    Aziyo Biologics, Inc.

    12510 Prosperity Drive, Suite 370

    Silver Spring, MD 20904

    Attn: Vice President, Finance

    Fax: (510) 307-9896

    E-Mail: [XXX]

 

5.6       Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

 

5.7       Attorneys’ Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

 

 

5.8       Automatic Conversion upon Expiration. Unless Holder notifies the Company in writing to the contrary prior to such automatic conversion, in the event that, upon the earliest to occur of the Expiration Date or any expiration, involuntary termination or cancellation of this Warrant, the Fair Market Value of one Share as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed as of immediately before such date to have been converted pursuant to Section 1.2 above as to all Shares for which it shall not previously have been exercised or converted, and the Company shall promptly deliver a certificate representing the Shares issued upon such conversion to the Holder.

 

5.9       Counterparts. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.

 

5.10     Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to its principles regarding conflicts of law.

 

5.11     Headings. The various headings in this Warrant are inserted for convenience only and shall not affect the meaning or interpretation of this Warrant or any provisions hereof.

 

5.12     Severability. In the event any one or more of the provisions of this Warrant shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Warrant shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision.

 

[Balance of Page Intentionally Left Blank]

 

 

“Company”

 

AZIYO BIOLOGICS, INC.

 

By:	/s/ Jeffrey D. Hamet
Name:	Jeffrey D. Hamet
	(Print)
Title:	Vice President, Finance and Treasurer

 

 

“Holder”

 

FLEXPOINT MCLS HOLDINGS LLC

 

By:	/s/ Daniel Edelman
Name:	Daniel Edelman
Title:	Vice President

 

 

 

APPENDIX 1

 

NOTICE OF EXERCISE

 

1.         Holder elects to purchase ___________ shares of the [Preferred/Common] Stock of Aziyo Biologics, Inc. pursuant to the terms of the attached Warrant, and tenders payment of the purchase price of the shares in full.

 

[or]

 

1.         Holder elects to convert the attached Warrant into Shares in the manner specified in the Warrant. This conversion is exercised for _____________________ of the Shares covered by the Warrant.

 

[Strike paragraph that does not apply.]

 

2.         Please issue a certificate or certificates representing the shares in the name specified below:

 

     ___________________________________________

Holder’s Name

 

     ___________________________________________

 

     ___________________________________________

(Address)

 

3.         By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Article 4 of the Warrant as the date hereof.

 

 

		HOLDER:
		By:
		Name:
		Title:
		(Date):

 

 

APPENDIX 2

 

ASSIGNMENT

 

For value received, FLEXPOINT MCLS HOLDINGS LLC hereby sells, assigns and transfers unto

 

Name:

Address:

 

Tax ID:

 

that certain Warrant to Purchase Stock issued by Aziyo Biologics, Inc. (the “Company”), on [______], 2017 (the “Warrant”) together with all rights, title and interest therein.

 

			FLEXPOINT MCLS HOLDINGS LLC
			By:	)
			Name:
				(Print)
			Title:
Date:

 

 

By its execution below, and for the benefit of the Company, _______________ makes each of the representations and warranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.

 

		[NAME OF TRANSFEREE]
		By:
		Name:
		Title:

 

 

Exhibit 4.6

 

EXECUTION VERSION

 

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW, OR SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION CAN BE MADE IN COMPLIANCE WITH RULE 144 OF THE ACT, OR IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

 

WARRANT TO PURCHASE STOCK

 

Company:	Aziyo Biologics, Inc., a Delaware corporation
Number of Shares:	334,500 (Subject to adjustment as hereinafter provided)
Class of Stock:	Series A Preferred Stock (Subject to Section 1.7)
Warrant Price:	$1.00 per Share (Subject to adjustment as hereinafter provided)
Issue Date:	May 31, 2017
Expiration Date:	The earlier to occur of the (i) expiration of this Warrant pursuant to Section 1.6 hereof or (ii) 10th anniversary of the Issue Date
Credit Facility:	This Warrant is issued in connection with the Credit and Security Agreement (Term Loan), dated as of May 31, 2017, among the Company, the other Borrowers (as defined therein) from time to time party thereto, MidCap Financial Trust, a Delaware statutory trust, as Agent and the lenders from time to time party thereto (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”).

 

THIS WARRANT TO PURCHASE STOCK (this “Warrant”) CERTIFIES THAT, for good and valuable consideration, including without limitation the mutual promises contained in the Credit Agreement (defined above), MidCap Funding XXVII Trust, a Delaware statutory trust (together with any registered holder from time to time of this Warrant or any holder of the Shares issuable or issued upon the exercise or conversion of this Warrant, "Holder") is entitled to purchase such aggregate number of fully paid and nonassessable shares of the class and series of capital stock of the Company equal to the Number of Shares (as set forth above), at the Warrant Price per Share, all as set forth above or herein below and as adjusted pursuant to the terms of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. As used herein, “Share” or “Shares” shall refer to either (i) the shares of stock issuable upon the exercise or conversion of this Warrant and any shares of capital stock into which such shares may be converted or exchanged, or (ii) the authorized or issued and outstanding shares of capital stock of the Company which are of the same class and series as the shares of stock issuable upon the exercise or conversion of this Warrant, in either case as the specific provisions of this Warrant or the context may require.

 

ARTICLE 1.

EXERCISE.

 

1.1           Method of Exercise. Holder may at any time and from time to time prior to the Expiration Date exercise this Warrant, in whole or in part, by delivering a duly completed and executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Section 1.2, Holder shall also deliver to the Company a check, wire transfer (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.

 

 

1.2           Conversion Right. In lieu of exercising this Warrant as specified in Section 1.1, Holder may at any time and from time to time after the Issue Date but prior to the Expiration Date convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate Fair Market Value of the number of Shares or the securities otherwise issuable upon exercise of this Warrant with respect to which Holder elects to convert this Warrant minus the aggregate Warrant Price of such Shares by (b) the Fair Market Value of one Share, and by delivering a duly completed and executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. The “Fair Market Value” of a Share shall be determined pursuant to Section 1.3.

 

1.3           Fair Market Value. If the Company’s common stock is traded on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “Trading Market”) and the Shares are common stock, the Fair Market Value of each Share shall be the closing price of a Share reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company’s initial public offering of its common stock (“IPO”), the “price to public” per share specified in the final prospectus relating to such offering). If the Company’s common stock is traded in a Trading Market and the Shares are preferred stock, the Fair Market Value of each Share shall be the closing price of such common stock reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or in the instance where the Warrant is exercised immediately prior to the effectiveness of an IPO, the initial “price to public” per share specified in the final prospectus relating to the IPO), in either case, multiplied by the number of shares of the Company’s common stock into which a Share is then convertible. In the event of an exercise in connection with an Acquisition, the Fair Market Value of a Share shall be the value to be received per Share by all holders of such Shares in such transaction. If the Company’s common stock is not traded in a Trading Market and other than in the event of an exercise in connection with an IPO or Acquisition, the Board of Directors of the Company shall determine the Fair Market Value in its reasonable good faith judgment.

 

1.4           Delivery of Certificate and New Warrant. Promptly after Holder exercises or converts this Warrant pursuant to Section 1.1 or 1.2, respectively, and, if applicable, the Company receives payment of the aggregate Warrant Price, the Company shall promptly deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant of like tenor representing the Shares not so acquired or used in a conversion. This Warrant shall be deemed to have been exercised and such certificates deemed issued, and Holder shall become the holder of record of the Shares for all purposes, as of the date of Holder’s delivery of the exercise notice pursuant to Section 1.1 or 1.2 and payment of the Warrant Price, if applicable. If an exercise or conversion is to be made in connection with an IPO or Acquisition, such exercise may at the election of Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

 

1.5           Replacement of Warrants. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation on surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

 

 

1.6           Treatment of Warrant Upon Acquisition or IPO. This Warrant shall terminate, and shall no longer be exercisable, upon the earlier to occur of: (a) the consummation of a Sale Transaction (as such term is defined in the Certificate) and (b) the consummation of an IPO. The Company shall provide at least ten (10) days prior written notice to the Holder of any Sale Transaction or IPO.

 

ARTICLE 2.

ADJUSTMENTS TO THE SHARES.

 

2.1           Stock Dividends, Subdivisions and Combinations. If the Company declares or pays a dividend on the Shares payable in common stock or other securities, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend occurred. If the Company subdivides the Shares by reclassification, stock split, split-up or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

 

2.2           Reclassification, Exchange, Combination or Substitution. Subject to Section 1.6, upon any reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event that results in a change of the number and/or class of the Shares, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number, amount and kind of securities, money and property that Holder would have ultimately received upon the completion of such reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event if this Warrant had been exercised immediately before such reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event. Such an event shall include any automatic conversion of the Shares to common stock pursuant to the terms of the Company’s Amended and Restated Certificate of Incorporation, as amended from time to time (the “Certificate”). Subject to Section 1.6, the Company or its successor shall promptly issue to Holder an amendment to this Warrant setting forth the number and kind of such new securities or other property issuable upon exercise or conversion of this Warrant as a result of such reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event that results in a change of the number and/or class of securities issuable upon exercise or conversion of this Warrant. The amendment to this Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the amended Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations, substitutions, reorganizations, mergers, consolidations or other events.

 

2.3           Adjustments for Diluting Issuances. The number of shares of common stock or other securities issuable upon conversion of the Shares shall be subject to adjustment, from time to time in the manner set forth in the Certificate as if the Shares were issued and outstanding on and as of the date of any such required adjustment. The provisions set forth for the Shares in the Certificate relating to the above in effect as of the Issue Date may not be amended, modified or waived, without the prior written consent of Holder unless such amendment, modification or waiver affects the rights associated with the Shares in the same manner as such amendment, modification or waiver affects the rights associated with all other Shares.

 

 

2.4           Fractional Shares. No fractional Shares shall be issuable upon exercise or conversion of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the Fair Market Value of a full Share.

 

2.5           Certificate as to Adjustments. Upon each adjustment of the Warrant Price or the kind or number of securities issuable under this Warrant pursuant to this Article 2, the Company shall promptly notify Holder in writing, and, at the Company’s expense, promptly compute such adjustment, and furnish Holder with a certificate of its Chief Executive Officer, Corporate Secretary or a senior financial officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price and the number and kind of securities issuable under this Warrant in effect upon the date thereof and the series of adjustments leading to such Warrant Price and such number and kind of securities.

 

ARTICLE 3.

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.

 

3.1          Representations and Warranties. The Company represents and warrants and covenants to Holder as of the Issue Date as follows:

 

(a)           The Company has all requisite legal and corporate power and authority, and has taken all corporate action on the part of itself, its officers, directors and stockholders necessary, to execute, issue and deliver this Warrant, to issue the Shares issuable upon exercise or conversion of this Warrant and the securities issuable upon conversion of the Shares, and to carry out and perform its obligations under this Warrant, and this Warrant constitutes the legally binding and valid obligation of the Company enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights, or to principles of equity.

 

(b)           This Warrant has been validly issued and is free of restrictions on transfer other than restrictions on transfer set forth herein and under applicable state and federal securities laws. All Shares which may be issued upon the exercise of the purchase or conversion right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances (including preemptive or other similar rights) except for restrictions on transfer provided for herein and under applicable federal and state securities laws and the restrictions set forth in the Stockholders Agreements.

 

(c)           The execution, delivery, and performance of this Warrant will not result in a violation of, be in conflict with, or constitute a default under, with or without the passage of time or giving of notice, any provision of the Certificate, the Stockholders Agreements or the Company’s by-laws, any provision of any judgment, decree, or order to which the Company is a party, by which it is bound, or to which any of its material assets are subject, any contract, obligation, or commitment to which the Company is a party or by which it is bound, or any statute, rule, or governmental regulation applicable to the Company, or the creation of any lien, charge, or encumbrance upon any assets of the Company.

 

 

(d)           The Company has provided Holder with a capitalization table of the Company, and such capitalization table is complete and accurate as of the date hereof and reflects all outstanding capital stock of the Company and all outstanding warrants, options, and other agreements (other than pursuant to the Stockholders Agreements) to purchase or otherwise acquire any equity or convertible securities of the Company. The Company has reserved a sufficient number of Shares for issuance upon the exercise of this Warrant and a sufficient number of shares of common stock issuable upon conversion of the Shares.

 

(e)           The Warrant Price is no greater than the lowest price at which the Company has issued Series A Preferred Stock

 

3.2          Notice of Certain Events; Information. If the Company proposes at any time (a) to declare any dividend or distribution upon the Shares, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to effect any reclassification or recapitalization of the Shares; (c) to merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, (d) to approve or participate in any Acquisition or an IPO or, (e) to liquidate, dissolve or wind up or approve or consummate any Sale Transaction (as defined in the Certificate), then, in connection with each such event, the Company shall give Holder: (1) at least ten (10) business days prior written notice of the date on which a record will be taken for such dividend or distribution (and specifying the date on which the holders of stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) above; and (2) in the case of the matters referred to in (b), (c), (d) or (e) above, at least ten (10) business days prior written notice of the date when the same will take place (and, if applicable, specifying the date on which the holders of stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event). The Company will also provide such information in its possession as is requested by Holder and as is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements, including without limitation, a capitalization table, to be provided to Holder within thirty (30) days after the end of each fiscal quarter of the Company, including the per share price of the Company’s equity securities most recently issued prior to the date such capitalization table and indication are so provided; provided, that the Company’s obligations set forth in this sentence shall terminate immediately prior to the earlier of the Company’s IPO, the exercise of this Warrant in full or the termination of this Warrant.

 

 

3.3          Stockholders Agreements; No Other Stockholder Rights. Holder will not have any rights as a stockholder of the Company until the exercise of this Warrant. Effective upon any exercise or conversion of this Warrant, Holder and any permitted transferee of the Warrant or the Shares shall be entitled to all of the rights and benefits provided to all other holders of the Shares pursuant to, and the Company and Holder agree that Holder (and any permitted transferee of the Warrant or the Shares) will execute a counterpart signature page and become a party to (a) the Investor Rights Agreement dated as of November 4, 2015 and the Right of First Refusal and Co-Sale Agreement, dated as of November 4, 2015, in each case by and among the Company and certain of its stockholders (as hereafter amended or restated, together, the “Stockholders Agreements”), provided that no such amendment or restatement shall in any respect restrict Holder’s or such permitted transferee’s right and ability to transfer this Warrant or the Shares to any affiliate and (b) any agreement reasonably acceptable to Holder to which holders of the Shares may hereafter become parties and the Shares may become bound (including, without limitation, any stockholders, investor rights, registration rights, right of refusal, voting and co-sale rights or similar agreement); and provided, that (v) Holder and any permitted transferee shall have all of the rights of each other holder of Shares under all such agreements (subject to any applicable minimum share ownership or other requirement on which such rights are conditioned), (w) with respect to Holder and its permitted transferees and assigns, notwithstanding any term or restriction on transfer contained in the Stockholders Agreements, Holder and its permitted transferees shall have the unrestricted right to transfer all or any portion of the Shares to any assignee of or purchaser from Holder or its affiliate of their rights under the Credit Agreement (to the extent permitted by the Credit Agreement) or any interest or participation therein, and, in connection with such transfer, Holder and its permitted transferees may transfer its rights under the Stockholders Agreements to any affiliate of Holder or any assignee of or purchaser from Holder or its affiliates of their rights under the Credit Agreement (to the extent permitted by the Credit Agreement) or any interest or participation therein, and (y) in the event any term, restriction or condition of the Stockholders Agreements or any such agreement conflicts with, is inconsistent with or would otherwise prohibit or restrict the exercise of any right of Holder under this Warrant, the terms of this Warrant shall control and this Warrant and Holder shall not be subject to such term, restriction or condition. As an illustration and not by way of limitation as to the purpose and intent of this Section 3.3, the Company shall grant registration rights to Holder for any Shares acquired by Holder upon exercise or conversion of this Warrant or conversion of such Shares in parity to the registration rights granted to any other holder of the Shares.

 

ARTICLE 4.

REPRESENTATIONS AND WARRANTIES OF HOLDER. Holder represents and warrants to the Company as follows:

 

4.1          Purchase for Own Account. This Warrant and the securities to be acquired upon exercise of this Warrant by Holder will be acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act and Holder has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption or any transfer contemplated by or permitted under Section 3.3. Holder also represents that Holder has not been formed for the specific purpose of acquiring this Warrant or the Shares.

 

4.2          Disclosure of Information. Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

 

4.3          Investment Experience. Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

 

 

4.4           Accredited Investor Status. Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

 

4.5           The Act. Holder understands that this Warrant and the Shares issuable upon exercise or conversion hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise or conversion hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.

 

4.6           Market Stand-Off. Holder hereby agrees that, in connection with the Company’s IPO it shall not to the extent requested by the Company’s underwriter(s) sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company (other than any permitted to be disposed of in the registration for up to one hundred eighty (180) days from the effective date of the registration statement filed in connection with the IPO; provided, however, that such one hundred eighty (180) day period may be extended to the extent necessary to permit any managing underwriter to comply with applicable law; provided further, however, that Holder shall not be bound by the restrictions set forth in this Section 4.6 unless all five percent (5%) or greater (in terms of ownership of the issued and outstanding capital stock of the Company) stockholders of the Company also agree to such restrictions; and provided, further, that any discretionary waiver or termination of the foregoing restrictions by the Company or the underwriters shall apply to all holders of the Company’s equity securities subject to such restrictions pro rata based on the number of shares subject to such restrictions. Holder agrees to enter into the form of lock-up agreement as reasonably requested by the underwriter(s) in connection with this Section 4.6.

 

ARTICLE 5.

MISCELLANEOUS.

 

5.1           Term. This Warrant is exercisable in whole or in part at any time and from time to time on or before the Expiration Date. The conditions under which the Warrant shall automatically convert on the Expiration Date are set forth in Section 5.8 below.

 

5.2           Legends.

 

(a)            This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

 

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT PURSUANT TO THE PROVISIONS OF ARTICLE 5 OF THIS WARRANT, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW, OR UNLESS SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION CAN BE MADE IN COMPLIANCE WITH RULE 144 OF THE ACT, OR UNLESS, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

 

 

THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE, INCLUDING A MARKET STAND-OFF PERIOD OF UP TO 180 DAYS IN THE EVENT OF A PUBLIC OFFERING, OR FOR A LONGER PERIOD IF THE ISSUER’S TRANSFER AGENT IS NOTIFIED BY THE ISSUER OR THE ISSUER’S COUNSEL THAT THIS MARKET STAND-OFF RESTRICTION HAS BEEN EXTENDED FOR THE PURPOSE OF COMPLYING WITH APPLICABLE LAW.

 

(b)           Notwithstanding the foregoing, neither this Warrant nor any certificate or instrument evidencing this Warrant or the Shares shall bear, and the Company hereby agrees to remove, within ten (10) days of any written request (together with such evidence or documentation described in the following provisions) by Holder, pursuant to the following provisions of this Section 5.2(b), or not to affix, as applicable, any restrictive or other legend, notice or provision restricting the sale or transfer of this Warrant or the Shares, in each case provided that Holder has provided reasonable evidence to the Company (including any customary broker’s or transferring stockholder’s letters but expressly excluding an opinion of counsel other than with respect to clause (C) below) that: (A) a transfer of this Warrant or the Shares, as applicable, has been made pursuant to SEC Rule 144 (assuming the transferor is not an “affiliate” (as defined in SEC Rule 144) of the Company); (B) the Warrant or the Shares, as applicable, are then eligible for transfer pursuant to SEC Rule 144; or (C) in connection with any other sale or transfer, provided that such Holder provides the Company with an opinion of counsel to such Holder, in a reasonably acceptable form to the Company, to the effect that such sale or transfer may be made without registration under the applicable requirements of the Act and that such a legend, notice or provision is not required by, and is not required in order to establish compliance with any provisions of, the Act.

 

5.3           Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of Rule 144.

 

5.4           Transfer Procedure. Subject to the provisions of Section 5.3 and upon and effective immediately as of providing Company with written notice substantially in the form attached as Appendix 2, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the Shares issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, provided, however, in connection with any such transfer, Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder promptly thereafter surrenders this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable). The Company may refuse to transfer this Warrant or the Shares to any person who directly competes with the Company, unless, in either case, the stock of the Company is publicly traded.

 

 

5.5         Notices. All notices, requests, documents and other communications (collectively, “Notices”) from the Company to Holder, or vice versa, shall be in writing and deemed validly delivered effective as of the earliest to occur of (a) when actually received, (b) when transmitted by facsimile or electronic mail (PDF), (c) the first business day after mailing by first-class registered or certified mail, postage prepaid, or after deposit with a reputable overnight courier with all charges paid, in each case other than actual receipt at such mailing, facsimile or electronic mail address as may have been furnished to the Company or Holder, as the case may be. As used in this Warrant, “business days” shall refer to all days other than any Saturday, Sunday or day on which the Company’s primary depository bank is closed. All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:

 

MIDCAP FUNDING XXVII TRUST

c/o MidCap Financial Services, LLC, as servicer

7255 Woodmont Avenue, Suite 200

Bethesda, MD 20814

Attention: Portfolio Management – Aziyo transaction

Facsimile: (301) 941-1450

E-mail: notices@midcapfinancial.com

 

with a copy to:

 

c/o MidCap Financial Services, LLC, as servicer

7255 Woodmont Avenue, Suite 200

Bethesda, Maryland 20814

Attn: General Counsel

Facsimile: 301-941-1450

E-mail: legalnotices@midcapfinancial.com

 

Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:

 

Aziyo Biologics, Inc.

12510 Prosperity Drive, Suite 370

Silver Spring, MD 20904

Attn: Vice President, Finance

Fax: (510) 307-9896

E-Mail: [XXX]

 

5.6         Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

 

5.7         Attorneys’ Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

 

 

5.8           Automatic Conversion upon Expiration. Unless Holder notifies the Company in writing to the contrary prior to such automatic conversion, in the event that, upon the earliest to occur of the Expiration Date or any expiration, involuntary termination or cancellation of this Warrant, the Fair Market Value of one Share as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed as of immediately before such date to have been converted pursuant to Section 1.2 above as to all Shares for which it shall not previously have been exercised or converted, and the Company shall promptly deliver a certificate representing the Shares issued upon such conversion to the Holder.

 

5.9           Counterparts. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.

 

5.10         Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to its principles regarding conflicts of law.

 

5.11         Headings. The various headings in this Warrant are inserted for convenience only and shall not affect the meaning or interpretation of this Warrant or any provisions hereof.

 

5.12         Severability. In the event any one or more of the provisions of this Warrant shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Warrant shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision.

 

[Balance of Page Intentionally Left Blank]

 

 

“COMPANY”

 

AZIYO BIOLOGICS, INC.

 

By:	/s/ Jeffrey Hamet
Name:	Jeffrey Hamet
	(Print)
Title:	Treasurer

 

 

“HOLDER”

 

MIDCAP FUNDING XXVII TRUST

 

By: Apollo Capital Management, L.P.,

its investment manager

 

By: Apollo Capital Management GP, LLC,

its general partner

 

 

By:	/s/ Maurice Amsellem
Name:	Maurice Amsellem
Title:	Authorized Signatory

 

 

 

APPENDIX 1

 

NOTICE OF EXERCISE

 

1.             Holder elects to purchase ___________ shares of the [Preferred/Common] Stock of Aziyo Biologics, Inc. pursuant to the terms of the attached Warrant, and tenders payment of the purchase price of the shares in full.

 

[or]

 

1.             Holder elects to convert the attached Warrant into Shares in the manner specified in the Warrant. This conversion is exercised for _____________________ of the Shares covered by the Warrant.

 

[Strike paragraph that does not apply.]

 

2.             Please issue a certificate or certificates representing the shares in the name specified below:

 

___________________________________________

Holder’s Name

 

___________________________________________

 

___________________________________________

(Address)

 

3. By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Article 4 of the Warrant as the date hereof.

 

		HOLDER:
		By:
		Name:
		Title:
		(Date):

 

 

APPENDIX 2

 

ASSIGNMENT

 

For value received, MIDCAP FUNDING XXVII TRUST hereby sells, assigns and transfers unto

 

Name:

 

Address:

 

 

Tax ID:

 

that certain Warrant to Purchase Stock issued by Aziyo Biologics, Inc. (the “Company”), on May 31, 2017 (the “Warrant”) together with all rights, title and interest therein.

 

			MIDCAP FUNDING XXVII TRUST
			By: Apollo Capital Management, L.P., its investment manager
			By: Apollo Capital Management GP, LLC, its general partner
			By:	)
			Name:
				(Print)
			Title:
Date:

 

 

By its execution below, and for the benefit of the Company, _______________ makes each of the representations and warranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.

 

		[NAME OF TRANSFEREE]
		By:
		Name:
		Title:

 

 

 

Exhibit 4.7

 

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW, OR SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION CAN BE MADE IN COMPLIANCE WITH RULE 144 OF THE ACT, OR IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

 

WARRANT TO PURCHASE STOCK

 

Company:		Aziyo Biologics, Inc., a Delaware corporation
Number of Shares:		3,187 (Subject to adjustment as hereinafter provided)
Class of Stock:		Series A Preferred Stock (Subject to Section 1.7)
Warrant Price:		$1.00 per Share (Subject to adjustment as hereinafter provided)
Issue Date:		December 14, 2017
Expiration Date:		The earlier to occur of the (i) expiration of this Warrant pursuant to Section 1.6 hereof or (ii) 10th anniversary of the Issue Date
Credit Facility:		This Warrant is issued in connection with the Credit and Security Agreement (Term Loan), dated as of May 31, 2017, among the Company, the other Borrowers (as defined therein) from time to time party thereto, MidCap Financial Trust, a Delaware statutory trust, as Agent and the lenders from time to time party thereto (as amended by that certain Amendment No. 1 to Credit and Security Agreement, dated as of the date hereof, and as further amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”).

 

THIS WARRANT TO PURCHASE STOCK (this “Warrant”) CERTIFIES THAT, for good and valuable consideration, including without limitation the mutual promises contained in the Credit Agreement (defined above), Flexpoint MCLS Holdings LLC (together with any registered holder from time to time of this Warrant or any holder of the Shares issuable or issued upon the exercise or conversion of this Warrant, "Holder") is entitled to purchase such aggregate number of fully paid and nonassessable shares of the class and series of capital stock of the Company equal to the Number of Shares (as set forth above), at the Warrant Price per Share, all as set forth above or herein below and as adjusted pursuant to the terms of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. As used herein, “Share” or “Shares” shall refer to either (i) the shares of stock issuable upon the exercise or conversion of this Warrant and any shares of capital stock into which such shares may be converted or exchanged, or (ii) the authorized or issued and outstanding shares of capital stock of the Company which are of the same class and series as the shares of stock issuable upon the exercise or conversion of this Warrant, in either case as the specific provisions of this Warrant or the context may require.

 

 

ARTICLE 1.

EXERCISE.

 

1.1           Method of Exercise. Holder may at any time and from time to time prior to the Expiration Date exercise this Warrant, in whole or in part, by delivering a duly completed and executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Section 1.2, Holder shall also deliver to the Company a check, wire transfer (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.

 

1.2          Conversion Right. In lieu of exercising this Warrant as specified in Section 1.1, Holder may at any time and from time to time after the Issue Date but prior to the Expiration Date convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate Fair Market Value of the number of Shares or the securities otherwise issuable upon exercise of this Warrant with respect to which Holder elects to convert this Warrant minus the aggregate Warrant Price of such Shares by (b) the Fair Market Value of one Share, and by delivering a duly completed and executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. The “Fair Market Value” of a Share shall be determined pursuant to Section 1.3.

 

1.3          Fair Market Value. If the Company’s common stock is traded on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “Trading Market”) and the Shares are common stock, the Fair Market Value of each Share shall be the closing price of a Share reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company’s initial public offering of its common stock (“IPO”), the “price to public” per share specified in the final prospectus relating to such offering). If the Company’s common stock is traded in a Trading Market and the Shares are preferred stock, the Fair Market Value of each Share shall be the closing price of such common stock reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or in the instance where the Warrant is exercised immediately prior to the effectiveness of an IPO, the initial “price to public” per share specified in the final prospectus relating to the IPO), in either case, multiplied by the number of shares of the Company’s common stock into which a Share is then convertible. In the event of an exercise in connection with an Acquisition, the Fair Market Value of a Share shall be the value to be received per Share by all holders of such Shares in such transaction. If the Company’s common stock is not traded in a Trading Market and other than in the event of an exercise in connection with an IPO or Acquisition, the Board of Directors of the Company shall determine the Fair Market Value in its reasonable good faith judgment.

 

1.4          Delivery of Certificate and New Warrant. Promptly after Holder exercises or converts this Warrant pursuant to Section 1.1 or 1.2, respectively, and, if applicable, the Company receives payment of the aggregate Warrant Price, the Company shall promptly deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant of like tenor representing the Shares not so acquired or used in a conversion. This Warrant shall be deemed to have been exercised and such certificates deemed issued, and Holder shall become the holder of record of the Shares for all purposes, as of the date of Holder’s delivery of the exercise notice pursuant to Section 1.1 or 1.2 and payment of the Warrant Price, if applicable. If an exercise or conversion is to be made in connection with an IPO or Acquisition, such exercise may at the election of Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

 

 

1.5         Replacement of Warrants. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation on surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

 

1.6         Treatment of Warrant Upon Acquisition or IPO. This Warrant shall terminate, and shall no longer be exercisable, upon the earlier to occur of: (a) the consummation of a Sale Transaction (as such term is defined in the Certificate) and (b) the consummation of an IPO. The Company shall provide at least ten (10) days prior written notice to the Holder of any Sale Transaction or IPO.

 

ARTICLE 2.

ADJUSTMENTS TO THE SHARES.

 

2.1         Stock Dividends, Subdivisions and Combinations. If the Company declares or pays a dividend on the Shares payable in common stock or other securities, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend occurred. If the Company subdivides the Shares by reclassification, stock split, split-up or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

 

2.2         Reclassification, Exchange, Combination or Substitution. Subject to Section 1.6, upon any reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event that results in a change of the number and/or class of the Shares, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number, amount and kind of securities, money and property that Holder would have ultimately received upon the completion of such reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event if this Warrant had been exercised immediately before such reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event. Such an event shall include any automatic conversion of the Shares to common stock pursuant to the terms of the Company’s Amended and Restated Certificate of Incorporation, as amended from time to time (the “Certificate”). Subject to Section 1.6, the Company or its successor shall promptly issue to Holder an amendment to this Warrant setting forth the number and kind of such new securities or other property issuable upon exercise or conversion of this Warrant as a result of such reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event that results in a change of the number and/or class of securities issuable upon exercise or conversion of this Warrant. The amendment to this Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the amended Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations, substitutions, reorganizations, mergers, consolidations or other events.

 

2.3         Adjustments for Diluting Issuances. The number of shares of common stock or other securities issuable upon conversion of the Shares shall be subject to adjustment, from time to time in the manner set forth in the Certificate as if the Shares were issued and outstanding on and as of the date of any such required adjustment. The provisions set forth for the Shares in the Certificate relating to the above in effect as of the Issue Date may not be amended, modified or waived, without the prior written consent of Holder unless such amendment, modification or waiver affects the rights associated with the Shares in the same manner as such amendment, modification or waiver affects the rights associated with all other Shares.

 

 

2.4         Fractional Shares. No fractional Shares shall be issuable upon exercise or conversion of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the Fair Market Value of a full Share.

 

2.5         Certificate as to Adjustments. Upon each adjustment of the Warrant Price or the kind or number of securities issuable under this Warrant pursuant to this Article 2, the Company shall promptly notify Holder in writing, and, at the Company’s expense, promptly compute such adjustment, and furnish Holder with a certificate of its Chief Executive Officer, Corporate Secretary or a senior financial officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price and the number and kind of securities issuable under this Warrant in effect upon the date thereof and the series of adjustments leading to such Warrant Price and such number and kind of securities.

 

ARTICLE 3.

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.

 

3.1         Representations and Warranties. The Company represents and warrants and covenants to Holder as of the Issue Date as follows:

 

(a)          The Company has all requisite legal and corporate power and authority, and has taken all corporate action on the part of itself, its officers, directors and stockholders necessary, to execute, issue and deliver this Warrant, to issue the Shares issuable upon exercise or conversion of this Warrant and the securities issuable upon conversion of the Shares, and to carry out and perform its obligations under this Warrant, and this Warrant constitutes the legally binding and valid obligation of the Company enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights, or to principles of equity.

 

(b)          This Warrant has been validly issued and is free of restrictions on transfer other than restrictions on transfer set forth herein and under applicable state and federal securities laws. All Shares which may be issued upon the exercise of the purchase or conversion right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances (including preemptive or other similar rights) except for restrictions on transfer provided for herein and under applicable federal and state securities laws and the restrictions set forth in the Stockholders Agreements.

 

(c)          The execution, delivery, and performance of this Warrant will not result in a violation of, be in conflict with, or constitute a default under, with or without the passage of time or giving of notice, any provision of the Certificate, the Stockholders Agreements or the Company’s by-laws, any provision of any judgment, decree, or order to which the Company is a party, by which it is bound, or to which any of its material assets are subject, any contract, obligation, or commitment to which the Company is a party or by which it is bound, or any statute, rule, or governmental regulation applicable to the Company, or the creation of any lien, charge, or encumbrance upon any assets of the Company.

 

 

(d)          The Company has provided Holder with a capitalization table of the Company, and such capitalization table is complete and accurate as of the date hereof and reflects all outstanding capital stock of the Company and all outstanding warrants, options, and other agreements (other than pursuant to the Stockholders Agreements) to purchase or otherwise acquire any equity or convertible securities of the Company. The Company has reserved a sufficient number of Shares for issuance upon the exercise of this Warrant and a sufficient number of shares of common stock issuable upon conversion of the Shares.

 

(e)         The Warrant Price is no greater than the lowest price at which the Company has issued Series A Preferred Stock

 

3.2         Notice of Certain Events; Information. If the Company proposes at any time (a) to declare any dividend or distribution upon the Shares, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to effect any reclassification or recapitalization of the Shares; (c) to merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, (d) to approve or participate in any Acquisition or an IPO or, (e) to liquidate, dissolve or wind up or approve or consummate any Sale Transaction (as defined in the Certificate), then, in connection with each such event, the Company shall give Holder: (1) at least ten (10) business days prior written notice of the date on which a record will be taken for such dividend or distribution (and specifying the date on which the holders of stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) above; and (2) in the case of the matters referred to in (b), (c), (d) or (e) above, at least ten (10) business days prior written notice of the date when the same will take place (and, if applicable, specifying the date on which the holders of stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event). The Company will also provide such information in its possession as is requested by Holder and as is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements, including without limitation, a capitalization table, to be provided to Holder within thirty (30) days after the end of each fiscal quarter of the Company, including the per share price of the Company’s equity securities most recently issued prior to the date such capitalization table and indication are so provided; provided, that the Company’s obligations set forth in this sentence shall terminate immediately prior to the earlier of the Company’s IPO, the exercise of this Warrant in full or the termination of this Warrant.

 

3.3         Stockholders Agreements; No Other Stockholder Rights. Holder will not have any rights as a stockholder of the Company until the exercise of this Warrant. Effective upon any exercise or conversion of this Warrant, Holder and any permitted transferee of the Warrant or the Shares shall be entitled to all of the rights and benefits provided to all other holders of the Shares pursuant to, and the Company and Holder agree that Holder (and any permitted transferee of the Warrant or the Shares) will execute a counterpart signature page and become a party to (a) the Investor Rights Agreement dated as of November 4, 2015 and the Right of First Refusal and Co-Sale Agreement, dated as of November 4, 2015, in each case by and among the Company and certain of its stockholders (as hereafter amended or restated, together, the “Stockholders Agreements”), provided that no such amendment or restatement shall in any respect restrict Holder’s or such permitted transferee’s right and ability to transfer this Warrant or the Shares to any affiliate and (b) any agreement reasonably acceptable to Holder to which holders of the Shares may hereafter become parties and the Shares may become bound (including, without limitation, any stockholders, investor rights, registration rights, right of refusal, voting and co-sale rights or similar agreement); and provided, that (v) Holder and any permitted transferee shall have all of the rights of each other holder of Shares under all such agreements (subject to any applicable minimum share ownership or other requirement on which such rights are conditioned), (w) with respect to Holder and its permitted transferees and assigns, notwithstanding any term or restriction on transfer contained in the Stockholders Agreements, Holder and its permitted transferees shall have the unrestricted right to transfer all or any portion of the Shares to any assignee of or purchaser from Holder or its affiliate of their rights under the Credit Agreement (to the extent permitted by the Credit Agreement) or any interest or participation therein, and, in connection with such transfer, Holder and its permitted transferees may transfer its rights under the Stockholders Agreements to any affiliate of Holder or any assignee of or purchaser from Holder or its affiliates of their rights under the Credit Agreement (to the extent permitted by the Credit Agreement) or any interest or participation therein, and (y) in the event any term, restriction or condition of the Stockholders Agreements or any such agreement conflicts with, is inconsistent with or would otherwise prohibit or restrict the exercise of any right of Holder under this Warrant, the terms of this Warrant shall control and this Warrant and Holder shall not be subject to such term, restriction or condition. As an illustration and not by way of limitation as to the purpose and intent of this Section 3.3, the Company shall grant registration rights to Holder for any Shares acquired by Holder upon exercise or conversion of this Warrant or conversion of such Shares in parity to the registration rights granted to any other holder of the Shares.

 

 

ARTICLE 4.

REPRESENTATIONS AND WARRANTIES OF HOLDER. Holder represents and warrants to the Company as follows:

 

4.1         Purchase for Own Account. This Warrant and the securities to be acquired upon exercise of this Warrant by Holder will be acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act and Holder has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption or any transfer contemplated by or permitted under Section 3.3. Holder also represents that Holder has not been formed for the specific purpose of acquiring this Warrant or the Shares.

 

4.2         Disclosure of Information. Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

 

4.3         Investment Experience. Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

 

 

4.4          Accredited Investor Status. Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

 

4.5          The Act. Holder understands that this Warrant and the Shares issuable upon exercise or conversion hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise or conversion hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.

 

4.6          Market Stand-Off. Holder hereby agrees that, in connection with the Company’s IPO it shall not to the extent requested by the Company’s underwriter(s) sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company (other than any permitted to be disposed of in the registration for up to one hundred eighty (180) days from the effective date of the registration statement filed in connection with the IPO; provided, however, that such one hundred eighty (180) day period may be extended to the extent necessary to permit any managing underwriter to comply with applicable law; provided further, however, that Holder shall not be bound by the restrictions set forth in this Section 4.6 unless all five percent (5%) or greater (in terms of ownership of the issued and outstanding capital stock of the Company) stockholders of the Company also agree to such restrictions; and provided, further, that any discretionary waiver or termination of the foregoing restrictions by the Company or the underwriters shall apply to all holders of the Company’s equity securities subject to such restrictions pro rata based on the number of shares subject to such restrictions. Holder agrees to enter into the form of lock-up agreement as reasonably requested by the underwriter(s) in connection with this Section 4.6.

 

ARTICLE 5.

MISCELLANEOUS.

 

5.1          Term. This Warrant is exercisable in whole or in part at any time and from time to time on or before the Expiration Date. The conditions under which the Warrant shall automatically convert on the Expiration Date are set forth in Section 5.8 below.

 

5.2            Legends.

 

(a)          This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

 

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT PURSUANT TO THE PROVISIONS OF ARTICLE 5 OF THIS WARRANT, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW, OR UNLESS SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION CAN BE MADE IN COMPLIANCE WITH RULE 144 OF THE ACT, OR UNLESS, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

 

 

THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE, INCLUDING A MARKET STAND-OFF PERIOD OF UP TO 180 DAYS IN THE EVENT OF A PUBLIC OFFERING, OR FOR A LONGER PERIOD IF THE ISSUER’S TRANSFER AGENT IS NOTIFIED BY THE ISSUER OR THE ISSUER’S COUNSEL THAT THIS MARKET STAND-OFF RESTRICTION HAS BEEN EXTENDED FOR THE PURPOSE OF COMPLYING WITH APPLICABLE LAW.

 

(b)          Notwithstanding the foregoing, neither this Warrant nor any certificate or instrument evidencing this Warrant or the Shares shall bear, and the Company hereby agrees to remove, within ten (10) days of any written request (together with such evidence or documentation described in the following provisions) by Holder, pursuant to the following provisions of this Section 5.2(b), or not to affix, as applicable, any restrictive or other legend, notice or provision restricting the sale or transfer of this Warrant or the Shares, in each case provided that Holder has provided reasonable evidence to the Company (including any customary broker’s or transferring stockholder’s letters but expressly excluding an opinion of counsel other than with respect to clause (C) below) that: (A) a transfer of this Warrant or the Shares, as applicable, has been made pursuant to SEC Rule 144 (assuming the transferor is not an “affiliate” (as defined in SEC Rule 144) of the Company); (B) the Warrant or the Shares, as applicable, are then eligible for transfer pursuant to SEC Rule 144; or (C) in connection with any other sale or transfer, provided that such Holder provides the Company with an opinion of counsel to such Holder, in a reasonably acceptable form to the Company, to the effect that such sale or transfer may be made without registration under the applicable requirements of the Act and that such a legend, notice or provision is not required by, and is not required in order to establish compliance with any provisions of, the Act.

 

5.3          Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of Rule 144.

 

5.4          Transfer Procedure. Subject to the provisions of Section 5.3 and upon and effective immediately as of providing Company with written notice substantially in the form attached as Appendix 2, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the Shares issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, provided, however, in connection with any such transfer, Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder promptly thereafter surrenders this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable). The Company may refuse to transfer this Warrant or the Shares to any person who directly competes with the Company, unless, in either case, the stock of the Company is publicly traded.

 

 

5.5          Notices. All notices, requests, documents and other communications (collectively, “Notices”) from the Company to Holder, or vice versa, shall be in writing and deemed validly delivered effective as of the earliest to occur of (a) when actually received, (b) when transmitted by facsimile or electronic mail (PDF), (c) the first business day after mailing by first-class registered or certified mail, postage prepaid, or after deposit with a reputable overnight courier with all charges paid, in each case other than actual receipt at such mailing, facsimile or electronic mail address as may have been furnished to the Company or Holder, as the case may be. As used in this Warrant, “business days” shall refer to all days other than any Saturday, Sunday or day on which the Company’s primary depository bank is closed. All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:

 

Flexpoint MCLS Holdings LLC 

c/o MidCap Financial Services, LLC, as servicer

7255 Woodmont Avenue, Suite 200 

Bethesda, MD 20814 

Attention: Portfolio Management – Aziyo transaction

Facsimile: (301) 941-1450 

E-mail: notices@midcapfinancial.com

 

with a copy to:

 

Flexpoint MCLS Holdings LLC

7255 Woodmont Avenue, Suite 200

Bethesda, Maryland 20814 

Attn: General Counsel Facsimile: 301-941-1450 

E-mail: legalnotices@midcapfinancial.com

 

Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:

 

Aziyo Biologics, Inc. 

12510 Prosperity Drive, Suite 370

Silver Spring, MD 20904 

Attn: Vice President, Finance

Fax: (510) 307-9896 

E-Mail: [XXX]

 

5.6          Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

 

5.7          Attorneys’ Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

 

 

5.8          Automatic Conversion upon Expiration. Unless Holder notifies the Company in writing to the contrary prior to such automatic conversion, in the event that, upon the earliest to occur of the Expiration Date or any expiration, involuntary termination or cancellation of this Warrant, the Fair Market Value of one Share as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed as of immediately before such date to have been converted pursuant to Section 1.2 above as to all Shares for which it shall not previously have been exercised or converted, and the Company shall promptly deliver a certificate representing the Shares issued upon such conversion to the Holder.

 

5.9          Counterparts. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.

 

5.10        Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to its principles regarding conflicts of law.

 

5.11        Headings. The various headings in this Warrant are inserted for convenience only and shall not affect the meaning or interpretation of this Warrant or any provisions hereof.

 

5.12        Severability. In the event any one or more of the provisions of this Warrant shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Warrant shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision.

 

[Balance of Page Intentionally Left Blank]

 

 

“COMPANY”

 

AZIYO BIOLOGICS, INC.

 

By:		/s/ Jeffrey Hamet
Name:		Jeffrey Hamet
		(Print)
Title:		Treasurer

 

 

“HOLDER”

 

FLEXPOINT MCLS HOLDINGS LLC

 

By:		/s/ Daniel Edelman
Name:		Daniel Edelman
Title:		Vice President

 

 

APPENDIX 1

 

NOTICE OF EXERCISE

 

1.          Holder elects to purchase ___________ shares of the [Preferred/Common] Stock of Aziyo Biologics, Inc. pursuant to the terms of the attached Warrant, and tenders payment of the purchase price of the shares in full.

 

[or]

 

1.          Holder elects to convert the attached Warrant into Shares in the manner specified in the Warrant. This conversion is exercised for _____________________ of the Shares covered by the Warrant.

 

[Strike paragraph that does not apply.]

 

2.          Please issue a certificate or certificates representing the shares in the name specified below:

 

___________________________________________ 

Holder’s Name

 

___________________________________________

 

___________________________________________ 

(Address)

 

3.          By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Article 4 of the Warrant as the date hereof.

 

	HOLDER:
	By:
	Name:
	Title:
	(Date):

  

 

APPENDIX 2

 

ASSIGNMENT

 

For value received, FLEXPOINT MCLS HOLDINGS LLC hereby sells, assigns and transfers unto

 

Name:

 

Address:

 

Tax ID:

 

that certain Warrant to Purchase Stock issued by Aziyo Biologics, Inc. (the “Company”), on [______], 2017 (the “Warrant”) together with all rights, title and interest therein.

 

	FLEXPOINT MCLS HOLDINGS LLC
	By:		)
	Name:
			(Print)
	Title:

 

 

Date:________________________________________________________

 

 

By its execution below, and for the benefit of the Company, _______________ makes each of the representations and warranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.

 

[NAME OF TRANSFEREE] 

 

	By:
	Name:
	Title:

 

 

Exhibit 4.8

 

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW, OR SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION CAN BE MADE IN COMPLIANCE WITH RULE 144 OF THE ACT, OR IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

 

WARRANT TO PURCHASE STOCK

 

Company:		Aziyo Biologics, Inc., a Delaware corporation
Number of Shares:		41,813 (Subject to adjustment as hereinafter provided)
Class of Stock:		Series A Preferred Stock (Subject to Section 1.7)
Warrant Price:		$1.00 per Share (Subject to adjustment as hereinafter provided)
Issue Date:		December 14, 2017
Expiration Date:		The earlier to occur of the (i) expiration of this Warrant pursuant to Section 1.6 hereof or (ii) 10th anniversary of the Issue Date
Credit Facility:		This Warrant is issued in connection with the Credit and Security Agreement (Term Loan), dated as of May 31, 2017, among the Company, the other Borrowers (as defined therein) from time to time party thereto, MidCap Financial Trust, a Delaware statutory trust, as Agent and the lenders from time to time party thereto (as amended by that certain Amendment No. 1 to Credit and Security Agreement, dated as of the date hereof, and as further amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”).

 

THIS WARRANT TO PURCHASE STOCK (this “Warrant”) CERTIFIES THAT, for good and valuable consideration, including without limitation the mutual promises contained in the Credit Agreement (defined above), MidCap Funding XXVIII Trust, a Delaware statutory trust (together with any registered holder from time to time of this Warrant or any holder of the Shares issuable or issued upon the exercise or conversion of this Warrant, "Holder") is entitled to purchase such aggregate number of fully paid and nonassessable shares of the class and series of capital stock of the Company equal to the Number of Shares (as set forth above), at the Warrant Price per Share, all as set forth above or herein below and as adjusted pursuant to the terms of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. As used herein, “Share” or “Shares” shall refer to either (i) the shares of stock issuable upon the exercise or conversion of this Warrant and any shares of capital stock into which such shares may be converted or exchanged, or (ii) the authorized or issued and outstanding shares of capital stock of the Company which are of the same class and series as the shares of stock issuable upon the exercise or conversion of this Warrant, in either case as the specific provisions of this Warrant or the context may require.

 

ARTICLE 1.         EXERCISE.

 

1.1           Method of Exercise. Holder may at any time and from time to time prior to the Expiration Date exercise this Warrant, in whole or in part, by delivering a duly completed and executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Section 1.2, Holder shall also deliver to the Company a check, wire transfer (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.

 

 

1.2           Conversion Right. In lieu of exercising this Warrant as specified in Section 1.1, Holder may at any time and from time to time after the Issue Date but prior to the Expiration Date convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate Fair Market Value of the number of Shares or the securities otherwise issuable upon exercise of this Warrant with respect to which Holder elects to convert this Warrant minus the aggregate Warrant Price of such Shares by (b) the Fair Market Value of one Share, and by delivering a duly completed and executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. The “Fair Market Value” of a Share shall be determined pursuant to Section 1.3.

 

1.3           Fair Market Value. If the Company’s common stock is traded on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “Trading Market”) and the Shares are common stock, the Fair Market Value of each Share shall be the closing price of a Share reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company’s initial public offering of its common stock (“IPO”), the “price to public” per share specified in the final prospectus relating to such offering). If the Company’s common stock is traded in a Trading Market and the Shares are preferred stock, the Fair Market Value of each Share shall be the closing price of such common stock reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or in the instance where the Warrant is exercised immediately prior to the effectiveness of an IPO, the initial “price to public” per share specified in the final prospectus relating to the IPO), in either case, multiplied by the number of shares of the Company’s common stock into which a Share is then convertible. In the event of an exercise in connection with an Acquisition, the Fair Market Value of a Share shall be the value to be received per Share by all holders of such Shares in such transaction. If the Company’s common stock is not traded in a Trading Market and other than in the event of an exercise in connection with an IPO or Acquisition, the Board of Directors of the Company shall determine the Fair Market Value in its reasonable good faith judgment.

 

1.4           Delivery of Certificate and New Warrant. Promptly after Holder exercises or converts this Warrant pursuant to Section 1.1 or 1.2, respectively, and, if applicable, the Company receives payment of the aggregate Warrant Price, the Company shall promptly deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant of like tenor representing the Shares not so acquired or used in a conversion. This Warrant shall be deemed to have been exercised and such certificates deemed issued, and Holder shall become the holder of record of the Shares for all purposes, as of the date of Holder’s delivery of the exercise notice pursuant to Section 1.1 or 1.2 and payment of the Warrant Price, if applicable. If an exercise or conversion is to be made in connection with an IPO or Acquisition, such exercise may at the election of Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

 

1.5           Replacement of Warrants. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation on surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

 

 

1.6           Treatment of Warrant Upon Acquisition or IPO. This Warrant shall terminate, and shall no longer be exercisable, upon the earlier to occur of: (a) the consummation of a Sale Transaction (as such term is defined in the Certificate) and (b) the consummation of an IPO. The Company shall provide at least ten (10) days prior written notice to the Holder of any Sale Transaction or IPO.

 

ARTICLE 2.          ADJUSTMENTS TO THE SHARES.

 

2.1           Stock Dividends, Subdivisions and Combinations. If the Company declares or pays a dividend on the Shares payable in common stock or other securities, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend occurred. If the Company subdivides the Shares by reclassification, stock split, split-up or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

 

2.2           Reclassification, Exchange, Combination or Substitution. Subject to Section 1.6, upon any reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event that results in a change of the number and/or class of the Shares, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number, amount and kind of securities, money and property that Holder would have ultimately received upon the completion of such reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event if this Warrant had been exercised immediately before such reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event. Such an event shall include any automatic conversion of the Shares to common stock pursuant to the terms of the Company’s Amended and Restated Certificate of Incorporation, as amended from time to time (the “Certificate”). Subject to Section 1.6, the Company or its successor shall promptly issue to Holder an amendment to this Warrant setting forth the number and kind of such new securities or other property issuable upon exercise or conversion of this Warrant as a result of such reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event that results in a change of the number and/or class of securities issuable upon exercise or conversion of this Warrant. The amendment to this Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the amended Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations, substitutions, reorganizations, mergers, consolidations or other events.

 

2.3           Adjustments for Diluting Issuances. The number of shares of common stock or other securities issuable upon conversion of the Shares shall be subject to adjustment, from time to time in the manner set forth in the Certificate as if the Shares were issued and outstanding on and as of the date of any such required adjustment. The provisions set forth for the Shares in the Certificate relating to the above in effect as of the Issue Date may not be amended, modified or waived, without the prior written consent of Holder unless such amendment, modification or waiver affects the rights associated with the Shares in the same manner as such amendment, modification or waiver affects the rights associated with all other Shares.

 

 

2.4           Fractional Shares. No fractional Shares shall be issuable upon exercise or conversion of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the Fair Market Value of a full Share.

 

2.5           Certificate as to Adjustments. Upon each adjustment of the Warrant Price or the kind or number of securities issuable under this Warrant pursuant to this Article 2, the Company shall promptly notify Holder in writing, and, at the Company’s expense, promptly compute such adjustment, and furnish Holder with a certificate of its Chief Executive Officer, Corporate Secretary or a senior financial officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price and the number and kind of securities issuable under this Warrant in effect upon the date thereof and the series of adjustments leading to such Warrant Price and such number and kind of securities.

 

ARTICLE 3.          REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.

 

3.1           Representations and Warranties. The Company represents and warrants and covenants to Holder as of the Issue Date as follows:

 

(a)           The Company has all requisite legal and corporate power and authority, and has taken all corporate action on the part of itself, its officers, directors and stockholders necessary, to execute, issue and deliver this Warrant, to issue the Shares issuable upon exercise or conversion of this Warrant and the securities issuable upon conversion of the Shares, and to carry out and perform its obligations under this Warrant, and this Warrant constitutes the legally binding and valid obligation of the Company enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights, or to principles of equity.

 

(b)           This Warrant has been validly issued and is free of restrictions on transfer other than restrictions on transfer set forth herein and under applicable state and federal securities laws. All Shares which may be issued upon the exercise of the purchase or conversion right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances (including preemptive or other similar rights) except for restrictions on transfer provided for herein and under applicable federal and state securities laws and the restrictions set forth in the Stockholders Agreements.

 

(c)           The execution, delivery, and performance of this Warrant will not result in a violation of, be in conflict with, or constitute a default under, with or without the passage of time or giving of notice, any provision of the Certificate, the Stockholders Agreements or the Company’s by-laws, any provision of any judgment, decree, or order to which the Company is a party, by which it is bound, or to which any of its material assets are subject, any contract, obligation, or commitment to which the Company is a party or by which it is bound, or any statute, rule, or governmental regulation applicable to the Company, or the creation of any lien, charge, or encumbrance upon any assets of the Company.

 

 

(d)           The Company has provided Holder with a capitalization table of the Company, and such capitalization table is complete and accurate as of the date hereof and reflects all outstanding capital stock of the Company and all outstanding warrants, options, and other agreements (other than pursuant to the Stockholders Agreements) to purchase or otherwise acquire any equity or convertible securities of the Company. The Company has reserved a sufficient number of Shares for issuance upon the exercise of this Warrant and a sufficient number of shares of common stock issuable upon conversion of the Shares.

 

(e)           The Warrant Price is no greater than the lowest price at which the Company has issued Series A Preferred Stock

 

3.2           Notice of Certain Events; Information. If the Company proposes at any time (a) to declare any dividend or distribution upon the Shares, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to effect any reclassification or recapitalization of the Shares; (c) to merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, (d) to approve or participate in any Acquisition or an IPO or, (e) to liquidate, dissolve or wind up or approve or consummate any Sale Transaction (as defined in the Certificate), then, in connection with each such event, the Company shall give Holder: (1) at least ten (10) business days prior written notice of the date on which a record will be taken for such dividend or distribution (and specifying the date on which the holders of stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) above; and (2) in the case of the matters referred to in (b), (c), (d) or (e) above, at least ten (10) business days prior written notice of the date when the same will take place (and, if applicable, specifying the date on which the holders of stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event). The Company will also provide such information in its possession as is requested by Holder and as is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements, including without limitation, a capitalization table, to be provided to Holder within thirty (30) days after the end of each fiscal quarter of the Company, including the per share price of the Company’s equity securities most recently issued prior to the date such capitalization table and indication are so provided; provided, that the Company’s obligations set forth in this sentence shall terminate immediately prior to the earlier of the Company’s IPO, the exercise of this Warrant in full or the termination of this Warrant.

 

3.3           Stockholders Agreements; No Other Stockholder Rights. Holder will not have any rights as a stockholder of the Company until the exercise of this Warrant. Effective upon any exercise or conversion of this Warrant, Holder and any permitted transferee of the Warrant or the Shares shall be entitled to all of the rights and benefits provided to all other holders of the Shares pursuant to, and the Company and Holder agree that Holder (and any permitted transferee of the Warrant or the Shares) will execute a counterpart signature page and become a party to (a) the Investor Rights Agreement dated as of November 4, 2015 and the Right of First Refusal and Co-Sale Agreement, dated as of November 4, 2015, in each case by and among the Company and certain of its stockholders (as hereafter amended or restated, together, the “Stockholders Agreements”), provided that no such amendment or restatement shall in any respect restrict Holder’s or such permitted transferee’s right and ability to transfer this Warrant or the Shares to any affiliate and (b) any agreement reasonably acceptable to Holder to which holders of the Shares may hereafter become parties and the Shares may become bound (including, without limitation, any stockholders, investor rights, registration rights, right of refusal, voting and co-sale rights or similar agreement); and provided, that (v) Holder and any permitted transferee shall have all of the rights of each other holder of Shares under all such agreements (subject to any applicable minimum share ownership or other requirement on which such rights are conditioned), (w) with respect to Holder and its permitted transferees and assigns, notwithstanding any term or restriction on transfer contained in the Stockholders Agreements, Holder and its permitted transferees shall have the unrestricted right to transfer all or any portion of the Shares to any assignee of or purchaser from Holder or its affiliate of their rights under the Credit Agreement (to the extent permitted by the Credit Agreement) or any interest or participation therein, and, in connection with such transfer, Holder and its permitted transferees may transfer its rights under the Stockholders Agreements to any affiliate of Holder or any assignee of or purchaser from Holder or its affiliates of their rights under the Credit Agreement (to the extent permitted by the Credit Agreement) or any interest or participation therein, and (y) in the event any term, restriction or condition of the Stockholders Agreements or any such agreement conflicts with, is inconsistent with or would otherwise prohibit or restrict the exercise of any right of Holder under this Warrant, the terms of this Warrant shall control and this Warrant and Holder shall not be subject to such term, restriction or condition. As an illustration and not by way of limitation as to the purpose and intent of this Section 3.3, the Company shall grant registration rights to Holder for any Shares acquired by Holder upon exercise or conversion of this Warrant or conversion of such Shares in parity to the registration rights granted to any other holder of the Shares.

 

 

ARTICLE 4.          REPRESENTATIONS AND WARRANTIES OF HOLDER. Holder represents and warrants to the Company as follows:

 

4.1           Purchase for Own Account. This Warrant and the securities to be acquired upon exercise of this Warrant by Holder will be acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act and Holder has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption or any transfer contemplated by or permitted under Section 3.3. Holder also represents that Holder has not been formed for the specific purpose of acquiring this Warrant or the Shares.

 

4.2           Disclosure of Information. Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

 

4.3           Investment Experience. Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

 

 

4.4           Accredited Investor Status. Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

 

4.5           The Act. Holder understands that this Warrant and the Shares issuable upon exercise or conversion hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise or conversion hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.

 

4.6           Market Stand-Off. Holder hereby agrees that, in connection with the Company’s IPO it shall not to the extent requested by the Company’s underwriter(s) sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company (other than any permitted to be disposed of in the registration for up to one hundred eighty (180) days from the effective date of the registration statement filed in connection with the IPO; provided, however, that such one hundred eighty (180) day period may be extended to the extent necessary to permit any managing underwriter to comply with applicable law; provided further, however, that Holder shall not be bound by the restrictions set forth in this Section 4.6 unless all five percent (5%) or greater (in terms of ownership of the issued and outstanding capital stock of the Company) stockholders of the Company also agree to such restrictions; and provided, further, that any discretionary waiver or termination of the foregoing restrictions by the Company or the underwriters shall apply to all holders of the Company’s equity securities subject to such restrictions pro rata based on the number of shares subject to such restrictions. Holder agrees to enter into the form of lock-up agreement as reasonably requested by the underwriter(s) in connection with this Section 4.6.

 

ARTICLE 5.          MISCELLANEOUS.

 

5.1           Term. This Warrant is exercisable in whole or in part at any time and from time to time on or before the Expiration Date. The conditions under which the Warrant shall automatically convert on the Expiration Date are set forth in Section 5.8 below.

 

5.2           Legends.

 

(a) This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

 

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT PURSUANT TO THE PROVISIONS OF ARTICLE 5 OF THIS WARRANT, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW, OR UNLESS SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION CAN BE MADE IN COMPLIANCE WITH RULE 144 OF THE ACT, OR UNLESS, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

 

 

THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE, INCLUDING A MARKET STAND-OFF PERIOD OF UP TO 180 DAYS IN THE EVENT OF A PUBLIC OFFERING, OR FOR A LONGER PERIOD IF THE ISSUER’S TRANSFER AGENT IS NOTIFIED BY THE ISSUER OR THE ISSUER’S COUNSEL THAT THIS MARKET STAND-OFF RESTRICTION HAS BEEN EXTENDED FOR THE PURPOSE OF COMPLYING WITH APPLICABLE LAW.

 

(b)           Notwithstanding the foregoing, neither this Warrant nor any certificate or instrument evidencing this Warrant or the Shares shall bear, and the Company hereby agrees to remove, within ten (10) days of any written request (together with such evidence or documentation described in the following provisions) by Holder, pursuant to the following provisions of this Section 5.2(b), or not to affix, as applicable, any restrictive or other legend, notice or provision restricting the sale or transfer of this Warrant or the Shares, in each case provided that Holder has provided reasonable evidence to the Company (including any customary broker’s or transferring stockholder’s letters but expressly excluding an opinion of counsel other than with respect to clause (C) below) that: (A) a transfer of this Warrant or the Shares, as applicable, has been made pursuant to SEC Rule 144 (assuming the transferor is not an “affiliate” (as defined in SEC Rule 144) of the Company); (B) the Warrant or the Shares, as applicable, are then eligible for transfer pursuant to SEC Rule 144; or (C) in connection with any other sale or transfer, provided that such Holder provides the Company with an opinion of counsel to such Holder, in a reasonably acceptable form to the Company, to the effect that such sale or transfer may be made without registration under the applicable requirements of the Act and that such a legend, notice or provision is not required by, and is not required in order to establish compliance with any provisions of, the Act.

 

5.3           Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of Rule 144.

 

5.4           Transfer Procedure. Subject to the provisions of Section 5.3 and upon and effective immediately as of providing Company with written notice substantially in the form attached as Appendix 2, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the Shares issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, provided, however, in connection with any such transfer, Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder promptly thereafter surrenders this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable). The Company may refuse to transfer this Warrant or the Shares to any person who directly competes with the Company, unless, in either case, the stock of the Company is publicly traded.

 

 

5.5           Notices. All notices, requests, documents and other communications (collectively, “Notices”) from the Company to Holder, or vice versa, shall be in writing and deemed validly delivered effective as of the earliest to occur of (a) when actually received, (b) when transmitted by facsimile or electronic mail (PDF), (c) the first business day after mailing by first-class registered or certified mail, postage prepaid, or after deposit with a reputable overnight courier with all charges paid, in each case other than actual receipt at such mailing, facsimile or electronic mail address as may have been furnished to the Company or Holder, as the case may be. As used in this Warrant, “business days” shall refer to all days other than any Saturday, Sunday or day on which the Company’s primary depository bank is closed. All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:

 

MIDCAP FUNDING XXVIII TRUST

c/o MidCap Financial Services, LLC, as servicer

7255 Woodmont Avenue, Suite 200

Bethesda, MD 20814

Attention: Portfolio Management – Aziyo transaction

Facsimile: (301) 941-1450

E-mail: notices@midcapfinancial.com

 

with a copy to:

 

c/o MidCap Financial Services, LLC, as servicer

7255 Woodmont Avenue, Suite 200

Bethesda, Maryland 20814

Attn: General Counsel

Facsimile: 301-941-1450

E-mail: legalnotices@midcapfinancial.com

 

Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:

 

Aziyo Biologics, Inc.

12510 Prosperity Drive, Suite 370

Silver Spring, MD 20904

Attn: Vice President, Finance

Fax: (510) 307-9896

E-Mail: [XXX]

 

5.6           Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

 

5.7           Attorneys’ Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

 

 

5.8           Automatic Conversion upon Expiration. Unless Holder notifies the Company in writing to the contrary prior to such automatic conversion, in the event that, upon the earliest to occur of the Expiration Date or any expiration, involuntary termination or cancellation of this Warrant, the Fair Market Value of one Share as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed as of immediately before such date to have been converted pursuant to Section 1.2 above as to all Shares for which it shall not previously have been exercised or converted, and the Company shall promptly deliver a certificate representing the Shares issued upon such conversion to the Holder.

 

5.9           Counterparts. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.

 

5.10         Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to its principles regarding conflicts of law.

 

5.11         Headings. The various headings in this Warrant are inserted for convenience only and shall not affect the meaning or interpretation of this Warrant or any provisions hereof.

 

5.12         Severability. In the event any one or more of the provisions of this Warrant shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Warrant shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision.

 

[Balance of Page Intentionally Left Blank]

 

 

“COMPANY”

 

AZIYO BIOLOGICS, INC.

 

By:	/s/ Jeffrey D. Hamet
Name:	Jeffrey D. Hamet
	(Print)
Title:	Vice President, Financial and Treasurer

 

 

“HOLDER”

 

MIDCAP FUNDING XXVII TRUST

 

By: Apollo Capital Management, L.P.,

its investment manager

 

By: Apollo Capital Management GP, LLC,

its general partner

 

 

By:	/s/ Maurice Amsellem
Name:	Maurice Amsellem
Title:	Authorized Signatory

 

 

APPENDIX 1

 

NOTICE OF EXERCISE

 

1.             Holder elects to purchase ___________ shares of the [Preferred/Common] Stock of Aziyo Biologics, Inc. pursuant to the terms of the attached Warrant, and tenders payment of the purchase price of the shares in full.

 

[or]

 

1.             Holder elects to convert the attached Warrant into Shares in the manner specified in the Warrant. This conversion is exercised for _____________________ of the Shares covered by the Warrant.

 

[Strike paragraph that does not apply.]

 

2.             Please issue a certificate or certificates representing the shares in the name specified below:

 

___________________________________________

Holder’s Name

 

___________________________________________

 

___________________________________________

(Address)

 

3.             By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Article 4 of the Warrant as the date hereof.

 

 

	HOLDER:
	By:
	Name:
	Title:
	(Date):

 

 

APPENDIX 2

 

ASSIGNMENT

 

For value received, MIDCAP FUNDING XXVIII TRUST hereby sells, assigns and transfers unto

 

Name:

 

Address:

 

 

Tax ID:

 

that certain Warrant to Purchase Stock issued by Aziyo Biologics, Inc. (the “Company”), on May 31, 2017 (the “Warrant”) together with all rights, title and interest therein.

 

			MIDCAP FUNDING XXVIII TRUST
			By: Apollo Capital Management, L.P., its investment manager
			By: Apollo Capital Management GP, LLC, its general partner
			By:	)
			Name:
				(Print)
			Title:
Date:

 

 

By its execution below, and for the benefit of the Company, _______________ makes each of the representations and warranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.

 

		[NAME OF TRANSFEREE]
		By:
		Name:
		Title:

 

 

 

Exhibit 10.1

 

FIRST AMENDMENT TO

AZIYO BIOLOGICS, INC.

2015 STOCK OPTION/STOCK ISSUANCE PLAN

 

This FIRST AMENDMENT TO AZIYO BIOLOGICS, INC. 2015 STOCK OPTION/STOCK ISSUANCE PLAN (this “First Amendment”) is dated as of July 25, 2018.

 

WHEREAS, the Board of Directors and stockholders of Aziyo Biologics, Inc. (the “Company”) deem it to be in the best interests of the Company to amend the Aziyo Biologics, Inc. 2015 Stock Option/Stock Issuance Plan (the “Plan”) in order to increase the aggregate number of the shares of the Company’s Common Stock issuable under the Plan from 4,558,235 to 5,892,544.

 

NOW, THEREFORE, the Plan shall be amended as follows.

 

1.       Amendment to Section V.A. of the Plan. The reference to “4,558,235” in Section V.A. of the Plan is hereby amended and replaced with “5,892,544”.

 

2.       Except as herein amended, the terms and provisions of the Plan shall remain in full force and effect as originally adopted and approved.

 

IN WITNESS WHEREOF, the undersigned hereby certifies that this First Amendment was duly adopted by the Company effective as of the date first set forth above.

 

	AZIYO BIOLOGICS, INC
	By:	/s/ Jeffrey D. Hamet
		Name:	Jeffrey D. Hamet
		Title:	Vice President, Finance and Treasurer

 

 

AZIYO BIOLOGICS, INC.

 

2015 STOCK OPTION/STOCK ISSUANCE PLAN

 

ARTICLE ONE

 

GENERAL PROVISIONS

 

I.              PURPOSE OF THE PLAN

 

This 2015 Stock Option/Stock Issuance Plan is intended to promote the interests of Aziyo Biologics, Inc., a Delaware corporation (the “Corporation”) by providing eligible persons with the opportunity to acquire an equity interest, or otherwise increase their equity interest, in the Corporation as an incentive for them to remain in the service of the Corporation.

 

Capitalized terms herein shall have the meanings assigned to such terms herein or in the attached Appendix.

 

II.            STRUCTURE OF THE PLAN

 

A.            The Plan shall be divided into two (2) separate equity programs:

 

(1)       the Option Grant Program under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock; and

 

(2)       the Stock Issuance Program under which eligible persons may, at the discretion of the Plan Administrator, be issued shares of Common Stock.

 

B.            The provisions of Articles One and Four shall apply to both equity programs under the Plan and shall accordingly govern the interests of all persons under the Plan.

 

III.           ADMINISTRATION OF THE PLAN

 

A.            The Plan shall be administered by the Board. However, any or all administrative functions otherwise exercisable by the Board may be delegated to the Committee. Members of the Committee shall serve for such period of time as the Board may determine and shall be subject to removal by the Board at any time. The Board may also at any time terminate the functions of the Committee and reassume all powers and authority previously delegated to the Committee.

 

B.            The Plan Administrator shall have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it may deem appropriate for proper administration of the Plan and to make such determinations under, and issue such interpretations of, the Plan and any outstanding options or stock issuances thereunder as it may deem necessary or advisable. Decisions of the Plan Administrator shall be final and binding on all parties who have an interest in the Plan or any option or stock issuance thereunder.

 

 

IV.           ELIGIBILITY

 

A.            The persons eligible to participate in the Plan are as follows:

 

(1)       Employees;

 

(2)       non-employee members of the Board or the non-employee members of the board of directors of any Subsidiary; and

 

(3)       consultants and other independent advisors who provide services to the Corporation or any Subsidiary.

 

B.            The Plan Administrator shall have full authority to determine, (i) with respect to the option grants under the Option Grant Program, which eligible persons are to receive option grants, the time or times when such option grants are to be made, the number of shares to be covered by each such grant, the status of the granted option as either an Incentive Option or a Non-Statutory Option, the time or times at which each option is to become exercisable, the vesting schedule (if any) applicable to the option shares, the exercise price per share, and the maximum term for which the option is to remain outstanding and (ii) with respect to stock issuances under the Stock Issuance Program, which eligible persons are to receive stock issuances, the time or times when such issuances are to be made, the number of shares to be issued to each Participant, the vesting schedule (if any) applicable to the issued shares and the consideration to be paid by the Participant for such shares.

 

C.            The Plan Administrator shall have the absolute discretion either to grant options in accordance with the Option Grant Program or to effect stock issuances in accordance with the Stock Issuance Program.

 

V.            STOCK SUBJECT TO THE PLAN

 

A.            The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock. The maximum number of shares of Common Stock which may be issued over the term of the Plan shall not exceed 4,558,235.

 

B.            Shares of Common Stock subject to outstanding options shall be available for subsequent issuance under the Plan to the extent (i) the options expire or terminate for any reason prior to exercise in full or (ii) the options are cancelled in accordance with the cancellation-regrant provisions of Article Two. Shares issued under the Plan and subsequently repurchased by the Corporation pursuant to the Corporation’s repurchase rights under the Plan shall also be available for reissuance through one or more subsequent grants under the Plan.

 

 

C.            Should any change be made to the Common Stock by reason of any stock split, stock dividend, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable under the Plan and (ii) the number and/or class of securities and the exercise price per share in effect under each outstanding option. The adjustments determined by the Plan Administrator shall be final, binding and conclusive. In no event shall any such adjustments be made in connection with the conversion of one or more outstanding shares of the Corporation’s preferred stock into shares of Common Stock.

 

ARTICLE TWO

 

OPTION GRANT PROGRAM

 

I.            OPTION TERMS

 

Each option shall be evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms specified below. Each document evidencing an Incentive Option shall, in addition, be subject to the provisions of the Plan applicable to such options.

 

A.            Exercise Price.

 

(1)            The exercise price per share shall be fixed by the Plan Administrator and, subject to the special requirements of Section II of this Article Two applicable to Incentive Options, may be equal to, less than or greater than the Fair Market Value per share of Common Stock on the option grant date.

 

(2)            The exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of Section I of Article Four and the documents evidencing the option, be payable in cash or check made payable to the Corporation. Should the Common Stock be registered under Section 12(g) of the 1934 Act at the time the option is exercised, then the exercise price may also be paid in shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date.

 

(3)            The Plan Administrator, in its discretion, may provide for the payment of the exercise price for any option in other forms of consideration that are acceptable to the Plan Administrator from time to time.

 

B.            Exercise and Term of Options. Each option shall be exercisable at such time or times, during such period and for such number of shares as shall be determined by the Plan Administrator, subject to the special requirements of Section II of this Article Two applicable to Incentive Options, and set forth in the documents evidencing the option. However, no option shall have a term in excess of ten (10) years measured from the option grant date. If no vesting schedule is specified by the Plan Administrator, the Optionee shall vest in (i) twenty-five percent (25%) of the shares of Common Stock issuable upon exercise of an option upon completion of the first one (1) year period of continuous Service from the vesting commencement date specified by the Plan Administrator, and (ii) the remaining seventy-five percent (75%) of the shares of Common Stock issuable upon exercise of an option, in thirty-six (36) equal monthly installments of two and eighty-three one hundredths percent (2.083%) of the shares of Common Stock issuable upon exercise of an option, each such installment to be vested upon completion of each successive month of continuous Service from the end of such initial one (1) year period (through the date that is four (4) years from such vesting commencement date).

 

 

C.            Effect of Termination of Service.

 

(1)            The following provisions shall govern the exercise of any options held by the Optionee at the time of cessation of Service, subject to the special requirements of Section II of this Article Two applicable to Incentive Options:

 

(a)            Should the Optionee’s Service terminate for any reason other than Disability, death or for cause while any option is outstanding, then the Optionee shall have a period of three (3) months commencing with the date of such cessation of Service, or such other period of time thereafter as shall be determined by the Plan Administrator and set forth in the documents evidencing the option, during which to exercise the option. In no event shall an option be exercisable at any time after the expiration of the option term.

 

(b)            In the event of a cessation of Service for cause, as determined by the Plan Administrator, while any option is outstanding, then such option or options shall immediately terminate and be of no further force or effect as of the effective date of such cessation of Service. The Plan Administrator may, in its sole discretion and without any obligation to do so, waive the termination of an option which would otherwise occur upon the cessation of Service for cause and as a result such option term shall be subject to paragraph (a) immediately above.

 

(c)            Should the Optionee’s Service terminate by reason of Disability while any option is outstanding, then the Optionee shall have a period of twelve (12) months commencing with the date of such cessation of Service during which to exercise the option. In no event shall an option be exercisable at any time after the expiration of the option term.

 

(d)            Should the Optionee die while holding one or more outstanding options, then the personal representative of the Optionee’s estate or the person or persons to whom the option is transferred pursuant to the Optionee’s will or in accordance with the laws of descent and distribution shall have a period of twelve (12) months commencing with the date of the Optionee’s death during which to exercise each such option. In no event shall an option be exercisable at any time after the expiration of the option term.

 

 

(e)            During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of vested shares for which the option is exercisable on the date of the Optionee’s cessation of Service. Upon the expiration of the applicable exercise period or, if earlier, upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee’s cessation of Service, terminate and cease to be outstanding to the extent the option is not otherwise at that time exercisable for vested shares.

 

(2)            The Plan Administrator shall have the discretion, exercisable either at the time an option is granted or at any time while the option remains outstanding, to:

 

(a)            extend the period of time for which the option is to remain exercisable following Optionee’s cessation of Service from the limited period otherwise in effect for that option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term, and/or

 

(b)            permit the option to be exercised, during the applicable post-Service exercise period, not only with respect to the number of vested shares of Common Stock for which such option is exercisable at the time of the Optionee’s cessation of Service but also with respect to one or more additional installments in which the Optionee would have vested under the option had the Optionee continued in Service.

 

D.            Stockholder Rights. The holder of an option shall have no stockholder rights with respect to the shares subject to the option until such person shall have exercised the option, paid the exercise price and become a holder of record of the purchased shares and until such shares shall have vested.

 

E.            Repurchase Rights. The Plan Administrator shall have the discretion to grant options which are exercisable for vested or unvested shares of Common Stock. Should the Optionee cease Service while holding such shares, the Corporation shall have the right to repurchase unvested shares at the lesser of the exercise price paid per share and the Fair Market Value per share. The terms upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right.

 

F.            Prohibited Transfer of Shares. Until such time as the Common Stock is first registered under Section 12(g) of the 1934 Act, the Optionee shall not sell, transfer, assign, pledge, encumber or otherwise dispose of any shares of Common Stock issued under the Plan without the Plan Administrator’s prior written consent. Any sale, transfer, assignment, pledge encumbrance or other disposition made in contravention of this Paragraph F shall be null and void.

 

 

G.            Prohibited Transfer of Options. During the lifetime of the Optionee, the option shall be exercisable only by the Optionee and shall not be sold, transferred, assigned, pledged, encumbered or otherwise disposed of without the Plan Administrator’s prior written consent. Any sale, transfer, assignment, pledge encumbrance or other disposition made in contravention of this Paragraph G shall be null and void.

 

H.            Withholding. The Corporation’s obligation to deliver shares of Common Stock upon the exercise of any options granted under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements.

 

II.            INCENTIVE OPTIONS

 

The terms specified below shall be applicable to all Incentive Options. Except as modified by the provisions of this Section II, all the provisions of the Plan shall be applicable to Incentive Options. Options which are specifically designated as Non-Statutory Options shall not be subject to the terms of this Section II.

 

A.            Eligibility. Incentive Options may only be granted to Employees.

 

B.            Exercise Price. Subject to the special requirements of Paragraph D of this Section II, the exercise price per share shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date.

 

C.            Dollar Limitation. The aggregate Fair Market Value of the shares of Common Stock (determined as of the respective date or dates of grant) for which one or more options granted to any Employee under the Plan (or any other option plan of the Corporation or any Subsidiary) may for the first time become exercisable as Incentive Options during any one (1) calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more such options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted.

 

D.            10% Stockholders. If any Employee to whom an Incentive Option is granted is a 10% Stockholder, then the exercise price per share shall not be less than one hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the option grant date and the option term shall not exceed five (5) years measured from the option grant date.

 

 

III.            CORPORATE TRANSACTION

 

A.            The following provisions shall apply to all options issued under the Plan in the event of a Corporate Transaction unless otherwise provided in the agreement evidencing the option issued under the Plan. Except as otherwise stated in the agreement evidencing the option issued under the Plan, in the event of a Corporate Transaction, then, notwithstanding any other provision of the Plan, the Board shall take one or more of the following actions with respect to the options issued under the Plan, contingent upon the closing or completion of the Corporate Transaction:

 

(1)            arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the options or to substitute a similar award for the options (including, but not limited to, an award to acquire the same consideration paid to the stockholders of the Corporation pursuant to the Corporate Transaction);

 

(2)            arrange for the assignment of any reacquisition or repurchase rights held by the Corporation in respect of Common Stock issued or issuable upon exercise of the option to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);

 

(3)            accelerate the vesting, in whole or in part, of the option or the shares of Common Stock issued or issuable upon exercise of the option (and, if applicable, the time at which the option may be exercised) to a date prior to the effective time of such Corporate Transaction as the Board shall determine, with such option terminating if not exercised at or prior to the effective time of the Corporate Transaction;

 

(4)            arrange for the lapse of any reacquisition or repurchase rights held by the Corporation with respect to the Common Stock issued or issuable upon exercise of the option;

 

(5)            cancel or arrange for the cancellation of the option, to the extent not exercised prior to the effective time of the Corporate Transaction, in exchange for such cash consideration, if any, as the Board, in its sole discretion, may consider appropriate; and

 

(6)            make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of the property the holder of the option would have received upon the exercise of the option over (B) any exercise price payable by such holder in connection with such exercise.

 

The Board need not take the same action with respect to all options issued under the Plan or with respect to all Optionees.

 

B.            The portion of any Incentive Option accelerated in connection with a Corporate Transaction shall remain exercisable as an Incentive Option only to the extent that the applicable One Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a Non-Statutory Option under the Federal tax laws.

 

C.            The grant of options under the Plan shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

 

 

IV.            CANCELLATION AND REGRANT OF OPTIONS

 

The Plan Administrator shall have the authority to effect, at any time and from time to time, with the consent of the affected option holders, the cancellation of any or all outstanding options under the Plan and to grant in substitution therefor new options covering the same or different number of shares of Common Stock but with an exercise price per share based on the Fair Market Value per share of Common Stock on the new option grant date.

 

ARTICLE THREE

 

STOCK ISSUANCE PROGRAM

 

I.            STOCK ISSUANCE TERMS

 

Shares of Common Stock may be issued under the Stock Issuance Program through direct and immediate issuances without any intervening option grants. Each such stock issuance shall be evidenced by a Stock Issuance Agreement which complies with the terms specified below.

 

A.            Purchase Price.

 

(1)            The purchase price per share shall be fixed by the Plan Administrator and may be equal to, less than or more than the Fair Market Value of the Common Stock on the stock issuance date.

 

(2)            Subject to the provisions of Section I of Article Four, shares of Common Stock may be issued under the Stock Issuance Program for one or more of the following items of consideration which the Plan Administrator may deem appropriate in each individual instance:

 

(a)            cash or check made payable to the Corporation; or

 

(b)            past services rendered to the Corporation or any Subsidiary.

 

 

B.            Vesting Provisions.

 

(1)            Shares of Common Stock issued under the Stock Issuance Program may, in the discretion of the Plan Administrator, be fully and immediately vested upon issuance or may vest in one or more installments over the Participant’s period of Service or upon attainment of specified performance objectives. If no vesting schedule is specified by the Plan Administrator, the Participant shall vest in (i) twenty-five percent (25%) of the shares of Common Stock issued to such Participant under the Stock Issuance Program upon completion of the first one (1) year period of continuous Service from the vesting commencement date specified by the Plan Administrator, and (ii) the remaining seventy-five percent (75%) of the shares of Common Stock issued to such Participant under the Stock Issuance Program, in thirty-six (36) equal monthly installments of two and eighty-three one hundredths percent (2.083%) of the shares of Common Stock issued to such Participant under the Stock Issuance Program, each such installment to be vested upon completion of each successive month of continuous Service from the end of such initial one (1) year period (through the date that is four (4) years from such vesting commencement date). In all other cases, the elements of the vesting schedule applicable to any unvested shares of Common Stock issued under the Stock Issuance Program, namely:

 

(a)            the Service period to be completed by the Participant or the performance objectives to be attained,

 

(b)            the number of installments in which the shares are to vest,

 

(c)            the interval or intervals (if any) which are to lapse between installments, and

 

(d)            the effect which death, Disability or other event designated by the Plan Administrator is to have upon the vesting schedule,

 

shall be determined by the Plan Administrator and incorporated into the Stock Issuance Agreement.

 

(2)            Any new, substituted or additional securities or other property (including money paid other than as a regular cash dividend) which the Participant may have the right to receive with respect to the Participant’s unvested shares of Common Stock by reason of any stock dividend, stock split, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration shall be issued subject to (i) the same vesting requirements applicable to the Participant’s unvested shares of Common Stock and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

 

(3)            Should the Participant cease to remain in Service while holding one or more unvested shares of Common Stock issued under the Stock Issuance Program or should the performance objectives not be attained with respect to one or more of such unvested shares of Common Stock, then those shares shall be immediately surrendered to the Corporation for cancellation, and the Participant shall have no further rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash or cash equivalent (including the Participant’s purchase-money indebtedness), the Corporation shall repay to the Participant the lesser of (a) the cash consideration paid for the surrendered shares (and the unpaid principal balance of any outstanding purchase-money note of the Participant attributable to such surrendered shares shall be cancelled) and (b) the Fair Market Value of such surrendered shares.

 

 

(4)            The Plan Administrator may in its discretion waive the surrender and cancellation of one or more unvested shares of Common Stock (or other assets attributable thereto) which would otherwise occur upon the non-completion of the vesting schedule applicable to such shares. Such waiver shall result in the immediate vesting of the Participant’s interest in the shares of Common Stock as to which the waiver applies. Such waiver may be effected at any time, whether before or after the Participant’s cessation of Service or the attainment or non-attainment of the applicable performance objectives.

 

C.            Prohibited Transfer of Shares. Until such time as the Common Stock is first registered under Section 12(g) of the 1934 Act, the Participant shall not sell, transfer, assign, pledge, encumber or otherwise dispose of any shares of Common Stock issued under the Stock Issuance Program without the Plan Administrator’s prior written consent. Any sale, transfer, assignment, pledge encumbrance or other disposition made in contravention of this Paragraph C shall be null and void.

 

D.            Compliance with Section 409A of the Code. Notwithstanding anything to the contrary set forth herein, any shares of Common Stock issued under the Stock Issuance Program that are not exempt from the requirements of Section 409A of the Code shall contain such provisions so that such shares of Common Stock will comply with the requirements of Section 409A of the Code. Such restrictions, if any, shall be determined by the Plan Administrator and shall be contained in the Stock Issuance Agreement evidencing such issuance. For example, such restrictions may include, without limitation, a requirement that any Common Stock that is to be issued in a year following the year in which the shares of Common Stock issued under the Stock Issuance Program vest must be issued in accordance with a fixed pre-determined schedule.

 

II.            CORPORATE TRANSACTION

 

A.            The following provisions shall apply to shares of Common Stock issued under the Stock Issuance Program in the event of a Corporate Transaction unless otherwise provided in the Stock Issuance Agreement evidencing such issuance. Except as otherwise stated in the Stock Issuance Agreement, in the event of a Corporate Transaction, notwithstanding any other provision of the Plan, the Board shall take one or more of the following actions with respect to shares of Common Stock issued under the Stock Issuance Program, contingent upon the closing or completion of the Corporate Transaction:

 

(1)            arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue any reacquisition or repurchase rights held by the Corporation as it relates to such shares of Common Stock or to substitute a similar stock award for such shares of Common Stock (including, but not limited to, an award to acquire the same consideration paid to the stockholders of the Corporation pursuant to the Corporate Transaction);

 

 

(2)            arrange for the assignment of any reacquisition or repurchase rights held by the Corporation in respect of Common Stock issued pursuant to the Stock Issuance Program to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);

 

(3)            accelerate the vesting, in whole or in part, of the shares of Common Stock subject to the Stock Issuance Program to a date prior to the effective time of such Corporate Transaction as the Board shall determine;

 

(4)            arrange for the lapse of any reacquisition or repurchase rights held by the Corporation with respect to some or all of the shares of Common Stock subject to the Stock Issuance Program; and/or

 

(5)            cancel or arrange for the cancellation of the shares of Common Stock subject to the Stock Issuance Program, to the extent not vested prior to the effective time of the Corporate Transaction, in exchange for such cash consideration, if any, as the Board, in its sole discretion, may consider appropriate.

 

The Board need not take the same action with respect to all shares of Common Stock subject to the Stock Issuance Program or with respect to all Participants.

 

III.            SHARE ESCROW/LEGENDS

 

Shares may, in the Plan Administrator’s discretion, be held in escrow by the Corporation or may be issued directly to the Participant with restrictive legends on the certificates evidencing those shares.

 

ARTICLE FOUR

 

MISCELLANEOUS

 

I.

FINANCING

 

The Plan Administrator may permit any Optionee or Participant to pay the option exercise price or the purchase price for shares issued to such person under the Plan by delivering a promissory note that constitutes valid consideration under the applicable state law payable in one or more installments. The terms of any such promissory note (including the interest rate and the terms of repayment) shall be established by the Plan Administrator in its sole discretion. Promissory notes may be authorized with or without security or collateral. In all events, the maximum credit available to the Optionee or Participant may not exceed the sum of (i) the aggregate option exercise price or purchase price payable for the purchased shares (less the par value of such shares) and (ii) any Federal, state and local income and employment tax liability incurred by the Optionee or the Participant in connection with the option exercise or share purchase.

 

 

II.             EFFECTIVE DATE AND TERM OF PLAN

 

A.            The Plan shall become effective when adopted by the Board, but no option granted under the Plan may be exercised, and no shares shall be issued under the Plan, until the Plan is approved by the Corporation’s stockholders. If such stockholder approval is not obtained within twelve (12) months after the date of the Board’s adoption of the Plan, then all options previously granted under the Plan shall terminate and cease to be outstanding, and no further options shall be granted and no shares shall be issued under the Plan. Subject to such limitation, the Plan Administrator may grant options and issue shares under the Plan at any time after the effective date of the Plan and before the date fixed herein for termination of the Plan.

 

B.            The Board may suspend or terminate the Plan at any time. Unless sooner terminated by the Board, the Plan shall automatically terminate on the expiration of the ten (10)-year period measured from the date the Plan is adopted by the Board. Upon such Plan termination, all options and stock issuances outstanding under the Plan shall continue to have full force and effect in accordance with the provisions of the documents evidencing such options or issuances.

 

III.            AMENDMENT OF THE PLAN

 

A.            The Board shall have complete and exclusive power and authority to amend or modify the Plan in any and all respects. However, no such amendment or modification shall adversely affect the rights and obligations with respect to options or unvested stock issuances at the time outstanding under the Plan unless the Optionees and Participants that hold at least a majority of the aggregate number of shares of Common Stock that are subject to such outstanding options and unvested stock issuances approve of, or consent to, such amendment or modification. Notwithstanding the foregoing, subject to the limitations of applicable law, if any, and without the affected Optionee’s or Participant’s consent, the Board may amend the terms of any one or more options or stock grants issued hereunder if necessary to maintain the qualified status of an Incentive Option or to bring such option or stock grant into compliance with Section 409A of the Code.

 

B.            Options to purchase shares of Common Stock may be granted under the Plan and shares of Common Stock may be issued under the Plan that are in each instance in excess of the number of shares then available for issuance under the Plan, provided any excess shares actually issued under the Plan are held in escrow until there is obtained stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock available for issuance under the Plan. If such approval is not obtained with twelve (12) months after the date the first such excess issuances are made, then (i) any unexercised options granted on the basis of such excess shares shall terminate and cease to be outstanding and (ii) the Corporation shall promptly refund to the Optionees and the Participants the exercise or purchase price paid for any excess shares issued under the Plan and held in escrow, together with interest (at the applicable short-term Federal rate) for the period the shares were held in escrow, and such shares shall thereupon be automatically cancelled and cease to be outstanding.

 

 

IV.           USE OF PROCEEDS

 

Any cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes.

 

V.            WITHHOLDING

 

The Corporation’s obligation to deliver shares of Common Stock upon the exercise of any options or upon the issuance or vesting of any shares issued under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements.

 

VI.           REGULATORY APPROVALS

 

The implementation of the Plan, the granting of any options under the Plan and the issuance of any shares of Common Stock (i) upon the exercise of any option or (ii) under the Stock Issuance Program shall be subject to the Corporation’s procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the options granted under it and the shares of Common Stock issued pursuant to it. To the extent that the Board determines that any award granted hereunder is subject to Section 409A of the Code, the agreement evidencing such award shall incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code. To the extent applicable, the Plan and the applicable award agreement shall be interpreted in accordance with Section 409A of the Code.

 

All options and shares of Common Stock granted under the Plan are intended to be exempt from the requirements of Section 409A of the Code and applicable regulatory guidance issued thereunder (“Section 409A”) or, if not exempt, to satisfy the requirements of Section 409A, and the provisions of the Plan and any options and shares of Common Stock granted under the Plan shall be construed in a manner consistent therewith. Although the Corporation may endeavor to qualify an option or issuance of shares of Common Stock under the Plan for favorable tax treatment or to avoid unfavorable tax treatment, the Corporation makes no representation that the desired tax treatment will be available and expressly disclaims any liability for the failure to maintain favorable or avoid unfavorable tax treatment No option or issuance of shares of Common Stock under the Plan shall permit an Optionee or a Participant to defer receipt of compensation beyond the date of exercise, unless the Committee determines that such option or issuance shall be subject to Section 409A. Notwithstanding any provision of the Plan or any option, award or agreement to the contrary, any amount that constitutes “deferred compensation” within the meaning of Section 409A and is payable under the Plan solely by reason of an Optionee’s or a Participant’s cessation of Service shall be payable only when the Optionee or Participant has experienced a “separation from service” within the meaning of Section 409A, provided, however, that if the Optionee or Participant is a “specified employee” within the meaning of Section 409A at the time of such separation from service, as determined by the Committee in accordance with Section 409A, payment shall be suspended until the six-month anniversary of the Optionee’s or Participant’s separation from service, at which time all payments that were suspended shall be paid to the Optionee or Participant in a lump sum.

 

 

VII.          NO EMPLOYMENT OR SERVICE RIGHTS

 

Nothing in the Plan shall confer upon the Optionee or the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Subsidiary employing or retaining such person) or of the Optionee or the Participant, which rights are hereby expressly reserved by each, to terminate such person’s Service at any time for any reason, with or without cause.

 

 

APPENDIX

 

The following definitions shall be in effect under the Plan:

 

A.            Board shall mean the Corporation’s Board of Directors.

 

B.            Code shall mean the Internal Revenue Code of 1986, as amended.

 

C.            Committee shall mean a committee of two (2) or more Board members appointed by the Board to exercise one or more administrative functions under the Plan.

 

D.            Common Stock shall mean the Corporation’s Common Stock.

 

E.            Corporate Transaction shall mean (1) any transaction or series of related transactions (including, without limitation, any reorganization, share exchange, consolidation or merger of the Corporation with or into any other entity but excluding any sale of capital stock by the Corporation for capital raising purposes) (x) in which the holders of the Corporation’s outstanding capital stock immediately before the first such transaction do not, immediately after any other such transaction, retain stock or other equity interests representing at least fifty percent (50%) of the voting power of the surviving entity of such transaction or (y) in which at least fifty percent (50%) of the Corporation’s outstanding capital stock is transferred (calculated on an as-converted to Common Stock basis); or (2) any sale, conveyance or disposition of all or substantially all of the assets of the Corporation.

 

F.            Corporation shall mean Aziyo Biologics, Inc., a Delaware corporation.

 

G.            Disability shall mean the inability of an Optionee or Participant to engage in any substantially gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code and shall be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.

 

H.            Employee shall mean an individual who is in the employ of the Corporation or any Subsidiary, subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance.

 

I.            Exercise Date shall mean the date on which the Corporation shall have received written notice of the option exercise.

 

 

J.            Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions and in compliance with Section 409A of the Code or, in the case of an Incentive Option, in compliance with Section 422 of the Code:

 

(1)            If the Common Stock is at the time listed on any United States stock exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on such stock exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

 

(2)            If the Common Stock is not at the time listed on any United States stock exchange, then the Fair Market Value shall be determined by the Plan Administrator after taking into account such factors as the Plan Administrator shall deem appropriate.

 

K.            Incentive Option shall mean an option which satisfies the requirements of Code Section 422.

 

L.            1934 Act shall mean the Securities Exchange Act of 1934, as amended.

 

M.            Non-Statutory Option shall mean an option that does not satisfy the requirements of Code Section 422.

 

N.            Option Grant Program shall mean the option grant program in effect under the Plan.

 

O.            Optionee shall mean any person to whom an option is granted under the Plan.

 

P.            Participant shall mean any person who is issued shares of Common Stock under the Stock Issuance Program.

 

Q.            Plan shall mean this 2015 Stock Option/Stock Issuance Plan, as amended from time to time.

 

R.            Plan Administrator shall mean either the Board or the Committee, to the extent the Committee is at the time responsible for the administration of the Plan.

 

S.            Service shall mean the provision of services to the Corporation (or any Subsidiary) by a person in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option or stock issuance grant.

 

T.            Stock Issuance Agreement shall mean the agreement entered into by the Corporation and the Participant at the time of issuance of shares of Common Stock under the Stock Issuance Program.

 

U.            Stock Issuance Program shall mean the stock issuance program in effect under the Plan.

 

 

V.            Subsidiary shall mean any entity in which the Corporation holds, directly or through one or more intermediaries, the beneficial or record ownership of a majority of the voting or economic interests of such entity.

 

W.            10% Stockholders shall mean the owner of stock (as determined under Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation.

 

 

AZIYO BIOLOGICS, INC.

 

STOCK OPTION AGREEMENT

 

RECITALS

 

A.            The Board has adopted the Plan for the purpose of retaining the services of selected Employees, non-employee members of the Board or the board of directors of any Subsidiary and consultants and other independent advisors who provide services to the Corporation or any Subsidiary.

 

B.            Optionee is to render valuable services to the Corporation or a Subsidiary and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Corporation’s grant of an option to Optionee.

 

C.            All capitalized terms in this Agreement shall have the meaning assigned to them in the attached Appendix.

 

AGREEMENT

 

NOW, THEREFORE, it is hereby agreed as follows:

 

1.            Grant of Option. The Corporation hereby grants to Optionee, as of the Grant Date, an option to purchase up to the number of Option Shares specified in the Grant Notice. The Option Shares shall be purchasable from time to time during the option term specified in Paragraph 2 at the Exercise Price.

 

2.            Option Term. This option shall expire at the close of business on the Expiration Date, unless sooner terminated in accordance with Paragraph 5 or 17.

 

3.             Prohibited Transfers. During the lifetime of Optionee, this option shall be exercisable only by Optionee and shall not be sold, transferred, assigned, pledged, encumbered or otherwise disposed of without the Plan Administrator’s prior written consent. Any sale, transfer, assignment, pledge encumbrance or other disposition made in contravention of this Paragraph 3 shall be null and void.

 

4.            Dates of Exercise. This option shall become exercisable for the Option Shares in one or more installments as specified in the Grant Notice. As the option becomes exercisable for such installments, those installments shall accumulate and the option shall remain exercisable for the accumulated installments until the Expiration Date or sooner termination of the option term under Paragraph 5 or 17.

 

5.            Cessation of Service. The following provisions shall govern the exercise of this option at the time of cessation of Optionee’s Service, subject to Paragraph 17:

 

(a)            Should the Optionee’s Service terminate for any reason other than Disability, death, or for cause while this option is outstanding, then the Optionee shall have a period of three (3) months commencing with the date of such cessation of Service during which

to exercise the option. In no event shall this option be exercisable at any time after the expiration of the option term.

 

 

(b)            In the event of a cessation of Service for cause, as determined by the Plan Administrator, while this option is outstanding, then this option shall immediately terminate and be of no further force or effect as of the effective date of such cessation of Service.

 

(c)            Should the Optionee’s Service terminate by reason of Disability while this option is outstanding, then the Optionee shall have a period of twelve (12) months commencing with the date of such cessation of Service during which to exercise this option. In no event shall this option be exercisable at any time after the expiration of the option term.

 

(d)            Should the Optionee die while holding this option, then the personal representative of the Optionee’s estate or the person or persons to whom this option is transferred pursuant to the Optionee’s will or in accordance with the laws of descent and distribution shall have a period of twelve (12) months commencing with the date of the Optionee’s death during which to exercise each this option. In no event shall this option be exercisable at any time after the expiration of the option term.

 

(e)            During the applicable post-Service exercise period, this option may not be exercised in the aggregate for more than the number of vested shares for which this option is exercisable on the date of the Optionee’s cessation of Service. Upon the expiration of the applicable exercise period or, if earlier, upon the expiration of the option term, this option shall terminate and cease to be outstanding for any vested shares for which this option has not been exercised. However, this option shall, immediately upon the Optionee’s cessation of Service, terminate and cease to be outstanding to the extent this option is not otherwise at that time exercisable for vested shares.

 

(f)            In the event of a Corporate Transaction, the provisions of Paragraph 6 shall govern the period for which this option is to remain exercisable following the Optionee’s cessation of Service and shall supersede any provisions to the contrary in this Paragraph.

 

6.            Corporate Transaction.

 

(a)            In the event of a Corporate Transaction, the Board shall take one or more of the following actions with respect to this option, contingent upon the closing or completion of the Corporate Transaction:

 

(i)            arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue this option or to substitute a similar award for this option (including, but not limited to, an award to acquire the same consideration paid to the stockholders of the Corporation pursuant to the Corporate Transaction);

 

(ii)            arrange for the assignment of any reacquisition or repurchase rights held by the Corporation in respect of Common Stock issued or issuable upon exercise of this option to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);

 

 

(iii)            accelerate the vesting, in whole or in part, of this option or the shares of Common Stock issued or issuable upon exercise of this option (and, if applicable, the time at which this option may be exercised) to a date prior to the effective time of such Corporate Transaction as the Board shall determine, with this option terminating if not exercised at or prior to the effective time of the Corporate Transaction;

 

(iv)            arrange for the lapse of any reacquisition or repurchase rights held by the Corporation with respect to the Common Stock issued or issuable upon exercise of this option;

 

(v)            cancel or arrange for the cancellation of this option, to the extent not vested or not exercised prior to the effective time of the Corporate Transaction, in exchange for such cash consideration, if any, as the Board, in its sole discretion, may consider appropriate; and

 

(vi)            make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of the property the holder of this option would have received upon the exercise of this option over (B) any exercise price payable by such holder in connection with such exercise.

 

(c)            This Agreement shall not in any way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

 

7.            Adjustment in Option Shares. Should any change be made to the Common Stock by reason of any stock split, stock dividend, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to (i) the total number and/or class of securities subject to this option and (ii) the Exercise Price in order to reflect such change.

 

8.            Stockholder Rights. The holder of this option shall not have any stockholder rights with respect to the Option Shares until such person shall have exercised the option, paid the Exercise Price and become a holder of record of the purchased shares and until such Option Shares have vested.

 

9.            Manner of Exercising Option.

 

(a)            In order to exercise this option with respect to all or any part of the Option Shares for which this option is at the time exercisable, Optionee (or any other person or persons exercising the option) must take the following actions:

 

(vii)            Execute and deliver to the Corporation a Purchase Agreement for the Option Shares for which the option is exercised.

 

 

(viii)            Pay the aggregate Exercise Price for the purchased shares in one or more of the following forms:

 

(1)            cash or check made payable to the Corporation; or

 

(2)            a promissory note that constitutes valid consideration under applicable state law payable to the Corporation, but only to the extent authorized by the Plan Administrator in accordance with Paragraph 14.

 

(b)            Should the Common Stock be registered under Section 12(g) of the 1934 Act at the time the option is exercised, then the Exercise Price may also be paid in shares of Common Stock held by Optionee (or any other person or persons exercising the option) for the requisite period necessary to avoid a charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date. The Optionee may also elect to receive Option Shares equal to the value of this option (or the portion thereof being canceled) by surrender of this Option to the President or Secretary of the Corporation at the principal office of the Corporation together with notice of such election, in which event the Corporation shall issue to the Optionee a number of Option Shares determined using the following formula:

 

X =	Y (A - B)
	A

 

Where

 

X --         The number of Option Shares to be issued to the Optionee.

Y --         The number of vested Option Shares purchasable under this Option at such time.

A --         The fair market value of one share of Common Stock at such time as determined in good faith by the Board.

B --         The Exercise Price.

 

(c)            Payment of the Exercise Price must accompany the Purchase Agreement delivered to the Corporation in connection with the option exercise and the Optionee must:

 

(i)            Furnish to the Corporation appropriate documentation that the person or persons exercising the option (if other than Optionee) have the right to exercise this option;

 

(ii)            execute and deliver to the Corporation such written representations as may be requested by the Corporation in order for it to comply with the applicable requirements of Federal and state securities laws; and

 

(iii)            make appropriate arrangements with the Corporation (or Subsidiary employing or retaining Optionee) for the satisfaction of all Federal, state and local income and employment tax withholding requirements applicable to the option exercise.

 

 

(d)            As soon as practical after the Exercise Date, the Corporation shall issue to or on behalf of Optionee (or any other person or persons exercising this option) a certificate for the purchased Option Shares, with the appropriate legends affixed thereto.

 

(e)            In no event may this option be exercised for any fractional shares.

 

10.            REPURCHASE RIGHTS. ALL OPTION SHARES ACQUIRED UPON THE EXERCISE OF THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE CORPORATION AND ITS ASSIGNS TO REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE TERMS SPECIFIED IN THE PURCHASE AGREEMENT.

 

11.            Compliance with Laws and Regulations.

 

(a)            The exercise of this option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Corporation and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange on which the Common Stock may be listed for trading at the time of such exercise and issuance.

 

(b)            The inability of the Corporation to obtain approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Common Stock pursuant to this option shall relieve the Corporation of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. The Corporation, however, shall use its commercially reasonable efforts to obtain all such approvals.

 

12.            Successors and Assigns. Except to the extent otherwise provided in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and Optionee, Optionee’s permitted assigns and the legal representatives, heirs and legatees of Optionee’s estate.

 

13.            Notices. Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated below Optionee’s signature line on the Grant Notice. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

 

14.            Financing. The Plan Administrator may, in its absolute discretion and without any obligation to do so, permit Optionee to pay the Exercise Price for the purchased Option Shares by delivering a promissory note that constitutes valid consideration under applicable state law. The terms of any such promissory note (including the interest rate, the requirements for collateral and the terms of repayment) shall be established by the Plan Administrator in its sole discretion.

 

15.            Construction. This Agreement and the option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this option.

 

 

16.            Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without resort to that State’s conflict-of-laws rules.

 

17.            Stockholder Approval.

 

(a)            The grant of this option is subject to approval of the Plan by the Corporation’s stockholders within twelve (12) months after the adoption of the Plan by the Board. Notwithstanding any provision of this Agreement to the contrary, this option may not be exercised in whole or in part until such stockholder approval is obtained. In the event that such stockholder approval is not obtained, then this option shall terminate in its entirety and Optionee shall have no further rights to acquire any Option Shares hereunder.

 

(b)            If the Option Shares covered by this Agreement exceed, as of the Grant Date, the number of shares of Common Stock which may without stockholder approval be issued under the Plan, then this option shall be void with respect to such excess shares, unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan.

 

18.            Additional Terms Applicable to an Incentive Option. In the event this option is designated an Incentive Option in the Grant Notice, the following terms and conditions shall also apply to the grant:

 

(a)            This option shall cease to qualify for favorable tax treatment as an Incentive Option if (and to the extent) this option is exercised for one or more Option Shares: (i) more than three (3) months after the date Optionee ceases to be an Employee for any reason other than death or Disability or (ii) more than twelve (12) months after the date Optionee ceases to be an Employee by reason of Disability.

 

(b)            This option shall not become exercisable in the calendar year in which granted if (and to the extent) the aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for which this option would otherwise first become exercisable in such calendar year would, when added to the aggregate value (determined as of the respective date or dates of grant) of the Common Stock and any other securities for which one or more other Incentive Options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Corporation or any Subsidiary) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. To the extent the exercisability of this option is deferred by reason of the foregoing limitation, the deferred portion shall become exercisable in the first calendar year or years thereafter in which the One Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18(b) would not be contravened, but such deferral shall in all events end immediately prior to the effective date of a Corporate Transaction in which this option is not to be assumed, whereupon the option shall become immediately exercisable as a Non-Statutory Option for the deferred portion of the Option Shares.

 

(c)            Should Optionee hold, in addition to this option, one or more other options to purchase Common Stock which become exercisable for the first time in the same calendar year as this option, then the foregoing limitations on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted.

 

 

APPENDIX

 

The following definitions shall be effect under the Agreement:

 

A.            Agreement shall mean this Stock Option Agreement.

 

B.            Board shall mean the Corporation’s Board of Directors.

 

C.            Code shall mean the Internal Revenue Code of 1986, as amended.

 

D.            Common Stock shall mean the Corporation’s Common Stock.

 

E.            Corporate Transaction shall mean (1) any transaction or series of related transactions (including, without limitation, any reorganization, share exchange, consolidation or merger of the Corporation with or into any other entity but excluding any sale of capital stock by the Corporation for capital raising purposes) (x) in which the holders of the Corporation’s outstanding capital stock immediately before the first such transaction do not, immediately after any other such transaction, retain stock or other equity interests representing at least fifty percent (50%) of the voting power of the surviving entity of such transaction or (y) in which at least fifty percent (50%) of the Corporation’s outstanding capital stock is transferred (calculated on an as-converted to Common Stock basis); or (2) any sale, conveyance or disposition of all or substantially all of the assets of the Corporation.

 

F.            Corporation shall mean Aziyo Biologics, Inc., a Delaware corporation.

 

G.            Disability shall mean the inability of an Optionee to engage in any substantially gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code and shall be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.

 

H.            Employee shall mean an individual who is in the employ of the Corporation or any Subsidiary, subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance.

 

I.            Exercise Date shall mean the date on which the option shall have been exercised in accordance with Paragraph 9 of the Agreement.

 

J.            Exercise Price shall mean the exercise price per share as specified in the Grant Notice.

 

K.            Expiration Date shall mean the date on which the option expires as specified in the Grant Notice.

 

 

L.            Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions and in compliance with Section 409A of the Code or, in the case of an Incentive Option, in compliance with Section 422 of the Code:

 

1.            If the Common Stock is at the time listed on any United States stock exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on such stock exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

 

2.            If the Common Stock is not at the time listed on any United States stock exchange, then the Fair Market Value shall be determined by the Plan Administrator after taking into account such factors as the Plan Administrator shall deem appropriate.

 

M.            Grant Date shall mean the date of grant of the option as specified in the Grant Notice.

 

N.            Grant Notice shall mean the Notice of Grant of Stock Option accompanying the Agreement.

 

O.            Incentive Option shall mean an option which satisfies the requirements of Code Section 422.

 

P.            1934 Act shall mean the Securities Exchange Act of 1934, as amended.

 

Q.            Non-Statutory Option shall mean an option that does not satisfy the requirements of Code Section 422.

 

R.            Option Shares shall mean the number of shares of Common Stock subject to the option as specified in the Grant Notice.

 

S.            Optionee shall mean the person to whom the option is granted as specified in the Grant Notice.

 

T.            Plan shall mean the Corporation’s 2015 Stock Option/Stock Issuance Plan, as amended from time to time.

 

U.            Plan Administrator shall mean either the Board or a committee of Board members, to the extent the committee is at the time responsible for the administration of the Plan.

 

V.            Purchase Agreement shall mean the stock purchase agreement in substantially the form of Exhibit B to the Grant Notice.

 

W.            Service shall mean the Optionee’s performance of services for the Corporation (or any Subsidiary) in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor.

 

X.            Subsidiary shall mean any entity in which the Corporation holds, directly or through one or more intermediaries, the beneficial or record ownership of a majority of the voting or economic interests of such entity.

 

 

AZIYO BIOLOGICS, INC.

 

STOCK PURCHASE AGREEMENT

 

This STOCK PURCHASE AGREEMENT (this “Agreement”) is made as of this         day of                          ,           , by and between Aziyo Biologics, Inc., a Delaware corporation (the “Corporation”) and                        , an individual (“Optionee”).

 

All capitalized terms in this Agreement shall have the meaning assigned to them in this Agreement or in the attached Appendix.

 

A.            EXERCISE OF OPTION

 

1.            Exercise. Optionee hereby purchases           shares of Common Stock (the “Purchased Shares”) pursuant to that certain option (the “Option”) granted to Optionee on the                    day of                           ,           (the “Grant Date”) to purchase up to       shares of Common Stock under the Plan (the “Purchased Shares”) at the exercise price of $           per share (the “Exercise Price”).

 

2.            Payment. Concurrently with the delivery of this Agreement to the Corporation, Optionee shall pay the Exercise Price for the Purchased Shares in accordance with the provisions of the Option Agreement and shall deliver whatever additional documents may be required by the Option Agreement as a condition for exercise.

 

3.            Stockholder Rights. Until such time as the Corporation exercises the Repurchase Right, Optionee (or any permitted successor in interest) shall have all the rights of a stockholder (including voting, dividend and liquidation rights) with respect to the Purchased Shares subject, however, to the transfer restrictions of Articles B and C. Optionee shall, if and when requested by the Corporation, execute a joinder to any right of first refusal and co-sale agreement, investor rights agreement or other stockholder agreement to which the Corporation is a party.

 

B.            SECURITIES LAW COMPLIANCE

 

1.            Restricted Securities. The Purchased Shares have not been registered under the 1933 Act and are being issued to Optionee in reliance upon the exemption from such registration provided by SEC Rule 701 for stock issuances under compensatory benefit plans such as the Plan. Optionee hereby confirms that Optionee has been informed that the Purchased Shares are restricted securities under the 1933 Act and may not be resold or transferred unless the Purchased Shares are first registered under the Federal securities laws or unless an exemption from such registration is available. Accordingly, Optionee hereby acknowledges that Optionee is prepared to hold the Purchased Shares for an indefinite period and that Optionee is aware that SEC Rule 144 issued under the 1933 Act which exempts certain resales of unrestricted securities is not presently available to exempt the resale of the Purchased Shares from the registration requirements of the 1933 Act.

 

 

2.            Restrictions on Disposition of Purchased Shares. Optionee shall not make any sale, transfer, assignment, pledge, encumbrance or other disposition of the Purchased Shares unless and until there is compliance with all of the following requirements:

 

(a)            Optionee shall have provided the Corporation with a written summary of the terms and conditions of the proposed sale, transfer, assignment, pledge, encumbrance or other disposition.

 

(b)            Optionee shall have complied with all requirements of this Agreement applicable to the sale, transfer, assignment, pledge, encumbrance or other disposition of the Purchased Shares.

 

(c)            Optionee shall have provided the Corporation with written assurances, in form and substance satisfactory to the Corporation, that (i) the proposed sale, transfer, assignment, pledge, encumbrance or other disposition does not require registration of the Purchased Shares under the 1933 Act and (ii) all appropriate action necessary for compliance with the registration requirements of the 1933 Act or any exemption from registration available under the 1933 Act (including Rule 144) has been taken.

 

The Corporation shall not be required (i) to transfer on its books any Purchased Shares which have been sold or transferred in violation of the provisions of this Agreement or (ii) to treat as the owner of the Purchased Shares, or otherwise to accord voting, dividend or liquidation rights to, any transferee to whom the Purchased Shares have been transferred in contravention of this Agreement.

 

3.            Restrictive Legends. The stock certificates for the Purchased Shares shall be endorsed with the following restrictive legends:

 

“The securities represented by this Certificate have not been registered under the Securities Act of 1933 or any other securities laws. These securities may not be sold, retransferred or otherwise disposed of in the absence of (1) an effective registration statement covering such securities under the Securities Act of 1933 and any other applicable securities laws or (2) an opinion of counsel reasonably satisfactory to the Corporation that registration is not required.”

 

(a)            “The voting and sale, transfer, hypothecation, negotiation, pledge, assignment, encumbrance, or other disposition of this Certificate and the securities represented hereby are restricted by and are subject to all of the terms, conditions and provisions of that certain Stock Purchase Agreement. The securities represented by this Certificate are also subject to vesting and repurchase obligations under such Agreement. A copy of such Agreement may be obtained by appropriate parties upon written request to the Secretary of the Corporation.”

 

 

C.            TRANSFER RESTRICTIONS

 

1.            Restriction on Transfer. Except for any Permitted Transfer, Optionee shall not sell, transfer, assign, pledge, encumber or otherwise dispose of any of the Purchased Shares without the prior written consent of the Board (which may be granted or withheld in its absolute discretion).

 

2.            Transferee Obligations. Each person (other than the Corporation) to whom the Purchased Shares are transferred by means of a Permitted Transfer must, as a condition precedent to the validity of such transfer, acknowledge in writing to the Corporation that such person is bound by the provisions of this Agreement and that the transferred shares are subject to (i) the Repurchase Right and (ii) the transfer restrictions contained in this Article C (including the Market Stand-Off), to the same extent such shares would be so subject if retained by Optionee.

 

3.            Market Stand-Off.

 

(a)            In connection with any underwritten public offering by the Corporation of its equity securities pursuant to an effective registration statement filed under the 1933 Act, including the Corporation’s initial public offering, Owner shall not sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose or transfer for value or otherwise agree to engage in any of the foregoing transactions with respect to, any Purchased Shares without the prior written consent of the Corporation or its underwriters. Such restriction (the “Market Stand-Off”) shall be in effect for such period of time from and after the effective date of the final prospectus for the offering as may be requested by the Corporation or such underwriters. In no event, however, shall such period exceed one hundred eighty (180) days (or such additional period as may be requested by the Corporation or an underwriter to accommodate regulatory restrictions on the publication or other distribution of research reports and analyst recommendations and opinions, including, but not limited to, the restrictions contained in the Financial Industry Regulatory Authority, Inc. Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto but in no event shall the total period exceed two hundred ten (210) days).

 

(b)            Any new, substituted or additional securities which are by reason of any Recapitalization or Reorganization distributed with respect to the Purchased Shares shall be immediately subject to the Market Stand-Off, to the same extent the Purchased Shares are at such time covered by such provisions.

 

(c)            In order to enforce the Market Stand-Off, the Corporation may impose stop-transfer instructions with respect to the Purchased Shares until the end of the applicable stand-off period.

 

 

D.            REPURCHASE RIGHT

 

1.            Grant. The Corporation is hereby granted the right (the “Repurchase Right”), exercisable at any time during the ninety (90) day period following the date Optionee ceases for any reason to remain in Service or, if later, during the ninety (90) day period following the execution date of this Agreement, to repurchase at the lesser of (i) the Exercise Price and (ii) the Fair Market Value all or any portion of the Purchased Shares in which Optionee is not, at the time of his or her cessation of Service, vested in accordance with the Vesting Schedule (such shares to be hereinafter referred to as the “Unvested Shares”).

 

2.            Exercise of the Repurchase Right. The Repurchase Right shall be exercisable by written notice delivered to each Owner of the Purchased Shares prior to the expiration of the ninety (90) day exercise period. The notice shall indicate the number of Unvested Shares to be repurchased and the date on which the repurchase is to be effected, such date to be not more than thirty (30) days after the date of such notice. The certificates representing the Unvested Shares to be repurchased shall be delivered to the Corporation prior to the close of business on the date specified for the repurchase. Concurrently with the receipt of such stock certificates, the Corporation shall pay to Owner, in cash or cash equivalents (including the cancellation of any purchase-money indebtedness), an amount equal to the lesser of (i) the Exercise Price and (ii) the Fair Market Value of any Unvested Shares which are to be repurchased from Owner.

 

3.            Termination of the Repurchase Right. The Repurchase Right shall terminate with respect to any Purchased Shares for which it is not timely exercised under Article D.2. All Purchased Shares as to which the Repurchase Right lapses shall, however, remain subject to the transfer restrictions contained in Article C (including the Market Stand-Off).

 

4.            Aggregate Vesting Limitation. If the Option is exercised in more than one increment so that Optionee is a party to one or more other Stock Purchase Agreements (the “Prior Purchase Agreements”) which are executed prior to the date of this Agreement, then the total number of Purchased Shares as to which Optionee shall be deemed to have a fully-vested interest under this Agreement and all Prior Purchase Agreements shall not exceed in the aggregate the number of Purchased Shares in which Optionee would otherwise at the time be vested, in accordance with the Vesting Schedule, had all the Purchased Shares (including those acquired under the Prior Purchase Agreements) been acquired exclusively under this Agreement.

 

5.            Recapitalization. Any new, substituted or additional securities or other property (including cash paid other than as a regular cash dividend) which is by reason of any Recapitalization distributed with respect to any Purchased Shares shall be immediately subject to the Repurchase Right, but only to the extent the Purchased Shares are at the time covered by such right. Appropriate adjustments to reflect such distribution shall be made to the number and/or class of Purchased Shares subject to this Agreement and to the price per share to be paid upon the exercise of the Repurchase Right in order to reflect the effect of any such Recapitalization upon the Corporation’s capital structure; provided, however, that the aggregate purchase price shall remain the same.

 

 

6.            Corporate Transaction.

 

(a)            The Repurchase Right shall be assignable to the successor entity in any Corporate Transaction.

 

(b)            To the extent the Repurchase Right remains in effect following a Corporate Transaction, such right shall apply to the new capital stock or other property (including any cash payments) received in exchange for the Purchased Shares in consummation of the Corporate Transaction, but only to the extent the Purchased Shares are at the time covered by such right. Appropriate adjustments shall be made to the price per share payable upon exercise of the Repurchase Right to reflect the effect of the Corporate Transaction upon the Corporation’s capital structure; provided, however, that the aggregate purchase price shall remain the same.

 

E.            SPECIAL TAX ELECTION

 

The acquisition of the Purchased Shares may result in adverse tax consequences which may be avoided or mitigated by filing an election under Code Section 83(b). Such election must be filed within thirty (30) days after the date of this Agreement. A description of the tax consequences applicable to the acquisition of the Purchased Shares and the form for making the Code Section 83(b) election are set forth in Exhibit I. OPTIONEE SHOULD CONSULT WITH HIS OR HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF ACQUIRING THE PURCHASED SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING THE CODE SECTION 83(b) ELECTION. OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE’S SOLE RESPONSIBILITY, AND NOT THE CORPORATION’S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.

 

F.            GENERAL PROVISIONS

 

1.            Assignment. The Corporation may assign the Repurchase Right to any person or entity selected by the Board including, without limitation, one or more stockholders of the Corporation.

 

2.            No Employment or Service Contract. Nothing in this Agreement or in the Plan shall confer upon Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Subsidiary employing or retaining Optionee) or of Optionee, which rights are hereby expressly reserved by each, to terminate Optionee’s Service at any time for any reason, with or without cause.

 

3.            Notices. Any notice required to be given under this Agreement shall be in writing and shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, registered or certified, postage prepaid and properly addressed to the party entitled to such notice at the address indicated below such party’s signature line on this Agreement or at such other address as such party may designate by ten (10) days advance written notice under this Paragraph to all other parties to this Agreement.

 

 

4.            No Waiver. The failure of the Corporation in any instance to exercise the Repurchase Right shall not constitute a waiver of any other repurchase rights that may subsequently arise under the provisions of this Agreement or any other agreement between the Corporation and Optionee or Optionee’s spouse. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature.

 

5.            Cancellation of Shares. If the Corporation shall make available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Purchased Shares to be repurchased in accordance with the provisions of this Agreement, then from and after such time, the person from whom such shares are to be repurchased shall no longer have any rights as a holder of such shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such shares shall be deemed purchased in accordance with the applicable provisions hereof, and the Corporation shall be deemed the owner and holder of such shares, whether or not the certificates therefor have been delivered as required by this Agreement.

 

G.            MISCELLANEOUS PROVISIONS

 

1.            Optionee Undertaking. Optionee hereby agrees to take whatever additional action and execute whatever additional documents the Corporation may deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on either Optionee or the Purchased Shares pursuant to the provisions of this Agreement.

 

2.            Agreement is Entire Contract. This Agreement constitutes the entire contract between the parties hereto with regard to the subject matter hereof. This Agreement is made pursuant to the provisions of the Plan and shall in all respects be construed in conformity with the terms of the Plan.

 

3.            Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware without resort to that State’s conflict-of-laws rules.

 

4.            Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

 

5.            Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and upon Optionee, Optionee’s permitted assigns and the legal representatives, heirs and legatees of Optionee’s estate, whether or not any such person shall have become a party to this Agreement and have agreed in writing to join herein and be bound by the terms hereof.

 

 

SIGNATURES

 

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first indicated above.

 

	AZIYO BIOLOGICS, INC.
	By:
		Name:
		Title:

 

	OPTIONEE
	Name:
	Title:

 

 

EXHIBIT I

 

FEDERAL INCOME TAX CONSEQUENCES AND

SECTION 83(b) TAX ELECTION

 

I.            Federal Income Tax Consequences and Section 83(b) Election For Exercise of Non-Statutory Option. If the Purchased Shares are acquired pursuant to the exercise of a Non-Statutory Option, as specified in the Grant Notice, then under Code Section 83, the excess of the Fair Market Value of the Purchased Shares on the date any forfeiture restrictions applicable to such shares lapse over the Exercise Price paid for such shares will be reportable as ordinary income on the lapse date. For this purpose, the term “forfeiture restrictions” includes the right of the Corporation to repurchase the Purchased Shares pursuant to the Repurchase Right. However, Optionee may elect under Code Section 83(b) to be taxed at the time the Purchased Shares are acquired, rather than when and as such Purchased Shares cease to be subject to such forfeiture restrictions. Such election must be filed with the Internal Revenue Service within thirty (30) days after the date of the Agreement. Even if the Fair Market Value of the Purchased Shares on the date of the Agreement equals the Exercise Price paid (and thus no tax is payable), the election must be made to avoid adverse tax consequences in the future. The form for making this election is attached as part of this exhibit. FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30) DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME BY OPTIONEE AS THE FORFEITURE RESTRICTIONS LAPSE.

 

II.            Federal Income Tax Consequences and Conditional Section 83(b) Election For Exercise of Incentive Option. If the Purchased Shares are acquired pursuant to the exercise of an Incentive Option, as specified in the Grant Notice, then the following tax principles shall be applicable to the Purchased Shares:

 

(i)            For regular tax purposes, no taxable income will be recognized at the time the Option is exercised.

 

(ii)            The excess of (a) the Fair Market Value of the Purchased Shares on the date the Option is exercised or (if later) on the date any forfeiture restrictions applicable to the Purchased Shares lapse over (b) the Exercise Price paid for the Purchased Shares will be included in Optionee’s taxable income for alternative minimum tax purposes.

 

(iii)            If Optionee makes a disqualifying disposition of the Purchased Shares, then Optionee will recognize ordinary income in the year of such disposition equal in amount to the excess of (a) the Fair Market Value of the Purchased Shares on the date the Option is exercised or (if later) on the date any forfeiture restrictions applicable to the Purchased Shares lapse over (b) the Exercise Price paid for the Purchased Shares. Any additional gain recognized upon the disqualifying disposition will be either short-term or long-term capital gain depending upon the period for which the Purchased Shares are held prior to the disposition.

 

 

(iv)            For purposes of the foregoing, the term “forfeiture restrictions” will include the right of the Corporation to repurchase the Purchased Shares pursuant to the Repurchase Right. The term “disqualifying disposition” means any sale or other disposition¹ of the Purchased Shares within two (2) years after the Grant Date or within one (1) year after the exercise date of the Option.

 

(v)            In the absence of final Treasury Regulations relating to Incentive Options, it is not certain whether Optionee may, in connection with the exercise of the Option for any Purchased Shares at the time subject to forfeiture restrictions, file a protective election under Code Section 83(b) which would limit (a) Optionee’s alternative minimum taxable income upon exercise and (b) Optionee’s ordinary income upon a disqualifying disposition to the excess of the Fair Market Value of the Purchased Shares on the date the Option is exercised over the Exercise Price paid for the Purchased Shares. Accordingly, such election if properly filed will only be allowed to the extent the final Treasury Regulations permit such a protective election. Page 2 of the attached form for making the election should be filed with any election made in connection with the exercise of an Incentive Option.

 

 

¹            Generally, a disposition of shares purchased under an Incentive Option includes any transfer of legal title, including a transfer by sale, exchange or gift, but does not include a transfer to the Optionee’s spouse, a transfer into joint ownership with right of survivorship if Optionee remains one of the joint owners, a pledge, a transfer by bequest or inheritance or certain tax free exchanges permitted under the Code.

 

 

SECTION 83(b) ELECTION

 

This statement is being made under Section 83(b) of the Internal Revenue Code, pursuant to Treas. Reg. Section 1.83-2.

 

(1)

The taxpayer who performed the services is:

 

Name:

Address:

Taxpayer Ident. No.:

 

(2)

The property with respect to which the election is being made is                 shares of the common stock of Aziyo Biologics, Inc.

 

(3)

The property was issued on                                     ,                              .

 

(4)

The taxable year in which the election is being made is the calendar year               .

 

(5)

The property is non-transferable and is subject to a risk of forfeiture unless and until certain service requirements are met.

 

(6)

The fair market value at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is $             per share.

 

(7)

The amount paid for such property is $                per share.

 

(8)

A copy of this statement was furnished to Aziyo Biologics, Inc. for whom taxpayer rendered the services underlying the transfer of property.

 

(9)

This statement is executed on                                     ,                              .

 

Spouse (if any)		Taxpayer

 

This election must be filed with the Internal Revenue Service Center with which taxpayer files or her Federal income tax returns and must be made within thirty (30) days after the execution date of the Stock Purchase Agreement. This filing should be made by registered or certified mail, return receipt requested. Optionee must retain two (2) copies of the completed form for filing with his or her Federal and state tax returns for the current tax year and an additional copy for his or her records.

 

 

The property described in the above Section 83(b) election is comprised of shares of common stock acquired pursuant to the exercise of an incentive stock option under Section 422 of the Internal Revenue Code (the “Code”). Accordingly, it is the intent of the Taxpayer to utilize this election to achieve the following tax results:

 

1.            The purpose of this election is to have the alternative minimum taxable income attributable to the purchased shares measured by the amount by which the fair market value of such shares at the time of their transfer to the Taxpayer exceeds the purchase price paid for the shares. In the absence of this election, such alternative minimum taxable income would be measured by the spread between the fair market value of the purchased shares and the purchase price which exists on the various lapse dates in effect for the forfeiture restrictions applicable to such shares. The election is to be effective to the full extent permitted under the Code.

 

2.            Section 421(a)(1) of the Code expressly excludes from income any excess of the fair market value of the purchased shares over the amount paid for such shares. Accordingly, this election is also intended to be effective in the event there is a “disqualifying disposition” of the shares, within the meaning of Section 421(b) of the Code, which would otherwise render the provisions of Section 83(a) of the Code applicable at that time. Consequently, the Taxpayer hereby elects to have the amount of disqualifying disposition income measured by the excess of the fair market value of the purchased shares on the date of transfer to the Taxpayer over the amount paid for such shares. Since Section 421(a) presently applies to the shares which are the subject of this Section 83(b) election, no taxable income is actually recognized for regular tax purposes at this time, and no income taxes are payable, by the Taxpayer as a result of this election.

 

[THIS PAGE 2 IS TO BE ATTACHED TO ANY SECTION 83(b) ELECTION FILED IN CONNECTION WITH THE EXERCISE OF AN INCENTIVE STOCK OPTION UNDER THE FEERAL TAX LAWS.]

 

 

APPENDIX

 

The following definitions shall be in effect under the Agreement:

 

A.            Agreement shall mean this Stock Purchase Agreement.

 

B.            Board shall mean the Corporation’s Board of Directors.

 

C.            Code shall mean the Internal Revenue Code of 1986, as amended.

 

D.            Common Stock shall mean the Corporation’s Common Stock.

 

E.            Corporate Transaction shall mean(1) any transaction or series of related transactions (including, without limitation, any reorganization, share exchange, consolidation or merger of the Corporation with or into any other entity but excluding any sale of capital stock by the Corporation for capital raising purposes) (x) in which the holders of the Corporation’s outstanding capital stock immediately before the first such transaction do not, immediately after any other such transaction, retain stock or other equity interests representing at least fifty percent (50%) of the voting power of the surviving entity of such transaction or (y) in which at least fifty percent (50%) of the Corporation’s outstanding capital stock is transferred (calculated on an as-converted to Common Stock basis); or (2) any sale, conveyance or disposition of all or substantially all of the assets of the Corporation.

 

F.            Corporation shall mean Aziyo Biologics, Inc., a Delaware corporation.

 

G.            Disability shall mean the inability of Optionee to engage in any substantially gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code and shall be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.

 

H.            Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions and in compliance with Section 409A of the Code or, in the case of an Incentive Option, in compliance with Section 422 of the Code:

 

1.            If the Common Stock is at the time listed on any United States stock exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on such stock exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

 

 

2.            If the Common Stock is not at the time listed on any United States stock exchange, then the Fair Market Value shall be determined by the Plan Administrator after taking into account such factors as the Plan Administrator shall deem appropriate.

 

I.            Grant Notice shall mean the Notice of Grant of Stock Option accompanying the Option Agreement.

 

J.            Incentive Option shall mean an option which satisfies the requirements of Code Section 422.

 

K.            1933 Act shall mean the Securities Act of 1933, as amended.

 

L.            Non-Statutory Option shall mean an option that does not satisfy the requirements of Code Section 422.

 

M.            Option Agreement shall mean the Stock Option Agreement between the Corporation and the Optionee evidencing the Option and the other documents and agreements related thereto.

 

N.            Owner shall mean Optionee and all subsequent holders of the Purchased Shares who derive their claim of ownership through a Permitted Transfer from Optionee.

 

O.            Permitted Transfer shall mean (i) a gratuitous transfer of the Purchased Shares, provided and only if (A) Optionee obtains the Corporation’s prior written consent to such transfer, (B) prior to the completion of the transfer the transferee shall have executed documents assuming the obligations of the Optionee under this Agreement with respect to the transferred securities and (C) prior to the completion of the transfer the transferee shall have executed an irrevocable proxy appointing the transferring Optionee as the transferee’s proxy and giving the transferring Optionee full power of substitution to vote all of the shares of capital stock transferred pursuant to a gratuitous transfer, (ii) a transfer of title to the Purchased Shares effected pursuant to Optionee’s will or the laws of intestate succession following Optionee’s death or (iii) a transfer to the Corporation in pledge as security for any purchase-money indebtedness incurred by Optionee in connection with the acquisition of the Purchased Shares.

 

P.            Plan shall mean the Corporation’s 2015 Stock Option/Stock Issuance Plan, as amended from time to time.

 

Q.            Plan Administrator shall mean either the Board or a committee of Board members, to the extent the committee is at the time responsible for administration of the Plan.

 

R.            Recapitalization shall mean any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration.

 

 

S.            Reorganization shall mean any of the following transactions:

 

1.            a merger or consolidation in which the Corporation is not the surviving entity,

 

2.            a sale, transfer or other disposition of all or substantially all of the Corporation’s assets,

 

3.            a reverse merger in which the Corporation is the surviving entity but in which the Corporation’s outstanding voting securities are transferred in whole or in part to a person or persons different from the persons holding those securities immediately prior to the merger, or

 

4.            any transaction effected primarily to change the state in which the Corporation is incorporated or to create a holding company structure.

 

T.            Repurchase Right shall mean the right granted to the Corporation in accordance with Article D.

 

U.            SEC shall mean the Securities and Exchange Commission.

 

V.            Service shall mean the provision of services to the Corporation (or any Subsidiary) by a person in the capacity of an employee, subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance, a non-employee member of the board of directors or a consultant or independent advisor.

 

W.            Subsidiary shall mean any entity in which the Corporation holds, directly or through one or more intermediaries, the beneficial or record ownership of a majority of the voting or economic interests of such entity.

 

X.            Vesting Schedule shall mean the vesting schedule specified in the Plan or in the Grant Notice.

 

 

AZIYO BIOLOGICS, INC.

 

STOCK ISSUANCE AGREEMENT

 

This STOCK ISSUANCE AGREEMENT (this “Agreement”) is made as of this             day of                      ,         , by and between Aziyo Biologics, Inc., a Delaware corporation (the “Corporation”) and                   , a participant (“Participant”) in the Corporation’s 2015 Stock Option/Stock Issuance Plan (as amended from time to time, the “Plan”).

 

A.

PURCHASE OF SHARES

 

1.            Purchase. Participant hereby purchases, and the Corporation hereby sells to Participant,                     shares of the Corporation’s Common Stock (the “Purchased Shares”) at a purchase price of $                 per share (the “Purchase Price”) pursuant to the provisions of the Stock Issuance Program of the Plan.

 

2.            Payment. Concurrently with the execution of this Agreement, Participant shall deliver to the Secretary of the Corporation: (i) the aggregate Purchase Price payable for the Purchased Shares in cash or check payable to the Corporation’s order and (ii) a duly-executed Assignment Separate from Certificate (in the form attached hereto as Exhibit I).

 

3.            Delivery of Certificates. The certificates representing the Purchased Shares shall be held in escrow by the Secretary of the Corporation as provided in Article F.

 

4.            Stockholder Rights. Until such time as the Corporation exercises the Repurchase Right, Participant (or any successor in interest) shall have all the rights of a stockholder (including voting, dividend and liquidation rights) with respect to the Purchased Shares subject, however, to the transfer restrictions of Articles B and D. Participant shall, if and when requested by the Corporation, execute a joinder to any right of first refusal and co-sale agreement, investor rights agreement or other stockholder agreement to which the Corporation is a party.

 

5.            Confidentiality and Proprietary Rights Assignment Agreement. As a condition precedent to the accrual of Participant’s rights under the Plan and this Agreement, Participant shall execute and deliver to the Corporation the Confidentiality and Proprietary Rights Assignment Agreement in the form attached hereto as Exhibit II. Participant acknowledges and agrees that Participant’s receipt of the rights under the Plan and this Agreement constitute good and valuable consideration for Participant’s execution and delivery of such Confidentiality and Proprietary Rights Assignment Agreement.

 

B.            SECURITIES LAW COMPLIANCE

 

1.            Restricted Securities. The Purchased Shares have not been registered under the 1933 Act and are being issued to Participant in reliance upon the exemption from such registration provided by SEC Rule 701 for stock issuances under compensatory benefit plans such as the Plan. Participant hereby confirms that Participant has been informed that the Purchased Shares are restricted securities under the 1933 Act and may not be resold or transferred unless the Purchased Shares are first registered under the Federal securities laws or unless an exemption from such registration is available. Accordingly, Participant hereby acknowledges that Participant is prepared to hold the Purchased Shares for an indefinite period and that Participant is aware that SEC Rule 144 issued under the 1933 Act which exempts certain resales of unrestricted securities is not presently available to exempt the resale of the Purchased Shares from the registration requirements of the 1933 Act.

 

 

2.            Disposition of Purchased Shares. Participant shall not make any sale, transfer, assignment, pledge, encumbrance or other disposition of the Purchased Shares unless and until there is compliance with all of the following requirements:

 

(a)            Participant shall have provided the Corporation with a written summary of the terms and conditions of the proposed sale, transfer, assignment, pledge, encumbrance or other disposition.

 

(b)            Participant shall have complied with all requirements of this Agreement applicable to the sale, transfer, assignment, pledge, encumbrance or other disposition of the Purchased Shares.

 

(c)            Participant shall have provided the Corporation with written assurances, in form and substance satisfactory to the Corporation, that (i) the proposed sale, transfer, assignment, pledge, encumbrance or other disposition does not require registration of the Purchased Shares under the 1933 Act and (ii) all appropriate action necessary for compliance with the registration requirements of the 1933 Act or any exemption from registration available under the 1933 Act (including Rule 144) has been taken.

 

The Corporation shall not be required (i) to transfer on its books any Purchased Shares which have been sold or transferred in violation of the provisions of this Agreement or (ii) to treat as the owner of the Purchased Shares, or otherwise to accord voting, dividend or liquidation rights to, any transferee to whom the Purchased Shares have been transferred in contravention of this Agreement.

 

3.            Restrictive Legends. The stock certificates for the Purchased Shares shall be endorsed with the following restrictive legends:

 

(a)            “The securities represented by this Certificate have not been registered under the Securities Act of 1933 or any other securities laws. These securities may not be sold, retransferred or otherwise disposed of in the absence of (1) an effective registration statement covering such securities under the Securities Act of 1933 and any other applicable securities laws or (2) an opinion of counsel reasonably satisfactory to the Corporation that registration is not required.”

 

(b)            “The voting and sale, transfer, hypothecation, negotiation, pledge, assignment, encumbrance, or other disposition of this Certificate and the securities represented hereby are restricted by and are subject to all of the terms, conditions and provisions of that certain Stock Issuance Agreement. The securities represented by this Certificate are also subject to vesting and repurchase obligations under such Agreement. A copy of such Agreement may be obtained by appropriate parties upon written request to the Secretary of the Corporation.”

 

 

C.            VESTING SCHEDULE

 

The Participant shall vest in the Purchased Shares in accordance with the following vesting schedule:

 

(a)            [ADD VESTING SCHEDULE].

 

(b)            In no event shall any Unvested Shares vest following the Participant’s cessation of Service for any reason.

 

D.            TRANSFER RESTRICTIONS

 

1.            Restriction on Transfer. Except for any Permitted Transfer, Participant shall not sell, transfer, assign, pledge, encumber or otherwise dispose of any of the Purchased Shares without the prior written consent of the Board (which may be granted or withheld in its absolute discretion).

 

2.            Transferee Obligations. Each person (other than the Corporation) to whom the Purchased Shares are transferred by means of a Permitted Transfer must, as a condition precedent to the validity of such transfer, acknowledge in writing to the Corporation that such person is bound by the provisions of this Agreement and that the transferred shares are subject to (i) the Repurchase Right and (ii) the transfer restrictions contained in this Article D (including the Market Stand-Off), to the same extent such shares would be so subject if retained by Participant.

 

3.            Market Stand-Off.

 

(a)            In connection with any underwritten public offering by the Corporation of its equity securities pursuant to an effective registration statement filed under the 1933 Act, including the Corporation’s initial public offering, Owner shall not sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose or transfer for value or otherwise agree to engage in any of the foregoing transactions with respect to, any Purchased Shares without the prior written consent of the Corporation or its underwriters. Such restriction (the “Market Stand-Off”) shall be in effect for such period of time from and after the effective date of the final prospectus for the offering as may be requested by the Corporation or such underwriters. In no event, however, shall such period exceed one hundred eighty (180) days (or such additional period as may be requested by the Corporation or an underwriter to accommodate regulatory restrictions on the publication or other distribution of research reports and analyst recommendations and opinions, including, but not limited to, the restrictions contained in the Financial Industry Regulatory Authority, Inc. Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto but in no event shall the total period exceed two hundred ten (210) days).

 

(b)            Any new, substituted or additional securities which are by reason of any Recapitalization or Reorganization distributed with respect to the Purchased Shares shall be immediately subject to the Market Stand-Off, to the same extent the Purchased Shares are at such time covered by such provisions.

 

(c)            In order to enforce the Market Stand-Off, the Corporation may impose stop-transfer instructions with respect to the Purchased Shares until the end of the applicable stand-off period.

 

 

E.            REPURCHASE RIGHT

 

1.            Grant. The Corporation is hereby granted the right (the “Repurchase Right”), exercisable at any time during the ninety (90) day period following the date Participant ceases for any reason to remain in Service, to repurchase at the lesser of (i) the Purchase Price and (ii) the Fair Market Value all or any portion of the Purchased Shares in which Participant is not, at the time of his or her cessation of Service, vested in accordance with the Vesting Schedule (such shares to be hereinafter referred to as the “Unvested Shares”).

 

2.            Exercise of the Repurchase Right. The Repurchase Right shall be exercisable by written notice delivered to each Owner of the Purchased Shares prior to the expiration of the ninety (90) day exercise period. The notice shall indicate the number of Unvested Shares to be repurchased and the date on which the repurchase is to be effected, such date to be not more than thirty (30) days after the date of such notice. The certificates representing the Purchased Shares to be repurchased shall be delivered to the Corporation prior to the close of business on the date specified for the repurchase. Concurrently with the receipt of such stock certificates, the Corporation shall pay to Owner, in cash or cash equivalents (including the cancellation of any purchase-money indebtedness), an amount equal to the lesser of (i) the Purchase Price and (ii) the Fair Market Value of the Unvested Shares which are to be repurchased from Owner.

 

3.            Termination of the Repurchase Right. The Repurchase Right shall terminate with respect to any Purchased Shares for which it is not timely exercised under Paragraph E.2. All Purchased Shares as to which the Repurchase Rights lapse shall, however, remain subject to the transfer restrictions contained in Article D (including the Market Stand-Off).

 

4.            Recapitalization. Any new, substituted or additional securities or other property (including cash paid other than as a regular cash dividend) which is by reason of any Recapitalization distributed with respect to any Purchased Shares shall be immediately subject to such right. Appropriate adjustments to reflect such distribution shall be made to the number and/or class of Purchased Shares subject to this Agreement and to the price per share to be paid upon the exercise of the Repurchase Right in order to reflect the effect of any such Recapitalization upon the Corporation’s capital structure; provided, however, that the aggregate purchase price shall remain the same.

 

 

5.            Corporate Transaction.

 

In the event of a Corporate Transaction, the Board shall take one or more of the following actions with respect to the Purchased Shares, contingent upon the closing or completion of the Corporate Transaction:

 

(a)            arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the Repurchase Right as it relates to the Purchased Shares or to substitute a similar stock award for such Purchased Shares (including, but not limited to, an award to acquire the same consideration paid to the stockholders of the Corporation pursuant to the Corporate Transaction);

 

(b)            arrange for the assignment of the Repurchase Right held by the Corporation in respect of the Purchased Shares to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);

 

(c)            accelerate the vesting, in whole or in part, of the Purchased Shares to a date prior to the effective time of such Corporate Transaction as the Board shall determine;

 

(d)            arrange for the lapse of the Repurchase Rights with respect to some or all of the Purchased Shares; and/or

 

(e)            cancel or arrange for the cancellation of the Purchased Shares to the extent not vested prior to the effective time of the Corporate Transaction, in exchange for such cash consideration, if any, as the Board, in its sole discretion, may consider appropriate.

 

To the extent the Repurchase Right remains in effect following a Corporate Transaction, such Repurchase Right shall apply to the new capital stock or other property (including any cash payments) received in exchange for the Purchased Shares in consummation of the Corporate Transaction, but only to the extent the Purchased Shares are at the time covered by such right and appropriate adjustments shall be made to the price per share payable upon exercise of the Repurchase Right to reflect the effect of the Corporate Transaction upon the Corporation’s capital structure; provided, however, that the aggregate purchase price shall remain the same.

 

F.            ESCROW

 

1.            Deposit. Upon issuance, the certificates for the Purchased Shares shall be deposited in escrow with the Corporation to be held in accordance with the provisions of this Article F. Each deposited certificate shall be accompanied by a duly-executed Assignment Separate from Certificate in the form of Exhibit I. The deposited certificates, together with any other assets or securities from time to time deposited with the Corporation pursuant to the requirements of this Agreement, shall remain in escrow until such time or times as the certificates (or other assets and securities) are to be released or otherwise surrendered for cancellation in accordance with Paragraph F.3. Upon delivery of the certificates (or other assets and securities) to the Corporation, Owner shall be issued a receipt acknowledging the number of Purchased Shares (or other assets and securities) delivered in escrow.

 

 

2.            Recapitalization/Reorganization. Any new, substituted or additional securities or other property which is by reason of any Recapitalization or Reorganization distributed with respect to the Purchased Shares shall be immediately delivered to the Corporation to be held in escrow under this Article F, but only to the extent the Purchased Shares are at the time subject to the escrow requirements hereunder. However, all regular cash dividends on the Purchased Shares (or other securities at the time held in escrow) shall be paid directly to Owner and shall not be held in escrow.

 

3.            Release/Surrender. The Purchased Shares, together with any other assets or securities held in escrow hereunder, shall be subject to the following terms relating to their release from escrow or their surrender to the Corporation for repurchase and cancellation:

 

(a)            Should the Corporation elect to exercise the Repurchase Right with respect to any Purchased Shares, then the escrowed certificates for those Purchased Shares (together with any other assets or securities attributable thereto) shall be surrendered to the Corporation concurrently with the payment to Owner of any amount equal to the aggregate Purchase Price or Fair Market Value, as applicable, paid for those Purchased Shares, and Owner shall cease to have any further rights or claims with respect to such Purchased Shares (or other assets or securities attributable thereto.)

 

(b)            All Purchased Shares which vest (and any other vested assets and securities attributable thereto) shall be released within thirty (30) days after the dated of the termination of the Repurchase Right.

 

(c)            All Purchased Shares (or other assets or securities) released from escrow shall nevertheless remain subject to the transfer restrictions contained in Article D (including the Market Stand-Off), until such restriction terminates.

 

G.            SPECIAL TAX ELECTION

 

1.            Section 83(b) Election. Under Code Section 83, the excess of the fair market value of the Purchased Shares on the date any forfeiture restrictions applicable to such shares lapse over the Purchase Price paid for such shares will be reportable as ordinary income on the lapse date. For this purpose, the term “forfeiture restrictions” includes the right of the Corporation to repurchase the Purchased Shares pursuant to the Repurchase Right. Participant may elect under Code Section 83(b) to be taxed at the time the Purchased Shares are acquired, rather than when and as such Purchased Shares cease to be subject to such forfeiture restrictions. Such election must be filed with the Internal Revenue Service within thirty (30) days after the date of this Agreement. Even if the fair market value of the Purchased Shares on the date of this Agreement equals the Purchase Price paid (and thus no tax is payable), the election must be made to avoid adverse tax consequences in the future. THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT III HERETO. PARTICIPANT UNDERSTANDS THAT THE FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME AS THE FORFEITURE RESTRICTIONS LAPSE.

 

2.            FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT IS PARTICIPANT’S SOLE RESPONSIBILITY, AND NOT THE CORPORATION’S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.

 

 

H.            GENERAL PROVISIONS

 

1.            Assignment. The Corporation may assign the Repurchase Right to any person or entity selected by the Board including, without limitation, one or more stockholders of the Corporation.

 

2.            No Employment or Service Contract. Nothing in this Agreement or in the Plan shall confer upon Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Subsidiary employing or retaining Participant) or of Participant, which rights are hereby expressly reserved by each, to terminate Participant’s Service at any time for any reason, with or without cause.

 

3.            Notices. Any notice required to be given under this Agreement shall be in writing and shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, registered or certified, postage prepaid and properly addressed to the party entitled to such notice at the address indicated below such party’s signature line on this Agreement or at such other address as such party may designate by ten (10) days advance written notice under this Paragraph to all other parties to this Agreement.

 

4.            No Waiver. The failure of the Corporation in any instance to exercise the Repurchase Right shall not constitute a waiver of any other repurchase rights and/or rights of first refusal that may subsequently arise under the provisions of this Agreement or any other agreement between the Corporation and Participant. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature.

 

5.            Cancellation of Purchased Shares. If the Corporation shall make available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Purchased Shares to be repurchased in accordance with the provisions of this Agreement, then from and after such time, the person from whom such shares are to be repurchased shall no longer have any rights as a holder of such shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such shares shall be deemed purchased in accordance with the applicable provisions hereof, and the Corporation shall be deemed the owner and holder of such shares, whether or not the certificates therefor have been delivered as required by this Agreement.

 

6.            Participant Undertaking. Participant hereby agrees to take whatever additional action and execute whatever additional documents the Corporation may deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on either Participant or the Purchased Shares pursuant to the provisions of this Agreement.

 

7.            Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as such laws are applied to contracts entered into and performed in such State without resort to that State’s conflict-of-laws provisions.

 

8.            Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and Participant and Participant’s permitted assigns, legal representatives, heirs and legatees of Participant’s estate, whether or not any such person shall have become a party to this Agreement and have agreed in writing to join herein and be bound by the terms and conditions hereof.

 

 

9.            Counterparts. This Agreement may be executed in one or more counterparts. Each such counterpart shall be deemed to be an original and all such counterparts shall together constitute one and the same instrument.

 

10.            Agreement is Entire Contract. This Agreement constitutes the entire contract between the parties hereto with regard to the subject matter hereof. This Agreement is made pursuant to the provisions of the Plan and shall in all respects be construed in conformity with the terms of the Plan. A copy of the Plan as in effect on the date hereof is attached hereto as Exhibit IV.

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first indicated above.

 

	AZIYO BIOLOGICS, INC.
	By:
		Name:
		Title:

 

	PARTICIPANT
	Name:
	Title:
	Address:

 

 

EXHIBIT I

 

ASSIGNMENT SEPARATE FROM CERTIFICATE

 

FOR VALUE RECEIVED                                            hereby sell(s), assign(s) and transfer(s) unto Aziyo Biologics, Inc. (the “Corporation”),                                   (                ) shares of the Common Stock of the Corporation standing in his/her name on the books of the Corporation represented by Certificate No.            herewith and do(es) hereby irrevocably constitute and appoint                              Attorney to transfer the said stock on the books of the Corporation with full power of substitution in the premises.

 

Dated:
			Signature:

 

Instruction: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Corporation to exercise it Repurchase Right set forth in the Agreement without requiring additional signatures on the part of Participant.

 

 

EXHIBIT II

 

FORM OF CONFIDENTIALITY AND 

PROPRIETARY RIGHTS ASSIGNMENT AGREEMENT

 

(Attached)

 

 

EXHIBIT III

 

SECTION 83(b) TAX ELECTION

 

This statement is being made under Section 83(b) of the Internal Revenue Code, pursuant to Treas. Reg. Section 1.83-2.

 

(1)

The taxpayer who performed the services is:

 

Name:

Address:

Taxpayer Ident. No.:

 

(2)

The property with respect to which the election is being made is ______ shares of the common stock of Aziyo Biologics, Inc.

 

(3)

The property was issued on _________, __________.

 

(4)

The taxable year in which the election is being made is the calendar year ______________.

 

(5)

The property is non-transferable and is subject to a risk of forfeiture unless and until certain service requirements are met.

 

(6)

The fair market value at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is $______ per share.

 

(7)

The amount paid for such property is $_______ per share.

 

(8)

A copy of this statement was furnished to Aziyo Biologics, Inc. for whom taxpayer rendered the services underlying the transfer of property.

 

(9)

This statement is executed as of: _________.

 

Spouse (if any)		Taxpayer

 

This form must be filed with the Internal Revenue Service Center with which taxpayer files his or her Federal income tax returns. The filing must be made within thirty (30) days after the execution date of the Stock Issuance Agreement and should be made by registered or certified mail, return receipt requested. Participant must retain two (2) copies of the completed form for filing with his or her Federal and state tax returns for the current tax year and an additional copy for his or her records.

 

 

EXHIBIT IV

 

2015 STOCK OPTION/STOCK ISSUANCE PLAN

 

(Attached)

 

 

 

Exhibit 10.4

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (this “Agreement”), effective as of June 1, 2018, is by and between Aziyo Biologics, Inc., a Delaware corporation (the “Company”) and Ronald Lloyd (the “Executive”).

 

Section 1.                   Employment.

 

The Company shall employ Executive, and Executive accepts employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the date of this Agreement (such initial date of employment shall be referred to herein as the “Commencement Date”) and ending as provided in Section 4 (the “Employment Period”).

 

Section 2.                   Position and Duties.

 

(a)                During the Employment Period, (i) Executive shall serve as the Company’s President and Chief Executive Officer subject to supervision by the board of directors of the Company (the “Board”) and the Executive Chairman (the “Chairman”) of the Company and (ii) Executive shall be a member of the Board. Executive agrees to perform such duties as well as such other duties as the Chairman or Board may assign from time to time consistent with his position as the Company’s President and Chief Executive Officer. Executive shall, if so requested by the Company, also serve without additional compensation, as an officer or director of the Company and/or other entities from time to time directly or indirectly controlled by, under common control with, or controlling, the Company (each, an “Affiliate”).

 

(b)                Executive shall report to the Chairman and shall devote substantially all of his active business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company and the Affiliates. Executive shall perform his duties and responsibilities to the best of his abilities in a diligent and professional manner. During the Employment Period, without the Board’s approval, Executive shall not engage in any business activity which, in the reasonable judgment of the Board, conflicts with the duties of Executive hereunder, whether or not such activity is pursued for gain, profit or other pecuniary benefit. Executive may serve on the governing boards of other companies if Executive provides the Board with all information related to the proposed service (including the company’s name, business activity and compensation) and the Board provides express written consent to such service prior to Executive accepting or serving in such capacity.

 

Section 3.                   Base Salary and Benefits.

 

(a)                During the Employment Period, Executive’s base salary shall be $450,000 per annum (the “Base Salary”), which Base Salary shall be payable in regular installments in accordance with the Company’s general payroll practices and shall be subject to withholding and other payroll taxes and obligations. The Base Salary shall be reviewed at least annually by the Board and is subject to adjustment, in the Board’s sole discretion, in connection therewith.

 

(b)                During the Employment Period, Executive shall be eligible to receive an annual target bonus of fifty percent (50%) of the Base Salary, which shall be conditioned upon, among other things, Executive’s performance and the performance of the Company. The Board, after consultation with Executive, shall establish objectives and goals for Executive and the Company to achieve in order for Executive to earn such annual bonus and such bonus shall also be subject to the Company’s standard eligibility requirements (including the requirement that Executive be employed by the Company through the end of the calendar year and at the time that the bonus amount is paid). The amount of any bonus payable to Executive shall be determined by the Board in its discretion (and may be more or less than the target amount). Any bonus payable to Executive in respect of the 2018 calendar year shall be prorated based on the portion of such calendar year that Executive was employed by the Company. The Company will pay any such bonus that has been duly earned and awarded by the Board as soon as administratively possible following its approval by the Board and, in any event, no later than the later of (i) the fifteenth day of the third month after the end of the Company’s fiscal year in which such bonus is earned or (ii) March 15 following the calendar year in which such bonus is earned.

 

 

(c)                Beginning on June 1, 2018, during the Employment Period and subject to eligibility requirements and Company policy, Executive shall have the right, on the same basis as other employees of the Company, to participate in, and to receive benefits under, any medical and dental insurance policy maintained by the Company and the Company shall, at its expense, pay a portion of the cost of the premiums for such medical and dental insurance that is consistent with the Company’s then current employee benefit policy if Executive elects to participate in such plans.

 

(d)                Executive will be entitled to twenty (20) days of paid time off each calendar year (allocated ratably for any partial year worked by Executive) that must be used by Executive in accordance with the Company’s paid time off policies as in effect from time to time.

 

(e)                Following the Commencement Date, subject to approval by the Board, the Company shall grant Executive a non-qualified option under the Company’s 2015 Stock Option/Stock Issuance Plan (the “Option”) to purchase 1,920,500 shares of the Company’s Common Stock. The exercise price per share of Common Stock under the Option shall be equal to fair market value of a share of Common Stock on the date that the Option is granted to Executive and the Option shall vest according to the following schedule: 25% of the shares issuable upon exercise of the Option shall vest on the twelve (12) month anniversary of such grant date provided that Executive continues to be employed by the Company on such date and the remaining 75% of the shares issuable upon exercise of the Option shall vest in twelve (12) equal quarterly installments commencing at the end of the quarter following such twelve (12) month anniversary date provided that Executive continues to be employed by the Company at the end of each such quarter; provided that all of such shares shall vest if a “Sale Transaction” (as defined below) is consummated while Executive is employed by the Company and Executive’s employment with the Company is terminated without Cause (as defined below) within six (6) months after such Sale Transaction is consummated or Executive resigns with Good Reason (as defined below) within six (6) months after such Sale Transaction is consummated. The Company will use commercially reasonable efforts to obtain the fair market value of a share of Common Stock and obtain the Board’s approval of the Option within sixty (60) days of the Commencement Date.

 

(f)                The Company shall make a one-time payment of $50,000 to Executive on the last regularly scheduled payroll date in July, 2018 as long as Executive continues to be employed by the Company at such time.

 

(g)              The Company shall reimburse Executive for up to $15,000 of reasonable out-of-pocket expenses incurred by Executive to move his household goods from his current residence in New Jersey to the Silver Spring, Maryland vicinity subject to Executive’s compliance with the Company’s requirements with respect to documentation of such expenses. If the reimbursement amount payable to Executive under this Section 3(g) is included in Executive’s income by the Company, then the Company shall provide a tax gross-up payment to Executive in an amount equal to thirty-five percent (35%) of such reimbursement amount.

 

 

Section 4.                   Employment Period.

 

(a)                Notwithstanding any other provision set forth in this Agreement or otherwise, Executive’s employment with the Company is at-will and may be terminated by the Company at any time and for any reason. The Employment Period shall terminate upon the earliest to occur of Executive’s resignation with or without Good Reason (as defined below), death or Disability (as defined below) and the Company’s termination of Executive’s employment with or without Cause (as defined below). The last day on which Executive is employed by the Company, whether termination is voluntary or involuntary, as a result of death or Disability, is with or without Cause or by reason of Executive’s resignation with or without Good Reason, is referred to as the “Termination Date.”

 

(b)                If a Sale Transaction (as defined below) is consummated and within six (6) months thereafter either Executive’s employment with the Company is terminated by the Company without Cause or Executive resigns from his employment with the Company for Good Reason, then, so long as (i) Executive executes and delivers a general release of all claims in a form provided by the Company (a “Release”), (ii) such Release becomes effective in accordance with the terms thereof and (iii) Executive does not revoke or seek to revoke or nullify the Release, Executive shall be entitled to receive Base Salary for the period beginning on such Termination Date and ending on the twelve (12) month anniversary of the Termination Date, in regular periodic installments in accordance with the Company’s general payroll practices unless Executive has breached the provisions of Section 5, Section 6 or Section 7 of this Agreement or his Release, in which case the provisions of Section 10 shall apply. If Executive’s employment with the Company is terminated by the Company without Cause or Executive resigns from his employment with the Company for Good Reason at any time prior to the consummation of a Sale Transaction, then, so long as (A) Executive executes and delivers a Release, (B) such Release becomes effective in accordance with the terms thereof and (C) Executive does not revoke or seek to revoke or nullify the Release, Executive shall be entitled to receive Base Salary for the period beginning on such Termination Date and ending on the six (6) month anniversary of the Termination Date, in regular periodic installments in accordance with the Company’s general payroll practices unless Executive has breached the provisions of Section 5, Section 6 or Section 7 of this Agreement or his Release, in which case the provisions of Section 10 shall apply. Such severance payments shall be subject to withholding and other payroll taxes and obligations. If the date that the Release becomes effective and irrevocable (the “Release Effective Date”) is on or before December 10 of the calendar year of Executive’s “separation from service” (within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the final regulations and any other guidance promulgated thereunder (“Section 409A”)), any portion of the severance payments provided under this Section 4(b) that would be considered Deferred Compensation Separation Benefits (as defined in Section 4(e) below) will be made to Executive on or before December 31 of that calendar year or, if later, (1) such time as required by the payment schedule applicable to each payment as set forth in this Section 4(b) or (2) such time as required by Section 4(e). If the Release Effective Date is after December 10 of the calendar year of Executive’s “separation from service” (within the meaning of Section 409A), any portion of the severance payments provided under this Section 4(b) that would be considered Deferred Compensation Separation Benefits will be made to Executive on the first payroll date to occur during the calendar year following the calendar year in which such separation from service occurs, or, if later, (I) the first payroll date following the Release Effective Date, (II) such time as required by the payment schedule applicable to each payment as set forth in this Section 4(b) or (III) such time as required by Section 4(e).

 

(c)                Except as specifically provided in Section 4(b), if the Employment Period is terminated by the Company with or without Cause, by reason of Executive’s resignation with or without Good Reason or by reason of Executive’s death or Disability, Executive shall be entitled to receive his Base Salary only to the extent that such amount has accrued through the Termination Date. Except as otherwise required by law or as specifically provided in Section 4(b), all of Executive’s rights to salary, severance and other benefits hereunder, if any, accruing or payable after the Termination Date shall cease upon the Termination Date.

 

 

(d)                Certain Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

 

(i)                 “Cause” means: (A) Executive performing his duties, in the good faith opinion of the Board, in a grossly negligent or reckless manner or with willful malfeasance; (B) Executive exhibiting habitual drunkenness or engaging in substance abuse; (C) Executive committing any material violation of any state or federal law relating to the workplace environment (including, without limitation, laws relating to sexual harassment or age, sex or other prohibited discrimination) or any material violation of any Company policy; (D) Executive willfully failing or refusing to perform in the usual manner at the usual time those duties which he regularly and routinely performs in connection with the business of the Company or such other duties reasonably related to the capacity in which he is employed hereunder which may be assigned to him by the Board; (E) Executive performing any material action when specifically and reasonably instructed not to do so by the Chairman or the Board; (F) Executive breaching Section 5, Section 6 or Section 7 hereof; (G) Executive committing any fraud or using or appropriating for his personal use or benefit any funds, properties or opportunities of the Company not authorized by the Board to be so used or appropriated; or (H) Executive being convicted of any felony or any other crime related to his employment or involving moral turpitude. The Company shall not be entitled to terminate Executive for Cause pursuant to clause (C), (D), (E) or (F) unless the Company provides written notice stating in reasonable detail the basis for termination and a fifteen (15) day opportunity to cure to Executive (unless (1) the Company reasonably determines that providing such opportunity to cure to Executive is reasonably likely to have a material adverse effect on its business, financial condition, results of operations, prospects or assets, (2) the facts and circumstances underlying such termination are not able to be cured or (3) the Company has previously provided Executive an opportunity to cure the applicable issue; in the case of (1), (2) or (3), the Company may terminate Executive without providing an opportunity to cure).

 

(ii)               “Disability” means any disability or incapacity that (A) renders Executive unable to substantially perform his duties hereunder for ninety (90) days during any 12-month period or (B) would reasonably be expected to render Executive unable to substantially perform his duties for ninety (90) days during any 12-month period, in each case as determined by the Board in its good faith judgment.

 

(iii)             “Good Reason” means: (A) Executive failing to be the Chief Executive Officer of the surviving company in a Sale Transaction (or, if there is a parent of the surviving company in a Sale Transaction, Executive failing to be the Chief Executive Officer of such parent); (B) a material reduction in Executive’s job responsibilities and duties for the Company that is not cured by the Company within fifteen (15) days after the Company’s receipt of written notice from Executive of such event; (C) a material reduction in Executive’s Base Salary; or (D) a requirement imposed by the Company on Executive that Executive’s principal place of employment be anywhere other than within a 50 mile radius of the Company’s current office location in Silver Spring, Maryland, except for required travel on Company business to an extent substantially consistent with Executive's business travel obligations, that, in any such case, is not cured by the Company within fifteen (15) days after the Company’s receipt of written notice from Executive of such event.

 

(iv)              “Sale Transaction” means (A) any transaction or series of related transactions (including, without limitation, any reorganization, share exchange, consolidation or merger of the Company with or into any other entity but excluding any sale of capital stock by the Company for capital raising purposes) (x) in which the holders of the Company’s outstanding capital stock immediately before the first such transaction do not, immediately after any other such transaction, retain stock or other equity interests representing at least sixty percent (60%) of the voting power of the surviving entity of such transaction or (y) in which at least sixty percent (60%) of the Company’s outstanding capital stock is transferred (calculated on an as-converted to Common Stock basis); or (B) any sale, conveyance, exclusive license or other disposition of all or substantially all of the assets of the Company.

 

 

(e)                Notwithstanding anything to the contrary in this Agreement, no severance pay to be paid or provided to Executive, if any, pursuant to this Agreement, when considered together with any other severance payments or separation benefits that are considered deferred compensation under Section 409A (together, the “Deferred Compensation Separation Benefits”) will be paid or otherwise provided to Executive until Executive has a “separation from service” within the meaning of Section 409A. Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A at the time of Executive’s termination, then the Deferred Compensation Separation Benefits that are payable within the first six (6) months following Executive’s separation from service, will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executive’s separation from service. All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment. Notwithstanding anything herein to the contrary, if Executive dies following Executive’s separation from service, but prior to the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this Section will be payable in a lump sum as soon as administratively practicable after the date of Executive’s death and all other Deferred Compensation Separation Benefits will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Compensation Separation Benefits for purposes of this Section. Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit will not constitute Deferred Compensation Separation Benefits for purposes of this Section. For purposes of this Agreement, “Section 409A Limit” means two (2) times the lesser of: (i) Executive’s annualized compensation based upon the annual rate of pay paid to Executive during Executive’s taxable year preceding Executive’s taxable year of Executive’s termination of employment as determined under Treasury Regulation Section 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executive’s employment is terminated. The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply.

 

Section 5.                   Nondisclosure and Nonuse of Confidential Information.

 

(a)                Executive’s employment creates a relationship of confidence and trust between the Company and Executive with respect to any information that is applicable to the business of the Company or the Affiliates, any information that is otherwise used, developed or obtained by the Company or any Affiliate in connection with its business and any information that is applicable to the business of any client, customer or other commercial partner of the Company or the Affiliates, which may be made known to Executive or learned by Executive in such context during the period of his employment with the Company. All such information, whether oral or written, has commercial value in the business in which the Company is engaged and is referred to herein as “Confidential Information”.

 

 

(b)                The Company owns all right, title and interest in and to all Confidential Information. Executive hereby assigns to the Company all right, title and interest that he may have acquired or hereafter may acquire in all Confidential Information. Executive shall, at all times, both during the Employment Period and after the termination of the Employment Period, keep in confidence and trust all Confidential Information and Executive shall not use or disclose any Confidential Information except as may be necessary in the ordinary course of performing his duties as an employee of the Company. Upon termination of the Employment Period, or at any time upon the request of the Company before such termination, Executive shall promptly (but no later than five (5) days after the earlier of such termination or such request) destroy or deliver to the Company, at the Company’s option, all Confidential Information in Executive’s control or possession and a written certification of Executive’s compliance with such obligations.

 

(c)                Executive hereby represents and warrants to the Company that neither his performance of the terms of this Agreement nor his employment with the Company will breach or conflict with any agreement, understanding, policy or other arrangement that he is a party to or otherwise subject to or bound by (including, without limitation, any such agreement, understanding, policy or arrangement (i) relating to nondisclosure or nonuse of proprietary information, knowledge or data or (ii) that otherwise assigns, licenses or otherwise transfers any interest in or to any Company Innovation (as defined below) to person or entity other than the Company). Executive shall not disclose to the Company or otherwise use any confidential or proprietary information or material belonging to any other person or entity.

 

(d)                Notice of Immunity Under the Economic Espionage Act of 1996, as amended by the Defend Trade Secrets Act of 2016 (“DTSA”). Notwithstanding any other provision of this Agreement:

 

(i)                 Executive will not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that: (A) is made: (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding.

 

(ii)               If Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Executive may disclose the Company’s trade secrets to Executive’s attorney and use the trade secret information in the court proceeding if Executive: (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

 

(e)                Executive shall (i) comply with all Company security policies and procedures as in force from time to time including, without limitation, those regarding computer equipment, telephone systems, voicemail systems, facilities access, monitoring, key cards, access codes, Company intranet, internet, social media and instant messaging systems, e-mail systems, document storage systems, software licenses, data security, encryption, firewalls and passwords (the “Facilities and Information Technology Resources”); (ii) not access or use any Facilities and Information Technology Resources except as authorized by the Company; and (iii) not access or use any Facilities and Information Technology Resources in any manner after the termination of the Executive’s employment by the Company, whether termination is voluntary or involuntary.

 

Section 6.                   Inventions and Proprietary Rights.

 

(a)                Executive represents and warrants to the Company that he does not have any right, title or interest in or to any Innovation (as defined below) applicable to the business of the Company or relating in any way to the Company’s business or demonstrably anticipated research and development or business that were conceived, reduced to practice, created, derived, developed or made by Executive prior to the date hereof.

 

 

(b)                Executive hereby agrees promptly to disclose and describe to the Company, and Executive hereby assigns to the Company all right, title and interest in and to, each of the Innovations and all associated intellectual property rights that Executive may solely or jointly conceive, reduce to practice, create, derive, develop or make during the period of his employment with the Company that (i) relate to the Company’s or any Affiliate’s business or actual or demonstrably anticipated research or development, (ii) were developed on any amount of the Company’s or any Affiliate’s time or with the use of any of the Company’s or any Affiliate’s materials, equipment, supplies, facilities or information or (iii) resulted from any work that Executive performed for the Company or any Affiliate (collectively, the “Company Innovations”). Executive further acknowledges and agrees that all Company Innovations, including, without limitation, any computer programs, programming documentation, and other works of authorship, are “works made for hire” for purposes of the Company’s rights under copyright laws and Executive hereby assigns to the Company any and all right, title and interest that Executive may have acquired or may hereafter acquire in such Company Innovations. Any assignment of copyright hereunder includes all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as “moral rights” (collectively “Moral Rights”). To the extent that such Moral Rights cannot be assigned under applicable law and to the extent the following is allowed by the laws in the various countries where Moral Rights exist, Executive hereby waives such Moral Rights and consents to any action of the Company and the Affiliates that would violate such Moral Rights in the absence of such consent. Executive shall confirm any such waivers and consents from time to time as requested by the Company. To the extent that any right, title or interest in or to any Company Innovation cannot be assigned by Executive to the Company, Executive hereby grants to the Company an exclusive, royalty-free, transferable, irrevocable, worldwide license (with rights to sublicense through multiple tiers of sublicensees) to practice such non-assignable right, title or interest. To the extent that any right, title or interest in or to any Company Innovation can be neither assigned nor licensed by Executive to the Company, Executive hereby irrevocably waives and agrees never to assert such non-assignable and non-licensable right, title or interest against the Company, any Affiliate or any of their successors in interest to such non-assignable and non-licensable rights.

 

(c)                Executive recognizes that Innovations and Confidential Information relating to his activities while working for the Company and conceived, reduced to practice, created, derived, developed or made by Executive, alone or with others, within six (6) months after termination of his employment with the Company may have been conceived, reduced to practice, created, derived, developed or made, as applicable, in significant part while employed by the Company. Accordingly, Executive agrees that such Innovations and Confidential Information shall be presumed to have been conceived, reduced to practice, created, derived, developed or made, as applicable, during his employment with the Company and shall be assigned to the Company unless and until Executive has established the contrary by written evidence satisfying the clear and convincing standard of proof.

 

(d)                Executive shall perform, during and after his employment with the Company, all acts deemed necessary or desirable by the Company to permit and assist the Company, at the Company’s expense, in obtaining and enforcing the full benefits, enjoyment, rights and title throughout the world in the Confidential Information and Innovations assigned or licensed to, or whose rights are irrevocably waived and shall not be asserted against, the Company and the Affiliates under this Agreement. Such acts may include, but are not limited to, execution of documents and assistance or cooperation (i) in the filing, prosecution, registration, and memorialization of assignment of any applicable patents, copyrights, mask works or other applications, (ii) in the enforcement of any applicable patents, copyrights, mask works, Moral Rights, trade secrets or other rights, and (iii) in other legal proceedings related to the Confidential Information or Innovations.

 

 

(e)                In the event that the Company is unable for any reason to secure Executive’s signature to any document required to file, prosecute, register, or memorialize the assignment of any patent, copyright, mask work or other applications or to enforce any patent, copyright, mask work, Moral Right, trade secret or other right under any Confidential Information (including improvements thereof) or any Innovations (including derivative works, improvements, renewals, extensions, continuations, divisionals, continuations in part, continuing patent applications, reissues, and reexaminations thereof), Executive hereby irrevocably designates and appoints the Company and the Company’s duly authorized officers and agents as his agents and attorneys-in-fact to act for and on his behalf and instead of Executive (i) to execute, file, prosecute, register and memorialize the assignment of any such application, (ii) to execute and file any documentation required for such enforcement and (iii) to do all other lawfully permitted acts to further the filing, prosecution, registration, memorialization of assignment, issuance, and enforcement of patents, copyrights, mask works, Moral Rights, trade secrets or other rights under the Confidential Information or Innovations, all with the same legal force and effect as if executed by Executive.

 

(f)                 The term “Innovations” means all processes, improvements, inventions (whether or not protectable under patent laws), works of authorship, information fixed in any tangible medium of expression (whether or not protectable under copyright laws), moral rights, mask works, trademarks, trade names, trade dress, trade secrets, know-how, ideas (whether or not protectable under trade secret laws) and all other subject matter protectable under patent, copyright, moral right, mask work, trademark, trade secret or other laws and includes, without limitation, all new or useful art, combinations, designs, developments, modifications, derivative works, discoveries, formulae, techniques and all goodwill associated with any of the foregoing.

 

(g)                Executive hereby irrevocably consents to any and all uses and displays, by the Company and its Affiliates, agents, representatives and licensees, of the Executive’s name, voice, likeness, image, appearance, and biographical information in, on or in connection with any pictures, photographs, audio and video recordings, digital images, websites, television programs and advertising, other advertising and publicity, sales and marketing brochures, books, magazines, other publications, CDs, DVDs, tapes, and all other printed and electronic forms and media throughout the world, at any time during or after the period of his employment by the Company, for all legitimate commercial and business purposes of the Company (“Permitted Uses”) without further consent from or royalty, payment, or other compensation to the Executive. Executive hereby forever waives and releases the Company and its directors, managing members, officers, employees and agents from any and all claims, actions, damages, losses, costs, expenses, and liability of any kind, arising under any legal or equitable theory whatsoever at any time during or after the period of his employment by the Company, arising directly or indirectly from the Company’s and its Affiliates’, agents’, representatives’ and licensees’ exercise of their rights in connection with any Permitted Uses.

 

Section 7.                   Non-Compete, Non-Solicitation.

 

(a)                Executive acknowledges that, in the course of his employment with the Company and/or the Restricted Affiliates (as defined below), he has become familiar, or will become familiar, with trade secrets and with other confidential information concerning the Company and the Restricted Affiliates and that his services have been and will be of special, unique and extraordinary value to the Company and the Restricted Affiliates. Executive understands that the following restrictions may limit his ability to earn a livelihood in a business similar to the business of the Company or any of the Restricted Affiliates, but he nevertheless believes that he will receive sufficient consideration and other benefits as an equityholder and an employee of the Company and as otherwise provided hereunder to clearly justify such restrictions which, in any event (given his education, skills and ability), Executive does not believe would prevent him from otherwise earning a living. Executive further understands that the provisions of Sections 5 through 7, inclusive, are reasonable and necessary to preserve the business of the Company and the Restricted Affiliates. “Restricted Affiliate” means any Affiliate for which, during the twenty-four (24) month period preceding the Termination Date, Executive served as an officer or director or Executive provided any material services.

 

 

(b)                In light of Section 7(a), Executive agrees that while Executive is employed by the Company and for twelve (12) months thereafter (such period, subject to automatic extension for an additional period equal to the period of any breach of the covenants in this Section 7, shall be referred to herein as the “Non-Compete Period”), he shall not directly or indirectly own, manage, operate, control, finance or invest in, participate in, consult with, render services for, act as an officer, director, manager, partner, principal, agent, representative, contractor or advisor of or to, or in any manner engage in or be associated with, hold any interest in, be employed by or represent any other business competing with the businesses or the services or products of the Company or the Restricted Affiliates as such businesses and/or services or products exist or are in the process of being formed, developed or acquired as of the Termination Date. Nothing herein shall prohibit Executive from being a passive owner of not more than one percent (1%) of the outstanding stock of any class of a corporation which is publicly traded, so long as Executive has no active participation in the business of such corporation.

 

(c)                Furthermore, in light of Section 7(a), during the Non-Compete Period, Executive shall not directly or indirectly through another person or entity: (i) induce or attempt to induce any employee or independent contractor of the Company or any Restricted Affiliate to leave the employ of or engagement with the Company or such Restricted Affiliate, or in any way interfere with the relationship between the Company or any such Restricted Affiliate, on the one hand, and any employee or independent contractor thereof, on the other hand; (ii) hire or engage any person who was an employee or independent contractor of the Company until twelve months after such individual’s relationship with the Company or any Restricted Affiliate has been terminated; (iii) induce or attempt to induce any customer (it being understood that the term “customer” as used throughout this Agreement includes any person or entity (x) that is receiving services from the Company or any Restricted Affiliate or (y) that is directly or indirectly providing or referring business for the Company or any Restricted Affiliate), supplier, independent contractor, licensee or other business relation of the Company or any Restricted Affiliate to cease doing business with the Company or any Restricted Affiliate, or in any way interfere with the relationship between any such customer, supplier, independent contractor, licensee or business relation, on the one hand, and the Company or any Restricted Affiliate, on the other hand; or (iv) solicit any customer of the Company or any Restricted Affiliate in order to offer products or services similar to those offered by the Company or any Restricted Affiliate.

 

(d)                Executive shall inform any prospective or future employer of any and all restrictions contained in this Agreement and provide such employer with a copy of such restrictions (but no other terms of this Agreement) prior to the commencement of that employment.

 

(e)                If, at the time of enforcement of Section 7, a court holds that the restrictions stated herein are unreasonable under the circumstances then existing, Executive and the Company agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area so as to protect the Company to the greatest extent possible under applicable law from improper competition.

 

(f)                 In the event of any breach or violation by Executive of any of the restrictions contained in Section 7, any time period specified herein shall abate during the time of any such breach or violation thereof and that portion remaining at the time of commencement of any such breach or violation shall not begin to run until such breach or violation has been cured in all respects.

 

 

Section 8.                   Enforcement.

 

Because Executive’s services are unique and because Executive has access to Confidential Information and Company Innovations, the parties hereto agree that monetary damages alone would be an inadequate remedy for any breach of this Agreement. Therefore, in the event of a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor at law or in equity, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security) or require Executive to account for and pay over to the Company all compensation, profits, moneys, accruals, increments or other benefits derived from or received as a result of any transactions constituting a breach of the covenants contained in this Agreement, if and when final judgment of a count of competent jurisdiction is so entered against Executive. The rights and remedies of the Company under this Agreement are not exclusive of or limited by any other rights or remedies which they may have, whether at law, in equity, by contract or otherwise, all of which shall be cumulative (and not alternative). Without limiting the generality of the foregoing, the rights and remedies of the Company under this Agreement, and the obligations and liabilities of Executive under this Agreement, are in addition to their respective rights, remedies, obligations and liabilities under the laws of unfair competition, laws relating to misappropriation of trade secrets and all other laws, rules and regulations. No failure on the part of any person or entity to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any person or entity in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. No person or entity shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such person or entity; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.

 

Section 9.                   Insurance.

 

The Company or any of the Affiliates may, for its own benefit or for the benefit of its financing sources, maintain “keyman” life and disability insurance policies covering Executive. Executive shall cooperate with the Company and/or the Affiliates and provide such information or other assistance as the Company and/or the Affiliates and reasonably may request in connection with obtaining and maintaining such policies.

 

Section 10.                 Severance Payments.

 

In addition to the foregoing, and not in any way in limitation thereof, or in limitation of any right or remedy otherwise available to the Company, if Executive violates any provision of Section 5, Section 6 or Section 7 or his Release, any severance payment then or thereafter due from the Company to Executive shall be terminated forthwith and the Company’s obligation to pay and Executive’s right to receive such severance payments shall terminate and be of no further force or effect, in each case without limiting or affecting Executive’s obligations under such Section 5, Section 6 and Section 7 and his Release or the Company’s other rights and remedies available at law or equity.

 

 

Section 11.                 Representations and Warranties of Executive.

 

Executive hereby represents and warrants to the Company that (a) he has the full capacity to execute and deliver, and to perform all of his obligations under, this Agreement; (b) neither the execution and delivery of this Agreement or his employment with the Company nor the performance of his obligations under this Agreement will result directly or indirectly in a violation or breach of: (i) any agreement or obligation to which he or any of his affiliates is or may be bound (including, without limitation, any employment agreement, consulting agreement, non-competition or non-solicitation agreement, confidentiality agreement or other similar agreement with any other person or entity); or (ii) any law, rule or regulation; (c) the terms and conditions of this Agreement are fair and reasonable to him in all respects and the restraints imposed herein and the enforcement of the terms and conditions hereof will not lead to any hardship or inconvenience or cause him to be unable to engage in lawful professions, trades or businesses; (d) he has never been charged with, or convicted of, any criminal offense (including, without limitation, any crime related to health care and/or the provision of services paid for by Medicare, Medicaid or any other state or federal health care program) and he has never been excluded, debarred or suspended from participation, or has otherwise become ineligible to participate, in any state or federal health care program, including Medicare or Medicaid, or any state or federal procurement or non-procurement program; and (e) this Agreement constitutes the legal, valid and binding obligation of Executive, and is enforceable against Executive in accordance with its terms.

 

Section 12.                Notices.

 

Any notice or other communication required or permitted to be delivered to any party under this Agreement shall be in writing and shall be deemed properly delivered, given and received: (a) if delivered by hand, when delivered; (b) if sent by registered, certified or first class mail, the third business day after being sent; and (c) if sent by overnight delivery via a national courier service, one business day after being sent, in each case to the address set forth beneath the name of such party below (or to such other address as such party shall have specified in a written notice given to the other party hereto in accordance with this Section):

 

If to the Company, to:

 

Azyio Biologics, Inc.

12510 Prosperity Drive

Suite 1-370

Silver Spring, MD 20904

Attention: Board of Directors

If to Executive, to:

 

Ronald Lloyd

[XXX]

[XXX]

 

Section 13.            General Provisions.

 

(a)                Severability. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

 

 

(b)                Complete Agreement. This Agreement embodies the complete agreement and understanding among the parties and supersedes and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof including, without limitation, any summaries of terms or offer letters but expressly excluding any Confidentiality and Proprietary Rights Assignment Agreement between Executive and the Company, which shall continue in full force and effect.

 

(c)                Right of Set Off. In the event of a breach by Executive of the provisions of this Agreement, the Company is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all amounts at any time owing by the Company or the Affiliates to Executive against any and all of the obligations of Executive to the Company or the Affiliates now or hereafter existing.

 

(d)                Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive and the Company and their respective successors, assigns, heirs, representatives and estate; provided, however, that the rights and obligations of Executive under this Agreement shall not be assigned without the prior written consent of the Company. The Company may assign this Agreement and its rights, together with its obligations, hereunder in connection with any sale, transfer or other disposition of all or substantially all of its assets or business, whether by merger, consolidation or otherwise, including a merger of the Company. The rights of the Company hereunder are enforceable by the Affiliates, who are the intended third party beneficiaries hereof. Any assignment made in violation of this Agreement is null and void.

 

(e)                Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF MARYLAND WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER MARYLAND OR ANY OTHER JURISDICTION), THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF MARYLAND TO BE APPLIED.

 

(f)                 Jurisdiction and Venue.

 

(i)                 The Company and Executive hereby irrevocably and unconditionally submit, for themselves and their property, to the exclusive jurisdiction of any State of Maryland court or federal court in the State of Maryland and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or for recognition or enforcement of any judgment, and the Company and Executive hereby irrevocably and unconditionally agree that all claims in respect of any such action or proceeding may be heard and determined in any such State of Maryland court or, to the extent permitted by law, in such federal court. The Company and Executive irrevocably waive, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. The Company and Executive agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. The Company and Executive agree that in the event of any action or proceeding arising out of or relating to the enforcement of this Agreement, the non-prevailing party shall pay all costs and expenses (including reasonable legal fees and expenses) of the prevailing party incurred in connection with such action or proceeding.

 

 

(ii)               The Company and Executive irrevocably and unconditionally waive, to the fullest extent they may legally and effectively do so, any objection that they may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any State of Maryland court or federal court in the State of Maryland and any appellate court of such court.

 

(iii)             Notwithstanding clauses (i)-(ii), the parties intend to and hereby confer jurisdiction to enforce the covenants contained in Section 7 upon the courts of any jurisdiction within the geographical scope of such covenants. If the courts of any one or more of such jurisdictions hold such covenants wholly or partially invalid or unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the parties that such determination not bar or in any way affect the Company’s right to the relief provided above in the courts of any other jurisdiction within the geographical scope of such covenants, as to breaches of such covenants in such other respective jurisdictions, such covenants as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants.

 

(g)                Amendment. The provisions of this Agreement may be amended only with the prior written consent of the Company and Executive and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement or any provision hereof.

 

(h)                Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

(i)                 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

 

(j)                 Survival. The obligations and undertakings set forth in Section 4 through Section 8, inclusive, and Section 10 through Section 13, inclusive, and any Release that Executive executes shall survive the termination of this Agreement or termination of Executive’s employment with the Company for any reason whatsoever.

 

(k)                WAIVER OF JURY TRIAL. NO PARTY TO THIS AGREEMENT OR ANY ASSIGNEE, SUCCESSOR, HEIR OR PERSONAL REPRESENTATIVE OF A PARTY SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER LITIGATION PROCEDURE BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER AGREEMENTS OR THE DEALINGS OR THE RELATIONSHIP BETWEEN THE PARTIES. NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS SECTION HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO THE OTHER PARTY THAT THE PROVISIONS OF THIS SECTION WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.

 

*   *   *   *

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above.

 

COMPANY:

 

AZIYO BIOLOGICS, INC.
By:	/s/ Kevin Rakin
	Name: Kevin Rakin
	Title:  Executive Chairman
EXECUTIVE:
/s/ Ronald Lloyd
RONALD LLOYD

 

 

Exhibit 10.5

 

 

June 25, 2019

 

Thomas Englese

[XXX]

[XXX]

 

Dear Tom,

 

I would like to formally extend an offer of employment to you as Chief Commercial Officer for Aziyo Biologics, Inc. (the “Company”). We believe that your skills, talent, and motivation will complement our team as we look to be the premier partner of regenerative medicine solutions. The basic terms and conditions of employment are set forth below.

 

Duties and Responsibilities

 

In your position as Chief Commercial Officer you will report directly to me. In this position, you will be a key member of the Company’s leadership team and as such will be involved in setting the Company’s long-term vision and short- term goals and objectives. This position is responsible for successfully commercializing globally the Company’s current and future product offerings that span several therapeutic areas, including cardiovascular other medical specialties. This position has direct responsibility for leading the Company’s sales, marketing and market access teams to include setting the strategic direction to tactical execution of sales and marketing efforts. This position will also work closely with the Company’s commercial business partners to ensure our product offerings are successfully sold and that maximum volume levels are achieved.

 

Your employment is subject to all Company personnel policies and procedures as they may be promulgated, adopted, revised, interpreted or deleted from time to time by the Company in its sole discretion.

 

Compensation

 

The salary for this exempt position is at the annual rate of $375,000 paid at the rate of $14,423.08 bi-weekly less deductions and withholdings as required by law, in accordance with the Company’s standard payroll procedures (“Annual Base Compensation”).

 

Aziyo Biologics, Inc.

880 Harbour Way S, Suite 100

Richmond, CA 94804

 

T: 855-416-0596

F: 510-307-9896

 

www.aziyobio.com

 

 

Bonus

 

You will be eligible to receive a performance- based bonus, the target of which is set at 40% of your base salary. Please keep in mind for calendar year 2019 your bonus will be prorated based on your actual start date with the Company. The exact amount of the bonus will be based on the achievement of overall company milestones and individual performance goals mutually agreed to at the start of your employment. This annual bonus will be paid out as soon as administratively possible following the end of the calendar year.

 

Stock Options

 

Pending Board of Directors approval, the Company will grant you stock options to purchase 300,000 shares of the Company’s common stock (“Stock Options”) with an exercise price equal to the fair market value of the Company’s common stock on the date of such grant.

 

The definitive terms of the Company’s Equity Incentive Plan and the terms and conditions related to your stock option grant (including the number of options, exercise price for such options, the vesting schedule and eligibility criteria) are subject to Board of Director’s approval and will be communicated to you formally in a Equity Incentive Plan Document, which you should expect to receive as soon as administratively possible following your start date with the Company and Board of Directors approval.

 

Employee Benefits

 

You will be eligible to participate on the same basis as similarly situated employees in the Company’s benefit plans in effect from time to time during your employment. At this time, the Company provides medical, dental and vision benefit plans, a 401(k) retirement plan with a company match after a year of service, life insurance and short and long-term disability insurance coverage. Specific information on the Company’s benefits programs will be provided to you separately. Enrollment in the Company’s benefits programs for which you are eligible must be completed within the first 30 days of your employment.

 

You will also be eligible to receive vacation and sick time as defined by the Company’s time off policy. In addition, the Company offers 7 paid Company- designated holidays per year.

 

Aziyo Biologics, Inc.

880 Harbour Way S, Suite 100

Richmond, CA 94804

 

T:855-416-0596

F:510-307-9896

 

www.aziyobio.com

 

 

Employment

 

Your employment with the Company will be “at will” which means that either you or the Company may terminate your employment at any time for any reason with or without cause. The “at will” nature of your employment may not be changed, except as put in writing by the Company’s CEO. You agree and understand that you are not entitled to, and have not been promised, any employment, position, compensation, benefits or payments of any kind, or any other terms of employment, that are not specifically stated in this offer letter or the documents referred to herein.

 

Contingencies and Conditions Precedent

 

Your employment is contingent upon:

 

·

Accepting and returning a signed original of this Offer Letter within three (3) days of receipt.

 

·

Verifying your legal authorization to work in the United States pursuant to the Immigration Reform and Control Act. In order to comply with this legal obligation, we must complete an Employment Eligibility Verification Form I-9 within three days of your start date.

 

·

The successful completion of required onboarding documents and pre-employment background and drug screening (if applicable).

 

·

Your review, execution and delivery of a Confidentiality and Proprietary Rights Assignment Agreement prior to your first day of employment.

 

By signing this letter, you acknowledge that the terms described in this letter, together with the necessary Confidentiality and Proprietary Rights Assignment Agreement, set forth the entire understanding between us and supersede any prior representations or agreements, whether written or oral; there are no terms, conditions, representations, warranties or covenants other than those contained therein. No term or provision of this letter may be amended waived, released, discharged or modified except in writing, signed by you and an authorized officer of the Company, except that the Company may, in its sole discretion, adjust salaries and bonuses, incentive compensation, equity incentive plans, benefits, job titles, locations, duties, responsibilities and reporting relationships. By signing this letter, you represent that (a) you have never been convicted of any criminal offense; (b) you are not subject to any legal or contractual obligation that could prevent you from undertaking or performing the functions described herein; (c) you will not, in connection with your employment by the Company, use or disclose to any employee or representative of the Company any confidential, proprietary and/or trade secret information that you obtained during any prior employment; and (d) you will fully abide by all ongoing obligations (of confidentiality or otherwise) to all prior employers.

 

Aziyo Biologics, Inc.

880 Harbour Way S, Suite 100

Richmond, CA 94804

 

T:855-416-0596

F:510-307-9896

 

www.aziyobio.com

 

 

If these terms are acceptable to you, please sign below and return to Jennifer Barretta, Human Resources by Thursday, June 27, 2019. Upon acceptance of our offer, we will discuss a mutually agreeable start date.

 

We look forward to welcoming you to the Aziyo Biologics team!

 

Sincerely,
/s/ Ronald Lloyd
Ronald Lloyd
President & CEO

 

My signature below denotes my acceptance of the offer of employment with the terms and conditions as described above.

 

/s/ Thomas Englese		6/25/19
Thomas Englese		Date

 

Aziyo Biologics, Inc.

880 Harbour Way S, Suite 100

Richmond, CA 94804

 

T:855-416-0596

F:510-307-9896

 

www.aziyobio.com

 

 

 

Exhibit 10.6

 

 

April 25, 2016

 

Darryl Roberts

[XXX]

[XXX]

 

Dear Darryl,

 

I would like to formally extend an offer of employment to you as Senior Vice President, Operations and General Manager, Richmond for Aziyo Biologics, Inc. (the “Company”). We believe that your skills, talent, and motivation will complement our team as we look to be the premier partner of regenerative medicine solutions. The basic terms and conditions of this revised offer of employment are set forth below.

 

Duties and Responsibilities

 

In your position as Senior Vice President, Operations and General Manager, Richmond you will report directly to me. This position is a key member of the Company’s leadership team and as such is involved in setting the Company’s long-term vision and short- term goals and objectives. Specifically, you will have responsibility for the Richmond, CA site including direct oversight of the Manufacturing, Quality, Donor Services, Materials and Facility teams.

 

This position requires you to work out of the Company’s Richmond, CA facility.

 

Your employment is subject to all Company personnel policies and procedures as they may be promulgated, adopted, revised, interpreted or deleted from time to time by the Company in its sole discretion.

 

Compensation

 

The salary for this exempt position is at the annual rate of $270,000, paid at the rate of $10,384.62 bi-weekly less deductions and withholdings as required by law, in accordance with the Company’s standard payroll procedures (“Annual Base Compensation”).

 

Bonus Plan

 

In your role as Senior Vice President, Operations and General Manager, Richmond, you may be eligible for a performance-based bonus in a manner consistent with similarly situated employees. This bonus will be based on your performance and that of the Company and will be awarded at the sole discretion of management, as approved by the Board of Directors. Your performance will be evaluated as part of the Company’s annual performance review process.

 

Aziyo Biologics, Inc.

880 Harbour Way S, Suite 100

Richmond, CA 94804

 

T: 855-416-0596

F: 510-307-9896

 

www.aziyobio.com

 

 

Stock Options

 

Pending Board of Directors approval, the Company will grant you stock options to purchase 150,000 shares of the Company’s common stock (“Stock Options”) with an exercise price equal to the fair market value of the Company’s common stock on the date of such grant. The definitive terms of the Company’s Equity Incentive Plan and the terms and conditions related to your stock option grant (including the number of options, exercise price for such options, the vesting schedule and eligibility criteria) are subject to Board of Director’s approval and will be communicated to you formally in a Equity Incentive Plan Document, which you should expect to receive as soon as administratively possible following your start date with the Company and Board of Directors approval.

 

Employee Benefits

 

You will be eligible to participate on the same basis as similarly situated employees in the Company’s benefit plans in effect from time to time during your employment. At this time, the Company provides medical, dental and vision benefit plans, a 401(k) retirement plan with a company match after a year of service, life insurance and short and long-term disability insurance coverage. Specific information on the Company’s benefits programs will be provided to you separately. Enrollment in the Company’s benefits programs for which you are eligible must be completed within the first 30 days of your employment.

 

You will also be eligible to receive vacation and sick time as defined by the Company’s time off policy. In addition, the Company offers 7 paid Company- designated holidays per year.

 

Relocation

 

In order to assist in your relocation to the Richmond, CA area, you are eligible to receive reimbursement of up to $100,000 for relocation expenses upon submission of appropriate expense documentation in accordance with the Company’s business expense reimbursement policies. Allowable expenses include shipment of household goods, security deposit and/or closing costs for a new home, and temporary housing. All allowable expenses will be reimbursed upon submission and approval of original receipts.

 

Should you decide to commute to the Richmond, CA area instead of formally relocating, you may use the relocation allotment of $100,000 for housing and travel to and from your home location. If you later decide to formally relocate, you will have the remaining balance of the $100,000 to spend on relocation expenses. For the avoidance of doubt, should you spend $30,000 on the first year of temporary housing/ travel, and then decide to formally relocate to the Richmond, CA area, you will have up to the remaining $70,000 to spend on your relocation.

 

Aziyo Biologics, Inc.

880 Harbour Way S, Suite 100

Richmond, CA 94804

 

T:855-416-0596

F:510-307-9896

 

www.aziyobio.com

 

 

As this relocation allowance represents a significant commitment from the Company to you, should your personal circumstances change and you decide to resign from your position at Aziyo Biologics a 90- day notice period will be required. Should you fail to provide a 90-day notice period, you will be required to repay the Company all monies spend on your relocation.

 

Severance

 

Should you be terminated by the Company, other than for Cause, you will receive severance in an amount equal to twelve (12) weeks base pay, at the rate in effect at the time of your separation, payable in the same manner_as regular payroll checks in bi-weekly payments. Severance is contingent upon your execution of the Company’s standard Separation and Release Agreement and will payable upon expiration of the twenty-one (21) day revocation period.

 

“Cause” means: (A) Executive performing his duties, in the good faith opinion of the CEO, in a grossly negligent or reckless manner or with willful malfeasance; (B) Executive exhibiting habitual drunkenness or engaging in substance abuse; (C) Executive committing any material violation of any state or federal law relating to the workplace environment (including, without limitation, laws relating to sexual harassment or age, sex or other prohibited discrimination) or any material violation of any Company policy; (D) Executive willfully failing or refusing to perform in the usual manner at the usual time those duties which he regularly and routinely performs in connection with the business of the Company or such other duties reasonably related to the capacity in which he is employed hereunder which may be assigned to him by the CEO (E) Executive performing any material action when specifically and reasonably instructed not to do so by the CEO; (F) Executive breaching the Confidentiality and Proprietary Rights Agreement for which the Executive signed at the start of his employment; (G) Executive committing any fraud or using or appropriating for his personal use or benefit any funds, properties or opportunities of the Company not authorized by the CEO to be so used or appropriated; or (H) Executive being convicted of any felony or any other crime related to his employment or involving moral turpitude. The Company shall not be entitled to terminate Executive for Cause unless the Company provides written notice stating in reasonable detail the basis for termination and a fifteen (15) day opportunity to cure to Executive (unless (1) the Company reasonably determines that providing such opportunity to cure to Executive is reasonably likely to have a material adverse effect on its business, financial condition, results of operations, prospects or assets, (2) the facts and circumstances underlying such termination are not able to be cured or (3) the Company has previously provided Executive an opportunity to cure the applicable issue; in the case of (1), (2) or (3), the Company may terminate Executive without providing an opportunity to cure).

 

Aziyo Biologics, Inc.

880 Harbour Way S, Suite 100

Richmond, CA 94804

 

T:855-416-0596

F:510-307-9896

 

www.aziyobio.com

 

 

Employment

 

Your employment with the Company will be “at will” which means that either you or the Company may terminate your employment at any time for any reason with or without cause. The “at will” nature of your employment may not be changed, except as put in writing by me. You agree and understand that you are not entitled to, and have not been promised, any employment, position, compensation, benefits or payments of any kind, or any other terms of employment, that are not specifically stated in this offer letter or the documents referred to herein.

 

Contingencies and Conditions Precedent

 

Your employment is contingent upon:

 

·

Accepting and returning a signed original of this Offer Letter within three (3) days of receipt.

 

·

Verifying your legal authorization to work in the United States pursuant to the Immigration Reform and Control Act. In order to comply with this legal obligation, we must complete an Employment Eligibility Verification Form I-9 within three days of your start date.

 

·

The successful completion of required onboarding documents and pre-employment background and drug screening (if applicable).

 

·

Your review, execution and delivery of a Confidentiality and Proprietary Rights Assignment Agreement prior to your first day of employment.

 

By signing this letter, you acknowledge that the terms described in this letter, together with the necessary Confidentiality and Proprietary Rights Assignment Agreement, set forth the entire understanding between us and supersede any prior representations or agreements, whether written or oral; there are no terms, conditions, representations, warranties or covenants other than those contained therein. No term or provision of this letter may be amended waived, released, discharged or modified except in writing, signed by you and an authorized officer of the Company, except that the Company may, in its sole discretion, adjust salaries and bonuses, incentive compensation, equity incentive plans, benefits, job titles, locations, duties, responsibilities and reporting relationships. By signing this letter, you represent that (a) you have never been convicted of any criminal offense; (b) you are not subject to any legal or contractual obligation that could prevent you from undertaking or performing the functions described herein; (c) you will not, in connection with your employment by the Company, use or disclose to any employee or representative of the Company any confidential, proprietary and/or trade secret information that you obtained during any prior employment; and (d) you will fully abide by all ongoing obligations (of confidentiality or otherwise) to all prior employers.

 

If these terms are acceptable to you, please sign below and return to Jennifer Barretta, Human Resources by April 28^nd. We expect your start date with the Company to be Monday, May 2^nd.

 

Aziyo Biologics, Inc.

880 Harbour Way S, Suite 100

Richmond, CA 94804

 

T:855-416-0596

F:510-307-9896

 

www.aziyobio.com

 

 

We look forward to welcoming you to the Aziyo Biologics team!

 

Sincerely,
/s/ Lode Debrabandere
Lode Debrabandere
Chief Executive Officer
Aziyo Biologics

 

My signature below denotes my acceptance of the offer of employment with the terms and conditions as described above.

 

/s/ Darryl Roberts		April 27, 2016
Darryl Roberts		Date

 

Aziyo Biologics, Inc.

880 Harbour Way S, Suite 100

Richmond, CA 94804

 

T:855-416-0596

F:510-307-9896

 

www.aziyobio.com

 

 

Exhibit 10.7

 

 

November 27, 2019

 

Dr. Jerome Riebman

[XXX]

[XXX]

 

Dear Jerry,

 

I would like to formally extend an offer of employment to you as Chief Medical Officer for Aziyo Biologics, Inc. (the “Company”). We believe that your skills, talent, and motivation will complement our team as we look to be the premier partner of regenerative medicine solutions. The basic terms and conditions of employment are set forth below.

 

Duties and Responsibilities

 

In your position as Chief Medical Officer you will report directly to me. In this position, you will be a key member of the leadership team and as such will be involved in setting the Company’s long-term vision and short- term goals and objectives designed to successfully commercialize our current and future product offerings that span several therapeutic areas.

 

Your employment is subject to all Company personnel policies and procedures as they may be promulgated, adopted, revised, interpreted or deleted from time to time by the Company in its sole discretion.

 

Compensation

 

The salary for this exempt position is at the annual rate of $365,000 paid at the rate of $14,038.46 bi-weekly less deductions and withholdings as required by law, in accordance with the Company’s standard payroll procedures (“Annual Base Compensation”).

 

Bonus

 

You will be eligible to receive an annual performance- based bonus, the target of which is set at 30% of your base salary. This bonus will be based on the Company meeting its overall objectives as well as personal performance objectives that will be mutually agreed upon and set at the start of each calendar year. Payment of this bonus will be made as soon as administratively possible following the end of the calendar year.

 

	Aziyo Biologics, Inc.
	880 Harbour Way S, Suite 100
	Richmond, CA 94804
	T: 855-416-0596
	F: 510-307-9896
	www.aziyobio.com

 

 

Stock Options

 

Pending Board of Directors approval, the Company will grant you stock options to purchase 220,000 shares of the Company’s common stock (“Stock Options”) with an exercise price equal to the fair market value of the Company’s common stock on the date of such grant.

 

The definitive terms of the Company’s Equity Incentive Plan and the terms and conditions related to your stock option grant (including the number of options, exercise price for such options, the vesting schedule and eligibility criteria) are subject to Board of Director’s approval and will be communicated to you formally in a Equity Incentive Plan Document, which you should expect to receive as soon as administratively possible following your start date with the Company and Board of Directors approval.

 

Sign-On Bonus

 

You will be eligible to receive a one-time sign on bonus of $65,000. This bonus will be paid to you in two (2) installments. The first installment of $25,000 will be paid to you on the first regularly scheduled pay date following your date of hire with the Company; the second installment of $40,000 you will be eligible to receive based on achievement of mutually agreeable performance milestones that will be set at the start of your employment and paid to you on the first regularly scheduled pay date following 90 days of employment.

 

Relocation Expense Reimbursement

 

You will be eligible to be reimbursed for out of pocket relocation expenses paid to you by your current employer up to an amount equal to $75,000 provided that you (1) begin employment with Aziyo on or before January 20, 2020 and (2) are required to re-pay those relocation dollars to your current employer. In order to be eligible for reimbursement by the Company, documentation detailing the amount of the expense must be submitted within 30 days of the repayment.

 

Employee Benefits

 

You will be eligible to participate on the same basis as similarly situated employees in the Company’s benefit plans in effect from time to time during your employment. At this time, the Company provides medical, dental and vision benefit plans, a 401(k) retirement plan with a company match after a year of service, life insurance and short and long-term disability insurance coverage. Specific information on the Company’s benefits programs will be provided to you separately. Enrollment in the Company’s benefits programs for which you are eligible must be completed within the first 30 days of your employment.

 

	Aziyo Biologics, Inc.
	880 Harbour Way S, Suite 100
	Richmond, CA 94804
	T: 855-416-0596
	F: 510-307-9896
	www.aziyobio.com

 

 

You will also be eligible to receive vacation and sick time as defined by the Company’s time off policy. In addition, the Company offers 7 paid Company- designated holidays per year.

 

Employment

 

Your employment with the Company will be “at will” which means that either you or the Company may terminate your employment at any time for any reason with or without cause. The “at will” nature of your employment may not be changed, except as put in writing by the Company’s CEO. You agree and understand that you are not entitled to, and have not been promised, any employment, position, compensation, benefits or payments of any kind, or any other terms of employment, that are not specifically stated in this offer letter or the documents referred to herein.

 

Contingencies and Conditions Precedent

 

Your employment is contingent upon:

 

Ÿ

Accepting and returning a signed original of this Offer Letter within three (3) days of receipt.

 

Ÿ

Verifying your legal authorization to work in the United States pursuant to the Immigration Reform and Control Act. In order to comply with this legal obligation, we must complete an Employment Eligibility Verification Form I-9 within three days of your start date.

 

Ÿ

The successful completion of required onboarding documents and pre-employment background and drug screening (if applicable).

 

Ÿ

Your review, execution and delivery of a Confidentiality and Proprietary Rights Assignment Agreement prior to your first day of employment.

 

By signing this letter, you acknowledge that the terms described in this letter, together with the necessary Confidentiality and Proprietary Rights Assignment Agreement, set forth the entire understanding between us and supersede any prior representations or agreements, whether written or oral; there are no terms, conditions, representations, warranties or covenants other than those contained therein. No term or provision of this letter may be amended waived, released, discharged or modified except in writing, signed by you and an authorized officer of the Company, except that the Company may, in its sole discretion, adjust salaries and bonuses, incentive compensation, equity incentive plans, benefits, job titles, locations, duties, responsibilities and reporting relationships. By signing this letter, you represent that (a) you have never been convicted of any criminal offense; (b) you are not subject to any legal or contractual obligation that could prevent you from undertaking or performing the functions described herein; (c) you will not, in connection with your employment by the Company, use or disclose to any employee or representative of the Company any confidential, proprietary and/or trade secret information that you obtained during any prior employment; and (d) you will fully abide by all ongoing obligations (of confidentiality or otherwise) to all prior employers.

 

	Aziyo Biologics, Inc.
	880 Harbour Way S, Suite 100
	Richmond, CA 94804
	T: 855-416-0596
	F: 510-307-9896
	www.aziyobio.com

 

 

If these terms are acceptable to you, please sign below and return to Jennifer Barretta, Human Resources by Monday, December 2, 2019. Upon acceptance of our offer, we will discuss a mutually agreeable start date.

 

We look forward to welcoming you to the Aziyo Biologics team!

 

Sincerely,
/s/ Ron Lloyd
Ron Lloyd
President & Chief Executive Officer

 

 

 

My signature below denotes my acceptance of the offer of employment with the terms and conditions as described above.

 

/s/ Jerome Riebman		12/1/2019
Dr. Jerome Riebman		Date

 

	Aziyo Biologics, Inc.
	880 Harbour Way S, Suite 100
	Richmond, CA 94804
	T: 855-416-0596
	F: 510-307-9896
	www.aziyobio.com

 

 

Exhibit 10.8

 

 

November 5, 2015

 

Mr. Jeff Hamet

[XXX]

[XXX]

 

Dear Jeff,

 

I would like to formally extend an offer of employment to you as VP, Finance for Aziyo Biologics, Inc. (the "Company"). We believe that your skills, talent, and motivation will complement our team as we look to be the premier partner of regenerative medicine solutions. The basic terms and conditions of employment are set forth below.

 

Duties and Responsibilities

 

In your position as VP, Finance you will initially report to me. In this role, you will be responsible for leading the Company's finance, accounting and information technology teams from strategic direction to tactical execution of management, systems, reporting, and other duties and responsibilities as assigned.

 

Your employment is subject to all Company personnel policies and procedures as they may be promulgated, adopted, revised, interpreted or deleted from time to time by the Company in its sole discretion.

 

Compensation

 

The salary for this exempt position is at the annual rate of $200,000 paid at the rate of $7,692.31 bi-weekly, in accordance with the Company's standard payroll procedures ("Annual Base Compensation").

 

Bonus Plan

 

In your role as VP, Finance, you may be eligible for a performance-based bonus. This bonus will be based on your performance and that of the Company and will be awarded at the sole discretion of management, as approved by the Board of Directors. Your performance will be evaluated as part of the Company's annual performance review process.

 

 

Employee Benefits

 

You will be eligible to participate on the same basis as similarly situated employees in the Company's benefit plans and policies in effect from time to time during your employment. At this time, it is the Company's intention to provide medical, dental and vision benefit plans, a 40l(k) retirement plan, life insurance and short and long-term disability insurance coverage. Once available, information on the Company's benefits packages will be provided to you separately.

 

Stock Options

 

After the commencement of employment with the Company and upon the adoption of an equity incentive plan by the Company, you would be eligible to receive stock options under such plan commensurate with your VP, Finance position. These stock options represent an opportunity for you to share in the future success of the Company. The definitive terms of the equity incentive plan and the terms and conditions related to any individual stock option grant (including the number of stock options, the exercise price for such options, the vesting schedule and eligibility criteria) will be determined, and must be approved, by the Company's Board of Directors.

 

Employment

 

Your employment with the Company will be "at will" which means that either you or the Company may terminate the employment at any time for any reason with or without cause. The "at will" nature of your employment may not be changed, except as put in writing by the Company's CEO. You agree and understand that you are not entitled to, and have not been promised, any employment, position, compensation, benefits or payments of any kind, or any other terms of employment, that are not specifically stated in this offer letter or the documents referred to herein.

 

Contingencies and Conditions Precedent

 

Your employment will be contingent upon your review, execution and delivery of a Confidentiality and Proprietary Rights Assignment Agreement prior to your first day of employment.

 

By signing this letter, you acknowledge that the terms described in this letter, together with the necessary Confidentiality and Proprietary Rights Assignment Agreement, set forth the entire understanding between us and supersede any prior representations or agreements, whether written or oral; there are no terms, conditions, representations, warranties or covenants other than those contained therein. No term or provision of this letter may be amended waived, released, discharged or modified except in writing, signed by you and an authorized officer of the Company, except that the Company may, in its sole discretion, adjust salaries and bonuses, incentive compensation, equity incentive plans, benefits, job titles, locations, duties, responsibilities and reporting relationships. By signing this letter, you represent that (a) you have never been convicted of any criminal offense; (b) you are not subject to any legal or contractual obligation that could prevent you from undertaking or performing the functions described herein; (c) you will not, in connection with your employment by the Company, use or disclose to any employee or representative of the Company any confidential, proprietary and/or trade secret information that you obtained during any prior employment; and (d) you will fully abide by all ongoing obligations (of confidentiality or otherwise) to all prior employers.

 

 

If these terms are acceptable to you, please sign below and return to me by Monday, November 9, 2015. We expect your employment with the Company to have begun on Wednesday, November 4, 2015.

 

We look forward to welcoming you to the Aziyo Biologics team!

 

Sincerely,

 

/s/ Kevin Rakin
Kevin Rakin
Executive Chairman

 

My signature below denotes my acceptance of the offer of employment with the terms and conditions as described above.

 

/s/ Jeff Hamet		11/9/15
Jeff Hamet		Date

 

 

 

Exhibit 10.10

Execution Version

 

 

AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT (TERM LOAN)

 

dated as of July 15, 2019

 

by and among

 

AZIYO BIOLOGICS, INC.,

 

AZIYO MED, LLC

 

and any additional borrower that hereafter becomes party hereto, each as Borrower, and collectively as Borrowers,

 

and

 

MIDCAP FINANCIAL TRUST,

 

as Agent and as a Lender,

 

and

 

THE ADDITIONAL LENDERS

 

FROM TIME TO TIME PARTY HERETO

 

 

 

 

Table of Contents

 

Page

 

Article 1 - DEFINITIONS			1
	Section 1.1	Certain Defined Terms	1
	Section 1.2	Accounting Terms and Determinations	27
	Section 1.3	Other Definitional and Interpretive Provisions	27
	Section 1.4	Time is of the Essence	27
Article 2 - LOANS			28
	Section 2.1	Loans	28
	Section 2.2	Interest, Interest Calculations and Certain Fees	32
	Section 2.3	Notes	34
	Section 2.4	Reserved	34
	Section 2.5	Reserved	34
	Section 2.6	General Provisions Regarding Payment; Loan Account	34
	Section 2.7	Maximum Interest	35
	Section 2.8	Taxes; Capital Adequacy; Mitigation Obligations	35
	Section 2.9	Appointment of Borrower Representative	39
	Section 2.10	Joint and Several Liability; Rights of Contribution; Subordination and Subrogation	40
	Section 2.11	Aziyo Med Controlled Account	41
	Section 2.12	Termination; Restriction on Termination	42
Article 3 - REPRESENTATIONS AND WARRANTIES			42
	Section 3.1	Existence and Power	42
	Section 3.2	Organization and Governmental Authorization; No Contravention	43
	Section 3.3	Binding Effect	43
	Section 3.4	Capitalization	43
	Section 3.5	Financial Information	43
	Section 3.6	Litigation	43
	Section 3.7	Ownership of Property	44
	Section 3.8	No Default	44
	Section 3.9	Labor Matters	44
	Section 3.10	Regulated Entities	44
	Section 3.11	Margin Regulations	44
	Section 3.12	Compliance With Laws; Anti-Terrorism Laws	44
	Section 3.13	Taxes	45
	Section 3.14	Compliance with ERISA	45
	Section 3.15	Consummation of Operative Documents; Brokers	46
	Section 3.16	Related Transactions	46
	Section 3.17	Material Contracts	46
	Section 3.18	Compliance with Environmental Requirements; No Hazardous Materials	46
	Section 3.19	Intellectual Property and License Agreements	46
	Section 3.20	Solvency	47
	Section 3.21	Full Disclosure	47
	Section 3.22	Reserved	47
	Section 3.23	Subsidiaries	47
	Section 3.24	Reserved	47
	Section 3.25	Regulatory Matters	47
	Section 3.26	Accuracy of Schedules	48

 

 

Article 4 - AFFIRMATIVE COVENANTS			49
	Section 4.1	Financial Statements and Other Reports	49
	Section 4.2	Payment and Performance of Obligations	50
	Section 4.3	Maintenance of Existence	50
	Section 4.4	Maintenance of Property; Insurance	50
	Section 4.5	Compliance with Laws and Material Contracts	52
	Section 4.6	Inspection of Property, Books and Records	52
	Section 4.7	Use of Proceeds	52
	Section 4.8	Estoppel Certificates	52
	Section 4.9	Notices of Material Contracts, Litigation and Defaults	52
	Section 4.10	Hazardous Materials; Remediation	53
	Section 4.11	Further Assurances	54
	Section 4.12	Reserved	55
	Section 4.13	Power of Attorney	55
	Section 4.14	Reserved	55
	Section 4.15	Schedule Updates	55
	Section 4.16	Intellectual Property and Licensing	55
	Section 4.17	Regulatory Covenants	56
	Section 4.18	Aziyo Med.  Since the date of its formation and at all times on and after the date thereof, Aziyo Med has complied with and shall at all times after the date hereof comply with the following requirements:	57
Article 5 - NEGATIVE COVENANTS			58
	Section 5.1	Debt; Contingent Obligations	58
	Section 5.2	Liens	59
	Section 5.3	Distributions	59
	Section 5.4	Restrictive Agreements	59
	Section 5.5	Payments and Modifications of Subordinated Debt	59
	Section 5.6	Consolidations, Mergers and Sales of Assets; Change in Control	60
	Section 5.7	Purchase of Assets, Investments	60
	Section 5.8	Transactions with Affiliates	61
	Section 5.9	Modification of Organizational Documents	61
	Section 5.10	Modification of Certain Agreements	61
	Section 5.11	Conduct of Business	61
	Section 5.12	Lease Payments	61
	Section 5.13	Limitation on Sale and Leaseback Transactions	61
	Section 5.14	Deposit Accounts and Securities Accounts; Payroll and Benefits Accounts	61
	Section 5.15	Compliance with Anti-Terrorism Laws	62
	Section 5.16	Change in Accounting	62
	Section 5.17	Management Fees.  No Borrower shall, nor shall it permit any Subsidiary to, directly or indirectly, pay or become obligated to pay any management, consulting, professional or similar advisory fees or other amounts to or for the account of any holder of equity interests in such Borrower of Subsidiary or any or any Affiliate thereof, except the payment of management fees to HighCape pursuant to the Management Agreement solely to the extent constituting a Permitted Distribution	62

 

 

Article 6 - FINANCIAL COVENANTS			63
	Section 6.1	Minimum Net Product Revenue	63
	Section 6.2	Evidence of Compliance	63
Article 7 - CONDITIONS			63
	Section 7.1	Conditions to Closing	63
	Section 7.2	Conditions to Each Loan	63
	Section 7.3	Searches	64
	Section 7.4	Post-Closing Requirements	65
Article 8 – Reserved			65
Article 9 - SECURITY AGREEMENT			65
	Section 9.1	Generally	65
	Section 9.2	Representations and Warranties and Covenants Relating to Collateral	65
Article 10 - EVENTS OF DEFAULT			69
	Section 10.1	Events of Default	69
	Section 10.2	Acceleration and Suspension or Termination of Term Loan Commitment	71
	Section 10.3	UCC Remedies	72
	Section 10.4	Reserved	73
	Section 10.5	Default Rate of Interest	73
	Section 10.6	Setoff Rights	73
	Section 10.7	Application of Proceeds	74
	Section 10.8	Waivers	74
	Section 10.9	Injunctive Relief	76
	Section 10.10	Marshalling; Payments Set Aside	76
	Section 10.11	Transfer of Licenses.  In the event any Permit is terminated or in the event of foreclosure or other acquisition of any location owned or leased by Borrower, any Inventory or other Collateral by Agent or its designee or any purchaser at a foreclosure sale, Borrower shall cooperate with Agent to cause all Permits to be reissued or transferred to Agent or Agent’s designee, including, without limitation, any subsequent purchaser	76

 

 

Article 11 - AGENT			77
	Section 11.1	Appointment and Authorization	77
	Section 11.2	Agent and Affiliates	77
	Section 11.3	Action by Agent	77
	Section 11.4	Consultation with Experts	77
	Section 11.5	Liability of Agent	77
	Section 11.6	Indemnification	78
	Section 11.7	Right to Request and Act on Instructions	78
	Section 11.8	Credit Decision	78
	Section 11.9	Collateral Matters	78
	Section 11.10	Agency for Perfection	78
	Section 11.11	Notice of Default	79
	Section 11.12	Assignment by Agent; Resignation of Agent; Successor Agent	79
	Section 11.13	Payment and Sharing of Payment	80
	Section 11.14	Right to Perform, Preserve and Protect	80
	Section 11.15	Additional Titled Agents	81
	Section 11.16	Amendments and Waivers	81
	Section 11.17	Assignments and Participations	82
	Section 11.18	Funding and Settlement Provisions Applicable When Non-Funding Lenders Exist	85
Article 12 - MISCELLANEOUS			85
	Section 12.1	Survival	85
	Section 12.2	No Waivers	85
	Section 12.3	Notices	86
	Section 12.4	Severability	86
	Section 12.5	Headings	86
	Section 12.6	Confidentiality	86
	Section 12.7	Waiver of Consequential and Other Damages	87
	Section 12.8	GOVERNING LAW; SUBMISSION TO JURISDICTION	87
	Section 12.9	WAIVER OF JURY TRIAL	88
	Section 12.10	Publication; Advertisement	88
	Section 12.11	Counterparts; Integration	89
	Section 12.12	No Strict Construction	89
	Section 12.13	Lender Approvals	89
	Section 12.14	Expenses; Indemnity	89
	Section 12.15	Reinstatement	91
	Section 12.16	Successors and Assigns	91
	Section 12.17	USA PATRIOT Act Notification	91
	Section 12.18	Cross Default and Cross Collateralization.	91
	Section 12.19	Existing Agreements Superseded; Exhibits and Schedules	92

 

 

Amended and Restated CREDIT AND SECURITY AGREEMENT (term Loan)

 

This AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT (TERM LOAN) (as the same may be amended, supplemented, restated or otherwise modified from time to time, the “Agreement”) is dated as of July 15, 2019 by and among AZIYO BIOLOGICS, INC., a Delaware corporation (“Aziyo”), AZIYO MED, LLC, a Delaware limited liability company (“Aziyo Med”) and any additional borrower that may hereafter be added to this Agreement (individually as a “Borrower”, and collectively with any entities that become party hereto as Borrower and each of their successors and permitted assigns, the “Borrowers”), MIDCAP FINANCIAL TRUST, a Delaware statutory trust, individually as a Lender, and as Agent, and the financial institutions or other entities from time to time parties hereto, each as a Lender.

 

RECITALS

 

WHEREAS, Agent, Lenders and Borrowers have entered into that certain Credit and Security Agreement (Term Loan), dated as of May 31, 2017 (as amended by that certain Amendment No. 1 and Limited Waiver to Credit and Security Agreement (Term Loan), dated as of December 14, 2017, as amended by that certain Amendment No. 2 to Credit and Security Agreement (Term Loan), dated as of February 15, 2018, as amended by that certain Amendment No. 3 to Credit and Security Agreement (Term Loan), dated as of November 30, 2018 and as further amended, modified, supplemented and restated prior to the date hereof, the “Original Credit Agreement” and as the same is amended hereby and as it may be further amended, modified, supplemented and restated from time to time, the “Credit Agreement”), pursuant to which the Lenders have agreed to make certain advances of money and to extend certain financial accommodations to Borrowers in the amounts and manner set forth in the Credit Agreement

 

WHEREAS, in connection with the continued working capital and other needs of the Borrowers, Borrowers have requested, among other things, that Agent and Lenders (a) make certain term loan facilities available to Borrowers and (b) amend certain other economic terms, covenants and other provisions of the Original Credit Agreement; and

 

WHEREAS, Agent and Lenders have agreed to the requests of Borrowers and Parent on the terms and conditions set forth herein and in the other Financing Documents.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the receipt and sufficiency of which are hereby acknowledged, Borrowers, Lenders and Agent agree to amend and restate the Original Credit Agreement as follows:

 

Article 1 - DEFINITIONS

 

Section 1.1               Certain Defined Terms. The following terms have the following meanings:

 

“Acceleration Event” means the occurrence of an Event of Default (a) in respect of which Agent has declared all or any portion of the Obligations to be immediately due and payable pursuant to Section 10.2, (b) pursuant to Section 10.1(a), and in respect of which Agent has suspended or terminated the Term Loan Commitment pursuant to Section 10.2, and/or (c) pursuant to either Section 10.1(e) and/or Section 10.1(f).

 

“Account Debtor” means “account debtor”, as defined in Article 9 of the UCC, and any other obligor in respect of an Account.

 

 

“Accounts” means, collectively, (a) any right to payment of a monetary obligation, whether or not earned by performance, (b) without duplication, any “account” (as defined in the UCC), any accounts receivable (whether in the form of payments for services rendered or goods sold, rents, license fees or otherwise), any “health-care-insurance receivables” (as defined in the UCC), any “payment intangibles” (as defined in the UCC) and all other rights to payment and/or reimbursement of every kind and description, whether or not earned by performance, (c) all accounts, “general intangibles” (as defined in the UCC), Intellectual Property, rights, remedies, Guarantees, “supporting obligations” (as defined in the UCC), “letter-of-credit rights” (as defined in the UCC) and security interests in respect of the foregoing, all rights of enforcement and collection, all books and records evidencing or related to the foregoing, and all rights under the Financing Documents in respect of the foregoing, (d) all information and data compiled or derived by any Borrower or to which any Borrower is entitled in respect of or related to the foregoing, and (e) all proceeds of any of the foregoing.

 

“Additional Titled Agents” has the meaning set forth in Section 11.15.

 

“Affiliate” means, with respect to any Person, (a) any Person that directly or indirectly controls such Person, (b) any Person which is controlled by or is under common control with such controlling Person, and (c) each of such Person’s (other than, with respect to any Lender, any Lender’s) officers or directors (or Persons functioning in substantially similar roles) and the spouses, parents, descendants and siblings of such officers, directors or other Persons. As used in this definition, the term “control” of a Person means the possession, directly or indirectly, of the power to vote five percent (5%) or more of any class of voting securities of such Person or to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Affiliated Credit Agreement” means that certain Amended and Restated Credit and Security Agreement (Revolving Loan) (as the same may be amended, restated, supplemented or otherwise modified from time to time), among MCF, as Agent and a lender, the other lenders party thereto and Borrowers pursuant to which such Agent and lenders have extended a revolving credit facility to Borrowers.

 

“Affiliated Financing Agent” means the “Agent” under and as defined in the Affiliated Credit Agreement.

 

“Affiliated Financing Documents” means the “Financing Documents” as defined in the Affiliated Credit Agreement.

 

“Affiliated Intercreditor Agreement” means that certain Intercreditor Agreement dated as of the Original Closing Date between Agent and the Affiliated Financing Agent, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Affiliated Obligations” means all “Obligations”, as such term is defined in the Affiliated Financing Documents.

 

“Agent” means MCF, in its capacity as administrative agent for itself and for Lenders hereunder, as such capacity is established in, and subject to the provisions of, Article 11, and the successors and assigns of MCF in such capacity.

 

“Anti-Terrorism Laws” means any Laws relating to terrorism or money laundering, including, without limitation, Executive Order No. 13224 (effective September 24, 2001), the USA PATRIOT Act, the Laws comprising or implementing the Bank Secrecy Act, and the Laws administered by OFAC.

 

“Applicable Margin” means seven and one quarter percent (7.25%).

 

 

“Approved Fund” means any (a) investment company, fund, trust, securitization vehicle or conduit that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the Ordinary Course of Business, or (b) any Person (other than a natural person) which temporarily warehouses loans for any Lender or any entity described in the preceding clause (a) and that, with respect to each of the preceding clauses (a) and (b), is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender, or (iii) a Person (other than a natural person) or an Affiliate of a Person (other than a natural person) that administers or manages a Lender.

 

“Asset Disposition” means any sale, lease, license, transfer, assignment or other consensual disposition by any Credit Party or any Subsidiary thereof of any asset.

 

“Assignment Agreement” means an assignment agreement in form and substance acceptable to Agent.

 

“Aziyo” has the meaning set forth in the introductory paragraph hereto.

 

“Aziyo Med” has the meaning set forth in the introductory paragraph hereto.

 

“Aziyo Med Operating Account” means the Deposit Account maintained by Aziyo Med at Silicon Valley Bank with account number [XXX] in accordance with the terms of Section 4.18.

 

“Aziyo Med Controlled Account” has the meaning set forth in Section 2.11.

 

“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as the same may be amended, modified or supplemented from time to time, and any successor statute thereto.

 

“Base LIBOR Rate” means, for each Interest Period, the rate per annum, determined by Agent in accordance with its customary procedures, and utilizing such electronic or other quotation sources as it considers appropriate (rounded upwards, if necessary, to the next 1/100%), to be the rate at which Dollar deposits (for delivery on the first day of such Interest Period or, if such day is not a Business Day on the preceding Business Day) in the amount of $1,000,000 are offered to major banks in the London interbank market on or about 11:00 a.m. (London, England time) two (2) Business Days prior to the commencement of such Interest Period, for a term comparable to such Interest Period, which determination shall be conclusive in the absence of manifest error; provided, however, that Agent may, upon prior written notice to Borrower Representative, choose a reasonably comparable index or source to use as the basis for Base LIBOR Rate.

 

“Base Rate” means a per annum rate of interest equal to the greater of (a) two and one -quarter percent (2.25%) per annum and (b) the rate of interest announced, from time to time, within Wells Fargo Bank, National Association (“Wells Fargo”) at its principal office in San Francisco as its “prime rate,” with the understanding that the “prime rate” is one of Wells Fargo’s base rates (not necessarily the lowest of such rates) and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto and is evidenced by the recording thereof after its announcement in such internal publications as Wells Fargo may designate; provided, however, that Agent may, upon prior written notice to Borrower, choose a reasonably comparable index or source to use as the basis for the Base Rate.

 

“Blocked Person” means any Person: (a) listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (b) owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (c) with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (d) that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224, or (e) that is named a “specially designated national” or “blocked person” on the most current list published by OFAC or other similar list or is named as a “listed person” or “listed entity” on other lists made under any Anti-Terrorism Law.

 

 

“Borrower” and “Borrowers” has the meaning set forth in the introductory paragraph hereto. If there is more than one Person that constitutes a Borrower, then the term “Borrower” shall mean, on a joint and several basis, the singular and the collective reference to any or all entities constituting or comprising Borrower, as the context may require.

 

“Borrower Representative” means Aziyo, in its capacity as Borrower Representative pursuant to the provisions of Section 2.9, or any successor Borrower Representative selected by Borrowers and approved by Agent.

 

“Borrowing Base” has the meaning set forth in the Affiliated Credit Agreement.

 

“Business Day” means any day except a Saturday, Sunday or other day on which either the New York Stock Exchange is closed, or on which commercial banks in New York City are authorized by Law to close and, in the case of a Business Day which relates to a Loan bearing interest at a rate based on the LIBOR Rate, a day on which dealings are carried on in the London interbank eurodollar market.

 

“Capital Expenditures” means all liabilities incurred or expenditures made by Borrower or any of its Subsidiaries for the acquisition of fixed assets, or any improvements, substitutions or additions thereto with a useful life of more than one year.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.A. § 9601 et seq., as the same may be amended from time to time.

 

“Change in Control” means any event, transaction, or occurrence as a result of which: (a) the owners of the voting and economic interests of the equity interests of Aziyo as of the Original Closing Date shall collectively cease to, directly or indirectly, own and control at least (i) fifty-one percent (51%) of the voting and economic interests of the equity interests of Aziyo (other than by the sale of Aziyo’s common stock in or following a Qualified IPO; provided that upon the consummation of a Qualified IPO, a Change in Control under this clause (a)(i) shall occur when any “person”  (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Exchange Act), other than the owners of the voting and economic interests of the equity interests of Aziyo as of the Original Closing Date, is or becomes a beneficial owner (within the meaning Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of equity securities of Aziyo, representing thirty-five percent (35%) or more of the combined voting power of Aziyo’s then outstanding securities) and/or (ii) that percentage of the outstanding voting equity interests of Aziyo necessary at all times to elect a majority of the board of directors (or similar governing body) of Aziyo and to direct the management policies and decisions of Aziyo; (b) during any period of twelve consecutive calendar months, individuals who at the beginning of such period constituted the board of directors or board of managers or similar governing Person(s) of each Borrower (together with any new directors or managers whose election by the board of directors or board of managers or similar governing Person(s) of each Borrower was approved by a vote of not less than two-thirds of the directors or managers then still in office who either were directors or managers at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason other than death or disability to constitute a majority of the directors or managers then in office; (c) any Credit Party ceases to own and control, directly or indirectly, all of the economic and voting rights associated with the outstanding securities of each of its Subsidiaries; or (d) the occurrence of any “Change of Control”, “Change in Control”, or terms of similar import under any document or instrument governing or relating to Debt of or equity in such Person. As used herein, “beneficial ownership” shall have the meaning provided in Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934. For the avoidance of doubt, a Qualified IPO shall not constitute a Change in Control.

 

 

“Closing Date” means the date of this Agreement.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form.

 

“Collateral” means all property, now existing or hereafter acquired, mortgaged or pledged to, or purported to be subjected to a Lien in favor of, Agent, for the benefit of Agent and Lenders, pursuant to this Agreement and the Security Documents, including, without limitation, all of the property described in Schedule 9.1 hereto.

 

“Commitment Annex” means Annex A to this Agreement.

 

“Compliance Certificate” means a certificate, duly executed by a Responsible Officer of Borrower Representative, appropriately completed and substantially in the form of Exhibit B hereto.

 

“Consolidated Subsidiary” means, at any date, any Subsidiary the accounts of which would be consolidated with those of “parent” Borrower (or any other Person, as the context may require hereunder) in its consolidated financial statements if such statements were prepared as of such date.

 

“Contingent Obligation” means, with respect to any Person, any direct or indirect liability of such Person: (a) with respect to any Debt of another Person (a “Third Party Obligation”) if the purpose or intent of such Person incurring such liability, or the effect thereof, is to provide assurance to the obligee of such Third Party Obligation that such Third Party Obligation will be paid or discharged, or that any agreement relating thereto will be complied with, or that any holder of such Third Party Obligation will be protected, in whole or in part, against loss with respect thereto; (b) with respect to any undrawn portion of any letter of credit issued for the account of such Person or as to which such Person is otherwise liable for the reimbursement of any drawing; (c) under any Swap Contract, to the extent not yet due and payable; (d) to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement; or (e) for any obligations of another Person pursuant to any Guarantee or pursuant to any agreement to purchase, repurchase or otherwise acquire any obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to preserve the solvency, financial condition or level of income of another Person. The amount of any Contingent Obligation shall be equal to the amount of the obligation so Guaranteed or otherwise supported or, if not a fixed and determinable amount, the maximum amount so Guaranteed or otherwise supported.

 

“Controlled Group” means all members of a group of corporations and all members of a group of trades or businesses (whether or not incorporated) under common control which, together with any Borrower, are treated as a single employer under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA and, solely for purposes of Section 412 and 436 of the Code, Section 414(m) or (o) of the Code.

 

“Cook License Agreement” means that certain License Agreement, dated as of the Original Closing Date, among Cook Biotech Incorporated and Aziyo Med, as amended, supplemented or otherwise modified from time to time following the Original Closing Date in accordance with the terms of the Financing Documents.

 

 

“Cook Supply Agreement” means that certain Material Supply Agreement, dated as of the Original Closing Date, among Cook Biotech Incorporated and Aziyo Med, as amended, supplemented or otherwise modified from time to time following the Original Closing Date in accordance with the terms of the Financing Documents.

 

“CorMatrix” means CorMatrix Cardiovascular, Inc., a Georgia corporation.

 

“Correction” means repair, modification, adjustment, relabeling, destruction or inspection (including patient monitoring) of a product without its physical removal to some other location.

 

“Credit Exposure” means, at any time, any portion of the Term Loan Commitments and of any other Obligations that remains outstanding; provided, however, that no Credit Exposure shall be deemed to exist solely due to the existence of contingent indemnification liability, absent the assertion of a claim, or the known existence of a claim reasonably likely to be asserted, with respect thereto.

 

“Credit Party” means each Borrower and each Guarantor; and “Credit Parties” means all such Persons, collectively.

 

“Cross License Agreement” means that certain License Agreement, dated as of the Original Closing Date, by and between CorMatrix and Aziyo Med, as amended, supplemented or otherwise modified from time to time following the Original Closing Date in accordance with the terms of the Financing Documents.

 

“DEA” means the Drug Enforcement Administration of the United States of America, any comparable state or local Governmental Authority, any comparable Governmental Authority in any non-United States jurisdiction, and any successor agency of any of the foregoing.

 

“Debt” of a Person means at any date, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising and paid on a timely basis and in the Ordinary Course of Business, (d) all capital leases of such Person, (e) all non-contingent obligations of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit, banker’s acceptance or similar instrument, (f) all equity securities of such Person subject to repurchase or redemption other than at the sole option of such Person, (g) all obligations secured by a Lien on any asset of such Person, whether or not such obligation is otherwise an obligation of such Person, (h) “earnouts”, purchase price adjustments, profit sharing arrangements, deferred purchase money amounts and similar payment obligations or continuing obligations of any nature of such Person arising out of purchase and sale contracts, (i) all Debt of others Guaranteed by such Person, and (j) off-balance sheet liabilities and/or Pension Plan or Multiemployer Plan liabilities of such Person. Without duplication of any of the foregoing, Debt of Borrowers shall include any and all Loans.

 

“Default” means any condition or event which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.

 

“Defaulted Lender” means, so long as such failure shall remain in existence and uncured, any Lender which shall have failed to make any Loan or other credit accommodation, disbursement, settlement or reimbursement required pursuant to the terms of any Financing Document.

 

“Defined Period” means for any given calendar month or date of determination, the twelve (12) month period ending on the last day of such calendar month or if such date of determination is not the last day of a calendar month, the twelve (12) month period immediately preceding any such date of determination.

 

 

“Deposit Account” means a “deposit account” (as defined in Article 9 of the UCC), an investment account, or other account in which funds are held or invested for credit to or for the benefit of any Borrower.

 

“Deposit Account Control Agreement” means an agreement, in form and substance satisfactory to Agent, among Agent, any Borrower and each financial institution in which such Borrower maintains a Deposit Account, which agreement provides that (a) such financial institution shall comply with instructions originated by Agent directing disposition of the funds in such Deposit Account without further consent by the applicable Borrower, and (b) such financial institution shall agree that it shall have no Lien on, or right of setoff or recoupment against, such Deposit Account or the contents thereof, other than in respect of usual and customary service fees and returned items for which Agent has been given value, in each such case expressly consented to by Agent, and containing such other terms and conditions as Agent may require.

 

“Distribution” means as to any Person (a) any dividend or other distribution (whether in cash, securities or other property) on any equity interest in such Person (except those payable solely in its equity interests of the same class), (b) any payment by such Person on account of (i) the purchase, redemption, retirement, defeasance, surrender, cancellation, termination or acquisition of any equity interests in such Person or any claim respecting the purchase or sale of any equity interest in such Person, or (ii) any option, warrant or other right to acquire any equity interests in such Person, (c) any management fees, salaries or other fees or compensation to any Person holding an equity interest in a Borrower or a Subsidiary of a Borrower (other than reasonable and customary (i) payments of salaries to individuals, (ii) directors fees, and (iii) advances and reimbursements to employees or directors, all in the Ordinary Course of Business), an Affiliate of a Borrower or an Affiliate of any Subsidiary of a Borrower, (d) any lease or rental payments to an Affiliate or Subsidiary of a Borrower, or (e) repayments of or debt service on loans or other indebtedness held by any Person holding an equity interest in a Borrower or a Subsidiary of a Borrower, an Affiliate of a Borrower or an Affiliate of any Subsidiary of a Borrower unless permitted under and made pursuant to a Subordination Agreement applicable to such loans or other indebtedness.

 

“Dollars” or “$” means the lawful currency of the United States of America.

 

“Donor Network West” means Donor Network West, a California nonprofit corporation.

 

“Donor Network West Note” means that certain Promissory Note issued by Aziyo in favor of Donor Network West, dated as of March 2, 2017 in the original principal amount of $2,068,492.00.

 

“Drug Application” means a new drug application, an abbreviated drug application, or a product license application for any Product, as appropriate, as those terms are defined in the FDCA.

 

“EBITDA” means, for any period, determined on a consolidated basis for Borrower and its Subsidiaries, net income, calculated before interest expense, provision for income taxes, depreciation and amortization expense, gains or losses arising from the sale of capital assets, gains arising from the write-up of assets, any extraordinary gains and any non-cash equity compensation (in each case, to the extent included in determining net income) plus (a) extraordinary losses of Borrower and its Subsidiaries approved by Agent in its sole discretion, and (b) the “Acquiror Buydown Payments” (as defined in the Ligand Royalty Agreement) made pursuant to the terms of the Ligand Royalty Agreement during such period to the extent included in the determination of net income for such period.

 

 

“Eligible Assignee” means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund, and (d) any other Person (other than a natural person) approved by Agent; provided, however, that notwithstanding the foregoing, (x) “Eligible Assignee” shall not include any Borrower or any of a Borrower’s Affiliates, and (y) no proposed assignee intending to assume any unfunded portion of the Term Loan Commitment shall be an Eligible Assignee unless such proposed assignee either already holds a portion of such Term Loan Commitment, or has been approved as an Eligible Assignee by Agent.

 

“Environmental Laws” means any and all Laws pertaining to the environment, natural resources, pollution, Hazardous Materials, or, to the extent relating to exposure to substances that are harmful or detrimental to the environment, employee health or safety, including any environmental clean-up Laws which pertain to or impose liability or standards of conduct concerning medical waste or medical products, equipment or supplies.

 

“Equity Investment Documents” means, collectively, (i) the Series A Preferred Stock Purchase Agreement, dated as of the Original Closing Date among Aziyo, HighCape and/or certain Affiliates of HighCape and the other parties thereto (the “Series A Purchase Agreement”), pursuant to which Borrower received $10,500,000 from HighCape and such Affiliates in exchange for issuing equity interests pursuant thereto on or prior to the Original Closing Date and an additional $1,500,000 thereafter, (ii) the Joinder and Acknowledgement Agreement, dated as of the Original Closing Date among Aziyo, MCF and/or certain Affiliates of MCF, pursuant to which MCF and/or such Affiliates joined and became a party to such Series A Purchase Agreement, the Investor Rights Agreement (as defined in the Series A Purchase Agreement) and the ROFR Agreement (as defined in the Series A Purchase Agreement), (iii) the Investor Rights Agreement (as defined in the Series A Purchase Agreement) and (iv) the ROFR Agreement (as defined in the Series A Purchase Agreement).

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as the same may be amended, modified or supplemented from time to time, and any successor statute thereto, and any and all rules or regulations promulgated from time to time thereunder.

 

“ERISA Plan” means any “employee benefit plan”, as such term is defined in Section 3(3) of ERISA (other than a Multiemployer Pension Plan), which any Credit Party or any Subsidiary maintains, sponsors or contributes to, or, in the case of an employee benefit plan which is subject to Section 412 of the Code or Title IV of ERISA, to which any Credit Party or any Subsidiary has any liability, including on account of any member of the Controlled Group, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.

 

“Event of Default” has the meaning set forth in Section 10.1.

 

“Excluded Accounts” has the meaning set forth in Section 5.14(b).

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to Agent, any Lender or any other recipient of any payment to be made by or on behalf of any obligation of Credit Parties hereunder or the Obligations or required to be withheld or deducted from a payment to Agent, such Lender or such recipient (including any interest and penalties thereon): (a) Taxes to the extent imposed on or measured by Agent’s, any Lender’s or such recipient’s net income (however denominated), branch profits Taxes, and franchise Taxes and similar Taxes, in each case, (i) imposed by the jurisdiction (or any political subdivision thereof) under which Agent, such Lender or such recipient is organized, has its principal office or conducts business with respect to entering into any of the Financing Documents or taking any action thereunder or (ii) that are Other Connection Taxes; (b) in the case of a Lender, United States withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in the Loans pursuant to a Law in effect on the date on which (i) such Lender becomes a party to this Agreement other than as a result of an assignment requested by a Credit Party under the terms hereof or (ii) such Lender changes its lending office for funding its Loan, except in each case to the extent that, pursuant to Section 2.8, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender acquired the applicable interest in a Loan or Term Loan Commitment or to such Lender immediately before it changed its lending office; (c) Taxes attributable to such Lender’s failure to comply with Section 2.8(c); and (d) any U.S. federal withholding taxes imposed in respect of a Lender under FATCA.

 

 

“FATCA” means Sections 1471 through 1474 of the Code as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future U.S. Treasury regulations or official interpretations thereof and any agreement entered into pursuant to the implementation of Section 1471(b)(1) of the Code, and any intergovernmental agreement between the United States Internal Revenue Service, the U.S. Government and any governmental or taxation authority under any other jurisdiction which agreement’s principal purposes deals with the implement such sections of the Code.

 

“FDA” means the Food and Drug Administration of the United States of America, any comparable state or local Governmental Authority, any comparable Governmental Authority in any non-United States jurisdiction, and any successor agency of any of the foregoing.

 

“FDCA” means the Federal Food, Drug and Cosmetic Act, as amended, 21 U.S.C. Section 301 et seq., and all regulations promulgated thereunder.

 

“Federal Funds Rate” means, for any day, the rate of interest per annum (rounded upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided, however, that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day, and (b) if no such rate is so published on such next preceding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Agent on such day on such transactions as determined by Agent.

 

“Fee Letter” means each agreement between Agent and Borrowers relating to fees payable to Agent, for its own account, in connection with the execution of this Agreement or the Original Credit Agreement.

 

“Financing Documents” means this Agreement, any Notes, the Security Documents, each Fee Letter, the Affiliated Intercreditor Agreement, each subordination or intercreditor agreement pursuant to which any Debt and/or any Liens securing such Debt is subordinated to all or any portion of the Obligations and all other documents, instruments and agreements related to the Obligations and heretofore executed, executed concurrently with the Original Credit Agreement or executed at any time and from time to time thereafter, as any or all of the same may be amended, supplemented, restated or otherwise modified from time to time.

 

“Fixed Charge Coverage Ratio” means, for any period, the quotient obtained by dividing (a) the difference between (i) EBITDA for such period, minus (ii) without duplication, the sum of (A) all of Borrower's Unfinanced Capital Expenditures made in such period, and (B) any Distributions paid by Borrower in such period, and (C) cash Taxes paid by Borrower in such period (without benefit of any refund), divided (b) the sum of (i) principal payments on Debt for Money Borrowed in such period plus (ii) cash interest payments paid by Borrower in such period.

 

 

“Foreign Lender” has the meaning set forth in Section 2.8(c)(i).

 

“GAAP” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the United States accounting profession), which are applicable to the circumstances as of the date of determination.

 

“General Intangible” means any “general intangible” as defined in Article 9 of the UCC, and any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas or other minerals before extraction, but including payment intangibles and software.

 

“Good Manufacturing Practices” means current good manufacturing practices, as set forth in 21 C.F.R. Parts 210 and 211.

 

“Governmental Authority” means any nation or government, any state, local or other political subdivision thereof, and any agency, department or Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any corporation or other Person owned or controlled (through stock or capital ownership or otherwise) by any of the foregoing, whether domestic or foreign.

 

“Guarantee” by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise), or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided, however, that the term Guarantee shall not include endorsements for collection or deposit in the Ordinary Course of Business. The term “Guarantee” used as a verb has a corresponding meaning.

 

“Guarantor” means any Credit Party that has executed or delivered, or shall in the future execute or deliver, any Guarantee of any portion of the Obligations.

 

“Hazardous Materials” means (a) any “hazardous substance” as defined in CERCLA, (b) any “hazardous waste” as defined by the Resource Conservation and Recovery Act, (c) asbestos, (d) polychlorinated biphenyls, (e) petroleum and its derivatives, by-products and other hydrocarbons, and (f) any other pollutant, toxic, radioactive, caustic or otherwise hazardous substance regulated under Environmental Laws.

 

“Hazardous Materials Contamination” means contamination (whether now existing or hereafter occurring) of the improvements, buildings, facilities, personalty, soil, groundwater, air or other elements on or of the relevant property by Hazardous Materials, or any derivatives thereof, or on or of any other property as a result of Hazardous Materials, or any derivatives thereof, generated on, emanating from or disposed of in connection with the relevant property.

 

 

“Healthcare Laws” means all applicable Laws relating to the procurement, development, provision, clinical and non-clinical evaluation or investigation, product approval or clearance, manufacture, production, analysis, distribution, dispensing, importation, exportation, use, handling, quality, reimbursement, sale, labeling, advertising, promotion, or postmarket requirements of any drug, medical device, food, dietary supplement, or other product (including, without limitation, any ingredient or component of, or accessory to, the foregoing products) subject to regulation under the Federal Food, Drug, and Cosmetic Act (21 U.S.C. et seq.), and similar state or foreign laws, controlled substances laws, pharmacy laws, consumer product safety laws, the National Organ Transplant Act or any regulations promulgated thereunder or any state laws and/or regulations of similar import, Medicare, Medicaid, and all laws, policies, procedures, requirements and regulations pursuant to which Permits are issued, in each case, as the same may be amended from time to time.

 

“HighCape” means, collectively, HighCape Partners QP, L.P., its Affiliates and their respective related funds and management entities.

 

“HighCape Portfolio Company” means any operating portfolio company of HighCape.

 

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of Borrowers or any other Credit Party under any Financing Documents and (b) to the extent not otherwise described in (a), Other Taxes.

 

“Instrument” means “instrument”, as defined in Article 9 of the UCC.

 

“Intellectual Property” means all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks, trade names, service marks, mask works, rights of use of any name, domain names, or any other similar rights, any applications therefor, whether registered or not, know-how, operating manuals, trade secret rights, clinical and non-clinical data, rights to unpatented inventions, and any claims for damage by way of any past, present, or future infringement of any of the foregoing.

 

“Interest Period” means any period commencing on the first day of a calendar month and ending on the last day of such calendar month.

 

“Inventory” means “inventory” as defined in Article 9 of the UCC, whether now existing or hereafter arising.

 

“Investment” means, with respect to any Person, directly or indirectly, (a) to purchase or acquire any stock or stock equivalents, or any obligations or other securities of, or any interest in, any Person, including the establishment or creation of a Subsidiary, (b) to make or commit to make any acquisition (including through licensing) of (i) of all or substantially all of the assets of another Person, or (ii) any business, business line or product line, division or other unit operation of any Person or any Product or Intellectual Property of any Person (in each case, an “Acquisition”) or (c) make or purchase any advance, loan, extension of credit or capital contribution to, or any other investment in, any Person. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect thereto.

 

“Investment Company Act” means the Investment Company Act of 1940, as amended.

 

“IRS” has the meaning set forth in Section 2.8(c)(i).

 

 

“Laws” means any and all federal, state, provincial, territorial, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, codes, injunctions, permits, governmental agreements and governmental restrictions, whether now or hereafter in effect, which are applicable to any Credit Party in any particular circumstance. “Laws” includes, without limitation, Healthcare Laws and Environmental Laws.

 

“Lender” means each of (a) MCF, in its capacity as a lender hereunder, (b) each other Person party hereto in its capacity as a lender hereunder, (c) each other Person that becomes a party hereto as Lender pursuant to Section 11.17, and (d) the respective successors of all of the foregoing, and “Lenders” means all of the foregoing.

 

“LIBOR Rate” means, for each Loan, a per annum rate of interest equal to the greater of (a) two and one-quarter percent (2.25%) and (b) the rate determined by Agent (rounded upwards, if necessary, to the next 1/100th%) by dividing (i) the Base LIBOR Rate for the Interest Period, by (ii) the sum of one minus the daily average during such Interest Period of the aggregate maximum reserve requirement (expressed as a decimal) then imposed under Regulation D of the Board of Governors of the Federal Reserve System (or any successor thereto) for “Eurocurrency Liabilities” (as defined therein).

 

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, in respect of such asset. For the purposes of this Agreement and the other Financing Documents, any Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.

 

“Ligand” means Ligand Pharmaceuticals Incorporated, a Delaware corporation.

 

“Ligand Intercreditor Agreement” means that certain Intercreditor Agreement, dated as of the Original Closing Date, among Ligand, Agent, Affiliated Financing Agent and Borrowers, as amended, supplemented or otherwise modified from time to time in accordance with the terms thereof.

 

“Ligand Parent Guaranty” means that certain Guaranty Agreement, dated as of the Original Closing Date, entered into between Aziyo and Ligand in respect of certain of Aziyo Med’s obligations under the Ligand Royalty Agreement, as amended, supplemented or otherwise modified from time to time in accordance with the terms of this Agreement and the Ligand Intercreditor Agreement.

 

“Ligand Royalty Agreement” means that certain Royalty Agreement, dated as of the Original Closing Date, by and among Aziyo Med and Ligand, pursuant to which Ligand has the right to receive certain payments from Aziyo Med on the terms and conditions set forth therein as amended, supplemented or otherwise modified from time to time on or prior to the Original Closing Date or following the Original Closing Date in accordance with the terms of the Financing Documents.

 

“Ligand Royalty Payments” means the regularly scheduled payments by Aziyo Med to Ligand on a non-accelerated basis pursuant to Section 2.02 of the Ligand Royalty Agreement.

 

“Litigation” means any action, suit or proceeding before any court, mediator, arbitrator or Governmental Authority.

 

“Liquidity” means, as of any date of calculation, the sum of (a) Borrower’s cash and cash equivalents and (b) the Revolving Loan Availability.

 

“Loan Account” has the meaning set forth in Section 2.6(b).

 

 

“Loan(s)” means the Term Loan and each and every advance under the Term Loan. All references herein to the “making” of a Loan or words of similar import mean, with respect to the Term Loan, the making of any advance in respect of a Term Loan.

 

“Lockbox Account” has the meaning set forth in the Affiliated Credit Agreement.

 

“Management Agreement” means that certain Management Services Agreement, dated as of January 1, 2016, between HighCape Partners Management, L.P. and Aziyo, as amended from time to time prior to the Closing Date.

 

“Market Withdrawal” means a Person’s Removal or Correction of a distributed product which involves a minor violation that would not be subject to legal action by the FDA or which involves no violation, e.g., normal stock rotation practices, routine equipment adjustments and repairs, etc.

 

“Material Adverse Effect” means with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, a material adverse change in, or a material adverse effect upon, any of (a) the condition (financial or otherwise), operations, business or properties of any of the Credit Parties, (b) the rights and remedies of Agent or Lenders under any Financing Document, or the ability of any Credit Party to perform any of its obligations under any Financing Document to which it is a party, (c) the legality, validity or enforceability of any Financing Document, (d) the existence, perfection or priority of any security interest granted in any Financing Document, (e) the value of any material Collateral, or (f) a material impairment of the prospect of repayment of any portion of the Obligations.

 

“Material Contracts” means (a) the Operative Documents, including the Ligand Royalty Agreement, the Ligand Parent Guaranty and each Subordinated Debt Document, (b) the agreements listed on Schedule 3.17, including the Cook License Agreement , the Cook Supply Agreement and the Cross License Agreement, and (c) (i) each agreement or contract to which a Credit Party is a party relating to Material Intangible Assets or development of Products or Intellectual Property, (ii) any agreement with respect to any Product, the loss of which would materially impair Borrower’s ability to sell or market such Product, and (iii) any agreement or contract to which such Credit Party or its Subsidiaries is a party the termination of which could reasonably be expected to result in a Material Adverse Effect.

 

“Material Intangible Assets” means all of (a) Borrower’s Intellectual Property and (b) license or sublicense agreements or other agreements with respect to rights in Intellectual Property, in each case that are material to the condition (financial or other), business or operations of Borrower, as determined by Agent.

 

“Maturity Date” means July 15, 2024.

 

“Maximum Lawful Rate” has the meaning set forth in Section 2.7.

 

“MCF” means MidCap Financial Trust, a Delaware statutory trust, and its successors and assigns.

 

“Medicaid” means, collectively, the healthcare assistance program established by Title XIX of the Social Security Act (42 U.S.C. §§ 1396 et seq.) and any statutes succeeding thereto, all state statutes and plans for medical assistance enacted in connection with such program, and all laws, rules, regulations, manuals, orders, guidelines or requirements (whether or not having the force of Law) pertaining to such program, in each case as the same may be amended, supplemented or otherwise modified from time to time.

 

 

“Medicare” means, collectively, the health insurance program for the aged and disabled established by Title XVIII of the Social Security Act (42 U.S.C. §§ 1395 et seq.) and any statutes succeeding thereto, and all laws, rules, regulations, manuals, orders or guidelines (whether or not having the force of Law) pertaining to such program, in each case as the same may be amended, supplemented or otherwise modified from time to time.

 

“Money Borrowed” means, as applied to any Credit Party, without duplication: (a) Debt arising from the lending of money by any other Person to such Credit Party; (b) Debt, whether or not in any such case arising from the lending of money by another Person to such Credit Party, (i) which is represented by notes payable or drafts accepted that evidence extensions of credit, (ii) which constitutes obligations evidenced by bonds, debentures, notes or similar instruments, or (iii) upon which interest charges are customarily paid (other than accounts payable) or that was issued or assumed as full or partial payment for property; (c) Debt under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP; (d) reimbursement obligations with respect to letters of credit or guarantees relating thereto; and (e) Debt of such Credit Party under any guaranty of obligations that would constitute Debt for Money Borrowed under clauses (a) through (d) hereof, if owed directly by such Credit Party.

 

“Multiemployer Plan” means a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA to which any Borrower or any other member of the Controlled Group (or any Person who in the last five years was a member of the Controlled Group) is making or accruing an obligation to make contributions or has within the preceding five plan years (as determined on the applicable date of determination) made contributions.

 

“National Organ Transplant Act” means the National Organ Transplant Act of 1984 (“NOTA”) 42 U.S.C. § 274e, as amended.

 

“Net Product Revenue” means, for any period, (a) the consolidated gross revenues of Borrowers and their Subsidiaries generated solely through the commercial sale of all Products by Borrowers and their Subsidiaries in the Ordinary Course of Business during such period, less (b) (i) sales of Products whose specifications are owned by the customer and are sold through a contract manufacturing services agreement, (ii) sales of sports medicine, cancellous bone and cervical spacer Products, (iii) trade, quantity and cash discounts allowed by Borrower or its Subsidiaries, (iv) discounts, refunds, rebates, charge backs, retroactive price adjustments and any other allowances which effectively reduce net selling price, (v) product returns and allowances, (vi) allowances for shipping or other distribution expenses, (vii) set-offs and counterclaims, and (viii) any other similar and customary deductions used by Borrower or its Subsidiaries in determining net revenues, all, in respect of (a) and (b), as determined in accordance with GAAP and in the Ordinary Course of Business.

 

“Notes” has the meaning set forth in Section 2.3.

 

“Notice of Borrowing” means a notice of a Responsible Officer of Borrower Representative, appropriately completed and substantially in the form of Exhibit D hereto.

 

“Obligations” means all obligations, liabilities and indebtedness (monetary (including, without limitation, the payment of interest and other amounts arising after the commencement of any case with respect to any Credit Party under the Bankruptcy Code or any similar statute which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case) or otherwise) of each Credit Party under this Agreement or any other Financing Document, in each case howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due. “Obligations” does not include obligations under any warrants issued to Agent or a Lender.

 

 

“OFAC” means the U.S. Department of Treasury Office of Foreign Assets Control.

 

“OFAC Lists” means, collectively, the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other restricted Persons maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Executive Orders.

 

“Operative Documents” means the Financing Documents, the Equity Investment Documents, the Subordinated Debt Documents and the Transaction Documents.

 

“Ordinary Course of Business” means, in respect of any transaction involving any Credit Party, the ordinary course of business of such Credit Party, as conducted by such Credit Party in accordance with past practices.

 

“Organizational Documents” means, with respect to any Person other than a natural person, the documents by which such Person was organized (such as a certificate of incorporation, certificate of limited partnership or articles of organization, and including, without limitation, any certificates of designation for preferred stock or other forms of preferred equity) and which relate to the internal governance of such Person (such as by-laws, a partnership agreement or an operating agreement, joint venture agreement, limited liability company agreement or members agreement), including any and all shareholder agreements or voting agreements relating to the capital stock or other equity interests of such Person.

 

“Original Closing Date” means May 31, 2017.

 

“Original Credit Agreement” has the meaning set forth in the recitals hereto.

 

“Other Connection Taxes” means taxes imposed as a result of a present or former connection between Agent or any Lender and the jurisdiction imposing such tax (other than connections arising from Agent or such Lender having executed, delivered, become a party to, performed its obligations under, received payments under, engaged in any other transaction pursuant to or enforced any Financing Document, or sold or assigned an interest in any Loans or any Financing Document).

 

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Financing Document, except any such taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.8(i)).

 

“Participant” has the meaning set forth in Section 11.17(b).

 

“Participant Register” has the meaning set forth in Section 11.17(a)(iii).

 

“Payment Account” means the account specified on the signature pages hereof into which all payments by or on behalf of each Borrower to Agent under the Financing Documents shall be made, or such other account as Agent shall from time to time specify by notice to Borrower Representative.

 

“Payroll Account” has the meaning set forth in Section 5.14(b).

 

“PBGC” means the Pension Benefit Guaranty Corporation and any Person succeeding to any or all of its functions under ERISA.

 

 

“Pension Plan” means any ERISA Plan that is subject to Section 412 of the Code or Title IV of ERISA.

 

“Perfection Certificate” means the Perfection Certificate delivered to Agent as of the Closing Date, together with any amendments thereto required under this Agreement.

 

“Permit” means all licenses, certificates, accreditations, product clearances or approvals, provider numbers or provider authorizations, supplier numbers, marketing authorizations, drug or device authorizations and approvals, other authorizations, franchises, qualifications, accreditations, registrations, permits, consents and approvals of a Credit Party issued or required under Laws applicable to the business of Borrower or any of its Subsidiaries or necessary in the manufacturing, importing, exporting, possession, ownership, warehousing, marketing, promoting, sale, labeling, furnishing, distribution or delivery of goods or services under Laws applicable to the business of Borrower or any of its Subsidiaries. Without limiting the generality of the foregoing, “Permit” includes any Regulatory Required Permit.

 

“Permitted Asset Dispositions” means the following Asset Dispositions; provided, however, that at the time of such Asset Disposition, no Default or Event of Default exists or would result from such Asset Disposition:

 

(a)

dispositions of (i) Inventory in the Ordinary Course of Business and not pursuant to any bulk sale and (ii) equipment that is obsolete, worn out, replaced, is no longer used or useful, unmerchantable, or unsaleable, in each case, in the Ordinary Course of Business;

 

(b)

abandonment or lapse of Intellectual Property (other than any Material Intangible Asset) that is, in the reasonable good faith judgment of a Credit Party, no longer useful in the conduct of the business of the Credit Parties or any of their Subsidiaries;

 

(c)

sales, forgiveness or discounting, on a non-recourse basis and in the Ordinary Course of Business, of past due Accounts (other than Eligible Accounts (as defined in the Affiliated Credit Agreement) included in the Borrowing Base) in connection with the collection or compromise thereof of the settlement of delinquent Accounts or in connection with the bankruptcy or reorganization of suppliers or customers in accordance with the applicable terms of this Agreement;

 

(d)

Permitted Licenses;

 

(e)

Permitted Distributions; and

 

(f)

other dispositions approved by Agent from time to time in its sole discretion.

 

“Permitted Contest” means a contest maintained in good faith by appropriate proceedings promptly instituted and diligently conducted and with respect to which such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; provided that compliance with the obligation that is the subject of such contest is effectively stayed during such challenge.

 

“Permitted Contingent Obligations” means

 

(a)

Contingent Obligations arising in respect of the Debt under the Financing Documents;

 

(b)

Contingent Obligations resulting from endorsements for collection or deposit in the Ordinary Course of Business;

 

 

(c)

Contingent Obligations outstanding on the date of this Agreement and set forth on Schedule 5.1 (but not including any refinancings, extensions, increases or amendments to the indebtedness underlying such Contingent Obligations other than extensions of the maturity thereof without any other change in terms);

 

(d)

Contingent Obligations incurred in the Ordinary Course of Business with respect to surety and appeal bonds, performance bonds and other similar obligations not to exceed $250,000 in the aggregate at any time outstanding;

 

(e)

Contingent Obligations arising under indemnity agreements with title insurers to cause such title insurers to issue to Agent mortgagee title insurance policies;

 

(f)

Contingent Obligations arising with respect to customary indemnification obligations in favor of purchasers in connection with dispositions of personal property assets permitted under Section 5.6;

 

(g)

so long as there exists no Event of Default both immediately before and immediately after giving effect to any such transaction, Contingent Obligations existing or arising under any Swap Contract, provided, however, that such obligations are (or were) entered into by Borrower or an Affiliate in the Ordinary Course of Business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person and not for purposes of speculation;

 

(h)

Guarantees by any Credit Party of any Permitted Debt of any Subsidiary that is a Credit Party provided that (x) any such Contingent Obligation is subordinated to the Obligations to the same extent as the Debt to which it relates is subordinated to the Obligations, (y) no Credit Party may incur Contingent Obligations under this clause (h) in respect of Debt incurred by any Person that is not a Borrower or Guarantor and (z) no guaranties shall be provided by Aziyo in respect of the Aziyo Med’s obligations under the Ligand Royalty Agreement; and

 

(i)

other Contingent Obligations not permitted by clauses (a) through (h) above, not to exceed $250,000 in the aggregate at any time outstanding.

 

“Permitted Debt” means:

 

(a)

Borrowers’ and its Subsidiaries’ Debt to Agent and each Lender under this Agreement and the other Financing Documents;

 

(b)

Debt incurred as a result of endorsing negotiable instruments received in the Ordinary Course of Business;

 

(c)

purchase money Debt not to exceed $250,000 in the aggregate at any time (whether in the form of a loan or a lease) used solely to acquire equipment used in the Ordinary Course of Business and secured only by such equipment;

 

(d)

Debt existing on the date of this Agreement and described on Schedule 5.1 (but not including any refinancings, extensions, increases or amendments to such Debt other than extensions of the maturity thereof without any other change in terms);

 

 

(e)

so long as there exists no Event of Default both immediately before and immediately after giving effect to any such transaction, Debt existing or arising under any Swap Contract, provided, however, that such obligations are (or were) entered into by Borrower or an Affiliate in the Ordinary Course of Business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person and not for purposes of speculation;

 

(f)

Debt not to exceed $250,000 in the aggregate at any time outstanding owed to any Person providing property, casualty, liability, or other insurance to the Credit Parties, including to finance insurance premiums, so long as the amount of such Debt is not in excess of the amount of the unpaid cost of, and shall be incurred only to defer the cost of, such insurance for the policy year in which such Debt is incurred and such Debt is outstanding only during such policy year;

 

(g)

trade accounts payable arising and paid on a timely basis and in the Ordinary Course of Business;

 

(h)

Debt of the Credit Parties incurred under the Affiliated Financing Documents; and

 

(i)

Subordinated Debt (including the Ligand Royalty Payments).

 

“Permitted Distributions” means the following Distributions:

 

(a)

dividends by any Subsidiary of any Borrower to such parent Borrower;

 

(b)

dividends payable solely in common stock;

 

(c)

repurchases of stock of former employees, directors or consultants pursuant to stock purchase agreements so long as an Event of Default does not exist at the time of such repurchase and would not exist after giving effect to such repurchase, provided, however, that such repurchase does not exceed $50,000 in the aggregate per fiscal year; and

 

(d)

so long as (i) no Event of Default exists at the time of such payment or would exist after giving effect thereto, (ii) Borrower is in pro forma compliance with all of its Obligations hereunder after the making of any such payment, (iii) the payment of such management fees is subordinated to the payment of the Obligations pursuant to the terms of a management fee subordination agreement reasonably satisfactory to Lender and (iv) either (x) the pro forma Fixed Charge Coverage Ratio is greater than 1.20 to 1.00 or (y) Liquidity is greater than $5,000,000, in each case, computed on a pro forma basis as of the last day of the most recent month for which Lender should have received monthly financial statements in accordance with Section 4.1(a) (hereinafter such last day shall be referred to as the “Management Fee Computation Date”), with such pro forma calculation being made for the twelve (12) month period ending as of the Management Fee Computation Date and with the amount of any such payment being included in such computation and being deemed to have been made on the Management Fee Computation Date, payment by Aziyo of, the accrued and unpaid management fees owing to HighCape pursuant to the terms of the Management Agreement in an aggregate amount not to exceed $250,000 per fiscal year.

 

“Permitted Investments” means:

 

(a)

[reserved];

 

 

(b)

Investments shown on Schedule 5.7 and existing on the Closing Date;

 

(c)

Investments consisting of cash and cash equivalents;

 

(d)

Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the Ordinary Course of Business;

 

(e)

Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the Ordinary Course of Business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrowers or their Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrowers’ Board of Directors (or other governing body), but the aggregate of all such loans outstanding may not exceed $250,000 at any time;

 

(f)

Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the Ordinary Course of Business;

 

(g)

Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the Ordinary Course of Business, provided, however, that this subpart (g) shall not apply to Investments of Borrowers in any Subsidiary;

 

(h)

deposits required to be made in the Ordinary Course of Business made to a landlord in the Ordinary Course of Business to secure or support obligations of any Credit Party or any Subsidiary under a lease of real property;

 

(i)

Investments consisting of Deposit Accounts in which Agent has received a Deposit Account Control Agreement;

 

(j)

Investments of cash and cash equivalents by any Borrower in any Subsidiary now owned or hereafter created by such Borrower, which Subsidiary is a Borrower or has provided a Guarantee of the Obligations of the Borrowers which Guarantee is secured by a Lien granted by such Subsidiary to Agent in all or substantially all of its property of the type described in Schedule 9.1 hereto and otherwise made in compliance with Section 4.11(d); provided that no Borrower shall make any Investment in Aziyo Med so long as any obligations of Borrowers under the Ligand Royalty Agreement or obligations of Aziyo under the Ligand Parent Guaranty remain outstanding without Agent’s prior consent; and

 

(k)

so long as no Event of Default exists at the time of such Investment or after giving effect to such Investment, other Investments of cash and cash equivalents in an amount not exceeding $250,000 in the aggregate.

 

“Permitted License” means (a) the licenses of patent rights granted by Aziyo Med to CorMatrix on the Closing Date pursuant to the Cross License Agreement and (b) any non-exclusive license of patent rights of Borrower or its Subsidiaries so long as all such Permitted Licenses are granted to third parties in the Ordinary Course of Business, do not result in a legal transfer of title to the licensed property, and have been granted in exchange for fair consideration.

 

 

“Permitted Liens” means:

 

(a)

(i) Liens and encumbrances in favor of Agent under the Financing Documents and (ii) Liens and encumbrances in favor of the holders of the Affiliated Financing Documents;

 

(b)

Liens existing on the date hereof and set forth on Schedule 5.2;

 

(c)

Liens on equipment securing Debt permitted under subpart (c) of the definition of Permitted Debt, provided, however, that such Lien attaches concurrently with or within twenty (20) days after the acquisition thereof;

 

(d)

deposits or pledges of cash to secure obligations under workmen’s compensation, social security or similar laws, or under unemployment insurance (but excluding Liens arising under ERISA or, with respect to any Pension Plan or Multiemployer Plan, the Code) pertaining to a Borrower’s or its Subsidiary’s employees, if any;

 

(e)

deposits or pledges of cash to secure bids, tenders, contracts (other than contracts for the payment of money or the deferred purchase price of property or services), leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the Ordinary Course of Business;

 

(f)

carrier’s, warehousemen’s, mechanic’s, workmen’s, materialmen’s or other like Liens on Collateral arising in the Ordinary Course of Business with respect to obligations which are not due, or which are being contested pursuant to a Permitted Contest;

 

(g)

Liens for taxes, assessments or other governmental charges (i) not at the time delinquent or thereafter payable without penalty or (ii) which are the subject of a Permitted Contest;

 

(h)

attachments, appeal bonds, judgments and other similar Liens on Collateral for sums not exceeding $100,000 in the aggregate arising in connection with court proceedings; provided, however, that the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are the subject of a Permitted Contest;

 

(i)

easements, zoning restrictions, rights of way, restrictions, minor defects or irregularities in title and other similar Liens on real property not interfering in any material respect with the ordinary conduct of the business of any Credit Party or any Subsidiary; and Liens of landlords and mortgagees of landlords (i) arising by statute or under any lease or related contractual obligation entered into in the Ordinary Course of Business, (ii) on fixtures and movable tangible property located on the real property leased or subleased from such landlord and (iii) for amounts not yet due or that are subject to a Permitted Contest;

 

(j)

Liens that are rights of set-off, bankers’ liens or similar non-consensual Liens relating to deposit or securities accounts in favor of banks, other depositary institutions and securities intermediaries arising in the Ordinary Course of Business;

 

(k)

purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to operating leases or consignments of personal property entered into the Ordinary Course of Business;

 

(l)

any Lien arising under conditional sale, title retention, consignment or similar arrangements for the sale of goods in the Ordinary Course of Business; provided that such Lien attaches only to the goods subject to such sale, title retention, consignment or similar arrangement;

 

 

 

(m)

Liens (i) of a collection bank on items in the course of collection arising under Section 4-210 of the UCC or (ii) in favor of a banking or other financial institution arising in the ordinary course of business encumbering deposits or other funds maintained with such financial institution (including the right of setoff) and that are within the general parameters customary in the banking industry (and not securing any Debt for borrowed money);

 

(n)

Liens granted in the Ordinary Course of Business on the unearned portion of insurance premiums securing the financing of insurance premiums to the extent the financing is permitted clause (f) of the definition of Permitted Debt;

 

(o)

Liens in favor of customs and revenue authorities arising as a matter of Law to secure payment of customs duties in connection with the importation of goods;

 

(p)

to the extent constituting a Lien, the granting of a Permitted License; and

 

(q)

Liens granted by Aziyo Med in favor of Ligand under the Ligand Royalty Agreement (as the same is in effect on the Closing Date) to secure Aziyo Med’s obligations under the Ligand Royalty Agreement, including on the Permitted Ligand Account, so long as such Liens remain subject to the Ligand Intercreditor Agreement at all times following the Closing Date.

 

“Permitted Ligand Account” means a Deposit Account maintained by Aziyo Med at Silicon Valley Bank with account number [XXX] so long as such Deposit Account is the “Special Account” under the Ligand Royalty Agreement and is used solely for the purpose of holding amounts in respect of regularly scheduled payments due and owing on a non-accelerated basis under the Ligand Royalty Agreement and permitted to be paid pursuant to this Agreement and the Ligand Intercreditor Agreement and holding and distributing to a Credit Party amounts constituting “Excluded Costs” (as defined in the Ligand Royalty Agreement).

 

“Permitted Modifications” means (a) such amendments or other modifications to a Borrower’s or Subsidiary’s Organizational Documents as are required under this Agreement or by applicable Law and disclosed to Agent within thirty (30) days after such amendments or modifications have become effective, and (b) such amendments or modifications to a Borrower’s or Subsidiary’s Organizational Documents (other than those involving a change in the name of a Borrower or Subsidiary or involving a reorganization of a Borrower or Subsidiary under the laws of a different jurisdiction) that would not adversely affect the rights and interests of Agent or Lenders and are disclosed to Agent within thirty (30) days after such amendments or modifications have become effective.

 

“Person” means any natural person, corporation, limited liability company, professional association, limited partnership, general partnership, joint stock company, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any Governmental Authority.

 

“Prepayment Fee” has the meaning set forth in Section 2.2.

 

“Products” means, from time to time, any products currently manufactured, sold, developed, tested or marketed by any Borrower or any of its Subsidiaries, including without limitation, those products set forth on Schedule 4.17 (as updated from time to time in accordance with Section 4.15); provided, that, for the avoidance of doubt, any new Product not disclosed on Schedule 4.17 shall still constitute a “Product” as herein defined.

 

 

“Pro Rata Share” means (a) with respect to a Lender’s obligation to make advances in respect of a Term Loan and such Lender’s right to receive payments of principal and interest with respect to the Term Loans, the Term Loan Commitment Percentage of such Lender in respect of such Term Loan; and (b) for all other purposes (including, without limitation, the indemnification obligations arising under Section 11.6) with respect to any Lender, the percentage obtained by dividing (i) the Term Loan Commitment Amount of such Lender (or, in the event the Term Loan Commitment shall have been terminated, such Lender’s then outstanding principal advances of such Lender under the Term Loan), by (ii) the sum of the Term Loan Commitment (or, in the event the Term Loan Commitment shall have been terminated, the then outstanding principal advances of such Lenders under the Term Loan) of all Lenders.

 

“Purchase Agreement” means that certain Asset Purchase Agreement, dated as of the Original Closing Date, by and among Borrowers, as purchasers, and CorMatrix and certain subsidiaries thereof as sellers (collectively, “Seller”), pursuant to which Borrower has purchased certain commercial assets from Seller on the terms and conditions as set forth therein.

 

“Qualified IPO” means the issuance and sale by Aziyo of its common stock in an underwritten public offering (other than a public offering pursuant to a registration statement on Form S-8) pursuant to an effective registration statement (whether alone or in connection with a secondary public offering) filed with the SEC in accordance with the Securities Act of 1933, as amended, following which Aziyo’s common stock is listed on a nationally-recognized stock exchange in the United States and in respect of which Aziyo has delivered evidence satisfactory to Agent that Aziyo has received net cash proceeds of not less than $40,000,000 (subject to no clawback, escrow or other terms limiting the Aziyo’s ability to freely use such proceeds).

 

“Recall” means a Person’s Removal or Correction of a marketed product that the FDA considers to be in violation of the laws it administers and against which the FDA would initiate legal action, e.g., seizure.

 

“Registered Intellectual Property” means any patent, registered trademark or servicemark, registered copyright, registered mask work, or any pending application for any of the foregoing.

 

“Regulatory Required Permit” means any and all licenses, approvals and permits issued by the FDA, DEA or any other applicable Governmental Authority, including without limitation Drug Applications, necessary for the testing, manufacture, marketing or sale of any Product by any applicable Borrower(s) and its Subsidiaries as such activities are being conducted by such Borrower and its Subsidiaries with respect to such Product at such time and any drug listings and drug establishment registrations under 21 U.S.C. Section 510, registrations issued by DEA under 21 U.S.C. Section 823 (if applicable to any Product), and those issued by State or local governments for the conduct of Borrower’s or any Subsidiary’s business, including without limitation, all licenses, approvals and permits necessary in connection with the removal, transportation, implantation, processing, preservation, quality control, and storage of human tissue.

 

“Removal” means the physical removal of a product from its point of use to some other location for repair, modification, adjustment, relabeling, destruction, or inspection.

 

“Required Lenders” means at any time Lenders holding (a) sixty percent (60%) or more of the sum of the Term Loan Commitment (taken as a whole), or (b) if the Term Loan Commitment has been terminated, sixty percent (60%) or more of the then aggregate outstanding principal balance of the Loans.

 

“Responsible Officer” means any of the Chief Executive Officer, Chief Financial Officer, Treasurer or any other officer of the applicable Borrower acceptable to Agent.

 

 

“Revolving Loan Availability” has the meaning set forth in the Affiliated Credit Agreement.

 

“Revolving Loans” has the meaning set forth in the Affiliated Credit Agreement.

 

“SEC” means the United States Securities and Exchange Commission.

 

“Securities Account” means a “securities account” (as defined in Article 9 of the UCC), an investment account, or other account in which investment property or securities are held or invested for credit to or for the benefit of any Borrower.

 

“Securities Account Control Agreement” means an agreement, in form and substance satisfactory to Agent, among Agent, any applicable Borrower and each securities intermediary in which such Borrower maintains a Securities Account pursuant to which Agent shall obtain “control” (as defined in Article 9 of the UCC) over such Securities Account.

 

“Security Document” means this Agreement and any other agreement, document or instrument executed concurrently with the Original Credit Agreement or at any time thereafter pursuant to which one or more Credit Parties or any other Person either (a) Guarantees payment or performance of all or any portion of the Obligations, and/or (b) provides, as security for all or any portion of the Obligations, a Lien on any of its assets in favor of Agent for its own benefit and the benefit of the Lenders, as any or all of the same may be amended, supplemented, restated or otherwise modified from time to time.

 

“Solvent” means, with respect to any Person, that such Person (a) owns and will own assets the fair saleable value of which are (i) greater than the total amount of its debts and liabilities (including subordinated and Contingent Obligations), and (ii) greater than the amount that will be required to pay the probable liabilities of its then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to it; (b) has capital that is not unreasonably small in relation to its business as presently conducted or after giving effect to any contemplated transaction; and (c) does not intend to incur and does not believe that it will incur debts beyond its ability to pay such debts as they become due.

 

“Stated Rate” has the meaning set forth in Section 2.7.

 

“Subordinated Debt” means the (a) the Debt or Contingent Obligations (as applicable) under the (i) Ligand Royalty Agreement, (ii) the Ligand Parent Guaranty, and (iii) the Donor Network West Note, and (b) any other Debt of Borrowers incurred pursuant to the terms of the Subordinated Debt Documents and with the prior written consent of Agent, all of which documents must be in form and substance acceptable to Agent in its sole discretion.

 

“Subordinated Debt Documents” means (a) the Ligand Royalty Agreement, (b) the Ligand Parent Guaranty, (c) the Donor Network West Note and (d) any other documents evidencing and/or securing Debt governed by a Subordination Agreement, all of which documents must be in form and substance acceptable to Agent in its sole discretion.

 

“Subordination Agreements” means (a) the Ligand Intercreditor Agreement, (b) that certain Debt Subordination Agreement (Donor Network West), dated as of the date hereof, by and among Donor Network West and Agent, as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms of the Financing Documents (the “Debt Subordination Agreement (Donor Network West)”), and (c) each other agreement between Agent and another creditor of Borrowers, as the same may be amended, supplemented, restated or otherwise modified from time to time in accordance with the terms thereof, pursuant to which the Debt owing from any Borrower(s) and/or the Liens securing such Debt granted by any Borrower(s) to such creditor are subordinated in any way to the Obligations and the Liens created under the Security Documents, the terms and provisions of such Subordination Agreements to have been agreed to by and be acceptable to Agent in the exercise of its sole discretion.

 

 

“Subsidiary” means, with respect to any Person, (a) any corporation of which an aggregate of more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, capital stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of more than fifty percent (50%) of such capital stock whether by proxy, agreement, operation of law or otherwise, and (b) any partnership or limited liability company in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%) or of which any such Person is a general partner or may exercise the powers of a general partner. Unless the context otherwise requires, each reference to a Subsidiary shall be a reference to a Subsidiary of a Borrower.

 

“Swap Contract” means any “swap agreement”, as defined in Section 101 of the Bankruptcy Code, that is obtained by Borrower to provide protection against fluctuations in interest or currency exchange rates, but only if Agent provides its prior written consent to the entry into such “swap agreement”.

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

“Termination Date” means the earlier to occur of (a) the Maturity Date, (b) any date on which Agent accelerates the maturity of the Loans pursuant to Section 10.2, or (c) the termination date stated in any notice of termination of this Agreement provided by Borrowers in accordance with Section 2.12.

 

“Term Loan” means, collectively, the Term Loan Tranche 1, Term Loan Tranche 2, Term Loan Tranche 3, Term Loan Tranche 4 and Term Loan Tranche 5.

 

“Term Loan Commitment” means the sum of each Lender’s Term Loan Commitment Amount.

 

“Term Loan Commitment Amount” means, with respect to each Lender, the sum of such Lender’s Term Loan Tranche 1 Commitment Amount, Term Loan Tranche 2 Commitment Amount, Term Loan Tranche 3 Commitment Amount, Term Loan Tranche 4 Commitment Amount and Term Loan Tranche 5 Commitment Amount.

 

“Term Loan Commitment Percentage” means, as to any Lender with respect to each of such Lender’s Term Loan Commitments, (a) on the Closing Date with respect to each tranche of the Term Loan, the applicable percentage set forth opposite such Lender’s name on the Commitment Annex under the column “Term Loan Tranche 1 Commitment Percentage”, “Term Loan Tranche 2 Commitment Percentage”, “Term Loan Tranche 3 Commitment Percentage”, “Term Loan Tranche 4 Commitment Percentage” and “Term Loan Tranche 5 Commitment Percentage” (if such Lender’s name is not so set forth thereon, then, on the Closing Date, such percentage for such Lender shall be deemed to be zero), and (b) on any date following the Closing Date, as applicable to each tranche of Term Loan, the percentage equal to (i) the Term Loan Tranche 1 Commitment of such Lender on such date divided by the aggregate Term Loan Tranche 1 Commitments on such date, (ii) the Term Loan Tranche 2 Commitment of such Lender on such date divided by the aggregate Term Loan Tranche 2 Commitments on such date, (iii) the Term Loan Tranche 3 Commitment of such Lender on such date divided by the aggregate Term Loan Tranche 3 Commitments on such date, (iv) the Term Loan Tranche 4 Commitment of such Lender on such date divided by the aggregate Term Loan Tranche 4 Commitments on such date or (v) the Term Loan Tranche 5 Commitment of such Lender on such date divided by the aggregate Term Loan Tranche 5 Commitments on such date.

 

 

“Term Loan Tranche 1” has the meaning set forth in Section 2.1(a)(i)(A).

 

“Term Loan Tranche 1 Commitment Amount” means, with respect to each Lender, the amount set forth opposite such Lender’s name on Annex A hereto under the caption “Term Loan Tranche 1 Commitment Amount”, as amended from time to time to reflect any permitted and effective assignments and as such amount may be reduced or terminated pursuant to this Agreement.

 

“Term Loan Tranche 1 Commitments” means the sum of each Lender’s Term Loan Tranche 1 Commitment Amount.

 

“Term Loan Tranche 2” has meaning set forth in Section 2.1(a)(i)(A).

 

“Term Loan Tranche 2 Commitment Amount” means, with respect to each Lender, the amount set forth opposite such Lender’s name on Annex A hereto under the caption “Term Loan Tranche 2 Commitment Amount”, as amended from time to time to reflect any permitted and effective assignments and as such amount may be reduced or terminated pursuant to this Agreement.

 

“Term Loan Tranche 2 Commitments” means the sum of each Lender’s Term Loan Tranche 2 Commitment Amount.

 

“Term Loan Tranche 3” has meaning set forth in Section 2.1(a)(i)(A).

 

“Term Loan Tranche 3 Commitment Amount” means, with respect to each Lender, the amount set forth opposite such Lender’s name on Annex A hereto under the caption “Term Loan Tranche 3 Commitment Amount”, as amended from time to time to reflect any permitted and effective assignments and as such amount may be reduced or terminated pursuant to this Agreement.

 

“Term Loan Tranche 3 Commitments” means the sum of each Lender’s Term Loan Tranche 3 Commitment Amount.

 

“Term Loan Tranche 4” has meaning set forth in Section 2.1(a)(i)(B).

 

“Term Loan Tranche 4 Activation Date” means the date (if any) on or after the Closing Date on which the Credit Parties shall have delivered to Agent (a) such consents from each of Ligand and Donor Network West as may be requested by the Agent in its sole discretion, including without limitation consents to the Term Loan Tranche 4 under the Ligand Intercreditor Agreement and the Debt Subordination Agreement (Donor Network West), respectively, and (b) a Compliance Certificate, delivered in accordance with Section 4.1(i), that demonstrates to Agent’s reasonable satisfaction that the consolidated Net Product Revenue for the Defined Period ending on the last day of the month for which the most recent Compliance Certificate was delivered (or required to be delivered) is greater than or equal to $30,000,000.

 

“Term Loan Tranche 4 Commitment Amount” means, with respect to each Lender, the amount set forth opposite such Lender’s name on Annex A hereto under the caption “Term Loan Tranche 4 Commitment Amount”, as amended from time to time to reflect any permitted and effective assignments and as such amount may be reduced or terminated pursuant to this Agreement.

 

“Term Loan Tranche 4 Commitment Termination Date” means March 31, 2020.

 

 

“Term Loan Tranche 4 Commitments” means the sum of each Lender’s Term Loan Tranche 4 Commitment Amount.

 

“Term Loan Tranche 5” has meaning set forth in Section 2.1(a)(i)(C).

 

“Term Loan Tranche 5 Activation Date” means the date (if any) on or after September 30, 2019 on which the Credit Parties shall have delivered to Agent (a) such consents from each of Ligand and Donor Network West as may be requested by the Agent in sole discretion, including without limitation consents to the Term Loan Tranche 5 under the Ligand Intercreditor Agreement and the Debt Subordination Agreement (Donor Network West), respectively, and (b) evidence satisfactory to Agent that Aziyo has consummated a Qualified IPO.

 

“Term Loan Tranche 5 Commitment Amount” means, with respect to each Lender, the amount set forth opposite such Lender’s name on Annex A hereto under the caption “Term Loan Tranche 5 Commitment Amount”, as amended from time to time to reflect any permitted and effective assignments and as such amount may be reduced or terminated pursuant to this Agreement.

 

“Term Loan Tranche 5 Commitment Termination Date” means June 30, 2020.

 

“Term Loan Tranche 5 Commitments” means the sum of each Lender’s Term Loan Tranche 5 Commitment Amount.

 

“Third Party Payor” means Medicare, Medicaid, TRICARE, and other state or federal health care program, Blue Cross and/or Blue Shield, private insurers, managed care plans and any other Person or entity which presently or in the future maintains Third Party Payor Programs.

 

“Third Party Payor Programs” means all payment and reimbursement programs, sponsored by a Third Party Payor, in which a Borrower participates.

 

“Transaction Documents” means the Purchase Agreement, including the exhibits and schedules thereto, and all agreements, documents and instruments executed and delivered pursuant thereto or in connection therewith.

 

“TRICARE” means the program administered pursuant to 10 U.S.C. Section 1071 et. seq), Sections 1320a-7 and 1320a-7a of Title 42 of the United States Code and the regulations promulgated pursuant to such statutes.

 

“UCC” means the Uniform Commercial Code of the State of New York or of any other state the laws of which are required to be applied in connection with the perfection of security interests in any Collateral.

 

“Unfinanced Capital Expenditures” means, for any fiscal period, Capital Expenditures made by Borrower and its consolidated Subsidiaries that are not funded by Debt for Money Borrowed (other than Loans made under the Affiliated Credit Agreement) or purchase money Debt, in each case incurred by Borrower and its Subsidiaries during such period.

 

“United States” means the United States of America.

 

“U.S. Tax Compliance Certificate” has the meaning set forth in Section 2.8(c)(i).

 

“Withholding Agent” means any Borrower or Agent.

 

 

Section 1.2            Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder (including, without limitation, determinations made pursuant to the exhibits hereto) shall be made, and all financial statements required to be delivered hereunder shall be prepared on a consolidated basis in accordance with GAAP applied on a basis consistent with the most recent audited consolidated financial statements of each Borrower and its Consolidated Subsidiaries delivered to Agent and each of the Lenders on or prior to the Closing Date. If at any time any change in GAAP would affect the computation of any financial ratio or financial requirement set forth in any Financing Document, and either Borrowers or the Required Lenders shall so request, Agent, the Lenders and Borrowers shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided, however, that until so amended, (a) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (b) Borrowers shall provide to Agent and the Lenders financial statements and other documents required under this Agreement which include a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under Statement of Financial Accounting Standards 159 (or any other Financial Accounting Standard having a similar result or effect) to value any Debt or other liabilities of any Credit Party or any Subsidiary of any Credit Party at “fair value”, as defined therein.

 

Section 1.3           Other Definitional and Interpretive Provisions. References in this Agreement to “Articles”, “Sections”, “Annexes”, “Exhibits”, or “Schedules” shall be to Articles, Sections, Annexes, Exhibits or Schedules of or to this Agreement unless otherwise specifically provided. Any term defined herein may be used in the singular or plural. “Include”, “includes” and “including” shall be deemed to be followed by “without limitation”. Except as otherwise specified or limited herein, references to any Person include the successors and assigns of such Person. References “from” or “through” any date mean, unless otherwise specified, “from and including” or “through and including”, respectively. Unless otherwise specified herein, the settlement of all payments and fundings hereunder between or among the parties hereto shall be made in lawful money of the United States and in immediately available funds. References to any statute or act shall include all related current regulations and all amendments and any successor statutes, acts and regulations. All amounts used for purposes of financial calculations required to be made herein shall be without duplication. References to any statute or act, without additional reference, shall be deemed to refer to federal statutes and acts of the United States. References to any agreement, instrument or document shall include all schedules, exhibits, annexes and other attachments thereto. As used in this Agreement, the meaning of the term “material” or the phrase “in all material respects” is intended to refer to an act, omission, violation or condition which reflects or could reasonably be expected to result in a Material Adverse Effect. References to capitalized terms that are not defined herein, but are defined in the UCC, shall have the meanings given them in the UCC. All references herein to times of day shall be references to daylight or standard time, as applicable.

 

Section 1.4            Time is of the Essence. Time is of the essence in Borrower’s and each other Credit Party’s performance under this Agreement and all other Financing Documents.

 

 

Article 2 - LOANS

 

Section 2.1             Loans.

 

(a)         Term Loans.

 

(i)            Term Loan Amounts.

 

(A)         Under the Original Credit Agreement, the Lenders thereunder made term loans to Borrowers in the principal amounts of (1) Eight Million Five Hundred Thousand Dollars ($8,500,000) (“Existing Term Loan 1”), (2) Five Million Dollars ($5,000,000) (“Existing Term Loan 2”) and (3) Three Million Dollars ($3,000,000) (“Existing Term Loan 3”, and together with Existing Term Loan 1 and Existing Term Loan 2, the “Existing Term Loans”) and, following the making of each such Existing Term Loan, the Term Loan Tranche 1 Commitment (as defined in the Original Credit Agreement), the Term Loan Tranche 2 Commitment (as defined in the Original Credit Agreement) and the Term Loan Tranche 3 Commitment (as defined in the Original Credit Agreement), as applicable, were reduced to zero ($0). Immediately prior to the effectiveness of this Agreement, the outstanding principal balance of the Existing Term Loan 1 is $8,500,000, which amount shall be deemed to have been, and hereby is, converted to the “Term Loan Tranche 1” under this Agreement, and hereby is deemed to be outstanding in the amount set forth with respect to each Lender’s Term Loan Tranche 1 Commitment Amount hereto without constituting a novation. Immediately prior to the effectiveness of this Agreement, the outstanding principal balance of the Existing Term Loan 2 is $5,000,000, which amount shall be deemed to have been, and hereby is, converted to the “Term Loan Tranche 2” under this Agreement, and hereby is deemed to be outstanding in the amount set forth with respect to each Lender’s Term Loan Tranche 2 Commitment Amount hereto without constituting a novation. Immediately prior to the effectiveness of this Agreement, the outstanding principal balance of the Existing Term Loan 3 is $3,000,000, which amount shall be deemed to have been, and hereby is, converted to the “Term Loan Tranche 3” under this Agreement, and hereby is deemed to be outstanding in the amount set forth with respect to each Lender’s Term Loan Tranche 3 Commitment Amount hereto without constituting a novation. Each Borrower hereby (x) represents, warrants, agrees, covenants and reaffirms that it has no defense, set off, claim or counterclaim against the Agent and the Lenders with regard to its Obligations in respect of each such Existing Term Loan and (y) reaffirms its obligation to repay each of Term Loan Tranche 1, Term Loan Tranche 2 and Term Loan Tranche 3 in accordance with the terms and provisions of this Agreement and the other Financing Documents.

 

(B)          On the terms and subject to the conditions set forth herein and in the other Financing Documents, each Lender with a Term Loan Tranche 4 Commitment severally hereby agrees to make to Borrowers a term loan on a Business Day occurring on or after the Term Loan Tranche 4 Activation Date and on or prior to the Term Loan Tranche 4 Commitment Termination Date (the “Term Loan Tranche 4 Funding Date”) in an original aggregate principal amount equal to the Term Loan Tranche 4 Commitment (the “Term Loan Tranche 4”). Each such Lender’s obligation to fund the Term Loan Tranche 4 shall be limited to such Lender’s Term Loan Tranche 4 Commitment Percentage, and no Lender shall have any obligation to fund any portion of any Term Loan required to be funded by any other Lender, but not so funded. Unless previously terminated, upon the Term Loan Tranche 4 Commitment Termination Date, the Term Loan Tranche 4 Commitment shall thereupon automatically be terminated and the Term Loan Tranche 4 Commitment Amount of each Lender as of such date shall be reduced by such Lender’s Pro Rata Share of such total reduction in the Term Loan Commitments. Without limiting the foregoing, until the Term Loan Tranche 4 Activation Date has occurred, no Borrower shall be entitled to request and no Lender shall be required to advance any principal amount in respect of the Term Loan Tranche 4.

 

 

(C)           On the terms and subject to the conditions set forth herein and in the other Financing Documents, each Lender with a Term Loan Tranche 5 Commitment severally hereby agrees to make to Borrowers a term loan on or after the Term Loan Tranche 5 Activation Date and on or prior to the Term Loan Tranche 4 Commitment Termination Date in an original aggregate principal amount equal to the Term Loan Tranche 5 Commitment (the “Term Loan Tranche 5”). Each such Lender’s obligation to fund the Term Loan Tranche 5 shall be limited to such Lender’s Term Loan Tranche 5 Commitment Amount, and no Lender shall have any obligation to fund any portion of any Term Loan required to be funded by any other Lender, but not so funded. Without limiting the foregoing, until the Term Loan Tranche 5 Activation Date has occurred, no Borrower shall be entitled to request and no Lender shall be required to advance any principal amount in respect of the Term Loan Tranche 5.

 

(D)          No Borrower shall have any right to reborrow any portion of the Term Loan that is repaid or prepaid from time to time. Borrowers shall deliver to Agent a Notice of Borrowing with respect to each proposed Term Loan advance, such Notice of Borrowing to be delivered, (i) in the case of a Term Loan Tranche 1, Term Loan Tranche 2 or Term Loan Tranche 3 borrowing, no later than 12:00 P.M. (Eastern time) on the Business Day prior to such proposed borrowing, (ii) in the case of a Term Loan Tranche 4 borrowing, no later than 12:00 P.M. (Eastern time) on the day of such proposed borrowing, or (iii) in the case of a Term Loan Tranche 5 borrowing, no later than 12:00 P.M. (Eastern time) on the day of such proposed borrowing.

 

(ii)           Scheduled Repayments; Mandatory Prepayments; Optional Prepayments.

 

(A)          There shall become due and payable, and Borrowers shall repay the Term Loan through, scheduled payments as set forth on Schedule 2.1 attached hereto. Notwithstanding the payment schedule set forth above, the outstanding principal amount of the Term Loan shall become immediately due and payable in full on the Termination Date.

 

(B)           There shall become due and payable and Borrowers shall prepay the Term Loan in the following amounts and at the following times:

 

(i)              Unless Agent shall otherwise consent in writing, on the date on which any Credit Party (or Agent as loss payee or assignee) receives any casualty proceeds in excess of $250,000 with respect to assets upon which Agent maintained a Lien, an amount equal to one hundred percent (100%) of such proceeds (net of out-of-pocket expenses and repayment of secured debt permitted under clause (c) of the definition of Permitted Debt and encumbering the property that suffered such casualty), or such lesser portion of such proceeds as Agent shall elect to apply to the Obligations;

 

(ii)            an amount equal to any interest that is deemed to be in excess of the Maximum Lawful Rate (as defined below) and is required to be applied to the reduction of the principal balance of the Loans by any Lender as provided for in Section 2.7;

 

(iii)            unless Agent shall otherwise consent in writing, upon receipt by any Credit Party of the proceeds of any Asset Disposition that is not made in the Ordinary Course of Business or that pertains to any Collateral upon which a Borrowing Base is calculated, an amount equal to one hundred percent (100%) of the net cash proceeds of such asset disposition (net of out-of-pocket expenses and repayment of secured debt permitted under clause (c) of the definition of Permitted Debt and encumbering such asset), or such lesser portion as Agent shall elect to apply to the Obligations; and

 

(iv)           upon the termination of all Revolving Loan Commitments (as defined in the Affiliated Credit Agreement) and the payment of the then existing aggregate outstanding principal amount of the Revolving Loans, the aggregate outstanding Obligations.

 

 

Notwithstanding the foregoing and so long as no Event of Default or Default then exists: (1) any such casualty proceeds in excess of $250,000 (other than with respect to Inventory and any real property, unless Agent shall otherwise elect) may be used by Borrowers within one hundred eighty (180) days from the receipt of such proceeds to replace or repair any assets in respect of which such proceeds were paid so long as such proceeds are deposited into a Deposit Account that is subject to a Deposit Account Control Agreement promptly upon receipt by such Borrower; and (2) proceeds of personal property asset dispositions that are not made in the Ordinary Course of Business (other than Collateral upon which the Borrowing Base is calculated or Intellectual Property, unless Agent shall otherwise elect) may be used by Borrowers within one hundred eighty (180) days from the receipt of such proceeds to purchase new or replacement assets of comparable value, provided, however, that such proceeds are deposited into a Deposit Account that is subject to a Deposit Account Control Agreement promptly upon receipt by such Borrower. All sums held by Agent pending reinvestment as described in subsections (1) and (2) above shall be deemed additional collateral for the Obligations and may be commingled with the general funds of Agent.

 

(C)           Borrowers may from time to time, with at least ten (10) Business Days prior written notice (which notice may be conditioned on the closing of a refinancing or other applicable transaction), prepay the Term Loan in whole but not in part (other than mandatory partial prepayments required under this Agreement); provided, however, that each such prepayment shall be accompanied by all prepayment fees, exit fees and any other applicable fees required hereunder.

 

(iii)         All Prepayments. Except as this Agreement may specifically provide otherwise, all prepayments of the Term Loan shall be applied by Agent to the Obligations in inverse order of maturity. The monthly payments required under Schedule 2.1 shall continue in the same amount (for so long as the Term Loan and/or (if applicable) any advance thereunder shall remain outstanding) notwithstanding any partial prepayment, whether mandatory or optional, of the Term Loan. Notwithstanding anything to the contrary contained in the foregoing, in the event that there have been multiple advances under the Term Loan each of which such advances has a separate amortization schedule of principal payments under Schedule 2.1 attached hereto, each prepayment of the Term Loan shall be applied by Agent to reduce and prepay the principal balance of the earliest-made advance then outstanding in the inverse order of maturity of the scheduled payments with respect to such advance until such earliest-made advance is paid in full (and to the extent the total amount of any such partial prepayment shall exceed the outstanding principal balance of such earliest-made advance, the remainder of such prepayment shall be applied successively to the remaining advances under the Term Loan in the direct order of the respective advance dates in the manner provided for in this sentence).

 

 

(iv)          LIBOR Rate.

 

(A)          Except as provided in subsection (C) below, the Term Loan shall accrue interest at the LIBOR Rate plus the Applicable Margin.

 

(B)           The LIBOR Rate may be adjusted by Agent with respect to any Lender on a prospective basis to take into account any additional or increased costs to such Lender of maintaining or obtaining any eurodollar deposits or increased costs, in each case, due to changes in applicable Law occurring subsequent to the commencement of the then applicable Interest Period, including changes in tax laws (except changes of general applicability in corporate income tax laws) and changes in the reserve requirements imposed by the Board of Governors of the Federal Reserve System (or any successor), which additional or increased costs would increase the cost of funding loans bearing interest based upon the LIBOR Rate; provided, however, that notwithstanding anything in this Agreement to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “change in applicable Law”, regardless of the date enacted, adopted or issued. In any such event, the affected Lender shall give Borrowers and Agent notice of such a determination and adjustment and Agent promptly shall transmit the notice to each other Lender and, upon its receipt of the notice from the affected Lender, Borrowers may, by notice to such affected Lender (I) require such Lender to furnish to Borrowers a statement setting forth the basis for adjusting such LIBOR Rate and the method for determining the amount of such adjustment, or (II) repay the Loans bearing interest based upon the LIBOR Rate with respect to which such adjustment is made.

 

(C)           In the event that any change in market conditions or any law, regulation, treaty, or directive, or any change therein or in the interpretation of application thereof, shall at any time after the date hereof, in the reasonable opinion of any Lender, make it unlawful or impractical for such Lender to maintain Loans bearing interest based upon the LIBOR Rate or to continue such maintaining, or to determine or charge interest rates at the LIBOR Rate, such Lender shall give notice of such changed circumstances to Agent and Borrowers and Agent promptly shall transmit the notice to each other Lender, (I) in the case of the pro rata share of the Term Loan held by such Lender and then outstanding, the date specified in such Lender’s notice shall be deemed to be the last day of the Interest Period of such portion of the Term Loan, and interest upon such portion thereafter shall accrue interest at the Base Rate plus the Applicable Margin, and (II) such portion of the Term Loan shall continue to accrue interest at the Base Rate plus the Applicable Margin until such Lender determines that it would no longer be unlawful or impractical to maintain such Term Loan at the LIBOR Rate.

 

(D)          Anything to the contrary contained herein notwithstanding, neither Agent nor any Lender is required actually to acquire eurodollar deposits to fund or otherwise match fund any Obligation as to which interest accrues based on the LIBOR Rate.

 

(b)         Reserved.

 

 

Section 2.2             Interest, Interest Calculations and Certain Fees.

 

(a)         Interest. From and following the Closing Date, except as expressly set forth in this Agreement, Loans and the other Obligations shall bear interest at the sum of the LIBOR Rate plus the Applicable Margin. Interest on the Loans shall be paid in arrears on the first (1st) day of each month and on the maturity of such Loans, whether by acceleration or otherwise. Interest on all other Obligations shall be payable upon demand. The Borrowers hereby agree that all accrued and unpaid interest due and owing to the "Lenders" (as defined in the Original Credit Agreement) as of the Closing Date shall be paid in cash by the Borrowers to the Agent, for the benefit of such Lenders, on the first (1st) day of the first calendar month following the Closing Date. All Loans made under the Original Credit Agreement shall bear interest at the sum of the LIBOR Rate plus the Applicable Margin starting on and after the Closing Date.

 

(b)         Reserved.

 

(c)         Fee Letter. In addition to the other fees set forth herein, the Borrowers agree to pay Agent the fees set forth in the Fee Letter.

 

(d)         Reserved.

 

(e)         Reserved.

 

(f)          Origination Fee. Contemporaneous with Borrowers’ execution of this Agreement, Borrowers shall pay Agent, for the benefit of all Lenders committed to make Term Loans on the Closing Date, a fee in an amount equal to $42,500. The fee payable pursuant to this paragraph shall be deemed fully earned when due and payable and non-refundable as of the Closing Date.

 

(g)         Reserved.

 

(h)        Exit Fee. Borrowers shall pay to Agent, for the benefit of all Lenders committed to make Term Loan advances, as compensation for the costs of making funds available to Borrowers under this Agreement an exit fee (the “Exit Fee”) calculated in accordance with this subsection and upon the date or dates required under this subsection. The Exit Fee shall be an amount equal to six and one half percent (6.50%) multiplied by the aggregate principal amount of all Term Loans advanced to Borrower under this Agreement. Upon any repayment of any portion of any Term Loan (whether by voluntary prepayment by Borrower, by mandatory prepayment by Borrower, by reason of the occurrence of an Event of Default or the acceleration of the Obligations (including any automatic acceleration due to the occurrence of an Event of Default described in Section 10.1(f)) or otherwise) other than scheduled amortization payments (if any) and the final payment of principal in respect of any tranche of any Term Loans, a portion of the Exit Fee shall be due in the following amount: that percentage which is obtained by dividing the amount prepaid by the then outstanding principal balance of such tranche of Term Loans. Any remaining unpaid amount of the Exit Fee shall be due and payable on the Termination Date. All fees payable pursuant to this paragraph shall be deemed fully accrued and earned as of the Closing Date.

 

 

(i)          Prepayment Fee. If any advance under the Term Loan is prepaid at any time, in whole or in part, for any reason (whether by voluntary prepayment by Borrowers, by reason of the occurrence of an Event of Default or the acceleration of the Term Loan, or otherwise), or if the Term Loan shall become accelerated and due and payable in full, Borrowers shall pay to Agent, for the benefit of all Lenders committed to make Term Loan advances, as compensation for the costs of such Lenders making funds available to Borrowers under this Agreement, a prepayment fee (the “Prepayment Fee”) calculated in accordance with this subsection. The Prepayment Fee in respect of each of Term Loan Tranche 1, Term Loan Tranche 2 or Term Loan Tranche 3 shall be equal to an amount determined by multiplying the amount being prepaid (or required to be prepaid, if such amount is greater) by the following applicable percentage amount: ((x) four percent (4.0%) for the first year following the Closing Date, (y) three percent (3.0%) for the second year following the Closing Date and (z) two percent (2.0%) thereafter. The Prepayment Fee in respect of Term Loan Tranche 4 shall be equal to an amount determined by multiplying the amount being prepaid (or required to be prepaid, if such amount is greater) by the following applicable percentage amount: (x) four percent (4.0%) for the first year following the Term Loan Tranche 4 Funding Date, (y) three percent (3.0%) for the second year following the Term Loan Tranche 4 Funding Date and (z) two percent (2.0%) thereafter. The Prepayment Fee in respect of Term Loan Tranche 5 shall be equal to an amount determined by multiplying the amount being prepaid (or required to be prepaid, if such amount is greater) by the following applicable percentage amount: (x) four percent (4.0%) for the first year following the Term Loan Tranche 5 Funding Date, (y) three percent (3.0%) for the second year following the Term Loan Tranche 5 Funding Date and (z) two percent (2.0%) thereafter. The Prepayment Fee shall not apply to or be assessed upon any prepayment made by Borrowers if such payments were required by Agent to be made pursuant to Section 2.1(a)(ii)(B) subpart (i) (relating to casualty proceeds), or subpart (ii) (relating to payments exceeding the Maximum Lawful Rate). All fees payable pursuant to this paragraph shall be deemed fully earned and non-refundable as of the Closing Date.

 

(j)           Audit Fees. Borrowers shall pay to Agent, for its own account and not for the benefit of any other Lenders, all reasonable fees and expenses in connection with audits and inspections of Borrowers’ books and records, audits, valuations or appraisals of the Collateral, audits of Borrowers’ compliance with applicable Laws and such other matters as Agent shall deem appropriate, which shall be due and payable on the first Business Day of the month following the date of issuance by Agent of a written request for payment thereof to Borrowers.

 

(k)          Wire Fees. Borrowers shall pay to Agent, for its own account and not for the account of any other Lenders, on written demand, fees for incoming and outgoing wires made for the account of Borrowers, such fees to be based on Agent’s then current wire fee schedule (available upon written request of the Borrowers).

 

(l)          Late Charges. If payments of principal (other than a final installment of principal upon the Termination Date), interest due on the Obligations, or any other amounts due hereunder or under the other Financing Documents are not timely made and remain overdue for a period of five (5) days, Borrowers, without notice or demand by Agent, promptly shall pay to Agent, for its own account and not for the benefit of any other Lenders, as additional compensation to Agent in administering the Obligations, an amount equal to five percent (5.0%) of each delinquent payment.

 

(m)        Computation of Interest and Related Fees. All interest and fees under each Financing Document shall be calculated on the basis of a 360-day year for the actual number of days elapsed. The date of funding of a Loan shall be included in the calculation of interest. The date of payment of a Loan shall be excluded from the calculation of interest. If a Loan is repaid on the same day that it is made, one (1) day’s interest shall be charged.

 

(n)        Automated Clearing House Payments. If Agent (or its designated servicer or trustee on behalf of a securitization vehicle) so elects, monthly payments of principal, interest, fees, expenses or any other amounts due and owing from Borrower to Agent hereunder shall be paid to Agent by Automated Clearing House debit of immediately available funds from the financial institution account designated by Borrower Representative in the Automated Clearing House debit authorization executed by Borrowers or Borrower Representative in connection with this Agreement, and shall be effective upon receipt. Borrowers shall execute any and all forms and documentation necessary from time to time to effectuate such automatic debiting. In no event shall any such payments be refunded to Borrowers.

 

 

Section 2.3            Notes. The portion of the Loans made by each Lender shall be evidenced, if so requested by such Lender, by one or more promissory notes executed by Borrowers on a joint and several basis (each, a “Note”) in an original principal amount equal to such Lender’s Term Loan Commitments.

 

Section 2.4             Reserved.

 

Section 2.5             Reserved.

 

Section 2.6             General Provisions Regarding Payment; Loan Account.

 

(a)         All payments to be made by each Borrower under any Financing Document, including payments of principal and interest made hereunder and pursuant to any other Financing Document, and all fees, expenses, indemnities and reimbursements, shall be made without set-off, recoupment or counterclaim. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension (it being understood and agreed that, solely for purposes of calculating financial covenants and computations contained herein and determining compliance therewith, if payment is made, in full, on any such extended due date, such payment shall be deemed to have been paid on the original due date without giving effect to any extension thereto). Any payments received in the Payment Account before 12:00 Noon (Eastern time) on any date shall be deemed received by Agent on such date, and any payments received in the Payment Account at or after 12:00 Noon (Eastern time) on any date shall be deemed received by Agent on the next succeeding Business Day.

 

(b)        Agent shall maintain a loan account (the “Loan Account”) on its books to record Loans and other extensions of credit made by the Lenders hereunder or under any other Financing Document, and all payments thereon made by each Borrower. All entries in the Loan Account shall be made in accordance with Agent’s customary accounting practices as in effect from time to time. The balance in the Loan Account, as recorded in Agent’s books and records at any time shall be conclusive and binding evidence of the amounts due and owing to Agent by each Borrower absent manifest error; provided, however, that any failure to so record or any error in so recording shall not limit or otherwise affect any Borrower’s duty to pay all amounts owing hereunder or under any other Financing Document. Agent shall endeavor to provide Borrowers with a monthly statement regarding the Loan Account (but neither Agent nor any Lender shall have any liability if Agent shall fail to provide any such statement). Unless any Borrower notifies Agent of any objection to any such statement (specifically describing the basis for such objection) within ninety (90) days after the date of receipt thereof, it shall be deemed final, binding and conclusive upon Borrowers in all respects as to all matters reflected therein.

 

 

Section 2.7            Maximum Interest. In no event shall the interest charged with respect to the Loans or any other Obligations of any Borrower under any Financing Document exceed the maximum amount permitted under the laws of the State of New York or of any other applicable jurisdiction. Notwithstanding anything to the contrary herein or elsewhere, if at any time the rate of interest payable hereunder or under any Note or other Financing Document (the “Stated Rate”) would exceed the highest rate of interest permitted under any applicable law to be charged (the “Maximum Lawful Rate”), then for so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable shall be equal to the Maximum Lawful Rate; provided, however, that if at any time thereafter the Stated Rate is less than the Maximum Lawful Rate, each Borrower shall, to the extent permitted by law, continue to pay interest at the Maximum Lawful Rate until such time as the total interest received is equal to the total interest which would have been received had the Stated Rate been (but for the operation of this provision) the interest rate payable. Thereafter, the interest rate payable shall be the Stated Rate unless and until the Stated Rate again would exceed the Maximum Lawful Rate, in which event this provision shall again apply. In no event shall the total interest received by any Lender exceed the amount which it could lawfully have received had the interest been calculated for the full term hereof at the Maximum Lawful Rate. If, notwithstanding the prior sentence, any Lender has received interest hereunder in excess of the Maximum Lawful Rate, such excess amount shall be applied to the reduction of the principal balance of the Loans or to other amounts (other than interest) payable hereunder, and if no such principal or other amounts are then outstanding, such excess or part thereof remaining shall be paid to Borrowers. In computing interest payable with reference to the Maximum Lawful Rate applicable to any Lender, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made.

 

Section 2.8             Taxes; Capital Adequacy; Mitigation Obligations.

 

(a)         All payments of principal and interest on the Loans and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future Taxes, except as required by applicable Law. If any applicable law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable Law and if any such withholding or deduction is in respect of any Indemnified Taxes, then the Borrowers shall pay such additional amount or amounts as is necessary to ensure that the net amount actually received by Agent and each Lender will equal the full amount Agent and such Lender would have received had no such withholding or deduction been required (including, without limitation, such withholdings and deductions applicable to additional sums payable under this Section 2.8). After payment of any Tax by a Borrower to a Governmental Authority pursuant to this Section 2.8, such Borrower shall promptly forward to Agent the original or a certified copy of an official receipt, a copy of the return reporting such payment, or other documentation satisfactory to Agent evidencing such payment to such authority. Borrowers shall timely pay to the relevant Governmental Authority in accordance with applicable Law, or at the option of Agent timely reimburse it for the payment of, any Other Taxes.

 

(b)         The Borrowers shall indemnify Agent and Lenders, within ten (10) days after demand thereof, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.8) payable or paid by Agent or any Lender or required to be withheld or deducted from a payment to Agent or any Lender and any expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes and Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate in reasonable detail as to the amount of such payment or liability delivered to Borrowers by a Lender (with a copy to Agent), or by Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

 

(c)         Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments made under any Financing Document shall deliver to Borrower Representative and Agent, at the time or times prescribed by applicable Law or reasonably requested by Borrower Representative or Agent, such properly completed and executed documentation reasonably requested by Borrower Representative or Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by Borrower Representative or Agent, shall deliver such other documentation prescribed by applicable Law or reasonably requested by Borrowers or Agent as will enable Borrowers or Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Sections 2.8(c)(i), 2.8(c)(ii) and 2.8(e) below) shall not be required if in such Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

 

 

(i)            Each Lender that is not a “United States person” (as such term is defined in Section 7701(a)(30) of the Code) for U.S. federal income tax purposes and is a party hereto on the Closing Date or purports to become an assignee of an interest pursuant to Section 11.17(a) after the Closing Date (unless such Lender was already a Lender hereunder immediately prior to such assignment) (each such Lender a “Foreign Lender”) shall, to the extent permitted by Law, execute and deliver to Borrower Representative and Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower Representative or the Agent) whichever of the following is applicable: (A) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party, (x) with respect to payments of interest under any Financing Document, two (2) properly completed and executed originals of United States Internal Revenue Service (“IRS”) Forms W-8BEN or W-8BEN-E (or successor form) establishing an exemption from, or reduction of, U.S. federal withholding tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Financing Documents, two (2) properly completed and executed originals of IRS Forms W-8BEN or W-8BEN-E (or successor form) establishing an exemption from, or reduction of, U.S. federal withholding tax pursuant to the “business profits” or “other income” article of such tax treaty; (B) two (2) executed originals of Form W-8ECI (or successor form); (C) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit F-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of any Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) two (2) executed originals of IRS Forms W-8BEN or W-8BEN-E (or successor form); (D) to the extent a Foreign Lender is not the beneficial owner, two (2) executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or W-8BEN-E (or successor form), a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-2 or Exhibit F-3, IRS Form W-9 (or successor form), and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-4 on behalf of each such direct and indirect partner; or (E) other applicable forms, certificates or documents prescribed by the IRS. Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify Borrower Representative and Agent in writing of its legal inability to do so. In addition, to the extent permitted by applicable Law, such forms shall be delivered by each Foreign Lender upon the obsolescence or invalidity of any form previously delivered by such Foreign Lender. Each Foreign Lender shall promptly notify Borrower Representative at any time it determines that it is no longer in a position to provide any previously delivered certificate to Borrower Representative (or any other form of certification adopted by the U.S. taxing authorities for such purpose).

 

 

(ii)           Each Lender that is a “United States person” (as such term is defined in Section 7701(a)(30) of the Code) for U.S. federal income tax purposes and is a party hereto on the Closing Date or purports to become an assignee of an interest pursuant to Section 11.17(a) after the Closing Date (unless such Lender was already a Lender hereunder immediately prior to such assignment) shall, to the extent permitted by Law, provide to Borrower Representative and Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower Representative or the Agent), a properly completed and executed IRS Form W-9 or any successor form certifying as to such Lender’s entitlement to an exemption from U.S. backup withholding and other applicable forms, certificates or documents prescribed by the IRS or reasonably requested by Borrower Representative or Agent. Each such Lender shall promptly notify Borrowers at any time it determines that any certificate previously delivered to Borrower Representative (or any other form of certification adopted by the U.S. governmental authorities for such purposes) is no longer valid.

 

(iii)          Any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to Borrower Representative and the Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower Representative or the Agent), executed copies of any other form prescribed by applicable Law as a basis for claiming exemption from or a reduction in U.S. Federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit Borrowers or Agent to determine the withholding or deduction required to be made.

 

(d)         If any Lender determines, in its sole discretion exercised in good faith, that it has received a refund in respect of any Taxes as to which it has been indemnified by any Borrower pursuant to this Section 2.8 (including by the payment of additional amounts pursuant to this Section 2.8), then it shall promptly pay an amount equal to such refund to Borrowers, net of all reasonable out-of-pocket expenses of such Lender or of Agent with respect thereto, including any Taxes; provided, however, that Borrowers, upon the written request of such Lender or Agent, agree to repay any amount paid over to Borrowers to such Lender or to Agent (plus any related penalties, interest or other charges imposed by the relevant Governmental Authority) in the event such Lender or Agent is required, for any reason, to disgorge or otherwise repay such refund. Notwithstanding anything to the contrary in this Section 2.8, in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this Section 2.8(d) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This Section 2.8 shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

 

(e)          If a payment made to a Lender under any Financing Document would be subject to U.S. federal withholding tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to Borrower Representative and Agent at the time or times prescribed by Law and at such time or times reasonably requested by Borrower Representative or Agent such documentation prescribed by applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Borrower Representative or Agent as may be necessary for Borrowers and Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (e), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

 

(f)          Each Lender shall severally indemnify Agent, within ten (10) days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that any Credit Party has not already indemnified Agent for such Indemnified Taxes and without limiting the obligation of the Credit Parties to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 11.17 relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by Agent in connection with any Financing Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by Agent shall be conclusive absent manifest error. Each Lender hereby authorizes Agent to set off and apply any and all amounts at any time owing to such Lender under any Financing Document or otherwise payable by Agent to such Lender from any other source against any amount due to Agent under this paragraph (f).

 

(g)         Each party’s obligations under Section 2.8(a) through (f) shall survive the resignation or replacement of the Agent or any assignment of rights by, or the replacement of, a Lender, and the repayment, satisfaction or discharge of all Obligations hereunder.

 

(h)         If any Lender shall reasonably determine that the adoption or taking effect of, or any change in, any applicable Law regarding capital adequacy, in each instance, after the Closing Date, or any change after the Closing Date in the interpretation, administration or application thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation, administration or application thereof, or the compliance by any Lender or any Person controlling such Lender with any request, guideline or directive regarding capital adequacy (whether or not having the force of Law) of any such Governmental Authority, central bank or comparable agency adopted or otherwise taking effect after the Closing Date, has or would have the effect of reducing the rate of return on such Lender’s or such controlling Person’s capital as a consequence of such Lender’s obligations hereunder to a level below that which such Lender or such controlling Person could have achieved but for such adoption, taking effect, change, interpretation, administration, application or compliance (taking into consideration such Lender’s or such controlling Person’s policies with respect to capital adequacy) then from time to time, upon demand by such Lender (which demand shall be accompanied by a certificate setting forth the basis for such demand and a calculation of the amount thereof in reasonable detail, a copy of which shall be furnished to Agent), Borrowers shall promptly pay to such Lender such additional amount as will compensate such Lender or such controlling Person for such reduction, so long as such amounts have accrued on or after the day which is two hundred seventy (270) days prior to the date on which such Lender first made demand therefor; provided that notwithstanding anything in this Agreement to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “change in applicable Law”, regardless of the date enacted, adopted or issued.

 

(i)          If any Lender requests compensation under either Section 2.1(a)(iv) or Section 2.8(h), or requires Borrowers to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.8, then, upon the written request of Borrower Representative, such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder (subject to the provisions of Section 11.17) to another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or materially reduce amounts payable pursuant to any such Section, as the case may be, in the future, (ii) would not subject such Lender to any unreimbursed cost or expense and (iii) would not otherwise be disadvantageous to such Lender (as determined in its sole good faith discretion). Without limitation of the provisions of Section 12.14, each Borrower hereby agrees to pay all reasonable and documented, out-of-pocket costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

 

Section 2.9             Appointment of Borrower Representative.

 

(a)           Each Borrower hereby irrevocably appoints and constitutes Borrower Representative as its agent and attorney-in-fact to request and receive Loans in the name or on behalf of such Borrower and any other Borrowers, deliver Notices of Borrowing, give instructions with respect to the disbursement of the proceeds of the Loans, give and receive all other notices and consents hereunder or under any of the other Financing Documents and taking all other actions (including in respect of compliance with covenants) in the name or on behalf of any Borrower or Borrowers pursuant to this Agreement and the other Financing Documents. Agent and Lenders may disburse the Loans to such bank account of Borrower Representative or a Borrower or otherwise make such Loans to a Borrower, in each case as Borrower Representative may designate or direct, without notice to any other Borrower. Notwithstanding anything to the contrary contained herein, Agent may at any time and from time to time require that Loans to or for the account of any Borrower be disbursed directly to an operating account of such Borrower.

 

(b)          Borrower Representative hereby accepts the appointment by Borrowers to act as the agent and attorney-in-fact of Borrowers pursuant to this Section 2.9. Borrower Representative shall ensure that the disbursement of any Loans that are at any time requested by or to be remitted to or for the account of a Borrower, shall be remitted or issued to or for the account of such Borrower.

 

(c)           Each Borrower hereby irrevocably appoints and constitutes Borrower Representative as its agent to receive statements on account and all other notices from Agent, Lenders with respect to the Obligations or otherwise under or in connection with this Agreement and the other Financing Documents.

 

(d)          Any notice, election, representation, warranty, agreement or undertaking made or delivered by or on behalf of any Borrower by Borrower Representative shall be deemed for all purposes to have been made or delivered by such Borrower, as the case may be, and shall be binding upon and enforceable against such Borrower to the same extent as if made or delivered directly by such Borrower.

 

(e)           No resignation by or termination of the appointment of Borrower Representative as agent and attorney-in-fact as aforesaid shall be effective, except after ten (10) Business Days’ prior written notice to Agent. If the Borrower Representative resigns under this Agreement, Borrowers shall be entitled to appoint a successor Borrower Representative (which shall be a Borrower and shall be reasonably acceptable to Agent as such successor). Upon the acceptance of its appointment as successor Borrower Representative hereunder, such successor Borrower Representative shall succeed to all the rights, powers and duties of the retiring Borrower Representative and the term “Borrower Representative” means such successor Borrower Representative for all purposes of this Agreement and the other Financing Documents, and the retiring or terminated Borrower Representative’s appointment, powers and duties as Borrower Representative shall be thereupon terminated.

 

 

Section 2.10          Joint and Several Liability; Rights of Contribution; Subordination and Subrogation.

 

(a)        Borrowers are defined collectively to include all Persons named as one of the Borrowers herein; provided, however, that any references herein to “any Borrower”, “each Borrower” or similar references, shall be construed as a reference to each individual Person named as one of the Borrowers herein. Each Person so named shall be jointly and severally liable for all of the obligations of Borrowers under this Agreement. Each Borrower, individually, expressly understands, agrees and acknowledges, that the credit facilities would not be made available on the terms herein in the absence of the collective credit of all of the Persons named as the Borrowers herein, the joint and several liability of all such Persons, and the cross-collateralization of the collateral of all such Persons. Accordingly, each Borrower individually acknowledges that the benefit to each of the Persons named as one of the Borrowers as a whole constitutes reasonably equivalent value, regardless of the amount of the credit facilities actually borrowed by, advanced to, or the amount of collateral provided by, any individual Borrower. In addition, each entity named as one of the Borrowers herein hereby acknowledges and agrees that all of the representations, warranties, covenants, obligations, conditions, agreements and other terms contained in this Agreement shall be applicable to and shall be binding upon and measured and enforceable individually against each Person named as one of the Borrowers herein as well as all such Persons when taken together. By way of illustration, but without limiting the generality of the foregoing, the terms of Section 10.1 of this Agreement are to be applied to each individual Person named as one of the Borrowers herein (as well as to all such Persons taken as a whole), such that the occurrence of any of the events described in Section 10.1 of this Agreement as to any Person named as one of the Borrowers herein shall constitute an Event of Default even if such event has not occurred as to any other Persons named as the Borrowers or as to all such Persons taken as a whole.

 

(b)         Notwithstanding any provisions of this Agreement to the contrary, it is intended that the joint and several nature of the liability of each Borrower for the Obligations and the Liens granted by Borrowers to secure the Obligations, not constitute a Fraudulent Conveyance (as defined below). Consequently, Agent, Lenders and each Borrower agree that if the liability of a Borrower for the Obligations, or any Liens granted by such Borrower securing the Obligations would, but for the application of this sentence, constitute a Fraudulent Conveyance, the liability of such Borrower and the Liens securing such liability shall be valid and enforceable only to the maximum extent that would not cause such liability or such Lien to constitute a Fraudulent Conveyance, and the liability of such Borrower and this Agreement shall automatically be deemed to have been amended accordingly. For purposes hereof, the term “Fraudulent Conveyance” means a fraudulent conveyance under Section 548 of Chapter 11 of Title II of the Bankruptcy Code or a fraudulent conveyance or fraudulent transfer under the applicable provisions of any fraudulent conveyance or fraudulent transfer law or similar law of any state, nation or other governmental unit, as in effect from time to time.

 

(c)         Agent is hereby authorized, without notice or demand (except as otherwise specifically required under this Agreement) and without affecting the liability of any Borrower hereunder, at any time and from time to time, to (i) renew, extend or otherwise increase the time for payment of the Obligations; (ii) with the written agreement of any Borrower, change the terms relating to the Obligations or otherwise modify, amend or change the terms of any Note or other agreement, document or instrument now or hereafter executed by any Borrower and delivered to Agent for any Lender; (iii) accept partial payments of the Obligations; (iv) take and hold any Collateral for the payment of the Obligations or for the payment of any guaranties of the Obligations and exchange, enforce, waive and release any such Collateral; (v) apply any such Collateral and direct the order or manner of sale thereof as Agent, in its sole discretion, may determine; and (vi) settle, release, compromise, collect or otherwise liquidate the Obligations and any Collateral therefor in any manner, all guarantor and surety defenses being hereby waived by each Borrower. Without limitations of the foregoing, with respect to the Obligations, each Borrower hereby makes and adopts each of the agreements and waivers set forth in each Guarantee, the same being incorporated hereby by reference. Except as specifically provided in this Agreement or any of the other Financing Documents, Agent shall have the exclusive right to determine the time and manner of application of any payments or credits, whether received from any Borrower or any other source, and such determination shall be binding on all Borrowers. All such payments and credits may be applied, reversed and reapplied, in whole or in part, to any of the Obligations that Agent shall determine, in its sole discretion, without affecting the validity or enforceability of the Obligations of the other Borrower.

 

 

 

(d)               Each Borrower hereby agrees that, except as hereinafter provided, its obligations hereunder shall be unconditional, irrespective of (i) the absence of any attempt to collect the Obligations from any obligor or other action to enforce the same; (ii) the waiver or consent by Agent with respect to any provision of any instrument evidencing the Obligations, or any part thereof, or any other agreement heretofore, now or hereafter executed by a Borrower and delivered to Agent; (iii) failure by Agent to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any security or collateral for the Obligations; (iv) the institution of any proceeding under the Bankruptcy Code, or any similar proceeding, by or against a Borrower or Agent’s election in any such proceeding of the application of Section 1111(b)(2) of the Bankruptcy Code; (v) any borrowing or grant of a security interest by a Borrower as debtor-in-possession, under Section 364 of the Bankruptcy Code; (vi) the disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of Agent’s claim(s) for repayment of any of the Obligations; or (vii) any other circumstance other than payment in full of the Obligations which might otherwise constitute a legal or equitable discharge or defense of a guarantor or surety.

 

(e)                Borrowers hereby agree, as between themselves, that to the extent that Agent, on behalf of Lenders, shall have received from any Borrower any Recovery Amount (as defined below), then the paying Borrower shall have a right of contribution against each other Borrower in an amount equal to such other Borrower’s contributive share of such Recovery Amount; provided, however, that in the event any Borrower suffers a Deficiency Amount (as defined below), then the Borrower suffering the Deficiency Amount shall be entitled to seek and receive contribution from and against the other Borrowers in an amount equal to the Deficiency Amount; and provided, further, that in no event shall the aggregate amounts so reimbursed by reason of the contribution of any Borrower equal or exceed an amount that would, if paid, constitute or result in Fraudulent Conveyance. Until all Obligations have been paid and satisfied in full, no payment made by or for the account of a Borrower including, without limitation, (i) a payment made by such Borrower on behalf of the liabilities of any other Borrower, or (ii) a payment made by any other Guarantor under any Guarantee, shall entitle such Borrower, by subrogation or otherwise, to any payment from such other Borrower or from or out of such other Borrower’s property. The right of each Borrower to receive any contribution under this Section 2.10(e) or by subrogation or otherwise from any other Borrower shall be subordinate in right of payment to the Obligations and such Borrower shall not exercise any right or remedy against such other Borrower or any property of such other Borrower by reason of any performance of such Borrower of its joint and several obligations hereunder, until the Obligations have been indefeasibly paid and satisfied in full, and no Borrower shall exercise any right or remedy with respect to this Section 2.10(e) until the Obligations have been indefeasibly paid and satisfied in full. As used in this Section 2.10(e), the term “Recovery Amount” means the amount of proceeds received by or credited to Agent from the exercise of any remedy of the Lenders under this Agreement or the other Financing Documents, including, without limitation, the sale of any Collateral. As used in this Section 2.10(e), the term “Deficiency Amount” means any amount that is less than the entire amount a Borrower is entitled to receive by way of contribution or subrogation from, but that has not been paid by, the other Borrowers in respect of any Recovery Amount attributable to the Borrower entitled to contribution, until the Deficiency Amount has been reduced to Zero Dollars ($0) through contributions and reimbursements made under the terms of this Section 2.10(e) or otherwise.

 

Section 2.11            Aziyo Med Controlled Account. Notwithstanding the foregoing or anything else to the contrary in this Agreement, all amounts owed to Aziyo Med in respect of Accounts that are subject to, or potentially subject to, a security interest of Ligand pursuant to the Ligand Royalty Agreement or any other funds constituting “Royalty Interests” (as defined in the Ligand Royalty Agreement) or the proceeds thereof shall be paid into a segregated Deposit Account owned solely by Aziyo Med that is subject to a “springing” Deposit Account Control Agreement (the “Aziyo Med Controlled Account”). Once per calendar week, Aziyo Med shall cause all amounts on deposit in the Aziyo Med Controlled Account required to be transferred by the Ligand Royalty Agreement, and permitted to be so transferred pursuant to the terms of the Ligand Intercreditor Agreement, to be transferred to the Permitted Ligand Account in order to pay the Ligand Royalty Payments in accordance with the terms of the Ligand Intercreditor Agreement.  Once per calendar week (and, for the avoidance of doubt, on the same day as each transfer to the Permitted Ligand Account pursuant to the preceding sentence), Aziyo Med shall transfer all amounts on deposit in the Aziyo Med Controlled Account other than those necessary to pay the Ligand Royalty Payments, in accordance with the previous sentence, to the Lockbox Account or, following the payment in full of the Affiliated Obligations, to such other Deposit Account that is subject to a Deposit Account Control Agreement as Agent may direct.

 

 

Section 2.12             Termination; Restriction on Termination.

 

(a)                Termination by Lenders. In addition to the rights set forth in Section 10.2, Agent may, and at the direction of Required Lenders shall, terminate this Agreement without notice upon or after the occurrence and during the continuance of an Event of Default.

 

(b)                Termination by Borrowers. Upon at least ten (10) days’ prior written notice and pursuant to payoff documentation in form and substance satisfactory to Agent and Lenders, Borrowers may, at its option, terminate this Agreement; provided, however, that no such termination shall be effective until Borrowers have complied with Section 2.2 and the terms of any fee letter. Any notice of termination given by Borrowers shall be irrevocable unless all Lenders otherwise agree in writing and no Lender shall have any obligation to make any Loans on or after the termination date stated in such notice. Borrowers may elect to terminate this Agreement in its entirety only. No section of this Agreement or type of Loan available hereunder may be terminated singly.

 

(c)                Effectiveness of Termination. All of the Obligations shall be immediately due and payable upon the Termination Date. All undertakings, agreements, covenants, warranties and representations of Borrowers contained in the Financing Documents shall survive any such termination and Agent shall retain their Liens in the Collateral and Agent and each Lender shall retain all of its rights and remedies under the Financing Documents notwithstanding such termination until all Obligations and Affiliated Obligations have been discharged or paid, in full, in immediately available funds, including, without limitation, all Obligations under Section 2.2 and the terms of any fee letter resulting from such termination. Notwithstanding the foregoing or the payment in full of the Obligations, Agent shall not be required to terminate its Liens in the Collateral unless, with respect to any loss or damage Agent may incur as a result of dishonored checks or other items of payment received by Agent from Borrower or any Account Debtor and applied to the Obligations, Agent shall, at its option, (i) have received a written agreement satisfactory to Agent, executed by Borrowers and by any Person whose loans or other advances to Borrowers are used in whole or in part to satisfy the Obligations, indemnifying Agent and each Lender from any such loss or damage or (ii) have retained cash Collateral or other Collateral for such period of time as Agent, in its discretion, may deem necessary to protect Agent and each Lender from any such loss or damage.

 

Article 3 - REPRESENTATIONS AND WARRANTIES

 

To induce Agent and Lenders to enter into this Agreement and to make the Loans and other credit accommodations contemplated hereby, each Borrower hereby represents and warrants to Agent and each Lender that:

 

Section 3.1              Existence and Power. Each Credit Party (a) is an entity as specified on Schedule 3.1, (b) is duly organized, validly existing and in good standing under the laws of the jurisdiction specified on Schedule 3.1 and no other jurisdiction, (c) has the same legal name as it appears in such Credit Party’s Organizational Documents and an organizational identification number (if any), in each case as specified on Schedule 3.1, (d) has all powers to own its assets and has powers and all Permits necessary or desirable in the operation of its business as presently conducted or as proposed to be conducted, except where the failure to have such Permits could not reasonably be expected to have a Material Adverse Effect, and (e) is qualified to do business as a foreign entity in each jurisdiction in which it is required to be so qualified, which jurisdictions as of the Closing Date are specified on Schedule 3.1, except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 3.1, no Credit Party (x) has had, over the five (5) year period preceding the Closing Date, any name other than its current name, or (y) was incorporated or organized under the laws of any jurisdiction other than its current jurisdiction of incorporation or organization.

 

 

Section 3.2               Organization and Governmental Authorization; No Contravention. The execution, delivery and performance by each Credit Party of the Operative Documents to which it is a party (a) are within its powers, (b) have been duly authorized by all necessary action pursuant to its Organizational Documents, (c) require no further action by or in respect of, or filing with, any Governmental Authority and (d) do not violate, conflict with or cause a breach or a default under (i) any Law applicable to any Credit Party, (ii) any of the Organizational Documents of any Credit Party, or (iii) any agreement or instrument binding upon it, except for such violations, conflicts, breaches or defaults as could not, with respect to this clause (iii), reasonably be expected to have a Material Adverse Effect.

 

Section 3.3               Binding Effect. Each of the Operative Documents to which any Credit Party is a party constitutes a valid and binding agreement or instrument of such Credit Party, enforceable against such Credit Party in accordance with its respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles. Each Financing Document has been duly executed and delivered by each Credit Party party thereto.

 

Section 3.4               Capitalization. The authorized equity securities of each of the Credit Parties as of the Closing Date are as set forth on Schedule 3.4. All issued and outstanding equity securities of each of the Credit Parties are duly authorized and validly issued, fully paid, nonassessable, free and clear of all Liens other than Permitted Liens, and such equity securities were issued in compliance with all applicable Laws. The identity of the holders of the equity securities of each of the Credit Parties and the percentage of their fully-diluted ownership of the equity securities of each of the Credit Parties as of the Closing Date is set forth on Schedule 3.4. No shares of the capital stock or other equity securities of any Credit Party, other than those described above, are issued and outstanding as of the Closing Date. Except as set forth in the Equity Investment Documents, as of the Closing Date there are no preemptive or other outstanding rights, options, warrants, conversion rights or similar agreements or understandings for the purchase or acquisition from any Credit Party of any equity securities of any such entity.

 

Section 3.5              Financial Information. All financial statements delivered to Agent by any Credit Party fairly present in all material respects the financial position of such Credit Party as of such date and shall be in conformity with GAAP (and as to unaudited financial statements, subject to normal year-end adjustments and the absence of footnote disclosures). Since December 31, 2018, there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect. Since December 31, 2018, to the knowledge of any Borrower (after the exercise of reasonable due diligence) there has been no material adverse change in the business, operations, properties, prospects or condition (financial or otherwise) of any business, assets or entities being purchased by Borrowers pursuant to the Transaction Documents.

 

Section 3.6               Litigation. Except as set forth on Schedule 3.6 as of the Closing Date, and except as hereafter disclosed to Agent in writing, there is no Litigation pending against, or to such Borrower’s knowledge threatened against, any Credit Party or, to such Borrower’s knowledge, any party to any Operative Document other than a Credit Party. There is no Litigation pending in which an adverse decision could reasonably be expected to have a Material Adverse Effect or which in any manner draws into question the validity of any of the Operative Documents.

 

 

Section 3.7              Ownership of Property. Each Borrower and its Subsidiaries are the lawful sole owner of, has good and marketable title to and is in lawful possession of, or has valid leasehold interests in, all properties, accounts and other assets (real or personal, tangible, intangible or mixed) purported or reported to be owned or leased (as the case may be) by such Person.

 

Section 3.8              No Default. No Event of Default, or to such Borrower’s knowledge, Default, has occurred and is continuing. No Credit Party is in breach or default under or with respect to any contract, agreement, lease or other instrument to which it is a party or by which its property is bound or affected, which breach or default could reasonably be expected to have a Material Adverse Effect.

 

Section 3.9              Labor Matters. As of the Closing Date, there are no strikes or other labor disputes pending or, to any Borrower’s knowledge, threatened against any Credit Party. Except as could not reasonably be expected to result in a Material Adverse Effect, (a) hours worked and payments made to the employees of each Borrower and each of its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Law dealing with such matters and (b) all payments due from each Borrower and each of its Subsidiaries, or for which any claim may be made against any of them, on account of wages and employee and retiree health and welfare insurance and other benefits have been paid or accrued as a liability on their books, as the case may be. The consummation of the transactions contemplated by the Financing Documents and the other Operative Documents will not give rise to a right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which any Borrower or any Subsidiary is a party or by which it is bound.

 

Section 3.10            Regulated Entities. No Credit Party is an “investment company” or a company “controlled” by an “investment company” or a “subsidiary” of an “investment company,” all within the meaning of the Investment Company Act of 1940.

 

Section 3.11            Margin Regulations. None of the proceeds from the Loans have been or will be used, directly or indirectly, for the purpose of purchasing or carrying any “margin stock” (as defined in Regulation U of the Federal Reserve Board), for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any “margin stock” or for any other purpose which might cause any of the Loans to be considered a “purpose credit” within the meaning of Regulation T, U or X of the Federal Reserve Board.

 

Section 3.12             Compliance With Laws; Anti-Terrorism Laws.

 

(a)                Each Credit Party is in compliance with the requirements of all applicable Laws, except for such Laws the noncompliance with which could not reasonably be expected to have a Material Adverse Effect.

 

(b)                None of the Credit Parties and, to the knowledge of the Credit Parties, none of their Affiliates (except for any Person that is an Affiliate of a Credit Party solely due to the fact that it is HighCape Portfolio Company) (i) is in violation of any Anti-Terrorism Law, (ii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law, (iii) is a Blocked Person, or is controlled by a Blocked Person, (iv) is acting or will act for or on behalf of a Blocked Person, (v) is associated with, or will become associated with, a Blocked Person or (vi) is providing, or will provide, material, financial or technical support or other services to or in support of acts of terrorism of a Blocked Person. No Credit Party nor, to the knowledge of any Credit Party, any of its Affiliates (except for any Person that is an Affiliate of a Credit Party solely due to the fact that it is HighCape Portfolio Company) or agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement, (A) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (B) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law.

 

 

Section 3.13            Taxes. All federal, state and material local tax returns, reports and statements required to be filed by or on behalf of each Credit Party have been filed with the appropriate Governmental Authorities in all jurisdictions in which such returns, reports and statements are required to be filed and, except to the extent subject to a Permitted Contest, all Taxes (including real property Taxes) and other charges shown to be due and payable in respect thereof have been timely paid prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for nonpayment thereof. Except to the extent subject to a Permitted Contest, all material state and local sales and use Taxes required to be paid by each Credit Party have been paid. All federal and state returns have been filed by each Credit Party for all periods for which returns were due with respect to employee income tax withholding, social security and unemployment taxes, and, except to the extent subject to a Permitted Contest, the amounts shown thereon to be due and payable have been paid in full or adequate provisions therefor have been made.

 

Section 3.14             Compliance with ERISA.

 

(a)                Each ERISA Plan (and the related trusts and funding agreements) complies in form and in operation with, has been administered in compliance with, and the terms of each ERISA Plan satisfy, the applicable requirements of ERISA and the Code in all material respects. Each ERISA Plan which is intended to be qualified under Section 401(a) of the Code is so qualified, and the United States Internal Revenue Service has issued a favorable determination letter with respect to each such ERISA Plan which may be relied on currently. No Credit Party has incurred liability for any material excise tax under any of Sections 4971 through 5000 of the Code.

 

(b)               Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, each Borrower and each Subsidiary is in compliance with the applicable provisions of ERISA and the provision of the Code relating to ERISA Plans and the regulations and published interpretations therein. During the thirty-six (36) month period prior to the Closing Date or the making of any Loan (i) no steps have been taken to terminate any Pension Plan, and (ii) no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 303(k) of ERISA or Section 430(k) of the Code and no event has occurred that would give rise to a Lien under Section 4068 of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which could result in the incurrence by any Credit Party of any material liability, fine or penalty. No Credit Party has incurred liability to the PBGC (other than for current premiums) with respect to any employee Pension Plan. All contributions (if any) have been made on a timely basis to any Multiemployer Plan that are required to be made by any Credit Party or any other member of the Controlled Group under the terms of the plan or of any collective bargaining agreement or by applicable Law; no Credit Party nor any member of the Controlled Group has withdrawn or partially withdrawn from any Multiemployer Plan, incurred any withdrawal liability with respect to any such plan or received notice of any claim or demand for withdrawal liability or partial withdrawal liability from any such plan, and no condition has occurred which, if continued, could result in a withdrawal or partial withdrawal from any such plan, and no Credit Party nor any member of the Controlled Group has received any notice that any Multiemployer Plan is in reorganization, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of any excise tax, that any such plan is or has been funded at a rate less than that required under Section 412 of the Code, that any such plan is or may be terminated, or that any such plan is or may become insolvent.

 

 

Section 3.15            Consummation of Operative Documents; Brokers. Except for fees payable to Agent and/or Lenders, no broker, finder or other intermediary has brought about the obtaining, making or closing of the transactions contemplated by the Operative Documents, and no Credit Party has or will have any obligation to any Person in respect of any finder’s or brokerage fees, commissions or other expenses in connection herewith or therewith.

 

Section 3.16             Related Transactions. All transactions contemplated by the Operative Documents to be consummated on or prior to the date hereof have been so consummated (including, without limitation, the disbursement and transfer of all funds in connection therewith) in all material respects pursuant to the provisions of the applicable Operative Documents, true and complete copies of which have been delivered to Agent, and in compliance with all applicable Law, except for such Laws the noncompliance with which would not reasonably be expected to have a Material Adverse Effect.

 

Section 3.17            Material Contracts. Except for the Operative Documents and the other agreements set forth on Schedule 3.17, as of the Closing Date there are no Material Contracts. The consummation of the transactions contemplated by the Financing Documents will not give rise to a right of termination in favor of any party to any Material Contract (other than any Credit Party), except for such Material Contracts the noncompliance with which would not reasonably be expected to have a Material Adverse Effect.

 

Section 3.18             Compliance with Environmental Requirements; No Hazardous Materials. Except in each case as set forth on Schedule 3.18:

 

(a)                no notice, notification, demand, request for information, citation, summons, complaint or order has been issued, no complaint has been filed, no penalty has been assessed and no investigation or review is pending, or to such Borrower’s knowledge, threatened by any Governmental Authority or other Person with respect to any (i) alleged violation by any Credit Party of any Environmental Law, (ii) alleged failure by any Credit Party to have any Permits required in connection with the conduct of its business or to comply with the terms and conditions thereof, (iii) any generation, treatment, storage, recycling, transportation or disposal of any Hazardous Materials, or (iv) release of Hazardous Materials; and

 

(b)                no property now owned or leased by any Credit Party and, to the knowledge of each Borrower, no such property previously owned or leased by any Credit Party, to which any Credit Party has, directly or indirectly, transported or arranged for the transportation of any Hazardous Materials, is listed or, to such Borrower’s knowledge, proposed for listing, on the National Priorities List promulgated pursuant to CERCLA, or CERCLIS (as defined in CERCLA) or any similar state list or is the subject of federal, state or local enforcement actions or, to the knowledge of such Borrower, other investigations which may lead to claims against any Credit Party for clean-up costs, remedial work, damage to natural resources or personal injury claims, including, without limitation, claims under CERCLA.

 

For purposes of this Section 3.18, each Credit Party shall be deemed to include any business or business entity (including a corporation) that is, in whole or in part, a predecessor of such Credit Party.

 

Section 3.19            Intellectual Property and License Agreements. A list of all Registered Intellectual Property of each Credit Party and all material in-bound license or sublicense agreements, exclusive and material out-bound license or sublicense agreements, or other material rights of any Credit Party to use Intellectual Property (but excluding in-bound licenses of over-the-counter software that is commercially available to the public), as of the Closing Date and, as updated pursuant to Section 4.15, is set forth on Schedule 3.19. Except for Permitted Licenses, each Credit Party is the sole owner of its Intellectual Property free and clear of any Liens other than Permitted Liens. Each patent is valid and enforceable and no part of the Material Intangible Assets has been judged invalid or unenforceable, in whole or in part, and to the best of Borrower’s knowledge, no claim has been made that any part of the Intellectual Property violates the rights of any third party.

 

 

Section 3.20            Solvency. Each Borrower is, and after giving effect to the Loan advance and the liabilities and obligations of each Borrower under the Operative Documents, will be, Solvent; and each other Credit Party together with Borrower and its Subsidiaries, taken as a whole, is Solvent.

 

Section 3.21            Full Disclosure. None of the material written information (financial or otherwise, but excluding any projections and forward-looking statements, estimates, budgets and industry data of a general nature) furnished by or on behalf of any Credit Party to Agent or any Lender in connection with the consummation of the transactions contemplated by the Operative Documents (in each case, taken as a whole and as modified or supplemented by other information so furnished promptly after the same becomes available) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which such statements were made. All financial projections and forward-looking statements delivered to Agent and the Lenders by the Borrowers have been prepared on the basis of the assumptions stated therein. Such projections represent the Borrowers’ best estimate of the Borrowers’ future financial performance as of the date of delivery and such assumptions are believed by the Borrowers to be fair and reasonable in light of current business conditions at the time of delivery to the Agent, provided that it being understood that such projections are subject to uncertainties and contingencies, many of which are beyond the control of the Borrowers, and the Borrowers can give no assurance that such projections will be attained, that actual results may differ in a material manner from such projections and any failure to meet such projections shall not be deemed to be a breach of any representation or covenant herein.

 

Section 3.22            Reserved.

 

Section 3.23            Subsidiaries. Borrowers do not own any stock, partnership interests, limited liability company interests or other equity securities or Subsidiaries except for Permitted Investments.

 

Section 3.24            Reserved.

 

Section 3.25            Regulatory Matters.

 

(a)                All of Borrower’s material Products and material Regulatory Required Permits as of the Closing Date are listed on Schedule 4.17.

 

(b)                None of the Borrowers are in violation of any Healthcare Laws in any material respect.

 

(c)                No Borrower is participating in any Third Party Payor Program.

 

(d)                None of the Borrower’s officers, directors, employees, shareholders, their agents or affiliates has made an untrue statement of material fact or fraudulent statement to the FDA or failed to disclose a material fact required to be disclosed to the FDA, committed an act, made a statement, or failed to make a statement that could reasonably be expected to provide a basis for the FDA to invoke its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities,” set forth in 56 Fed. Regulation 46191 (September 10, 1991).

 

(e)                No Borrower has received any written notice that any Governmental Authority, including without limitation the FDA, DEA, the Office of the Inspector General of HHS or the United States Department of Justice has commenced or threatened to initiate any action against a Credit Party, any action to enjoin a Credit Party, their officers, directors, employees, shareholders or their agents and Affiliates (except for any Person that is an Affiliate of a Credit Party solely due to the fact that it is HighCape Portfolio Company), from conducting their businesses at any facility owned or used by them or for any material civil penalty, injunction, seizure or criminal action.

 

 

(f)                 No Borrower has received from the FDA or the DEA, a Warning Letter, Form FDA-483, “Untitled Letter,” other correspondence or notice setting forth allegedly objectionable observations or alleged violations of laws and regulations enforced by the FDA or the DEA, or any comparable correspondence from any state or local authority responsible for regulating drug products and establishments, or any comparable correspondence from any foreign counterpart of the FDA or DEA, or any comparable correspondence from any foreign counterpart of any state or local authority with regard to any Product or the manufacture, processing, packing, or holding thereof.

 

(g)               No Borrower is subject to any proceeding, suit or, to Borrower’s knowledge, investigation by any federal, state or local government or quasi-governmental body, agency, board or authority or any other administrative or investigative body which could result in the revocation, transfer, surrender, suspension or other impairment of the Permits of such Borrower.

 

(h)               Borrower has not engaged in any Recalls, Market Withdrawals, or other forms of product retrieval from the marketplace of any Products.

 

(i)                 Each Product, to the extent applicable (a) is not adulterated or misbranded within the meaning of the FDCA; (b) is not an article prohibited from introduction into interstate commerce under the provisions of Sections 404, 505 or 512 of the FDCA; (c) has been, to Borrower’s knowledge after due inquiry, prior to the Closing Date and, thereafter, shall be manufactured, imported, possessed, owned, warehoused, marketed, promoted, sold, labeled, furnished, distributed and marketed and each service has been conducted in accordance with all applicable Permits and Laws; and (d) has been, to Borrower’s knowledge after due inquiry, prior to the Closing Date and, thereafter, shall be manufactured in accordance with Good Manufacturing Practices, except in each case as could not reasonably be expected to result in a Material Adverse Effect.

 

(j)                 No Borrower is subject to any proceeding, suit or, to Borrowers’ knowledge, investigation by any federal, state or local government or quasi-governmental body, agency, board or authority or any other administrative or investigative body: (i) which may result in the imposition of a fine, alternative, interim or final sanction or which would have a Material Adverse Effect on any Borrower; or (ii) which would reasonably be expected to result in the revocation, transfer, surrender, suspension or other material impairment of any material Permits of Borrower.

 

Section 3.26            Accuracy of Schedules. All information set forth in the Schedules to this Agreement (including Schedule 3.19 and Schedule 4.17) is true, accurate and complete as of the Closing Date, the date of delivery of the last Compliance Certificate and any other subsequent date in which Borrower is requested to update such Schedules. All information set forth in the Perfection Certificate is true, accurate and complete as of the Closing Date and any other subsequent date in which Borrower is requested to update such certificate.

 

 

Article 4 - AFFIRMATIVE COVENANTS

 

Each Borrower agrees that, so long as any Credit Exposure exists:

 

Section 4.1               Financial Statements and Other Reports. Each Borrower will deliver to Agent:

 

(a)                as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated and consolidating balance sheet, cash flow and income statement covering Borrowers’ and its Consolidated Subsidiaries’ consolidated operations during the period, prepared under GAAP, consistently applied, certified by a Responsible Officer and in a form acceptable to Agent;

 

(b)                [reserved];

 

(c)                as soon as available, but no later than one hundred twenty (120) days after the last day of Borrower’s fiscal year, audited consolidated and consolidating financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm acceptable to Agent in its reasonable discretion;

 

(d)                within five (5) days of delivery or filing thereof, copies of all material statements, reports and notices made available to Borrower’s security holders or to any holders of Subordinated Debt and copies of all reports and other filings made by Borrower with any stock exchange on which any securities of any Borrower are traded and/or the SEC;

 

(e)                a prompt written report of any legal actions pending or threatened against any Borrower or any of its Subsidiaries that could reasonably be expected to result in damages or costs to any Borrower or any of its Subsidiaries of Fifty Thousand Dollars ($50,000) or more;

 

(f)                 prompt written notice of an event that materially and adversely affects the value of any Intellectual Property;

 

(g)                within sixty (60) days after the start of each fiscal year, projections for the forthcoming two fiscal years, on a quarterly basis for the current year and on an annual basis for the subsequent year;

 

(h)                promptly (and in any event within ten (10) days of any request therefor) such readily available other budgets, sales projections, operating plans and other financial information and information, reports or statements regarding the Borrowers, their business and the Collateral as Agent may from time to time reasonably request;

 

(i)                 written notice to Agent promptly, and in any event within five (5) Business Days of a Responsible Officer of a Borrower receiving, becoming aware of or determining that: (i) development, testing, and/or manufacturing of any Product that is material to Borrowers’ business should cease, (ii) the marketing or sales of a Product, which is material to Borrowers’ business and which has been approved for marketing and sale, should cease or such Product should be withdrawn from the marketplace, (iii) any Governmental Authority is conducting an investigation or review of any material Regulatory Required Permit or (iv) any material Regulatory Required Permit has been revoked or withdrawn;

 

(j)                 promptly, but in any event within three (3) Business Days, after any Responsible Officer of any Borrower obtains knowledge of the occurrence of any event or change (including, without limitation, any notice of any violation of Healthcare Laws) that has resulted or could reasonably be expected to result in, either in any case or in the aggregate, a Material Adverse Effect, a certificate of a Responsible Officer specifying the nature and period of existence of any such event or change, or specifying the notice given or action taken by such holder or Person and the nature of such event or change, and what action the applicable Credit Party or Subsidiary has taken, is taking or proposes to take with respect thereto; and

 

 

(k)                within thirty (30) days after the last day of each month, a duly completed Compliance Certificate signed by a Responsible Officer setting forth calculations showing (i) cash and cash equivalents of Borrowers and Borrowers and their Consolidated Subsidiaries, and (ii) compliance with the financial covenants set forth in this Agreement.

 

Section 4.2               Payment and Performance of Obligations.

 

(a)                Each Borrower (i) will pay and discharge, and cause each Subsidiary to pay and discharge, on a timely basis as and when due, all of their respective obligations and liabilities, except for such obligations and/or liabilities (A) that may be the subject of a Permitted Contest, and (B) the nonpayment or nondischarge of which could not reasonably be expected to have a Material Adverse Effect or result in a Lien against any Collateral, except for Permitted Liens, (ii) without limiting anything contained in the foregoing clause (i), pay all amounts due and owing in respect of Taxes (including without limitation, payroll and withholdings tax liabilities) on a timely basis as and when due, and in any case prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for nonpayment thereof, (iii) will maintain, and cause each Subsidiary to maintain, in accordance with GAAP, appropriate reserves for the accrual of all of their respective obligations and liabilities, and (iv) will not breach or permit any Subsidiary to breach, or permit to exist any default under, the terms of any lease, commitment, contract, instrument or obligation to which it is a party, or by which its properties or assets are bound, except for such breaches or defaults which could not reasonably be expected to have a Material Adverse Effect.

 

(b)                Upon completion of any Permitted Contest, each Borrower shall, and will cause each Subsidiary to, promptly pay the amount due, if any, except where the failure to pay such amount could not reasonably be expected to have a Material Adverse Effect.

 

Section 4.3               Maintenance of Existence. Each Borrower will preserve, renew and keep in full force and effect, and will cause each Subsidiary to preserve, renew and keep in full force and effect, (a) their respective existence and (b) their respective rights, privileges and franchises necessary or desirable in the normal conduct of business, except with respect to clauses (a) and (b) above in connection with a transaction permitted under Section 5.6, and (c) their respective qualification to do business and good standing in each jurisdiction except, with respect to clause (b) and this clause (c), where the failure to be qualified or in good standing could not reasonably be expected to have a Material Adverse Effect.

 

Section 4.4               Maintenance of Property; Insurance.

 

(a)                Each Borrower will keep, and will cause each Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted. If all or any part of the Collateral useful or necessary in its business becomes damaged or destroyed, each Borrower will, and will cause each Subsidiary to, promptly and completely repair and/or restore the affected Collateral in a good and workmanlike manner, regardless of whether Agent agrees to disburse insurance proceeds or other sums to pay costs of the work of repair or reconstruction.

 

 

(b)                Upon completion of any Permitted Contest, Borrowers shall, and will cause each Subsidiary to, promptly pay the amount due, if any, and deliver to Agent proof of the completion of the contest and payment of the amount due, if any.

 

(c)                Each Borrower will maintain (i) casualty insurance on all real and personal property on an all risks basis (including the perils of flood, windstorm and quake), covering the repair and replacement cost of all such property and coverage, business interruption and rent loss coverages with extended period of indemnity (for the period required by Agent from time to time) and indemnity for extra expense, in each case without application of coinsurance and with agreed amount endorsements, (ii) general and professional liability insurance (including products/completed operations liability coverage), and (iii) such other insurance coverage, in each case against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons; provided, however, that, in no event shall such insurance be in amounts or with coverage less than, or with carriers with qualifications inferior to, any of the insurance or carriers in existence as of the Closing Date (or required to be in existence after the Closing Date under a Financing Document). All such insurance shall be provided by insurers having an A.M. Best policyholders rating reasonably acceptable to Agent.

 

(d)                On or prior to the Closing Date, and at all times thereafter, each Borrower will cause Agent to be named as an additional insured, assignee and lender loss payee, as applicable, on each insurance policy required to be maintained pursuant to this Section 4.4 pursuant to endorsements in form and substance acceptable to Agent. Borrowers shall deliver to Agent and the Lenders (i) on the Closing Date, a certificate from Borrowers’ insurance broker dated such date showing the amount of coverage as of such date, and that such policies will include effective waivers (whether under the terms of any such policy or otherwise) by the insurer of all claims for insurance premiums against all loss payees and additional insureds and all rights of subrogation against all loss payees and additional insureds, and that if all or any part of such policy is canceled, terminated or expires, the insurer will forthwith give notice thereof to each additional insured, assignee and loss payee and that no cancellation, reduction in amount or material change in coverage thereof shall be effective until at least thirty (30) days after receipt by each additional insured, assignee and loss payee of written notice thereof, (ii) on an annual basis, and upon the request of any Lender through Agent from time to time full information as to the insurance carried, (iii) within five (5) days of receipt of notice from any insurer, a copy of any notice of cancellation, nonrenewal or material change in coverage from that existing on the date of this Agreement, (iv) forthwith, notice of any cancellation or nonrenewal of coverage by any Borrower, and (v) at least sixty (60) days prior to expiration of any policy of insurance, evidence of renewal of such insurance upon the terms and conditions herein required.

 

(e)                In the event any Borrower fails to provide Agent with evidence of the insurance coverage required by this Agreement, Agent may purchase insurance at Borrowers’ expense to protect Agent’s interests in the Collateral. This insurance may, but need not, protect such Borrower’s interests. The coverage purchased by Agent may not pay any claim made by such Borrower or any claim that is made against such Borrower in connection with the Collateral. Such Borrower may later cancel any insurance purchased by Agent, but only after providing Agent with evidence that such Borrower has obtained insurance as required by this Agreement. If Agent purchases insurance for the Collateral, Borrowers will be responsible for the costs of that insurance to the fullest extent provided by law, including interest and other charges imposed by Agent in connection with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance may be added to the Obligations. The costs of the insurance may be more than the cost of insurance such Borrower is able to obtain on its own.

 

 

Section 4.5              Compliance with Laws and Material Contracts. Each Borrower will comply, and cause each Subsidiary to comply, with the requirements of all applicable Laws and Material Contracts, except to the extent that failure to so comply could not reasonably be expected to (a) have a Material Adverse Effect, or (b) result in any Lien upon either a material portion of the assets of any such Person in favor of any Governmental Authority.

 

Section 4.6              Inspection of Property, Books and Records. Each Borrower will keep, and will cause each Subsidiary to keep, proper books of record substantially in accordance with GAAP in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Subsidiary to permit, at the sole cost of the applicable Borrower or any applicable Subsidiary, representatives of Agent and of any Lender to visit and inspect any of their respective properties, to examine and make abstracts or copies from any of their respective books and records, to conduct a collateral audit and analysis of their respective operations and the Collateral (each a “Collateral Audit”), to evaluate and make physical verifications and appraisals of the Inventory and other Collateral in any manner and through any medium that Agent considers advisable, to verify the amount and age of the Accounts, the identity and credit of the respective Account Debtors, to review the billing practices of Borrowers and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants as often as may reasonably be desired. In the absence of a Default or an Event of Default, Agent or any Lender exercising any rights pursuant to this Section 4.6 shall give the applicable Borrower or any applicable Subsidiary commercially reasonable prior notice of such exercise. No notice shall be required during the existence and continuance of any Default or any time during which Agent reasonably believes a Default exists.

 

Section 4.7              Use of Proceeds. Borrowers shall use the proceeds of Loans solely for (a) transaction fees incurred in connection with the Financing Documents and the payment in full on the Closing Date of certain existing Debt of Borrower, (b) to make the “Acquiror Buydown Payments” (as defined in the Ligand Royalty Agreement), and (c) for working capital needs of Borrowers and their Subsidiaries.

 

Section 4.8              Estoppel Certificates. After written request by Agent, Borrowers, within fifteen (15) days and at their expense, will furnish Agent with a statement, duly acknowledged and certified, setting forth (a) the amount of the original principal amount of the Notes, and the unpaid principal amount of the Notes, (b) the rate of interest of the Notes, (c) the date payments of interest and/or principal were last paid, (d) any offsets or defenses to the payment of the Obligations, and if any are alleged, the nature thereof, (e) that the Notes and this Agreement have not been modified or if modified, giving particulars of such modification, and (f) that there has occurred and is then continuing no Default or if such Default exists, the nature thereof, the period of time it has existed, and the action being taken to remedy such Default. After written request by Agent, Borrowers, within fifteen (15) days and at their expense, will furnish Agent with a certificate, signed by a Responsible Officer of Borrowers, updating all of the representations and warranties contained in this Agreement and the other Financing Documents and certifying that all of the representations and warranties contained in this Agreement and the other Financing Documents, as updated pursuant to such certificate, are true, accurate and complete as of the date of such certificate.

 

Section 4.9               Notices of Material Contracts, Litigation and Defaults.

 

(a)                Borrower shall provide (i) five (5) Business Days written notice to Agent after any Borrower or Subsidiary (1) executes and delivers any amendment, consent, waiver or other modification to any Material Contract which is material and adverse to (x) Agent or Lenders, (y) Borrowers or their Subsidiaries, or (z) which could reasonably be expected to have a Material Adverse Effect or (2) receives or delivers any notice of termination or default or similar notice in connection with any Material Contract and (ii) at such time as the Schedules are required to be updated pursuant to Section 4.15, notice of the execution of any new Material Contract and/or any new material amendment, consent, waiver or other modification to any Material Contract not previously disclosed (which, for the avoidance of doubt, may be included as an updated to Schedule 3.17).

 

 

(b)                Borrowers shall promptly (but in any event within three (3) Business Days) provide written notice to Agent (i) of any litigation or governmental proceedings pending or threatened (in writing) against Borrowers or other Credit Party which would reasonably be expected to have a Material Adverse Effect with respect to Borrowers or any other Credit Party or which in any manner calls into question the validity or enforceability of any Financing Document, (ii) upon any Borrower becoming aware of the existence of any Default or Event of Default, (iii) of any strikes or other labor disputes pending or, to any Borrower’s knowledge, threatened against any Credit Party, (iv) if there is any infringement or claim of infringement by any other Person with respect to any Intellectual Property rights of any Credit Party that could reasonably be expected to have a Material Adverse Effect, or if there is any claim by any other Person that any Credit Party in the conduct of its business is infringing on the Intellectual Property rights of others, and (v) of all returns, recoveries, disputes and claims that involve more than $50,000. Borrowers represent and warrant that Schedule 4.9 sets forth a complete list of all matters existing as of the Closing Date for which notice could be required under this Section and all litigation or governmental proceedings pending or threatened (in writing) against Borrowers or other Credit Party as of the Closing Date.

 

(c)                Borrower shall, and shall cause each Credit Party, to provide such further information (including copies of such documentation) as Agent or any Lender shall reasonably request with respect to any of the events or notices described in clauses (a) and (b) above. From the date hereof and continuing through the termination of this Agreement, Borrower shall, and shall cause each Credit Party to, make available to Agent and each Lender, without expense to Agent or any Lender, each Credit Party’s officers, employees and agents and books, to the extent that Agent or any Lender may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against Agent or any Lender with respect to any Collateral or relating to a Credit Party.

 

Section 4.10            Hazardous Materials; Remediation.

 

(a)                If any release or disposal of Hazardous Materials shall occur or shall have occurred on any real property or any other assets of any Borrower or any other Credit Party, such Borrower will cause, or direct the applicable Credit Party to cause, the prompt containment and removal of such Hazardous Materials and the remediation of such real property or other assets as is necessary to comply with all Environmental Laws and Healthcare Laws and to preserve the value of such real property or other assets. Without limiting the generality of the foregoing, each Borrower shall, and shall cause each other Credit Party to, comply with each Environmental Law and Healthcare Law requiring the performance at any real property by any Borrower or any other Credit Party of activities in response to the release or threatened release of a Hazardous Material.

 

(b)                Borrowers will provide Agent within thirty (30) days after written demand therefor with a bond, letter of credit or similar financial assurance evidencing to the reasonable satisfaction of Agent that sufficient funds are available to pay the cost of removing, treating and disposing of any Hazardous Materials or Hazardous Materials Contamination and discharging any assessment which may be established on any property as a result thereof, such demand to be made, if at all, upon Agent’s reasonable business determination that the failure to remove, treat or dispose of any Hazardous Materials or Hazardous Materials Contamination, or the failure to discharge any such assessment could reasonably be expected to have a Material Adverse Effect.

 

 

Section 4.11             Further Assurances.

 

(a)                Each Borrower will, and will cause each Subsidiary to, at its own cost and expense, promptly and duly take, execute, acknowledge and deliver all such further acts, documents and assurances as may from time to time be necessary or as Agent or the Required Lenders may from time to time reasonably request in order to carry out the intent and purposes of the Financing Documents and the transactions contemplated thereby, including all such actions to (i) establish, create, preserve, protect and perfect a first priority Lien (subject only to the Affiliated Intercreditor Agreement and to Permitted Liens) in favor of Agent for itself and for the benefit of the Lenders on the Collateral (including Collateral acquired after the Original Closing Date), and (ii) unless Agent shall agree otherwise in writing, cause all Subsidiaries of Borrowers to be jointly and severally obligated with the other Borrowers under all covenants and obligations under this Agreement, including the obligation to repay the Obligations.

 

(b)                Upon receipt of an affidavit (which shall contain customary indemnification provisions in favor of Borrower) of an authorized representative of Agent or a Lender as to the loss, theft, destruction or mutilation of any Note or any other Financing Document which is not of public record, and, in the case of any such mutilation, upon surrender and cancellation of such Note or other applicable Financing Document, Borrowers will issue, in lieu thereof, a replacement Note or other applicable Financing Document, dated the date of such lost, stolen, destroyed or mutilated Note or other Financing Document in the same principal amount thereof and otherwise of like tenor.

 

(c)                Upon the request of Agent, Borrowers shall obtain a landlord’s agreement or mortgagee agreement, as applicable, from the lessor of each leased property or mortgagee of owned property with respect to any business location where any portion of the Collateral with an aggregate value in excess of $250,000, or the records relating to such Collateral and/or software and equipment relating to such records or Collateral, is stored or located, which agreement or letter shall be reasonably satisfactory in form and substance to Agent, Borrowers and such landlord. Borrowers shall timely and fully pay and perform its obligations under all leases and other agreements with respect to each leased location where any Collateral, or any records related thereto, is or may be located.

 

(d)                Borrower shall provide Agent with at least ten (10) days (or such shorter period as Agent may accept in its sole discretion) prior written notice of its intention to create (or to the extent permitted under this Agreement, acquire) a new Subsidiary. Upon the formation (or to the extent permitted under this Agreement, acquisition) of a new Subsidiary, Borrowers shall promptly (but in any event within ten (10) Business Days of such formation): (i) pledge, have pledged or cause or have caused to be pledged to Agent pursuant to a pledge agreement in form and substance satisfactory to Agent, all of the outstanding shares of equity interests or other equity interests of such new Subsidiary owned directly or indirectly by any Borrower, along with undated stock or equivalent powers for such certificates, executed in blank; (ii) unless Agent shall agree otherwise in writing, cause the new Subsidiary to take such other actions (including entering into or joining any Security Documents) as are necessary or advisable in the reasonable opinion of Agent in order to grant Agent, acting on behalf of the Lenders, a first priority Lien (subject to the Affiliated Intercreditor Agreement) on all real and personal property of such Subsidiary in existence as of such date and in all after acquired property, which first priority Liens are required to be granted pursuant to this Agreement; (iii) unless Agent shall agree otherwise in writing, cause such new Subsidiary to either (at the election of Agent) become a Borrower hereunder with joint and several liability for all obligations of Borrowers hereunder and under the other Financing Documents pursuant to a joinder agreement or other similar agreement in form and substance satisfactory to Agent or to become a Guarantor of the obligations of Borrowers hereunder and under the other Financing Documents pursuant to a guaranty and suretyship agreement in form and substance satisfactory to Agent; and (iv) cause the new Subsidiary to deliver certified copies of such Subsidiary’s certificate or articles of incorporation, together with good standing certificates, by-laws (or other operating agreement or governing documents), resolutions of the Board of Directors or other governing body, approving and authorizing the execution and delivery of the Security Documents, incumbency certificates and to execute and/or deliver such other documents and legal opinions or to take such other actions as may be requested by Agent, in each case, in form and substance satisfactory to Agent.

 

 

Section 4.12            Reserved.

 

Section 4.13            Power of Attorney. Each of the authorized representatives of Agent is hereby irrevocably made, constituted and appointed the true and lawful attorney for Borrowers (without requiring any of them to act as such) with full power of substitution to do the following: (a) after the occurrence and during the continuance of an Event of Default ,endorse the name of Borrowers upon any and all checks, drafts, money orders, and other instruments for the payment of money that are payable to Borrowers and constitute collections on Borrowers’ Accounts; (b) if an Event of Default has occurred and is continuing and so long as Agent has provided not less than three (3) Business Days’ prior written notice to Borrower to perform the same and Borrower has failed to take such action, execute in the name of Borrowers any schedules, assignments, instruments, documents, and statements that Borrowers are obligated to give Agent under this Agreement; (c) after the occurrence and during the continuance of an Event of Default, take any action Borrowers are required to take under this Agreement; (d) so long as Agent has provided not less than three (3) Business Days’ prior written notice to Borrower to perform the same and Borrower has failed to take such action, do such other and further acts and deeds in the name of Borrowers that Agent may deem necessary or desirable to enforce any Account or other Collateral or perfect Agent’s security interest or Lien in any Collateral; and (e) after the occurrence and during the continuance of an Event of Default, do such other and further acts and deeds in the name of Borrowers that Agent may deem necessary or desirable to enforce its rights with regard to any Account or other Collateral. This power of attorney shall be irrevocable and coupled with an interest.

 

Section 4.14            Reserved.

 

Section 4.15            Schedule Updates. At, or within two (2) Business Days following each Collateral Audit (but in no event more than once per calendar quarter), Borrower shall deliver to Agent updates to the Schedules correcting all information that has become outdated, inaccurate, incomplete or misleading in any material respects; provided, however, (i) with respect to any proposed updates to the Schedules involving Permitted Liens, Permitted Debt or Permitted Investments, Agent will replace the respective Schedule attached hereto with such proposed update only if such updated information is consistent with the definitions of and limitations herein pertaining to Permitted Liens, Permitted Debt or Permitted Investments and (ii) with respect to any proposed updates to such Schedules involving other matters, Agent will replace the applicable portion of such Schedules attached hereto with such proposed update upon Agent’s approval thereof.

 

Section 4.16            Intellectual Property and Licensing.

 

(f)                  Together with each Compliance Certificate required to be delivered pursuant to Section 4.1 to the extent (i) Borrower acquires and/or develops any new Registered Intellectual Property, (ii) Borrower enters into or becomes bound by any additional material in-bound license or sublicense agreement, any additional material exclusive out-bound license or sublicense agreement or other material agreement with respect to rights in Intellectual Property (other than over-the-counter software that is commercially available to the public), or (iii) there occurs any other material change in Borrower’s Registered Intellectual Property, in-bound licenses or sublicenses or exclusive out-bound licenses or sublicenses from that listed on Schedule 3.19 together with such Compliance Certificate, deliver to Agent an updated Schedule 3.19 reflecting such updated information. With respect to any updates to Schedule 3.19 involving exclusive out-bound licenses or sublicenses, such licenses shall be consistent with the definitions of and limitations herein pertaining to Permitted Licenses.

 

 

(g)                 If Borrower obtains any Registered Intellectual Property (other than copyrights, mask works and related applications, which are addressed below), Borrower shall promptly notify Agent and execute such documents and provide such other information (including, without limitation, copies of applications) and take such other actions as Agent shall request in its good faith business judgment to perfect and maintain a first priority perfected security interest in favor of Agent, for the ratable benefit of Lenders, in such Registered Intellectual Property.

 

(h)                 Borrower shall take such steps as Agent requests to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for (x) all licenses or agreements to be deemed “Collateral” and for Agent to have a security interest in it that might otherwise be restricted or prohibited by Law or by the terms of any such license or agreement, whether now existing or entered into in the future, and (y) Agent to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Agent’s rights and remedies under this Agreement and the other Financing Documents.

 

(i)                  Borrower shall own, or be licensed to use or otherwise have the right to use, all Material Intangible Assets. Borrower shall cause all Registered Intellectual Property to be duly and properly registered, filed or issued in the appropriate office and jurisdictions for such registrations, filings or issuances, except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect. Borrower shall at all times conduct its business without infringement or claim of infringement of any Intellectual Property rights of others. Borrower shall (i) protect, defend and maintain the validity and enforceability of its Material Intangible Assets (ii) promptly advise Agent in writing of material infringements of its Material Intangible Assets, or of a material claim of infringement by Borrower on the Intellectual Property rights of others; and (iii) not allow any of Borrower’s Material Intangible Assets to be abandoned, invalidated, forfeited or dedicated to the public or to become unenforceable. Borrower shall not become a party to, nor become bound by, any material license or other agreement with respect to which Borrower is the licensee that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or other property.

 

Section 4.17            Regulatory Covenants.

 

(a)                 Borrowers shall have, and shall ensure that it and each of its Subsidiaries has, each material Permit and other rights from, and have made all declarations and filings with, all applicable Governmental Authorities, all self-regulatory authorities and all courts and other tribunals necessary to engage in the ownership, management and operation of the business or the assets of any Borrower. Borrower shall ensure that all such Permits are valid and in full force and effect and Borrowers are in material compliance with the terms and conditions of all such Permits in all material respects.

 

(b)                 Borrower will maintain in full force and effect, and free from restrictions, probations, conditions or known conflicts which would materially impair the use or operation of Borrowers’ business and assets, all material Permits necessary under Healthcare Laws to carry on the business of Borrowers as it is conducted on the Closing Date in all material respects.

 

(c)                  In connection with the development, testing, manufacture, marketing or sale of each and any material Product by any Borrower, Borrower shall comply in all material respects with all material Regulatory Required Permits at all times issued by any Governmental Authority, specifically including the FDA, with respect to such development, testing, manufacture, marketing or sales of such Product by Borrower as such activities are at any such time being conducted by Borrower.

 

 

(d)                  Borrower will timely file or caused to be timely filed (after giving effect to any extension duly obtained), all material notifications, reports, submissions, Permit renewals and reports required by Healthcare Laws (which reports will be materially accurate and complete in all respects and not misleading in any respect and shall not remain open or unsettled).

 

(j)                   If, after the Closing Date, Borrower determines to manufacture, sell, develop, test or market any new material Product or obtains any new material Regulatory Required Permit, Borrower shall deliver prior written notice to Agent of such determination (which shall include a brief description of such Product or Regulatory Required Permit) and, at such time as the Schedules are required to be updated pursuant to Section 4.15, shall provide an updated Schedule 4.17 (and copies of such Permits as Agent may request) reflecting updates related to such determination.

 

Section 4.18            Aziyo Med. Since the date of its formation and at all times on and after the date thereof, Aziyo Med has complied with and shall at all times after the date hereof comply with the following requirements:

 

(k)                 Aziyo Med does not have and will not have any assets other than (i) the assets acquired by it and its rights under the Purchase Agreement, including all Accounts generated through the sale of Products acquired under such Purchase Agreement and payments made to Aziyo Med in respect thereof (the “Aziyo Med Purchased Assets”), (ii) its rights under a Ligand Royalty Agreement and (iii) de minimis cash necessary to pay fees and costs associated with maintaining its legal existence and good standing in its respective jurisdiction of formation, each in accordance with Section 4.2 of this Agreement;

 

(l)                  Aziyo Med is not engaged and will not engage in any business unrelated to (i) the performance of its obligations under the Purchase Agreement, (ii) its ownership and operation of the Aziyo Med Purchased Assets, and (iii) the performance of its obligations under the Ligand Royalty Agreement, and (iv) the performance of its obligations under the Financing Documents and the Affiliated Financing Documents;

 

(m)                Aziyo Med has not entered into and will not enter into any contract or agreement with any Affiliate of such entity, any constituent party of such entity or any Affiliate of any constituent party, except upon terms and conditions, that have been, are and shall be intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than any such party;

 

(n)                 Aziyo Med has not incurred and will not incur any Debt or Contingent Obligations other than the Obligations incurred under the Financing Documents, the Affiliated Obligations and its obligations under the Ligand Royalty Agreement;

 

(o)                 Aziyo Med has not made and will not make any loans or advances to any third party (including any affiliate or constituent party or any affiliate of any constituent party) and has not and shall not acquire obligations or securities of its Affiliates or any constituent party;

 

(p)                 Aziyo Med has done or caused to be done and will do all things necessary to observe organizational formalities and preserve its existence and will not, nor will such entity permit any constituent party to, amend, modify or otherwise change the organizational documents of such entity or such constituent party without the prior written consent of Agent;

 

(q)                 Aziyo Med has been and will be, and at all times has held itself out and will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate of such entity, any constituent party of such entity or any Affiliate of any constituent party), shall correct any known misunderstanding regarding its status as a separate entity, shall conduct business in its own name, shall not identify itself or any of its Affiliates as a division or part of the other;

 

 

(r)                  Aziyo Med has not engaged, sought or consented to and will not engage in, seek or consent to any dissolution, winding up, liquidation, consolidation, merger, sale of all or substantially all of its assets, transfer of its equity interests or amendment of its operating documents with respect to the matters set forth in this Section 4.18;

 

(s)                  except as expressly provided in Section 2.11 with respect to payments made from the Aziyo Med Controlled Account to the Lockbox Account, Aziyo Med has not commingled and will not commingle its funds and other assets with those of any Affiliate or constituent party, or any Affiliate of any constituent party, or any other person;

 

(t)                  Aziyo Med will not own or maintain any Deposit Accounts or Securities Accounts other than the Aziyo Med Controlled Account, the Permitted Ligand Account, the Aziyo Med Operating Account, and any other Deposit Account or Securities Account that has been opened with the consent of Agent; provided, however, that Aziyo Med shall not hold funds in the Aziyo Med Operating Account in excess of the amount necessary to fund its current operating expenses (taking into account their revenue from other sources) incurred in connection with its business as permitted to be undertaken pursuant to this Section 4.18.

 

(u)                 Aziyo Med has and will maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any Affiliate or constituent party, or any Affiliate of any constituent party, or any other Person and has held and will hold its assets in its own name;

 

(v)                 Aziyo Med has not and will not assume or guarantee or become obligated for the debts of any other Person or hold out its credit as being available to satisfy the obligations of any other Person except as permitted pursuant to this Agreement;

 

(w)                Aziyo Med has maintained and will maintain its financial statements, accounting records and other entity documents separate from any other Person and has not permitted and will not permit its assets to be listed as assets on the financial statement of any other entity except as required by GAAP;

 

(x)                  Aziyo Med has not pledged and will not pledge its assets for the benefit of any other Person, except as permitted pursuant to this Agreement; and

 

(y)                 Aziyo Med has not identified and will not identify its partners, members or shareholders, or any Affiliate of any of them, as a division or part of it and has not identified itself and shall not identify itself as a division of any other Person.

 

Article 5 - NEGATIVE COVENANTS

 

Each Borrower agrees that, so long as any Credit Exposure exists:

 

Section 5.1              Debt; Contingent Obligations. No Borrower will, or will permit any Subsidiary to, directly or indirectly, create, incur, assume, guarantee or otherwise become or remain directly or indirectly liable with respect to, any Debt, except for Permitted Debt. No Borrower will, or will permit any Subsidiary to, directly or indirectly, create, assume, incur or suffer to exist any Contingent Obligations, except for Permitted Contingent Obligations.

 

 

Section 5.2              Liens. No Borrower will, or will permit any Subsidiary to, directly or indirectly, create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except for Permitted Liens.

 

Section 5.3              Distributions. No Borrower will, or will permit any Subsidiary to, directly or indirectly, declare, order, pay, make or set apart any sum for any Distribution, except for Permitted Distributions.

 

Section 5.4              Restrictive Agreements. No Borrower will, or will permit any Subsidiary to, directly or indirectly (a) enter into or assume any agreement (other than the Financing Documents, the Affiliated Financing Documents, and any agreements for purchase money debt permitted under clause (c) of the definition of Permitted Debt) prohibiting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired, or (b) create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind (except as provided by the Financing Documents and the Affiliated Financing Documents) on the ability of any Subsidiary to: (i) pay or make Distributions to any Borrower or any Subsidiary; (ii) pay any Debt owed to any Borrower or any Subsidiary; (iii) make loans or advances to any Borrower or any Subsidiary; or (iv) transfer any of its property or assets to any Borrower or any Subsidiary; provided that (1) the foregoing shall not apply to restrictions or conditions imposed by Law, by this Agreement or any other Financing Document, (2) restrictions or conditions imposed by any agreement relating to secured Debt permitted by this Agreement if such restrictions and conditions apply only to the property or assets securing such Debt, (3) customary provisions in leases and subleases restricting the assignment thereof or the assets governed thereby and (4)  any agreement in connection with an Asset Disposition permitted by Section 5.6 pending consummation of such Asset Disposition solely to the extent it relates only to property being sold in such Permitted Asset Disposition.

 

Section 5.5               Payments and Modifications of Subordinated Debt. No Borrower will, or will permit any Subsidiary to, directly or indirectly:

 

(z)                  declare, pay, make or set aside any amount for payment in respect of Subordinated Debt, except for payments made in full compliance with and expressly permitted under any applicable Subordination Agreement;

 

(aa)               declare, pay, make or set aside any amount for payment in respect of Ligand Royalty Payments or otherwise pursuant to the Ligand Royalty Agreement or the Ligand Parent Guaranty except, in each case, in accordance with the terms of the Ligand Royalty Agreement and the Ligand Intercreditor Agreement;

 

(bb)              amend or otherwise modify the terms of any Subordinated Debt, except for amendments or modifications made in full compliance with any applicable Subordination Agreement;

 

(cc)               declare, pay, make or set aside any amount for payment in respect of any Debt hereinafter incurred that, by its terms, or by separate agreement, is subordinated to the Obligations (including Subordinated Debt), except for payments made in full compliance with and expressly permitted under the subordination provisions applicable thereto and any applicable Subordination Agreement;

 

(dd)               prior to making any payment to the holders of Subordinated Debt that are permitted under the Debt Subordination Agreement (Donor Network West) and solely to the extent requested by Agent, Agent shall have received a certificate from a Responsible Officer of Borrower setting for the amount of such payments and certifying that the conditions payment in Section 5 of the Debt Subordination Agreement (Donor Network West), as applicable, have been satisfied and providing such detail as to the financial calculations set forth therein as Agent may reasonable request; or

 

 

(ee)               unless provided otherwise in any applicable Subordination Agreement, amend or otherwise modify the terms of any such Debt if the effect of such amendment or modification is to (i) increase the interest rate or fees on, or change the manner or timing of payment of, such Debt, (ii) accelerate or shorten the dates upon which payments of principal or interest are due on, or the principal amount of, such Debt, (iii) change in a manner adverse to any Credit Party or Agent any event of default or add or make more restrictive any covenant with respect to such Debt, (iv) change the prepayment provisions of such Debt or any of the defined terms related thereto, (v) change the subordination provisions thereof (or the subordination terms of any guaranty thereof), or (vi) change or amend any other term if such change or amendment would materially increase the obligations of the obligor or confer additional material rights on the holder of such Debt in a manner adverse to Borrowers, any Subsidiaries, Agent or Lenders. Borrowers shall, prior to entering into any such amendment or modification, deliver to Agent reasonably in advance of the execution thereof, any final or execution form copy thereof.

 

Section 5.6               Consolidations, Mergers and Sales of Assets; Change in Control.

 

(a)                No Borrower will, or will permit any Subsidiary to, directly or indirectly (i) consolidate or merge or amalgamate with or into any other Person other than (A) consolidations or mergers among Borrowers (other than Aziyo Med), (B) consolidations or mergers among a Guarantor and a Borrower (other than Aziyo Med) so long as the Borrower is the surviving entity, (C) consolidations or mergers among Guarantors, and (D) consolidations or mergers among Subsidiaries that are not Credit Parties, or (ii) consummate any Asset Dispositions other than Permitted Asset Dispositions.

 

(b)               Prior to the termination of the Ligand Royalty Agreement and the Ligand Parent Guaranty, Aziyo Med shall not transfer any of its assets to Aziyo except for cash and cash equivalents (i) constituting Permitted Distributions, (ii) that are permitted or required to be transferred by Aziyo Med to Aziyo pursuant to Section 2.11, or (iii) constituting Excluded Costs (as such term is defined in the Ligand Royalty Agreement).

 

(c)                No Borrower will suffer or permit to occur any Change in Control with respect to itself, any Subsidiary or any Guarantor.

 

Section 5.7               Purchase of Assets, Investments. No Borrower will, or will permit any Subsidiary to, directly or indirectly:

 

(ff)                 (i) make any Acquisition or enter into any agreement to make an Acquisition other than a Permitted Investment or (ii) acquire or own or enter into any agreement to acquire or own any other Investment other than Permitted Investments,

 

(gg)              without limiting clause (a), otherwise acquire or enter into any agreement to acquire any assets other than (i) in the Ordinary Course of Business, (ii) constituting capital expenditures, and (iii) constituting replacement assets purchased with proceeds of property insurance policies, awards or other compensation with respect to any eminent domain, condemnation or similar proceeding and for which the requirements set forth in Section 2.2(a)(ii)(B) have been satisfied; or

 

(hh)               engage or enter into any agreement to engage in any joint venture or partnership with any other Person.

 

 

 

Section 5.8           Transactions with Affiliates. Except (a) as otherwise disclosed on Schedule 5.8, (b) for Permitted Distributions, and (c) for transactions that are disclosed to Agent in advance of being entered into, are not prohibited by Section 4.18 and which contain terms that are no less favorable to the applicable Borrower or any Subsidiary, as the case may be, than those which might be obtained from a third party not an Affiliate of any Credit Party, no Borrower will, or will permit any Subsidiary to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of any Borrower.

 

Section 5.9           Modification of Organizational Documents. No Borrower will, or will permit any Subsidiary to, directly or indirectly, amend or otherwise modify any Organizational Documents of such Person, except for Permitted Modifications.

 

Section 5.10          Modification of Certain Agreements. No Borrower will, or will permit any Subsidiary to, directly or indirectly, (i) amend or otherwise modify any Material Contract, which amendment or modification in any case: (a) is contrary to the terms of this Agreement or any other Financing Document or (b) could reasonably be expected to be adverse to the rights, interests or privileges of Agent or the Lenders or their ability to enforce the same; or (ii) without the prior written consent of Agent, amend or otherwise modify any Affiliated Financing Document. Each Borrower shall, prior to entering into any amendment or other modification of any of the foregoing documents, deliver to Agent reasonably in advance of the execution thereof, any final or execution form copy of amendments or other modifications to such documents, and such Borrower agrees not to take, nor permit any of its Subsidiaries to take, any such action with respect to any such documents without obtaining such approval from Agent.

 

Section 5.11          Conduct of Business. No Borrower will, or will permit any Subsidiary to, directly or indirectly, engage in any line of business other than those businesses engaged in on the Closing Date and businesses reasonably related thereto. No Borrower will, or will permit any Subsidiary to, other than in the Ordinary Course of Business, change its normal billing payment and reimbursement policies and procedures with respect to its Accounts (including, without limitation, the amount and timing of finance charges, fees and write-offs).

 

Section 5.12          Lease Payments. No Borrower will, or will permit any Subsidiary to, directly or indirectly, incur or assume (whether pursuant to a Guarantee or otherwise) any liability for rental payments except in the Ordinary Course of Business.

 

Section 5.13          Limitation on Sale and Leaseback Transactions. No Borrower will, or will permit any Subsidiary to, directly or indirectly, enter into any arrangement with any Person whereby, in a substantially contemporaneous transaction, any Borrower or any Subsidiaries sells or transfers all or substantially all of its right, title and interest in an asset and, in connection therewith, acquires or leases back the right to use such asset.

 

Section 5.14           Deposit Accounts and Securities Accounts; Payroll and Benefits Accounts.

 

(a)         No Borrower will, or will permit any Subsidiary to, directly or indirectly, establish any new Deposit Account or Securities Account without prior written notice to Agent, and unless Agent, such Borrower or such Subsidiary and the bank, financial institution or securities intermediary at which the account is to be opened enter into a Deposit Account Control Agreement or Securities Account Control Agreement prior to or concurrently with the establishment of such Deposit Account or Securities Account.

 

 

(b)         Borrowers represent and warrant that Schedule 5.14 lists all of the Deposit Accounts and Securities Accounts of each Borrower. The provisions of this Section requiring Deposit Account Control Agreements shall not apply to (i) Deposit Accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrowers’ employees and identified to Agent by Borrowers as such (each, a “Payroll Account”); provided, however, that the aggregate balance in such accounts does not exceed the amount necessary to make the immediately succeeding payroll, payroll tax or benefit payment (or such minimum amount as may be required by any requirement of Law with respect to such accounts) and (ii) the Permitted Ligand Account(the Deposit Accounts referred to in clauses (i)-(ii), collectively, the “Excluded Accounts”).

 

(c)         At all times that any Obligations or Affiliated Obligations remain outstanding following the date that is thirty (30) days following the Closing Date, Borrower shall maintain one or more separate Payroll Accounts to hold any and all amounts to be used for payroll, payroll taxes and other employee wage and benefit payments, and shall not commingle any monies allocated for such purposes with funds in any other Deposit Account.

 

Section 5.15          Compliance with Anti-Terrorism Laws. Agent hereby notifies Borrowers that pursuant to the requirements of Anti-Terrorism Laws, and Agent’s policies and practices, Agent is required to obtain, verify and record certain information and documentation that identifies Borrowers and its principals, which information includes the name and address of each Borrower and its principals and such other information that will allow Agent to identify such party in accordance with Anti-Terrorism Laws. No Borrower will, or will permit any Subsidiary to, directly or indirectly, knowingly enter into any Material Contracts with any Blocked Person or any Person listed on the OFAC Lists. Each Borrower shall immediately notify Agent if such Borrower has knowledge that any Borrower, any additional Credit Party or any of their respective Affiliates (except for any Person that is an Affiliate of a Credit Party solely due to the fact that it is HighCape Portfolio Company) or agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement is or becomes a Blocked Person or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is arraigned and held over on charges involving money laundering or predicate crimes to money laundering. No Borrower will, or will permit any Subsidiary to, directly or indirectly, (i) conduct any business or engage in any transaction or dealing with any Blocked Person, including, without limitation, the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law.

 

Section 5.16          Change in Accounting. No Borrower shall, and no Borrower shall suffer or permit any of its Subsidiaries to, (i) make any significant change in accounting treatment or reporting practices, except as required by GAAP or as otherwise consented to be Agent (in its reasonable discretion) or (ii) change the fiscal year or method for determining fiscal quarters of any Credit Party or of any consolidated Subsidiary of any Credit Party.

 

Section 5.17          Management Fees. No Borrower shall, nor shall it permit any Subsidiary to, directly or indirectly, pay or become obligated to pay any management, consulting, professional or similar advisory fees or other amounts to or for the account of any holder of equity interests in such Borrower of Subsidiary or any or any Affiliate thereof, except the payment of management fees to HighCape pursuant to the Management Agreement solely to the extent constituting a Permitted Distribution.

 

 

Article 6 - FINANCIAL COVENANTS

 

Section 6.1            Minimum Net Product Revenue. Borrower shall not permit its consolidated Net Product Revenue for any Defined Period, as tested monthly, to be less than the minimum amount set forth on Schedule 6.1 for such Defined Period. A breach of a financial covenant contained in this Section 6.1 shall be deemed to have occurred as of any date of determination by Agent or as of the last day of any specified Defined Period, regardless of when the financial statements reflecting such breach are delivered to Agent.

 

Section 6.2             Evidence of Compliance. Borrowers shall furnish to Agent, as required by Section 4.1, a Compliance Certificate as evidence of (x) the monthly cash and cash equivalents of Borrowers and Borrowers and their Consolidated Subsidiaries, (y) as applicable, of Borrowers’ compliance with the covenants in this Article, and (z) that no Event of Default specified in this Article has occurred. The Compliance Certificate shall include, without limitation, (a) a statement and report, in form and substance reasonably satisfactory to Agent, detailing Borrowers’ calculations, and (b) if requested by Agent, back-up documentation (including, without limitation, bank statements, invoices, receipts and other evidence of costs incurred during such quarter as Agent shall reasonably require) evidencing the propriety of the calculations.

 

Article 7 - CONDITIONS

 

Section 7.1             Conditions to Closing. The obligation of each Lender to make the initial Loans on the Closing Date shall be subject to the receipt by Agent of each agreement, document and instrument set forth on the closing checklist prepared by Agent or its counsel, each in form and substance satisfactory to Agent, and such other closing deliverables reasonably requested by Agent and Lenders, and to the satisfaction of the following conditions precedent, each to the satisfaction of Agent and Lenders and their respective counsel in their sole discretion:

 

(a)         the receipt by Agent of executed counterparts of this Agreement, the other Financing Documents and the Affiliated Financing Documents;

 

(b)         the payment of all fees, expenses and other amounts due and payable under each Financing Document;

 

(c)         since December 31, 2018, the absence of any material adverse change in any aspect of the business, operations, properties, prospects or condition (financial or otherwise) of any Credit Party or any Seller, or any event or condition which could reasonably be expected to result in such a material adverse change; and

 

Each Lender, by delivering its signature page to this Agreement, shall be deemed to have acknowledged receipt of, and consented to and approved, each Financing Document, each additional Operative Document and each other document, agreement and/or instrument required to be approved by Agent, Required Lenders or Lenders, as applicable, on the Closing Date.

 

Section 7.2            Conditions to Each Loan. The obligation of the Lenders to make a Loan or an advance in respect of any Loan, is subject to the satisfaction of the following additional conditions:

 

(a)         receipt by Agent of a Notice of Borrowing;

 

(b)         the fact that, immediately before and after such advance, no Default or Event of Default shall have occurred and be continuing;

 

 

(c)         for Loans made on the Closing Date, the fact that the representations and warranties of each Credit Party contained in the Financing Documents shall be true, correct and complete on and as of the Closing Date, except to the extent that any such representation or warranty relates to a specific date in which case such representation or warranty shall be true and correct as of such earlier date;

 

(d)        for Loans made after the Closing Date, the fact that the representations and warranties of each Credit Party contained in the Financing Documents shall be true, correct and complete in all material respects on and as of the date of such borrowing or issuance, except to the extent that any such representation or warranty relates to a specific date in which case such representation or warranty shall be true and correct in all material respects as of such earlier date; provided, however, in each case, such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof;

 

(e)         the fact that no adverse change in the condition (financial or otherwise), properties, business or operations of Borrowers or any other Credit Party shall have occurred and be continuing with respect to Borrowers or any Credit Party since the date of this Agreement; and

 

(f)          in the case of any borrowing of the Term Loan Tranche 4, Agent has received a duly executed Notice of Borrowing on the day of such proposed borrowing;

 

(g)         in the case of any borrowing of the Term Loan Tranche 4, the Term Loan Tranche 4 Activation Date shall have occurred, and Agent shall have received such document, agreement and/or instrument, opinions and certificates as it may have reasonably requested prior to funding;

 

(h)         in the case of any borrowing of the Term Loan Tranche 5, Agent has received a duly executed Notice of Borrowing no later than 12:00 P.M. (Eastern time) on the day prior to such proposed borrowing; and

 

(i)           in the case of any borrowing of the Term Loan Tranche 5, the Term Loan Tranche 5 Activation Date shall have occurred, and Agent shall have received such documents, agreements and/or instruments, opinions and certificates as it may have reasonably requested prior to funding.

 

Each giving of a Notice of Borrowing hereunder and each acceptance by any Borrower of the proceeds of any Loan made hereunder shall be deemed to be (y) a representation and warranty by each Borrower on the date of such notice or acceptance as to the facts specified in this Section, and (z) a restatement by each Borrower that each and every one of the representations made by it in any of the Financing Documents is true and correct as of such date (except to the extent that such representations and warranties expressly relate solely to an earlier date).

 

Section 7.3            Searches. Before the Closing Date, and thereafter (as and when determined by Agent in its discretion), Agent shall have the right to perform, all at Borrowers’ expense, the searches described in clauses (a), (b), and (c) below against Borrowers and any other Credit Party, the results of which are to be consistent with Borrowers’ representations and warranties under this Agreement and the satisfactory results of which shall be a condition precedent to all advances of Loan proceeds: (a) UCC searches with the Secretary of State of the jurisdiction in which the applicable Person is organized; (b) judgment, pending litigation, federal tax lien, personal property tax lien, and corporate and partnership tax lien searches, in each jurisdiction searched under clause (a) above; and (c) searches of applicable corporate, limited liability company, partnership and related records to confirm the continued existence, organization and good standing of the applicable Person and the exact legal name under which such Person is organized.

 

 

Section 7.4           Post-Closing Requirements. Borrowers shall complete each of the post-closing obligations and/or provide to Agent each of the documents, instruments, agreements and information listed on Schedule 7.4 attached hereto on or before the date set forth for each such item thereon, each of which shall be completed or provided in form and substance satisfactory to Agent.

 

Article 8 – Reserved

 

Article 9 - SECURITY AGREEMENT

 

Section 9.1            Generally. As security for the payment and performance of the Obligations, and for the payment and performance of all obligations under the Affiliated Financing Documents (if any) and without limiting any other grant of a Lien and security interest in any Security Document, Borrowers hereby assign and grant to Agent, for the benefit of itself and Lenders, and, subject only to the Affiliated Intercreditor Agreement and Permitted Liens (if applicable), a continuing first priority Lien on and security interest in, upon, and to the personal property set forth on Schedule 9.1 attached hereto and made a part hereof.

 

Section 9.2             Representations and Warranties and Covenants Relating to Collateral.

 

(a)         The security interest granted pursuant to this Agreement constitutes a valid and, to the extent such security interest is required to be perfected by this Agreement and any other Financing Document, continuing perfected security interest in favor of Agent in all Collateral subject, for the following Collateral, to the occurrence of the following: (i) in the case of all Collateral in which a security interest may be perfected by filing a financing statement under the UCC, the completion of the filings and other actions specified on Schedule 9.2(b) (which, in the case of all filings and other documents referred to on such schedule, have been delivered to Agent in completed and duly authorized form), (ii) with respect to any Deposit Account, the execution of Deposit Account Control Agreements, (iii) in the case of letter-of-credit rights that are not supporting obligations of Collateral, the execution of a contractual obligation granting control to Agent over such letter-of-credit rights, (iv) in the case of electronic chattel paper, the completion of all steps necessary to grant control to Agent over such electronic chattel paper, (v) in the case of all certificated stock, debt instruments and investment property, the delivery thereof to Agent of such certificated stock, debt instruments and investment property consisting of instruments and certificates, in each case properly endorsed for transfer to Agent or in blank, (vi) in the case of all investment property not in certificated form, the execution of control agreements with respect to such investment property and (vii) in the case of all other instruments and tangible chattel paper that are not certificated stock, debt instructions or investment property, the delivery thereof to Agent of such instruments and tangible chattel paper. Such security interest shall be prior to all other Liens on the Collateral except for Permitted Liens. Except to the extent not required pursuant to the terms of this Agreement, all actions by each Credit Party necessary or desirable to protect and perfect the Lien granted hereunder on the Collateral have been duly taken.

 

(b)         Schedule 9.2(b) sets forth (i) each chief executive office and principal place of business of each Borrower and each of their respective Subsidiaries, and (ii) all of the addresses (including all warehouses) at which any of the Collateral is located and/or books and records of Borrowers regarding any Collateral or any of Borrower’s assets, liabilities, business operations or financial condition are kept, which such Schedule 9.2(b) indicates in each case which Borrower(s) have Collateral and/or books located at such address, and, in the case of any such address not owned by one or more of the Borrowers(s), indicates the nature of such location (e.g., leased business location operated by Borrower(s), third party warehouse, consignment location, processor location, etc.) and the name and address of the third party owning and/or operating such location.

 

 

(c)         Without limiting the generality of Section 3.2, except as indicated on Schedule 3.19 with respect to any rights of any Borrower as a licensee under any license of Intellectual Property owned by another Person, and except for the filing of financing statements under the UCC, no authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or consent of any other Person is required for (i) the grant by each Borrower to Agent of the security interests and Liens in the Collateral provided for under this Agreement and the other Security Documents (if any), or (ii) the exercise by Agent of its rights and remedies with respect to the Collateral provided for under this Agreement and the other Security Documents or under any applicable Law, including the UCC and neither any such grant of Liens in favor of Agent or exercise of rights by Agent shall violate or cause a default under any agreement between any Borrower and any other Person relating to any such collateral, including any license to which a Borrower is a party, whether as licensor or licensee, with respect to any Intellectual Property, whether owned by such Borrower or any other Person.

 

(d)        As of the Closing Date, except as set forth on Schedule 9.2(d), no Borrower has any ownership interest in any Chattel Paper (as defined in Article 9 of the UCC), letter of credit rights, commercial tort claims, Instruments, documents or investment property (other than equity interests in any Subsidiaries of such Borrower disclosed on Schedule 3.4), and Borrowers shall give notice to Agent promptly (but in any event not later than the delivery by Borrowers of the next Compliance Certificate required pursuant to Section 4.1 above) upon the acquisition by any Borrower of any such Chattel Paper, letter of credit rights, commercial tort claims, Instruments, documents, investment property. No Person other than Agent or (if applicable) any Lender has “control” (as defined in Article 9 of the UCC) over any Deposit Account, investment property (including Securities Accounts and commodities account), letter of credit rights or electronic chattel paper in which any Borrower has any interest (except for such control arising by operation of law in favor of any bank or securities intermediary or commodities intermediary with whom any Deposit Account, Securities Account or commodities account of Borrowers is maintained).

 

(e)         Borrowers shall not, and shall not permit any Credit Party to, take any of the following actions or make any of the following changes unless Borrowers have given at least five (5) Business Days’ prior written notice to Agent of Borrowers’ intention to take any such action (which such written notice shall include an updated version of any Schedule impacted by such change) and have executed any and all documents, instruments and agreements and taken any other actions which Agent may request after receiving such written notice in order to protect and preserve the Liens, rights and remedies of Agent with respect to the Collateral: (i) change the legal name or organizational identification number of any Borrower as it appears in official filings in the jurisdiction of its organization, (ii) change the jurisdiction of incorporation or formation of any Borrower or Credit Party or allow any Borrower or Credit Party to designate any jurisdiction as an additional jurisdiction of incorporation for such Borrower or Credit Party, or change the type of entity that it is, or (iii) change its chief executive office, principal place of business, or the location of its books and records or move any Collateral to or place any Collateral on any location that is not then listed on the Schedules and/or establish any business location at any location that is not then listed on the Schedules.

 

(f)          Borrowers shall not adjust, settle or compromise the amount or payment of any Account, or release wholly or partly any Account Debtor, or allow any credit or discount thereon (other than adjustments, settlements, compromises, credits and discounts in the Ordinary Course of Business and made while no Default exists) without the prior written consent of Agent. Without limiting the generality of this Agreement or any other provisions of any of the Financing Documents relating to the rights of Agent after the occurrence and during the continuance of an Event of Default, Agent shall have the right at any time after the occurrence and during the continuance of an Event of Default to: (i) exercise the rights of Borrowers with respect to the obligation of any Account Debtor to make payment or otherwise render performance to Borrowers and with respect to any property that secures the obligations of any Account Debtor or any other Person obligated on the Collateral, and (ii) adjust, settle or compromise the amount or payment of such Accounts.

 

 

(g)         Without limiting the generality of Sections 9.2(c) and 9.2(e):

 

(i)             Borrowers shall deliver to Agent all tangible Chattel Paper and all Instruments and documents owned by any Borrower and constituting part of the Collateral duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Agent. Borrowers shall provide Agent with “control” (as defined in Article 9 of the UCC) of all electronic Chattel Paper owned by any Borrower and constituting part of the Collateral by having Agent identified as the assignee on the records pertaining to the single authoritative copy thereof and otherwise complying with the applicable elements of control set forth in the UCC. Borrowers also shall deliver to Agent all security agreements securing any such Chattel Paper and securing any such Instruments. Borrowers will mark conspicuously all such Chattel Paper and all such Instruments and documents with a legend, in form and substance satisfactory to Agent, indicating that such Chattel Paper and such instruments and documents are subject to the security interests and Liens in favor of Agent created pursuant to this Agreement and the Security Documents. Borrowers shall comply with all the provisions of Section 5.14 with respect to the Deposit Accounts and Securities Accounts of Borrowers.

 

(ii)            Borrowers shall deliver to Agent all letters of credit on which any Borrower is the beneficiary and which give rise to letter of credit rights owned by such Borrower which constitute part of the Collateral in each case duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Agent. Borrowers shall take any and all actions as may be necessary or desirable, or that Agent may request, from time to time, to cause Agent to obtain exclusive “control” (as defined in Article 9 of the UCC) of any such letter of credit rights in a manner acceptable to Agent.

 

(iii)           Borrowers shall promptly advise Agent upon any Borrower becoming aware that it has any interests in any commercial tort claim that constitutes part of the Collateral, which such notice shall include descriptions of the events and circumstances giving rise to such commercial tort claim and the dates such events and circumstances occurred, the potential defendants with respect such commercial tort claim and any court proceedings that have been instituted with respect to such commercial tort claims, and Borrowers shall, with respect to any such commercial tort claim, execute and deliver to Agent such documents as Agent shall request to perfect, preserve or protect the Liens, rights and remedies of Agent with respect to any such commercial tort claim.

 

(iv)           Except for Accounts and Inventory in an aggregate amount of $25,000, no Accounts or Inventory or other Collateral and no books and records and/or software and equipment of the Borrowers regarding any of the Collateral or any of the Borrower’s assets, liabilities, business operations or financial condition shall at any time be located at any leased location or in the possession or control of any warehouse, consignee, bailee or any of Borrowers’ agents or processors, without prior written notice to Agent and the receipt by Agent, of warehouse receipts, consignment agreements, landlord waivers, or bailee waivers (as applicable) satisfactory to Agent prior to the commencement of such lease or of such possession or control (as applicable). Borrower has notified Agent that Collateral and books and records are currently located at the locations set forth on Schedule 9.2(b). Borrowers shall, upon the request of Agent, notify any such landlord, warehouse, consignee, bailee, agent or processor of the security interests and Liens in favor of Agent created pursuant to this Agreement and the Security Documents, instruct such Person to hold all such Collateral for Agent’s account subject to Agent’s instructions and shall obtain an acknowledgement from such Person that such Person holds the Collateral for Agent’s benefit.

 

 

(v)           Borrowers shall cause all equipment and other tangible Personal Property other than Inventory to be maintained and preserved in the same condition, repair and in working order as when new, ordinary wear and tear excepted, and shall promptly make or cause to be made all repairs, replacements and other improvements in connection therewith that are necessary or desirable to such end. Upon request of Agent, Borrowers shall promptly deliver to Agent any and all certificates of title, applications for title or similar evidence of ownership of all such tangible Personal Property and shall cause Agent to be named as lienholder on any such certificate of title or other evidence of ownership. Borrowers shall not permit any such tangible Personal Property to become fixtures to real estate unless such real estate is subject to a Lien in favor of Agent.

 

(vi)          Each Borrower hereby authorizes Agent to file without the signature of such Borrower one or more UCC financing statements relating to liens on personal property relating to all or any part of the Collateral, which financing statements may list Agent as the “secured party” and such Borrower as the “debtor” and which describe and indicate the collateral covered thereby as all or any part of the Collateral under the Financing Documents (including an indication of the collateral covered by any such financing statement as “all assets” of such Borrower now owned or hereafter acquired), in such jurisdictions as Agent from time to time determines are appropriate, and to file without the signature of such Borrower any continuations of or corrective amendments to any such financing statements, in any such case in order for Agent to perfect, preserve or protect the Liens, rights and remedies of Agent with respect to the Collateral. Each Borrower also ratifies its authorization for Agent to have filed in any jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

 

(vii)          As of the Closing Date, no Borrower holds, and after the Closing Date Borrowers shall promptly notify Agent in writing upon creation or acquisition by any Borrower of, any Collateral which constitutes a claim against any Governmental Authority, including, without limitation, the federal government of the United States or any instrumentality or agency thereof, the assignment of which claim is restricted by any applicable Law, including, without limitation, the federal Assignment of Claims Act and any other comparable Law. Upon the request of Agent, Borrowers shall take such steps as may be necessary or desirable, or that Agent may request, to comply with any such applicable Law.

 

(viii)        Borrowers shall furnish to Agent from time to time any statements and schedules further identifying or describing the Collateral and any other information, reports or evidence concerning the Collateral as Agent may reasonably request from time to time.

 

(h)         Any obligation of any Credit Party in this Agreement that requires (or any representation or warranty hereunder to the extent that it would have the effect of requiring) delivery of Collateral (including any endorsements related thereto) to, or the possession of Collateral with, Agent shall be deemed complied with and satisfied (or, in the case of any representation or warranty hereunder, shall be deemed to be true) if such delivery of Collateral is made to, or such possession of Collateral is with, the Affiliated Financing Agent.

 

 

Article 10 - EVENTS OF DEFAULT

 

Section 10.1         Events of Default. For purposes of the Financing Documents, the occurrence of any of the following conditions and/or events, whether voluntary or involuntary, by operation of law or otherwise, shall constitute an “Event of Default”:

 

(a)         (i) any Credit Party shall fail to pay when due any principal, interest, premium or fee under any Financing Document or any other amount payable under any Financing Document, or (ii) there shall occur any default in the performance of or compliance with any of the following sections of this Agreement: Section 2.11, Section 4.1, Section 4.2(b), Section 4.4(c), Section 4.6, 4.9, 4.16, 4.17, 4.18, Article 5, Article 6 or Section 7.4;

 

(b)        any Credit Party defaults in the performance of or compliance with any term contained in this Agreement or in any other Financing Document (other than occurrences described in other provisions of this Section 10.1 for which a different grace or cure period is specified or for which no grace or cure period is specified and thereby constitute immediate Events of Default) and such default is not remedied by the Credit Party or waived by Agent within fifteen (15) days after the earlier of (i) receipt by Borrower Representative of notice from Agent or Required Lenders of such default, or (ii) actual knowledge of any Borrower or any other Credit Party of such default;

 

(c)         any representation, warranty, certification or statement made by any Credit Party or any other Person in any Financing Document or in any certificate, financial statement or other document delivered pursuant to any Financing Document is incorrect in any respect (or in any material respect if such representation, warranty, certification or statement is not by its terms already qualified as to materiality) when made (or deemed made);

 

(d)         (i) failure of any Credit Party to pay when due or within any applicable grace period any principal, interest or other amount on Debt (other than the Loans), or the occurrence of any breach, default, condition or event with respect to any Debt (other than the Loans), if the effect of such failure or occurrence is to cause or to permit the holder or holders of any such Debt, or to cause, Debt or other liabilities having an individual principal amount in excess of $250,000 or having an aggregate principal amount in excess of $250,000 to become or be declared due prior to its stated maturity, or (ii) the occurrence of any breach or default under any terms or provisions of any Subordinated Debt Document or under any agreement subordinating the Subordinated Debt to all or any portion of the Obligations or the occurrence of any event requiring the prepayment of any Subordinated Debt;

 

(e)        any Credit Party or any Subsidiary of a Borrower shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing;

 

(f)         an involuntary case or other proceeding shall be commenced against any Credit Party or any Subsidiary of a Borrower seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of forty-five (45) days; or an order for relief shall be entered against any Credit Party or any Subsidiary of a Borrower under applicable federal bankruptcy, insolvency or other similar law in respect of (i) bankruptcy, liquidation, winding-up, dissolution or suspension of general operations, (ii) composition, rescheduling, reorganization, arrangement or readjustment of, or other relief from, or stay of proceedings to enforce, some or all of the debts or obligations, or (iii) possession, foreclosure, seizure or retention, sale or other disposition of, or other proceedings to enforce security over, all or any substantial part of the assets of such Credit Party or Subsidiary;

 

 

(g)        (i) institution of any steps by any Person to terminate a Pension Plan if as a result of such termination any Credit Party or any member of the Controlled Group could be required to make a contribution to such Pension Plan, or could incur a liability or obligation to such Pension Plan, in excess of $250,000, (ii) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 303(k) of ERISA or Section 430(k) of the Code or an event occurs that could reasonably be expected to give rise to a Lien under Section 4068 of ERISA, or (iii) there shall occur any withdrawal or partial withdrawal from a Multiemployer Plan and the withdrawal liability (without unaccrued interest) to Multiemployer Plans as a result of such withdrawal (including any outstanding withdrawal liability that any Credit Party or any member of the Controlled Group have incurred on the date of such withdrawal) exceeds $250,000;

 

(h)         one or more judgments or orders for the payment of money (not paid or fully covered by insurance maintained in accordance with the requirements of this Agreement and as to which the relevant insurance company has acknowledged coverage) aggregating in excess of $250,000 shall be rendered against any or all Credit Parties and either (i) enforcement proceedings shall have been commenced by any creditor upon any such judgments or orders, or (ii) there shall be any period of twenty (20) consecutive days during which a stay of enforcement of any such judgments or orders, by reason of a pending appeal, bond or otherwise, shall not be in effect;

 

(i)         any Lien created by any of the Security Documents shall at any time fail to constitute a valid and perfected Lien on all of the Collateral purported to be encumbered thereby, subject to no prior or equal Lien except Permitted Liens, or any Credit Party shall so assert;

 

(j)          the institution by any Governmental Authority of criminal proceedings against any Credit Party;

 

(k)         a default or event of default occurs under any Guarantee of any portion of the Obligations;

 

(l)          any Borrower makes any payment on account of any Debt that has been subordinated to any of the Obligations, other than payments specifically permitted by the terms of such subordination;

 

(m)        if any Borrower is or becomes an entity whose equity is registered with the SEC, and/or is publicly traded on and/or registered with a public securities exchange, such Borrower’s equity fails to remain registered with the SEC in good standing, and/or such equity fails to remain publicly traded on and registered with a public securities exchange;

 

(n)         the occurrence of a Material Adverse Effect;

 

 

(o)         (i) the voluntary withdrawal or institution of any action or proceeding by the FDA or similar Governmental Authority to order the withdrawal of any Product or Product category from the market or to enjoin Borrower, its Subsidiaries or any representative of Borrower or its Subsidiaries from manufacturing, marketing, selling or distributing any Product or Product category, (ii) the institution of any action or proceeding by any FDA or any other Governmental Authority to revoke, suspend, reject, withdraw, limit, or restrict any Regulatory Required Permit held by Borrower, its Subsidiaries or any representative of Borrower or its Subsidiaries, which, in each case, has or could reasonably be expected to result in Material Adverse Effect, (iii) the commencement of any enforcement action against Borrower, its Subsidiaries or any representative of Borrower or its Subsidiaries (with respect to the business of Borrower or its Subsidiaries) by FDA or any other Governmental Authority which has or could reasonably be expected to result in a Material Adverse Effect, or (iv) the occurrence of adverse test results in connection with a Product which could result in Material Adverse Effect;

 

(p)        any Credit Party materially breaches, or otherwise materially defaults under, (i) the Cook License Agreement, the Cook Supply Agreement or Cross License Agreement or (ii) any other Material Contract (after any applicable grace period contained therein) the loss of which could be reasonably expected to result in a Material Adverse Effect, or any such Material Contract referred to in clauses (i) or (ii) shall be terminated by a third party or parties party thereto prior to the expiration thereof;

 

(q)        any Credit Party breaches, or defaults under, the Ligand Royalty Agreement or the Ligand Parent Guaranty or there occurs any Remedies Event (as defined in the Ligand Royalty Agreement);

 

(r)          there shall occur any default or event of default under the Affiliated Financing Documents;

 

(s)         the introduction of, or any change in, any law or regulation governing or affecting the healthcare industry, including, without limitation, any Healthcare Laws, which could reasonably be expected to have a material adverse effect on Borrowers’ business, condition (financial or otherwise), prospects or properties; or

 

(t)          any of the Operative Documents shall for any reason fail to constitute the valid and binding agreement of any party thereto, or any Credit Party shall so assert, in each case, unless such Operative Document terminates pursuant to the terms and conditions thereof without any breach or default thereunder by any Credit Party thereto.

 

All cure periods provided for in this Section 10.1 shall run concurrently with any cure period provided for in any applicable Financing Documents under which the default occurred.

 

Section 10.2          Acceleration and Suspension or Termination of Term Loan Commitment. Upon the occurrence and during the continuance of an Event of Default, Agent may, and shall if requested by Required Lenders, (a) by notice to Borrower Representative suspend or terminate the Term Loan Commitment and the obligations of Agent and the Lenders with respect thereto, in whole or in part (and, if in part, each Lender’s Term Loan Commitment shall be reduced in accordance with its Pro Rata Share), and/or (b) by notice to Borrower Representative declare all or any portion of the Obligations to be, and the Obligations shall thereupon become, immediately due and payable, with accrued interest thereon, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower and Borrowers will pay the same; provided, however, that in the case of any of the Events of Default specified in Section 10.1(e) or 10.1(f) above, without any notice to any Borrower or any other act by Agent or the Lenders, the Term Loan Commitment and the obligations of Agent and the Lenders with respect thereto shall thereupon immediately and automatically terminate and all of the Obligations shall become immediately and automatically due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower and Borrowers will pay the same.

 

 

Section 10.3           UCC Remedies.

 

(a)         Upon the occurrence of and during the continuance of an Event of Default under this Agreement or the other Financing Documents, Agent, in addition to all other rights, options, and remedies granted to Agent under this Agreement or at law or in equity, may exercise, either directly or through one or more assignees or designees, all rights and remedies granted to it under all Financing Documents and under the UCC in effect in the applicable jurisdiction(s) and under any other applicable law; including, without limitation:

 

(i)             the right to take possession of, send notices regarding, and collect directly the Collateral, with or without judicial process;

 

(ii)            the right to (by its own means or with judicial assistance) enter any of Borrowers’ premises and take possession of the Collateral, or render it unusable, or to render it usable or saleable, or dispose of the Collateral on such premises in compliance with subsection (iii) below and to take possession of Borrowers’ original books and records, to obtain access to Borrowers’ data processing equipment, computer hardware and software relating to the Collateral and to use all of the foregoing and the information contained therein in any manner Agent deems appropriate, without any liability for rent, storage, utilities, or other sums, and Borrowers shall not resist or interfere with such action (if Borrowers’ books and records are prepared or maintained by an accounting service, contractor or other third party agent, Borrowers hereby irrevocably authorize such service, contractor or other agent, upon notice by Agent to such Person that an Event of Default has occurred and is continuing, to deliver to Agent or its designees such books and records, and to follow Agent’s instructions with respect to further services to be rendered);

 

(iii)           the right to require Borrowers at Borrowers’ expense to assemble all or any part of the Collateral and make it available to Agent at any place designated by Lender;

 

(iv)           the right to notify postal authorities to change the address for delivery of Borrowers’ mail to an address designated by Agent and to receive, open and dispose of all mail addressed to any Borrower; and/or

 

(v)            the right to enforce Borrowers’ rights against Account Debtors and other obligors, including, without limitation, (i) the right to collect Accounts directly in Agent’s own name (as agent for Lenders) and to charge the collection costs and expenses, including attorneys’ fees, to Borrowers, and (ii) the right, in the name of Agent or any designee of Agent or Borrowers, to verify the validity, amount or any other matter relating to any Accounts by mail, telephone, telegraph or otherwise, including, without limitation, verification of Borrowers’ compliance with applicable Laws. Borrowers shall cooperate fully with Agent in an effort to facilitate and promptly conclude such verification process. Such verification may include contacts between Agent and applicable federal, state and local regulatory authorities having jurisdiction over the Borrowers’ affairs, all of which contacts Borrowers hereby irrevocably authorize.

 

 

(b)         Each Borrower agrees that a notice received by it at least ten (10) days before the time of any intended public sale, or the time after which any private sale or other disposition of the Collateral is to be made, shall be deemed to be reasonable notice of such sale or other disposition. If permitted by applicable law, any perishable Collateral which threatens to speedily decline in value or which is sold on a recognized market may be sold immediately by Agent without prior notice to Borrowers. At any sale or disposition of Collateral, Agent may (to the extent permitted by applicable law) purchase all or any part of the Collateral, free from any right of redemption by Borrowers, which right is hereby waived and released. Each Borrower covenants and agrees not to interfere with or impose any obstacle to Agent’s exercise of its rights and remedies with respect to the Collateral. Agent shall have no obligation to clean-up or otherwise prepare the Collateral for sale. Agent may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. Agent may sell the Collateral without giving any warranties as to the Collateral. Agent may specifically disclaim any warranties of title or the like. This procedure will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. If Agent sells any of the Collateral upon credit, Borrowers will be credited only with payments actually made by the purchaser, received by Agent and applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, Agent may resell the Collateral and Borrowers shall be credited with the proceeds of the sale. Borrowers shall remain liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all Obligations.

 

(c)         Without restricting the generality of the foregoing and for the purposes aforesaid, each Borrower hereby appoints and constitutes Agent its lawful attorney-in-fact with full power of substitution in the Collateral, upon the occurrence and during the continuance of an Event of Default, to (i) use unadvanced funds remaining under this Agreement or which may be reserved, escrowed or set aside for any purposes hereunder at any time, or to advance funds in excess of the face amount of the Notes, (ii) pay, settle or compromise all existing bills and claims, which may be Liens or security interests, or to avoid such bills and claims becoming Liens against the Collateral, (iii) execute all applications and certificates in the name of such Borrower and to prosecute and defend all actions or proceedings in connection with the Collateral, and (iv) do any and every act which such Borrower might do in its own behalf; it being understood and agreed that this power of attorney in this subsection (c) shall be a power coupled with an interest and cannot be revoked.

 

(d)        Agent and each Lender is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrowers’ labels, mask works, rights of use of any name, any other Intellectual Property and advertising matter, and any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Agent’s exercise of its rights under this Article, Borrowers’ rights under all licenses (whether as licensor or licensee) and all franchise agreements inure to Agent’s and each Lender’s benefit.

 

Section 10.4          Reserved.

 

Section 10.5          Default Rate of Interest. At the election of Agent or Required Lenders, after the occurrence of an Event of Default and for so long as it continues, the Loans and other Obligations shall bear interest at rates that are four percent (4.0%) per annum in excess of the rates otherwise payable under this Agreement; provided, however, that in the case of any Event of Default specified in Section 10.1(e) or 10.1(f) above, such default rates shall apply immediately and automatically without the need for any election or action of any kind on the part of Agent or any Lender.

 

Section 10.6          Setoff Rights. During the continuance of any Event of Default, each Lender is hereby authorized by each Borrower at any time or from time to time, with reasonably prompt subsequent notice to such Borrower (any prior or contemporaneous notice being hereby expressly waived) to set off and to appropriate and to apply any and all (a) balances held by such Lender or any of such Lender’s Affiliates at any of its offices for the account of such Borrower or any of its Subsidiaries (regardless of whether such balances are then due to such Borrower or its Subsidiaries), and (b) other property at any time held or owing by such Lender to or for the credit or for the account of such Borrower or any of its Subsidiaries, against and on account of any of the Obligations; except that no Lender shall exercise any such right without the prior written consent of Agent. Any Lender exercising a right to set off shall purchase for cash (and the other Lenders shall sell) interests in each of such other Lender’s Pro Rata Share of the Obligations as would be necessary to cause all Lenders to share the amount so set off with each other Lender in accordance with their respective Pro Rata Share of the Obligations. Each Borrower agrees, to the fullest extent permitted by law, that any Lender and any of such Lender’s Affiliates may exercise its right to set off with respect to the Obligations as provided in this Section 10.6.

 

 

Section 10.7           Application of Proceeds.

 

(a)         Notwithstanding anything to the contrary contained in this Agreement, upon the occurrence and during the continuance of an Event of Default, each Borrower irrevocably waives the right to direct the application of any and all payments at any time or times thereafter received by Agent from or on behalf of such Borrower or any Guarantor of all or any part of the Obligations, and, as between Borrowers on the one hand and Agent and Lenders on the other, Agent shall have the continuing and exclusive right to apply and to reapply any and all payments received against the Obligations in such manner as Agent may deem advisable notwithstanding any previous application by Agent.

 

(b)         Following the occurrence and continuance of an Event of Default, but absent the occurrence and continuance of an Acceleration Event, Agent shall apply any and all payments received by Agent in respect of the Obligations, and any and all proceeds of Collateral received by Agent, in such order as Agent may from time to time elect.

 

(c)          Notwithstanding anything to the contrary contained in this Agreement, if an Acceleration Event shall have occurred, and so long as it continues, Agent shall apply any and all payments received by Agent in respect of the Obligations, and any and all proceeds of Collateral received by Agent, in the following order: first, to all fees, costs, indemnities, liabilities, obligations and expenses incurred by or owing to Agent with respect to this Agreement, the other Financing Documents or the Collateral; second, to all fees, costs, indemnities, liabilities, obligations and expenses incurred by or owing to any Lender with respect to this Agreement, the other Financing Documents or the Collateral; third, to accrued and unpaid interest on the Obligations (including any interest which, but for the provisions of the Bankruptcy Code, would have accrued on such amounts); fourth, to the principal amount of the Obligations outstanding; and fifth to any other indebtedness or obligations of Borrowers owing to Agent or any Lender under the Financing Documents. Any balance remaining shall be delivered to Borrowers or to whomever may be lawfully entitled to receive such balance or as a court of competent jurisdiction may direct. In carrying out the foregoing, (y) amounts received shall be applied in the numerical order provided until exhausted prior to the application to the next succeeding category, and (z) each of the Persons entitled to receive a payment in any particular category shall receive an amount equal to its Pro Rata Share of amounts available to be applied pursuant thereto for such category.

 

Section 10.8           Waivers.

 

(a)          Except as otherwise provided for in this Agreement and to the fullest extent permitted by applicable law, each Borrower waives: (i) presentment, demand and protest, and notice of presentment, dishonor, intent to accelerate, acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all Financing Documents, the Notes or any other notes, commercial paper, accounts, contracts, documents, Instruments, Chattel Paper and Guarantees at any time held by Lenders on which any Borrower may in any way be liable, and hereby ratifies and confirms whatever Lenders may do in this regard; (ii) all rights to notice and a hearing prior to Agent’s or any Lender’s taking possession or control of, or to Agent’s or any Lender’s replevy, attachment or levy upon, any Collateral or any bond or security which might be required by any court prior to allowing Agent or any Lender to exercise any of its remedies; and (iii) the benefit of all valuation, appraisal and exemption Laws. Each Borrower acknowledges that it has been advised by counsel of its choices and decisions with respect to this Agreement, the other Financing Documents and the transactions evidenced hereby and thereby.

 

 

(b)         Each Borrower for itself and all its successors and assigns, (i) agrees that its liability shall not be in any manner affected by any indulgence, extension of time, renewal, waiver, or modification granted or consented to by Lender; (ii) consents to any indulgences and all extensions of time, renewals, waivers, or modifications that may be granted by Agent or any Lender with respect to the payment or other provisions of the Financing Documents, and to any substitution, exchange or release of the Collateral, or any part thereof, with or without substitution, and agrees to the addition or release of any Borrower, endorsers, guarantors, or sureties, or whether primarily or secondarily liable, without notice to any other Borrower and without affecting its liability hereunder; (iii) agrees that its liability shall be unconditional and without regard to the liability of any other Borrower, Agent or any Lender for any tax on the indebtedness; and (iv) to the fullest extent permitted by law, expressly waives the benefit of any statute or rule of law or equity now provided, or which may hereafter be provided, which would produce a result contrary to or in conflict with the foregoing.

 

(c)         To the extent that Agent or any Lender may have acquiesced in any noncompliance with any requirements or conditions precedent to the closing of the Loans or to any subsequent disbursement of Loan proceeds, such acquiescence shall not be deemed to constitute a waiver by Agent or any Lender of such requirements with respect to any future disbursements of Loan proceeds and Agent may at any time after such acquiescence require Borrowers to comply with all such requirements. Any forbearance by Agent or Lender in exercising any right or remedy under any of the Financing Documents, or otherwise afforded by applicable law, including any failure to accelerate the maturity date of the Loans, shall not be a waiver of or preclude the exercise of any right or remedy nor shall it serve as a novation of the Notes or as a reinstatement of the Loans or a waiver of such right of acceleration or the right to insist upon strict compliance of the terms of the Financing Documents. Agent’s or any Lender’s acceptance of payment of any sum secured by any of the Financing Documents after the due date of such payment shall not be a waiver of Agent’s and such Lender’s right to either require prompt payment when due of all other sums so secured or to declare a default for failure to make prompt payment. The procurement of insurance or the payment of taxes or other Liens or charges by Agent as the result of an Event of Default shall not be a waiver of Agent’s right to accelerate the maturity of the Loans, nor shall Agent’s receipt of any condemnation awards, insurance proceeds, or damages under this Agreement operate to cure or waive any Credit Party’s default in payment of sums secured by any of the Financing Documents.

 

(d)         Without limiting the generality of anything contained in this Agreement or the other Financing Documents, each Borrower agrees that if an Event of Default is continuing (i) Agent and Lenders shall not be subject to any “one action” or “election of remedies” law or rule, and (ii) all Liens and other rights, remedies or privileges provided to Agent or Lenders shall remain in full force and effect until Agent or Lenders have exhausted all remedies against the Collateral and any other properties owned by Borrowers and the Financing Documents and other security instruments or agreements securing the Loans have been foreclosed, sold and/or otherwise realized upon in satisfaction of Borrowers’ obligations under the Financing Documents.

 

(e)         Nothing contained herein or in any other Financing Document shall be construed as requiring Agent or any Lender to resort to any part of the Collateral for the satisfaction of any of Borrowers’ obligations under the Financing Documents in preference or priority to any other Collateral, and Agent may seek satisfaction out of all of the Collateral or any part thereof, in its absolute discretion in respect of Borrowers’ obligations under the Financing Documents. In addition, Agent shall have the right from time to time to partially foreclose upon any Collateral in any manner and for any amounts secured by the Financing Documents then due and payable as determined by Agent in its sole discretion, including, without limitation, the following circumstances: (i) in the event any Borrower defaults beyond any applicable grace period in the payment of one or more scheduled payments of principal and/or interest, Agent may foreclose upon all or any part of the Collateral to recover such delinquent payments, or (ii) in the event Agent elects to accelerate less than the entire outstanding principal balance of the Loans, Agent may foreclose all or any part of the Collateral to recover so much of the principal balance of the Loans as Lender may accelerate and such other sums secured by one or more of the Financing Documents as Agent may elect. Notwithstanding one or more partial foreclosures, any unforeclosed Collateral shall remain subject to the Financing Documents to secure payment of sums secured by the Financing Documents and not previously recovered.

 

 

(f)          To the fullest extent permitted by law, each Borrower, for itself and its successors and assigns, waives in the event of foreclosure of any or all of the Collateral any equitable right otherwise available to any Credit Party which would require the separate sale of any of the Collateral or require Agent or Lenders to exhaust their remedies against any part of the Collateral before proceeding against any other part of the Collateral; and further in the event of such foreclosure each Borrower does hereby expressly consent to and authorize, at the option of Agent, the foreclosure and sale either separately or together of each part of the Collateral.

 

Section 10.9         Injunctive Relief. The parties acknowledge and agree that, in the event of a breach or threatened breach of any Credit Party’s obligations under any Financing Documents, Agent and Lenders may have no adequate remedy in money damages and, accordingly, shall be entitled to an injunction (including, without limitation, a temporary restraining order, preliminary injunction, writ of attachment, or order compelling an audit) against such breach or threatened breach, including, without limitation, maintaining any cash management and collection procedure described herein. However, no specification in this Agreement of a specific legal or equitable remedy shall be construed as a waiver or prohibition against any other legal or equitable remedies in the event of a breach or threatened breach of any provision of this Agreement. Each Credit Party waives, to the fullest extent permitted by law, the requirement of the posting of any bond in connection with such injunctive relief. By joining in the Financing Documents as a Credit Party, each Credit Party specifically joins in this Section as if this Section were a part of each Financing Document executed by such Credit Party.

 

Section 10.10        Marshalling; Payments Set Aside. Neither Agent nor any Lender shall be under any obligation to marshal any assets in payment of any or all of the Obligations. To the extent that Borrower makes any payment or Agent enforces its Liens or Agent or any Lender exercises its right of set-off, and such payment or the proceeds of such enforcement or set-off is subsequently invalidated, declared to be fraudulent or preferential, set aside, or required to be repaid by anyone, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or set-off had not occurred.

 

Section 10.11        Transfer of Licenses. In the event any Permit is terminated or in the event of foreclosure or other acquisition of any location owned or leased by Borrower, any Inventory or other Collateral by Agent or its designee or any purchaser at a foreclosure sale, Borrower shall cooperate with Agent to cause all Permits to be reissued or transferred to Agent or Agent’s designee, including, without limitation, any subsequent purchaser.

 

 

Article 11 - AGENT

 

Section 11.1          Appointment and Authorization. Each Lender hereby irrevocably appoints and authorizes Agent to enter into each of the Financing Documents to which it is a party (other than this Agreement) on its behalf and to take such actions as Agent on its behalf and to exercise such powers under the Financing Documents as are delegated to Agent by the terms thereof, together with all such powers as are reasonably incidental thereto. Subject to the terms of Section 11.16 and to the terms of the other Financing Documents, Agent is authorized and empowered to amend, modify, or waive any provisions of this Agreement or the other Financing Documents on behalf of Lenders. The provisions of this Article 11 are solely for the benefit of Agent and Lenders and neither any Borrower nor any other Credit Party shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement, Agent shall act solely as agent of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for any Borrower or any other Credit Party. Agent may perform any of its duties hereunder, or under the Financing Documents, by or through its agents, servicers, trustees, investment managers or employees.

 

Section 11.2          Agent and Affiliates. Agent shall have the same rights and powers under the Financing Documents as any other Lender and may exercise or refrain from exercising the same as though it were not Agent, and Agent and its Affiliates may lend money to, invest in and generally engage in any kind of business with each Credit Party or Affiliate of any Credit Party as if it were not Agent hereunder.

 

Section 11.3         Action by Agent. The duties of Agent shall be mechanical and administrative in nature. Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender. Nothing in this Agreement or any of the Financing Documents is intended to or shall be construed to impose upon Agent any obligations in respect of this Agreement or any of the Financing Documents except as expressly set forth herein or therein.

 

Section 11.4          Consultation with Experts. Agent may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts.

 

Section 11.5          Liability of Agent. Neither Agent nor any of its directors, officers, agents, trustees, investment managers, servicers or employees shall be liable to any Lender for any action taken or not taken by it in connection with the Financing Documents, except that Agent shall be liable with respect to its specific duties set forth hereunder but only to the extent of its own gross negligence or willful misconduct in the discharge thereof as determined by a final non-appealable judgment of a court of competent jurisdiction. Neither Agent nor any of its directors, officers, agents, trustees, investment managers, servicers or employees shall be responsible for or have any duty to ascertain, inquire into or verify (a) any statement, warranty or representation made in connection with any Financing Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements specified in any Financing Document; (c) the satisfaction of any condition specified in any Financing Document; (d) the validity, effectiveness, sufficiency or genuineness of any Financing Document, any Lien purported to be created or perfected thereby or any other instrument or writing furnished in connection therewith; (e) the existence or non-existence of any Default or Event of Default; or (f) the financial condition of any Credit Party. Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, facsimile or electronic transmission or similar writing) believed by it to be genuine or to be signed by the proper party or parties. Agent shall not be liable for any apportionment or distribution of payments made by it in good faith and if any such apportionment or distribution is subsequently determined to have been made in error the sole recourse of any Lender to whom payment was due but not made, shall be to recover from other Lenders any payment in excess of the amount to which they are determined to be entitled (and such other Lenders hereby agree to return to such Lender any such erroneous payments received by them).

 

 

Section 11.6         Indemnification. Each Lender shall, in accordance with its Pro Rata Share, indemnify Agent (to the extent not reimbursed by Borrowers) upon demand against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from Agent’s gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction) that Agent may suffer or incur in connection with the Financing Documents or any action taken or omitted by Agent hereunder or thereunder. If any indemnity furnished to Agent for any purpose shall, in the opinion of Agent, be insufficient or become impaired, Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against even if so directed by Required Lenders until such additional indemnity is furnished.

 

Section 11.7          Right to Request and Act on Instructions. Agent may at any time request instructions from Lenders with respect to any actions or approvals which by the terms of this Agreement or of any of the Financing Documents Agent is permitted or desires to take or to grant, and if such instructions are promptly requested, Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person for refraining from any action or withholding any approval under any of the Financing Documents until it shall have received such instructions from Required Lenders or all or such other portion of the Lenders as shall be prescribed by this Agreement. Without limiting the foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting under this Agreement or any of the other Financing Documents in accordance with the instructions of Required Lenders (or all or such other portion of the Lenders as shall be prescribed by this Agreement) and, notwithstanding the instructions of Required Lenders (or such other applicable portion of the Lenders), Agent shall have no obligation to take any action if it believes, in good faith, that such action would violate applicable Law or exposes Agent to any liability for which it has not received satisfactory indemnification in accordance with the provisions of Section 11.6.

 

Section 11.8          Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under the Financing Documents.

 

Section 11.9          Collateral Matters. Lenders irrevocably authorize Agent, at its option and in its discretion, to (a) release any Lien granted to or held by Agent under any Security Document (i) upon termination of the Term Loan Commitment and payment in full of all Obligations; or (ii) constituting property sold or disposed of as part of or in connection with any disposition permitted under any Financing Document (it being understood and agreed that Agent may conclusively rely without further inquiry on a certificate of a Responsible Officer as to the sale or other disposition of property being made in full compliance with the provisions of the Financing Documents); and (b) subordinate any Lien granted to or held by Agent under any Security Document to a Permitted Lien that is allowed to have priority over the Liens granted to or held by Agent pursuant to the definition of “Permitted Liens”. Upon request by Agent at any time, Lenders will confirm Agent’s authority to release and/or subordinate particular types or items of Collateral pursuant to this Section 11.9.

 

Section 11.10        Agency for Perfection. Agent and each Lender hereby appoint each other Lender as agent for the purpose of perfecting Agent’s security interest in assets which, in accordance with the Uniform Commercial Code in any applicable jurisdiction, can be perfected by possession or control. Should any Lender (other than Agent) obtain possession or control of any such assets, such Lender shall notify Agent thereof, and, promptly upon Agent’s request therefor, shall deliver such assets to Agent or in accordance with Agent’s instructions or transfer control to Agent in accordance with Agent’s instructions. Each Lender agrees that it will not have any right individually to enforce or seek to enforce any Security Document or to realize upon any Collateral for the Loan unless instructed to do so by Agent (or consented to by Agent), it being understood and agreed that such rights and remedies may be exercised only by Agent.

 

 

Section 11.11        Notice of Default. Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default except with respect to defaults in the payment of principal, interest and fees required to be paid to Agent for the account of Lenders, unless Agent shall have received written notice from a Lender or a Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. Agent will notify each Lender of its receipt of any such notice. Agent shall take such action with respect to such Default or Event of Default as may be requested by Required Lenders (or all or such other portion of the Lenders as shall be prescribed by this Agreement) in accordance with the terms hereof. Unless and until Agent has received any such request, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interests of Lenders.

 

Section 11.12        Assignment by Agent; Resignation of Agent; Successor Agent.

 

(a)         Agent may at any time assign its rights, powers, privileges and duties hereunder to (i) another Lender or an Affiliate of Agent or any Lender or any Approved Fund, or (ii) any Person to whom Agent, in its capacity as a Lender, has assigned (or will assign, in conjunction with such assignment of agency rights hereunder) 50% or more of its Loan, in each case without the consent of the Lenders or Borrowers. Following any such assignment, Agent shall endeavor to give notice to the Lenders and Borrowers. Failure to give such notice shall not affect such assignment in any way or cause the assignment to be ineffective. An assignment by Agent pursuant to this subsection (a) shall not be deemed a resignation by Agent for purposes of subsection (b) below.

 

(b)         Without limiting the rights of Agent to designate an assignee pursuant to subsection (a) above, Agent may at any time give notice of its resignation to the Lenders and Borrowers. Upon receipt of any such notice of resignation, Required Lenders shall have the right to appoint a successor Agent. If no such successor shall have been so appointed by Required Lenders and shall have accepted such appointment within ten (10) Business Days after the retiring Agent gives notice of its resignation, then the retiring Agent may on behalf of the Lenders, appoint a successor Agent; provided, however, that if Agent shall notify Borrowers and the Lenders that no Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice from Agent that no Person has accepted such appointment and, from and following delivery of such notice, (i) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Financing Documents, and (ii) all payments, communications and determinations provided to be made by, to or through Agent shall instead be made by or to each Lender directly, until such time as Required Lenders appoint a successor Agent as provided for above in this paragraph.

 

(c)         Upon (i) an assignment permitted by subsection (a) above, or (ii) the acceptance of a successor’s appointment as Agent pursuant to subsection (b) above, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder and under the other Financing Documents (if not already discharged therefrom as provided above in this paragraph). The fees payable by Borrowers to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between Borrowers and such successor. After the retiring Agent’s resignation hereunder and under the other Financing Documents, the provisions of this Article and Section 11.12 shall continue in effect for the benefit of such retiring Agent and its sub-agents in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting or was continuing to act as Agent.

 

 

Section 11.13        Payment and Sharing of Payment.

 

(a)          Reserved.

 

(b)         Term Loan Payments. Payments of principal, interest and fees in respect of the Term Loans will be settled on the date of receipt if received by Agent on the last Business Day of a month or on the Business Day immediately following the date of receipt if received on any day other than the last Business Day of a month.

 

(c)          Return of Payments.

 

(i)             If Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has been or will be received by Agent from a Borrower and such related payment is not received by Agent, then Agent will be entitled to recover such amount from such Lender on demand without setoff, counterclaim or deduction of any kind, together with interest accruing on a daily basis at the Federal Funds Rate.

 

(ii)            If Agent determines at any time that any amount received by Agent under this Agreement must be returned to any Borrower or paid to any other Person pursuant to any insolvency law or otherwise, then, notwithstanding any other term or condition of this Agreement or any other Financing Document, Agent will not be required to distribute any portion thereof to any Lender. In addition, each Lender will repay to Agent on demand any portion of such amount that Agent has distributed to such Lender, together with interest at such rate, if any, as Agent is required to pay to any Borrower or such other Person, without setoff, counterclaim or deduction of any kind.

 

(d)         Defaulted Lenders. The failure of any Defaulted Lender to make any payment required by it hereunder shall not relieve any other Lender of its obligations to make payment, but neither any other Lender nor Agent shall be responsible for the failure of any Defaulted Lender to make any payment required hereunder. Notwithstanding anything set forth herein to the contrary, a Defaulted Lender shall not have any voting or consent rights under or with respect to any Financing Document or constitute a “Lender” (or be included in the calculation of “Required Lenders” hereunder) for any voting or consent rights under or with respect to any Financing Document.

 

(e)         Sharing of Payments. If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Loan (other than pursuant to the terms of Section 2.8(d)) in excess of its Pro Rata Share of payments entitled pursuant to the other provisions of this Section 11.13, such Lender shall purchase from the other Lenders such participations in extensions of credit made by such other Lenders (without recourse, representation or warranty) as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter required to be returned or otherwise recovered from such purchasing Lender, such portion of such purchase shall be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such return or recovery, without interest. Each Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this clause (e) may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 10.6) with respect to such participation as fully as if such Lender were the direct creditor of Borrowers in the amount of such participation). If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this clause (e) applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this clause (e) to share in the benefits of any recovery on such secured claim.

 

Section 11.14        Right to Perform, Preserve and Protect. If any Credit Party fails to perform any obligation hereunder or under any other Financing Document, Agent itself may, but shall not be obligated to, cause such obligation to be performed at Borrowers’ expense. Agent is further authorized by Borrowers and the Lenders to make expenditures from time to time which Agent, in its reasonable business judgment, deems necessary or desirable to (a) preserve or protect the business conducted by Borrowers, the Collateral, or any portion thereof, and/or (b) enhance the likelihood of, or maximize the amount of, repayment of the Loan and other Obligations. Each Borrower hereby agrees to reimburse Agent on demand for any and all costs, liabilities and obligations incurred by Agent pursuant to this Section 11.14. Each Lender hereby agrees to indemnify Agent upon demand for any and all costs, liabilities and obligations incurred by Agent pursuant to this Section 11.14, in accordance with the provisions of Section 11.6.

 

 

 

Section 11.15        Additional Titled Agents. Except for rights and powers, if any, expressly reserved under this Agreement to any bookrunner, arranger or to any titled agent named on the cover page of this Agreement, other than Agent (collectively, the “Additional Titled Agents”), and except for obligations, liabilities, duties and responsibilities, if any, expressly assumed under this Agreement by any Additional Titled Agent, no Additional Titled Agent, in such capacity, has any rights, powers, liabilities, duties or responsibilities hereunder or under any of the other Financing Documents. Without limiting the foregoing, no Additional Titled Agent shall have nor be deemed to have a fiduciary relationship with any Lender. At any time that any Lender serving as an Additional Titled Agent shall have transferred to any other Person (other than any Affiliates) all of its interests in the Loan, such Lender shall be deemed to have concurrently resigned as such Additional Titled Agent.

 

Section 11.16        Amendments and Waivers.

 

(a)        No provision of this Agreement or any other Financing Document may be amended, waived or otherwise modified unless such amendment, waiver or other modification is in writing and is signed or otherwise approved by Borrowers, the Required Lenders and any other Lender to the extent required under Section 11.16(b); provided, however, any Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto.

 

(b)         In addition to the required signatures under Section 11.16(a), no provision of this Agreement or any other Financing Document may be amended, waived or otherwise modified unless such amendment, waiver or other modification is in writing and is signed or otherwise approved by the following Persons:

 

(i)              if any amendment, waiver or other modification would increase a Lender’s funding obligations in respect of any Loan, by such Lender; and/or

 

(ii)             if the rights or duties of Agent are affected thereby, by Agent;

 

provided, however, that, in each of (i) and (ii) above, no such amendment, waiver or other modification shall, unless signed or otherwise approved in writing by all the Lenders directly affected thereby, (A) reduce the principal of, rate of interest on or any fees with respect to any Loan or forgive any principal, interest (other than default interest) or fees (other than late charges) with respect to any Loan; (B) postpone the date fixed for, or waive, any payment (other than any mandatory prepayment pursuant to Section 2.1(a)(ii)) of principal of any Loan, or of interest on any Loan (other than default interest) or any fees provided for hereunder (other than late charges) or postpone the date of termination of any commitment of any Lender hereunder; (C) change the definition of the term Required Lenders or the percentage of Lenders which shall be required for Lenders to take any action hereunder; (D) release all or substantially all of the Collateral, authorize any Borrower to sell or otherwise dispose of all or substantially all of the Collateral, release any Guarantor of all or any portion of the Obligations or its Guarantee obligations with respect thereto, or consent to a transfer of any of the Intellectual Property, except, in each case with respect to this clause (D), as otherwise may be provided in this Agreement or the other Financing Documents (including in connection with any disposition permitted hereunder); (E) amend, waive or otherwise modify this Section 11.16(b) or the definitions of the terms used in this Section 11.16(b) insofar as the definitions affect the substance of this Section 11.16(b); (F) consent to the assignment, delegation or other transfer by any Credit Party of any of its rights and obligations under any Financing Document or release any Borrower of its payment obligations under any Financing Document, except, in each case with respect to this clause (F), pursuant to a merger or consolidation permitted pursuant to this Agreement; or (G) amend any of the provisions of Section 10.7 or amend any of the definitions Pro Rata Share, Term Loan Commitment, Term Loan Tranche 1 Commitments, Term Loan Tranche 2 Commitments, Term Loan Tranche 4 Commitments, Term Loan Tranche 5 Commitments Term Loan Commitment Amount, Term Loan Tranche 1 Commitment Amount, Term Loan Tranche 2 Commitment Amount, Term Loan Tranche 3 Commitment Amount, Term Loan Tranche 4 Commitment Amount, Term Loan Tranche 5 Commitment Amount, Term Loan Commitment Percentage, Term Loan Tranche 1 Commitment Percentage, Term Loan Tranche 2 Commitment Percentage, Term Loan Tranche 3 Commitment Percentage, Term Loan Tranche 4 Commitment Percentage, Term Loan Tranche 5 Commitment Percentage or that provide for the Lenders to receive their Pro Rata Shares of any fees, payments, setoffs or proceeds of Collateral hereunder. It is hereby understood and agreed that all Lenders shall be deemed directly affected by an amendment, waiver or other modification of the type described in the preceding clauses (C), (D), (E), (F) and (G) of the preceding sentence.

 

 

Section 11.17        Assignments and Participations.

 

(a)         Assignments.

 

(i)              Any Lender may at any time assign to one or more Eligible Assignees all or any portion of such Lender’s Loan together with all related obligations of such Lender hereunder. Except as Agent may otherwise agree, the amount of any such assignment (determined as of the date of the applicable Assignment Agreement or, if a “Trade Date” is specified in such Assignment Agreement, as of such Trade Date) shall be in a minimum aggregate amount equal to $1,000,000 or, if less, the assignor’s entire interests in the outstanding Loan; provided, however, that, in connection with simultaneous assignments to two or more related Approved Funds, such Approved Funds shall be treated as one assignee for purposes of determining compliance with the minimum assignment size referred to above. Borrowers and Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned to an Eligible Assignee until Agent shall have received and accepted an effective Assignment Agreement executed, delivered and fully completed by the applicable parties thereto and a processing fee of $3,500 to be paid by the assigning Lender; provided, however, that only one processing fee shall be payable in connection with simultaneous assignments to two or more related Approved Funds.

 

(ii)             From and after the date on which the conditions described above have been met, (A) such Eligible Assignee shall be deemed automatically to have become a party hereto and, to the extent of the interests assigned to such Eligible Assignee pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder, and (B) the assigning Lender, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment Agreement, shall be released from its rights and obligations hereunder (other than those that survive termination pursuant to Section 12.1). Upon the request of the Eligible Assignee (and, as applicable, the assigning Lender) pursuant to an effective Assignment Agreement, each Borrower shall execute and deliver to Agent for delivery to the Eligible Assignee (and, as applicable, the assigning Lender) Notes in the aggregate principal amount of the Eligible Assignee’s Loan (and, as applicable, Notes in the principal amount of that portion of the principal amount of the Loan retained by the assigning Lender). Upon receipt by the assigning Lender of such Note, the assigning Lender shall return to Borrower Representative any prior Note held by it.

 

 

(iii)           Agent, acting solely for this purpose as an agent of Borrower, shall maintain at the office of its servicer located in Bethesda, Maryland a copy of each Assignment Agreement delivered to it and a register for the recordation of the names and addresses of each Lender, and the commitments of, and principal amount of the Loan owing to, such Lender pursuant to the terms hereof (the “Register”). The entries in such Register shall be conclusive, absent manifest effort, and Borrower, Agent and Lenders may treat each Person whose name is recorded therein pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. Such Register shall be available for inspection by Borrower and any Lender, at any reasonable time upon reasonable prior notice to Agent. Each Lender that sells a participation shall, acting solely for this purpose as an agent of Borrower maintain a register on which it enters the name and address of each participant and the principal amounts (and stated interest) of each participant’s interest in the Obligations (each, a “Participant Register”). The entries in the Participant Registers shall be conclusive, absent manifest error. Each Participant Register shall be available for inspection by Borrower and Agent at any reasonable time upon reasonable prior notice to the applicable Lender; provided, that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant's interest in any commitments, loans, letters of credit or its other obligations under any Financing Document) to any Person (including Borrower) except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. For the avoidance of doubt, Agent (in its capacity as Agent) shall have no responsibility for maintaining a participant register.

 

(iv)            Notwithstanding the foregoing provisions of this Section 11.17(a) or any other provision of this Agreement, any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided, however, that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

(v)             Notwithstanding the foregoing provisions of this Section 11.17(a) or any other provision of this Agreement, Agent has the right, but not the obligation, to effectuate assignments of Loan via an electronic settlement system acceptable to Agent as designated in writing from time to time to the Lenders by Agent (the “Settlement Service”). At any time when Agent elects, in its sole discretion, to implement such Settlement Service, each such assignment shall be effected by the assigning Lender and proposed assignee pursuant to the procedures then in effect under the Settlement Service, which procedures shall be consistent with the other provisions of this Section 11.17(a). Each assigning Lender and proposed Eligible Assignee shall comply with the requirements of the Settlement Service in connection with effecting any assignment of Loan pursuant to the Settlement Service. With the prior written approval of Agent, Agent’s approval of such Eligible Assignee shall be deemed to have been automatically granted with respect to any transfer effected through the Settlement Service. Assignments and assumptions of the Loan shall be effected by the provisions otherwise set forth herein until Agent notifies Lenders of the Settlement Service as set forth herein.

 

 

(b)         Participations. Any Lender may at any time, without the consent of, or notice to, any Borrower or Agent, sell to one or more Persons (other than any Borrower or any Borrower’s Affiliates) participating interests in its Loan, commitments or other interests hereunder (any such Person, a “Participant”). In the event of a sale by a Lender of a participating interest to a Participant, (i) such Lender’s obligations hereunder shall remain unchanged for all purposes, (ii) Borrowers and Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations hereunder, and (iii) all amounts payable by each Borrower shall be determined as if such Lender had not sold such participation and shall be paid directly to such Lender. Each Borrower agrees that if amounts outstanding under this Agreement are due and payable (as a result of acceleration or otherwise), each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement; provided, however, that such right of set-off shall be subject to the obligation of each Participant to share with Lenders, and Lenders agree to share with each Participant, as provided in Section 11.5.

 

(c)         Replacement of Lenders. Within thirty (30) days after: (i) receipt by Agent of notice and demand from any Lender for payment of additional costs as provided in Section 2.8(d), which demand shall not have been revoked, (ii) any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.8(a), (iii) any Lender is a Defaulted Lender, and the circumstances causing such status shall not have been cured or waived; or (iv) any failure by any Lender to consent to a requested amendment, waiver or modification to any Financing Document in which Required Lenders have already consented to such amendment, waiver or modification but the consent of each Lender, or each Lender affected thereby, is required with respect thereto (each relevant Lender in the foregoing clauses (i) through (iv) being an “Affected Lender”) each of Borrower Representative and Agent may, at its option, notify such Affected Lender and, in the case of Borrowers’ election, Agent, of such Person’s intention to obtain, at Borrowers’ expense, a replacement Lender (“Replacement Lender”) for such Lender, which Replacement Lender shall be an Eligible Assignee and, in the event the Replacement Lender is to replace an Affected Lender described in the preceding clause (iv), such Replacement Lender consents to the requested amendment, waiver or modification making the replaced Lender an Affected Lender. In the event Borrowers or Agent, as applicable, obtains a Replacement Lender within ninety (90) days following notice of its intention to do so, the Affected Lender shall sell, at par, and assign all of its Loan and funding commitments hereunder to such Replacement Lender in accordance with the procedures set forth in Section 11.17(a); provided, however, that (A) Borrowers shall have reimbursed such Lender for its increased costs and additional payments for which it is entitled to reimbursement under Section 2.8(a) or Section 2.8(d), as applicable, of this Agreement through the date of such sale and assignment, and (B) Borrowers shall pay to Agent the $3,500 processing fee in respect of such assignment. In the event that a replaced Lender does not execute an Assignment Agreement pursuant to Section 11.17(a) within five (5) Business Days after receipt by such replaced Lender of notice of replacement pursuant to this Section 11.17(c) and presentation to such replaced Lender of an Assignment Agreement evidencing an assignment pursuant to this Section 11.17(c), such replaced Lender shall be deemed to have consented to the terms of such Assignment Agreement, and any such Assignment Agreement executed by Agent, the Replacement Lender and, to the extent required pursuant to Section 11.17(a), Borrowers, shall be effective for purposes of this Section 11.17(c) and Section 11.17(a). Upon any such assignment and payment, such replaced Lender shall no longer constitute a “Lender” for purposes hereof, other than with respect to such rights and obligations that survive termination as set forth in Section 12.1.

 

(d)         Credit Party Assignments. No Credit Party may assign, delegate or otherwise transfer any of its rights or other obligations hereunder or under any other Financing Document without the prior written consent of Agent and each Lender.

 

 

Section 11.18        Funding and Settlement Provisions Applicable When Non-Funding Lenders Exist. So long as Agent has not waived the conditions to the funding of Loans set forth in Section 7.2 or Section 2.1, any Lender may deliver a notice to Agent stating that such Lender shall cease making Term Loans due to the non-satisfaction of one or more conditions to funding Loans set forth in Section 7.2 or Section 2.1, and specifying any such non-satisfied conditions. Any Lender delivering any such notice shall become a non-funding Lender (a “Non-Funding Lender”) for purposes of this Agreement commencing on the Business Day following receipt by Agent of such notice, and shall cease to be a Non-Funding Lender on the date on which such Lender has either revoked the effectiveness of such notice or acknowledged in writing to each of Agent the satisfaction of the condition(s) specified in such notice, or Required Lenders waive the conditions to the funding of such Loans giving rise to such notice by Non-Funding Lender. Each Non-Funding Lender shall remain a Lender for purposes of this Agreement to the extent that such Non-Funding Lender has Term Loans outstanding in excess of Zero Dollars ($0); provided, however, that during any period of time that any Non-Funding Lender exists, and notwithstanding any provision to the contrary set forth herein, the following provisions shall apply:

 

(a)         For purposes of determining the Pro Rata Share of each Lender under clause (c) of the definition of such term, each Non-Funding Lender shall be deemed to have a Term Loan Commitment Amount as in effect immediately before such Lender became a Non-Funding Lender.

 

(b)         Except as provided in clause (a) above, the Term Loan Commitment Amount of each Non-Funding Lender shall be deemed to be Zero Dollars ($0).

 

(c)         The Term Loan Commitment at any date of determination during such period shall be deemed to be equal to the sum of (i) the aggregate Term Loan Commitment Amounts of all Lenders, other than the Non-Funding Lenders as of such date plus (ii) the aggregate principal amount outstanding under the Term Loans of all Non-Funding Lenders as of such date.

 

 

 

Article 12 - MISCELLANEOUS

 

Section 12.1         Survival. All agreements, representations and warranties made herein and in every other Financing Document shall survive the execution and delivery of this Agreement and the other Financing Documents and the other Operative Documents. The provisions of Section 2.10 and Articles 11 and 12 shall survive the payment of the Obligations (both with respect to any Lender and all Lenders collectively) and any termination of this Agreement and any judgment with respect to any Obligations, including any final foreclosure judgment with respect to any Security Document, and no unpaid or unperformed, current or future, Obligations will merge into any such judgment.

 

Section 12.2          No Waivers. No failure or delay by Agent or any Lender in exercising any right, power or privilege under any Financing Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein and therein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Any reference in any Financing Document to the “continuing” nature of any Event of Default shall not be construed as establishing or otherwise indicating that any Borrower or any other Credit Party has the independent right to cure any such Event of Default, but is rather presented merely for convenience should such Event of Default be waived in accordance with the terms of the applicable Financing Documents.

 

 

Section 12.3           Notices.

 

(a)         All notices, requests and other communications to any party hereunder shall be in writing (including prepaid overnight courier, facsimile transmission or similar writing) and shall be given to such party at its address, facsimile number or e-mail address set forth on the signature pages hereof (or, in the case of any such Lender who becomes a Lender after the date hereof, in an assignment agreement or in a notice delivered to Borrower Representative and Agent by the assignee Lender forthwith upon such assignment) or at such other address, facsimile number or e-mail address as such party may hereafter specify for the purpose by notice to Agent and Borrower Representative; provided, however, that notices, requests or other communications shall be permitted by electronic means only in accordance with the provisions of Section 12.3(b) and (c). Each such notice, request or other communication shall be effective (i) if given by facsimile, when such notice is transmitted to the facsimile number specified by this Section and the sender receives a confirmation of transmission from the sending facsimile machine, or (ii) if given by mail, prepaid overnight courier or any other means, when received or when receipt is refused at the applicable address specified by this Section 12.3(a).

 

(b)         Notices and other communications to the parties hereto may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved from time to time by Agent, provided, however, that the foregoing shall not apply to notices sent directly to any Lender if such Lender has notified Agent that it is incapable of receiving notices by electronic communication. Agent or Borrower Representative may, in their discretion, agree to accept notices and other communications to them hereunder by electronic communications pursuant to procedures approved by it, provided, however, that approval of such procedures may be limited to particular notices or communications.

 

(c)         Unless Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgment from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgment), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor, provided, however, that if any such notice or other communication is not sent or posted during normal business hours, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day.

 

Section 12.4          Severability. In case any provision of or obligation under this Agreement or any other Financing Document shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

 

Section 12.5         Headings. Headings and captions used in the Financing Documents (including the Exhibits, Schedules and Annexes hereto and thereto) are included for convenience of reference only and shall not be given any substantive effect.

 

Section 12.6           Confidentiality.

 

(a)         Each Credit Party agrees (i) not to transmit or disclose provisions of any Financing Document to any Person (other than to Borrowers’ advisors, directors and officers on a need-to-know basis or as otherwise may be required by Law) without Agent’s prior written consent, (ii) to inform all Persons of the confidential nature of the Financing Documents and to direct them not to disclose the same to any other Person and to require each of them to be bound by these provisions.

 

 

(b)         Agent and each Lender shall hold all non-public information regarding the Credit Parties and their respective businesses identified as such by Borrowers and obtained by Agent or any Lender pursuant to the requirements hereof in accordance with such Person’s customary and reasonable procedures for handling information of such nature, except that disclosure of such information may be made (i) to their respective agents, employees, Subsidiaries, Affiliates, attorneys, auditors, professional consultants, rating agencies, insurance industry associations and portfolio management services, (ii) to prospective transferees or purchasers of any interest in the Loans, Agent or a Lender, provided, however, that any such Persons are bound by obligations of confidentiality, (iii) as required by Law, subpoena, judicial order or similar order and in connection with any litigation, (iv) as may be required in connection with the examination, audit or similar investigation of such Person, and (v) to a Person that is a trustee, investment advisor or investment manager, collateral manager, servicer, noteholder or secured party in a Securitization (as hereinafter defined) in connection with the administration, servicing and reporting on the assets serving as collateral for such Securitization. For the purposes of this Section, “Securitization” means (A) the pledge of the Loans as collateral security for loans to a Lender, or (B) a public or private offering by a Lender or any of its Affiliates or their respective successors and assigns, of securities which represent an interest in, or which are collateralized, in whole or in part, by the Loans. Confidential information shall include only such information identified as such at the time provided to Agent and shall not include information that either: (y) is in the public domain, or becomes part of the public domain after disclosure to such Person through no fault of such Person, or (z) is disclosed to such Person by a Person other than a Credit Party, provided, however, Agent does not have actual knowledge that such Person is prohibited from disclosing such information. The obligations of Agent and Lenders under this Section 12.6 shall supersede and replace the obligations of Agent and Lenders under any confidentiality agreement in respect of this financing executed and delivered by Agent or any Lender prior to the date hereof.

 

Section 12.7          Waiver of Consequential and Other Damages. To the fullest extent permitted by applicable law, no Borrower shall assert, and each Borrower hereby waives, any claim against any Indemnitee (as defined below), on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of this Agreement, any other Financing Document or any agreement or instrument contemplated hereby or thereby, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Financing Documents or the transactions contemplated hereby or thereby.

 

Section 12.8           GOVERNING LAW; SUBMISSION TO JURISDICTION.

 

(a)         THIS AGREEMENT, EACH NOTE AND EACH OTHER FINANCING DOCUMENT, AND ALL DISPUTES AND OTHER MATTERS RELATING HERETO OR THERETO OR ARISING THEREFROM (WHETHER SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW). EACH BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN THE STATE OF NEW YORK IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON SUCH BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

 

(b)         Each Borrower, Agent and each Lender agree that each Loan (including those made on the Closing Date) shall be deemed to be made in, and the transactions contemplated hereunder and in any other Financing Document shall be deemed to have been performed in, the State of Maryland.

 

Section 12.9           WAIVER OF JURY TRIAL.

 

(a)         EACH BORROWER, AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH BORROWER, AGENT AND EACH LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH BORROWER, AGENT AND EACH LENDER WARRANTS AND REPRESENTS THAT IT HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

(b)         In the event any such action or proceeding is brought or filed in any United States federal court sitting in the State of California or in any state court of the State of California, and the waiver of jury trial set forth in Section 12.9(a) hereof is determined or held to be ineffective or unenforceable, the parties agree that all actions or proceedings shall be resolved by reference to a private judge sitting without a jury, pursuant to California Code of Civil Procedure Section 638, before a mutually acceptable referee or, if the parties cannot agree, a referee selected by the Presiding Judge of the Los Angeles County, California. Such proceeding shall be conducted in Los Angeles County, California, with California rules of evidence and discovery applicable to such proceeding. In the event any actions or proceedings are to be resolved by judicial reference, any party may seek from any court having jurisdiction thereover any prejudgment order, writ or other relief and have such prejudgment order, writ or other relief enforced to the fullest extent permitted by Law notwithstanding that all actions or proceedings are otherwise subject to resolution by judicial reference.

 

Section 12.10        Publication; Advertisement.

 

(a)         Publication. No Credit Party will directly or indirectly publish, disclose or otherwise use in any public disclosure, advertising material, promotional material, press release or interview, any reference to the name, logo or any trademark of MCF or any of its Affiliates or any reference to this Agreement or the financing evidenced hereby, in any case except (i) as required by Law, subpoena or judicial or similar order, in which case the applicable Credit Party shall give Agent prior written notice of such publication or other disclosure, or (ii) with MCF’s prior written consent.

 

(b)         Advertisement. Each Lender and each Credit Party hereby authorizes MCF to publish the name of such Lender and Credit Party, the existence of the financing arrangements referenced under this Agreement, the primary purpose and/or structure of those arrangements, the amount of credit extended under each facility, the title and role of each party to this Agreement, and the total amount of the financing evidenced hereby in any “tombstone”, comparable advertisement or press release which MCF elects to submit for publication. In addition, each Lender and each Credit Party agrees that MCF may provide lending industry trade organizations with information necessary and customary for inclusion in league table measurements after the Closing Date. With respect to any of the foregoing, MCF shall provide Borrowers with an opportunity to review and confer with MCF regarding the contents of any such tombstone, advertisement or information, as applicable, prior to its submission for publication and, following such review period, MCF may, from time to time, publish such information in any media form desired by MCF, until such time that Borrowers shall have requested MCF cease any such further publication.

 

 

Section 12.11        Counterparts; Integration. This Agreement and the other Financing Documents may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Signatures by facsimile or by electronic mail delivery of an electronic version of any executed signature page shall bind the parties hereto. This Agreement and the other Financing Documents constitute the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.

 

Section 12.12        No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

 

Section 12.13       Lender Approvals. Unless expressly provided herein to the contrary, any approval, consent, waiver or satisfaction of Agent or Lenders with respect to any matter that is the subject of this Agreement, the other Financing Documents may be granted or withheld by Agent and Lenders in their sole and absolute discretion and credit judgment.

 

Section 12.14        Expenses; Indemnity

 

(a)        Borrowers hereby agree to promptly pay (i) all costs and expenses of Agent (including, without limitation, the fees, costs and expenses of counsel to, and independent appraisers and consultants retained by Agent) in connection with the examination, review, due diligence investigation, documentation, negotiation, closing and syndication of the transactions contemplated by the Financing Documents, in connection with the performance by Agent of its rights and remedies under the Financing Documents and in connection with the continued administration of the Financing Documents including (A) any amendments, modifications, consents and waivers to and/or under any and all Financing Documents, and (B) any periodic public record searches conducted by or at the request of Agent (including, without limitation, title investigations, UCC searches, fixture filing searches, judgment, pending litigation and tax lien searches and searches of applicable corporate, limited liability, partnership and related records concerning the continued existence, organization and good standing of certain Persons); (ii) without limitation of the preceding clause (i), all costs and expenses of Agent in connection with the creation, perfection and maintenance of Liens pursuant to the Financing Documents; (iii) without limitation of the preceding clause (i), all costs and expenses of Agent in connection with (A) protecting, storing, insuring, handling, maintaining or selling any Collateral, (B) any litigation, dispute, suit or proceeding relating to any Financing Document, and (C) any workout, collection, bankruptcy, insolvency and other enforcement proceedings under any and all of the Financing Documents; (iv) without limitation of the preceding clause (i), all costs and expenses of Agent in connection with Agent’s reservation of funds in anticipation of the funding of the initial Loans to be made hereunder; and (v) all costs and expenses incurred by Lenders in connection with any litigation, dispute, suit or proceeding relating to any Financing Document and in connection with any workout, collection, bankruptcy, insolvency and other enforcement proceedings under any and all Financing Documents, whether or not Agent or Lenders are a party thereto. If Agent or any Lender uses in-house counsel for any of these purposes, Borrowers further agree that the Obligations include reasonable charges for such work commensurate with the fees that would otherwise be charged by outside legal counsel selected by Agent or such Lender for the work performed.

 

 

(b)        Each Borrower hereby agrees to indemnify, pay and hold harmless Agent and Lenders and the officers, directors, employees, trustees, agents, investment advisors and investment managers, collateral managers, servicers, and counsel of Agent and Lenders (collectively called the “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the fees and disbursements of counsel for such Indemnitee) in connection with any investigative, response, remedial, administrative or judicial matter or proceeding, whether or not such Indemnitee shall be designated a party thereto and including any such proceeding initiated by or on behalf of a Credit Party, and the reasonable expenses of investigation by engineers, environmental consultants and similar technical personnel and any commission, fee or compensation claimed by any broker (other than any broker retained by Agent or Lenders) asserting any right to payment for the transactions contemplated hereby, which may be imposed on, incurred by or asserted against such Indemnitee as a result of or in connection with the transactions contemplated hereby or by the other Operative Documents (including (i)(A) as a direct or indirect result of the presence on or under, or escape, seepage, leakage, spillage, discharge, emission or release from, any property now or previously owned, leased or operated by Borrower, any Subsidiary or any other Person of any Hazardous Materials, (B) arising out of or relating to the offsite disposal of any materials generated or present on any such property, or (C) arising out of or resulting from the environmental condition of any such property or the applicability of any governmental requirements relating to Hazardous Materials, whether or not occasioned wholly or in part by any condition, accident or event caused by any act or omission of Borrower or any Subsidiary, and (ii) proposed and actual extensions of credit under this Agreement) and the use or intended use of the proceeds of the Loans, except that Borrower shall have no obligation hereunder to an Indemnitee with respect to any liability resulting from the gross negligence or willful misconduct of such Indemnitee, as determined by a final non-appealable judgment of a court of competent jurisdiction. To the extent that the undertaking set forth in the immediately preceding sentence may be unenforceable, Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under applicable Law to the payment and satisfaction of all such indemnified liabilities incurred by the Indemnitees or any of them.

 

(c)         Notwithstanding any contrary provision in this Agreement, the obligations of Borrowers under this Section 12.14 shall survive the payment in full of the Obligations and the termination of this Agreement. NO INDEMNITEE SHALL BE RESPONSIBLE OR LIABLE TO THE BORROWERS OR TO ANY OTHER PARTY TO ANY FINANCING DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

 

(d)         Each Borrower for itself and all endorsers, guarantors and sureties and their heirs, legal representatives, successors and assigns, hereby further specifically waives any rights that it may have under Section 1542 of the California Civil Code (to the extent applicable), which provides as follows: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR,” and further waives any similar rights under applicable Laws.

 

 

Section 12.15       Reinstatement. This Agreement shall remain in full force and effect and continue to be effective should any petition or other proceeding be filed by or against any Credit Party for liquidation or reorganization, should any Credit Party become insolvent or make an assignment for the benefit of any creditor or creditors or should an interim receiver, receiver, receiver and manager or trustee be appointed for all or any significant part of any Credit Party’s assets, and shall continue to be effective or to be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a fraudulent preference reviewable transaction or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

 

Section 12.16        Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Borrowers and Agent and each Lender and their respective successors and permitted assigns.

 

Section 12.17        USA PATRIOT Act Notification. Agent (for itself and not on behalf of any Lender) and each Lender hereby notifies Borrowers that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record certain information and documentation that identifies Borrowers, which information includes the name and address of Borrower and such other information that will allow Agent or such Lender, as applicable, to identify Borrowers in accordance with the USA PATRIOT Act.

 

Section 12.18        Cross Default and Cross Collateralization.

 

(ii)           Cross-Default. As stated under Section 10.1 hereof, an Event of Default under any of the Affiliated Financing Documents shall be an Event of Default under this Agreement. In addition, a Default or Event of Default under any of the Financing Documents shall be a Default under the Affiliated Financing Documents.

 

(jj)          Cross Collateralization. Borrowers acknowledge and agree that the Collateral securing this Loan, also secures the Affiliated Obligations.

 

(kk)         Consent. Each Borrower authorizes Agent, without giving notice to any Borrower or obtaining the consent of any Borrower and without affecting the liability of any Borrower for the Affiliated Obligations directly incurred by the Borrowers, from time to time to:

 

(i)              compromise, settle, renew, extend the time for payment, change the manner or terms of payment, discharge the performance of, decline to enforce, or release all or any of the Affiliated Obligations; grant other indulgences to any Borrowers in respect thereof; or modify in any manner any documents relating to the Affiliated Obligations;

 

(ii)             declare all Affiliated Obligations due and payable upon the occurrence and during the continuance of an Event of Default;

 

(iii)            take and hold security for the performance of the Affiliated Obligations of any Borrowers and exchange, enforce, waive and release any such security;

 

(iv)           apply and reapply such security and direct the order or manner of sale thereof as Agent, in its sole discretion, may determine;

 

 

(v)             release, surrender or exchange any deposits or other property securing the Affiliated Obligations or on which Agent at any time may have a Lien; release, substitute or add any one or more endorsers or guarantors of the Affiliated Obligations of any Borrowers; or compromise, settle, renew, extend the time for payment, discharge the performance of, decline to enforce, or release all or any obligations of any such endorser or guarantor or other Person who is now or may hereafter be liable on any Affiliated Obligations or release, surrender or exchange any deposits or other property of any such Person;

 

(vi)            apply payments received by Lender from Borrower to any Obligations or Affiliated Obligations, as permitted in accordance with the terms of this Agreement and in such order as Lender shall determine, in its sole discretion; and

 

(vii)           assign the Affiliated Financing Documents in whole or in part

 

Section 12.19        Existing Agreements Superseded; Exhibits and Schedules.

 

(a)         The Original Credit Agreement, including the schedules thereto, is superseded by this Agreement, including the schedules hereto, which has been executed in amendment, restatement and modification of, but not in novation or extinguishment of, the obligations under the Original Credit Agreement. It is the express intention of the parties hereto to reaffirm the indebtedness and other obligations created under the Original Credit Agreement. Any and all outstanding amounts under the Original Credit Agreement including, but not limited to principal, accrued interest, fees (except as otherwise provided herein) and other charges, as of the Closing Date shall be carried over and deemed outstanding under this Agreement.

 

(b)         Each Credit Party reaffirms its obligations under each Financing Document to which it is a party, including but not limited to the Security Documents and the schedules thereto.

 

(c)         Each Credit Party acknowledges and confirms that (i) the Liens and security interests granted pursuant to the Financing Documents secure the indebtedness, liabilities and obligations of the Borrowers and the other Credit Parties to Agent and the Lenders under the Original Credit Agreement, as amended and restated hereby, and that the term “Obligations” as used in the Financing Documents (or any other term used therein to describe or refer to the indebtedness, liabilities and obligations of the Borrowers to Agent and the Lenders) includes, without limitation, the indebtedness, liabilities and obligations of the Borrowers under this Agreement and the Notes to be delivered hereunder, if any, and under the Original Credit Agreement, as amended and restated hereby, as the same further may be amended, restated, supplemented and/or modified from time to time, and (ii) the grants of Liens under and pursuant to the Financing Documents shall continue unaltered, and each other Financing Document shall continue in full force and effect in accordance with its terms unless otherwise amended by the parties thereto, and the parties hereto hereby ratify and confirm the terms thereof as being in full force and effect and unaltered by this Agreement and all references in the any of the Financing Documents to the “Credit Agreement” shall be deemed to refer to this Amended and Restated Credit Agreement.

 

(d)         Nothing herein contained shall be construed as a substitution or novation of the obligations outstanding under the Original Credit Agreement or the other Financing Documents. Nothing in this Agreement shall be construed as a release or other discharge of any Borrower or any other Credit Party from its obligations and liabilities under the Original Credit Agreement or the other Financing Documents. On the Closing Date, any and all references in any Financing Documents to the Original Credit Agreement shall be deemed to be amended to refer to this Agreement.

 

[SIGNATURES APPEAR ON FOLLOWING PAGES]

 

 

IN WITNESS WHEREOF, intending to be legally bound, each of the parties have caused this Agreement to be executed day and year first above mentioned.

 

BORROWERS:	AZIYO BIOLOGICS, INC.
	By:	/s/ Jeffrey Hamet
	Name:	Jeffrey Hamet
	Title:	Treasurer
	AZIYO MED, LLC
	By:	/s/ Jeffrey Hamet
	Name:	Jeffrey Hamet
	Title:	Treasurer
	Address for Borrowers:
	c/o Aziyo Biologics, Inc.
	12510 Prosperity Drive, Suite 370
	Silver Spring, Maryland 20904
	Attn: [XXX]
	Facsimile:
	E-mail:	[XXX]
	with a copy to:
	Shipman & Goodwin LLP
	One Constitution Plaza
	Hartford, Connecticut 06103
	Attn: [XXX]
	Facsimile: 860-251-5311
	E-mail:	[XXX]

 

 

AGENT:	MIDCAP FINANCIAL TRUST
	By:	Apollo Capital Management, L.P.,
		its investment manager
	By:	Apollo Capital Management GP, LLC,
		its general partner

 

		By:	/s/ Maurice Amsellem
		Name:	Maurice Amsellem
		Title:	Authorized Signatory

 

	Address:
	c/o MidCap Financial Services, LLC, as servicer
	7255 Woodmont Avenue, Suite 200
	Bethesda, Maryland 20814
	Attn: Account Manager for Aziyo transaction
	Facsimile: 301-941-1450
	E-mail:	notices@midcapfinancial.com
	with a copy to:
	c/o MidCap Financial Services, LLC, as servicer
	7255 Woodmont Avenue, Suite 200
	Bethesda, Maryland 20814
	Attn: General Counsel
	Facsimile: 301-941-1450
	E-mail:	legalnotices@midcapfinancial.com
	Payment Account Designation:
	SunTrust Bank, N.A.
	ABA #: [XXX]
	Account Name: MidCap Financial Trust – Collections
	Account #: [XXX]
	Attention: Aziyo Facility

 

 

LENDER:	MIDCAP FINANCIAL TRUST
	By:	Apollo Capital Management, L.P.,
		its investment manager
	By:	Apollo Capital Management GP, LLC,
		its general partner

 

		By:	/s/ Maurice Amsellem
		Name:	Maurice Amsellem
		Title:	Authorized Signatory

 

	Address:
	c/o MidCap Financial Services, LLC, as servicer
	7255 Woodmont Avenue, Suite 200
	Bethesda, Maryland 20814
	Attn: Account Manager for Aziyo transaction
	Facsimile: 301-941-1450
	E-mail: notices@midcapfinancial.com
	with a copy to:
	c/o MidCap Financial Services, LLC, as servicer
	7255 Woodmont Avenue, Suite 200
	Bethesda, Maryland 20814
	Attn: General Counsel
	Facsimile: 301-941-1450
	E-mail: legalnotices@midcapfinancial.com

 

 

LENDER:	FLEXPOINT MCLS SPV LLC
		By:	/s/ Daniel Edelman
		Name:	Daniel Edelman
		Title:	Vice President

 

	Address:
	Flexpoint MCLS SPV, LLC
	c/o MidCap Financial Services, LLC, as servicer
	7255 Woodmont Avenue, Suite 200
	Bethesda, Maryland 20814
	Attn: Account Manager for Aziyo transaction
	Facsimile: 301-941-1450
	E-mail: notices@midcapfinancial.com
	with a copy to:
	Flexpoint MCLS SPV, LLC
	c/o MidCap Financial Services, LLC, as servicer
	7255 Woodmont Avenue, Suite 200
	Bethesda, Maryland 20814
	Attn: General Counsel
	Facsimile: 301-941-1450
	E-mail: legalnotices@midcapfinancial.com

 

 

ANNEXES, EXHIBITS AND SCHEDULES

 

ANNEXES
Annex A	Commitment Annex
EXHIBITS
Exhibit A	[Reserved]
Exhibit B	Form of Compliance Certificate
Exhibit C	[Reserved]
Exhibit D	Form of Notice of Borrowing
Exhibit F-1	Form of U.S. Tax Compliance Certificate
Exhibit F-2	Form of U.S. Tax Compliance Certificate
Exhibit F-3	Form of U.S. Tax Compliance Certificate
Exhibit F-4	Form of U.S. Tax Compliance Certificate
SCHEDULES
Schedule 2.1	Scheduled Principal Payments for Term Loan
Schedule 3.1	Existence, Organizational ID Numbers, Foreign Qualification, Prior Names
Schedule 3.4	Capitalization
Schedule 3.6	Litigation
Schedule 3.17	Material Contracts
Schedule 3.18	Environmental Compliance
Schedule 3.19	Intellectual Property
Schedule 4.9	Litigation, Governmental Proceedings and Other Notice Events
Schedule 4.17	Products and Permits
Schedule 5.1	Debt; Contingent Obligations
Schedule 5.2	Liens
Schedule 5.7	Permitted Investments
Schedule 5.8	Affiliate Transactions
Schedule 5.14	Deposit Accounts and Securities Accounts
Schedule 6.1	Minimum Net Product Revenue
Schedule 7.4	Post-Closing Obligations
Schedule 9.1	Collateral
Schedule 9.2(b)	Location of Collateral
Schedule 9.2(d)	Chattel Paper, Letter of Credit Rights, Commercial Tort Claims, Instruments, Documents, Investment Property

 

 

 

Annex A to Credit Agreement (Commitment Annex)

 

Lender		Term Loan Tranche 1 Commitment Amount				Term Loan Tranche 1 Commitment Percentage				Term Loan Tranche 2 Commitment Amount				Term Loan Tranche 2 Commitment Percentage				Term Loan Tranche 3 Commitment Amount				Term Loan Tranche 3 Commitment Percentage				Term Loan Tranche 4 Commitment Amount				Term Loan Tranche 4 Commitment Percentage				Term Loan Tranche 5 Commitment Amount				Term Loan Tranche 5 Commitment Percentage
MidCap Financial Trust		$	0				0	%		$	0				0	%		$	0				0	%		$	3,252,083.33				92.92	%		$	4,645,833.33				92.92	%
Elm 2018-2 Trust		$	3,497,916.67				41.15	%		$	0				0	%		$	2,787,500				92.92	%		$	0				0	%		$	0				0	%
Flexpoint MCLS SPV LLC		$	602,083.33				7.08	%		$	354,166.67				7.08	%		$	212,500				7.08	%		$	247,916.67				7.08	%		$	354,166.67				7.08	%
Elm 2016-1 Trust		$	4,400,000				51.76	%		$	4,645,833.33				92.92	%		$	0				0	%		$	0				0	%		$	0				0	%
TOTALS		$	8,500,000.00				100	%		$	5,000,000				100	%		$	3,000,000				100	%		$	3,500,000.00				100	%		$	5,000,000				100	%

 

 

Exhibit A to Credit Agreement (Reserved)

 

 

Exhibit B to Credit Agreement (Form of Compliance Certificate)

 

COMPLIANCE CERTIFICATE

 

This Compliance Certificate is given by _____________________, a Responsible Officer of Aziyo Biologics, Inc. (the “Borrower Representative”), pursuant to that certain Amended and Restated Credit and Security Agreement (Term Loan) dated as of July 15, 2019 among the Borrower Representative and any additional Borrower that may hereafter be added thereto (collectively, “Borrowers”), MidCap Financial Trust, individually as a Lender and as Agent, and the financial institutions or other entities from time to time parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.

 

The undersigned Responsible Officer hereby certifies to Agent and Lenders that:

 

(a)       the financial statements delivered with this certificate in accordance with Section 4.1 of the Credit Agreement fairly present in all material respects the results of operations and financial condition of Borrowers and their Consolidated Subsidiaries as of the dates and the accounting period covered by such financial statements;

 

(b)       the representations and warranties of each Credit Party contained in the Financing Documents are true, correct and complete in all material respects on and as of the date hereof, except to the extent that any such representation or warranty relates to a specific date in which case such representation or warranty shall be true and correct in all material respects as of such earlier date; provided, however, in each case, such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof;

 

(c)       I have reviewed the terms of the Credit Agreement and have made, or caused to be made under my supervision, a review in reasonable detail of the transactions and conditions of Borrowers and their Consolidated Subsidiaries during the accounting period covered by such financial statements, and such review has not disclosed the existence during or at the end of such accounting period, and I have no knowledge of the existence as of the date hereof, of any condition or event that constitutes a Default or an Event of Default, except as set forth in Schedule 1 hereto, which includes a description of the nature and period of existence of such Default or an Event of Default and what action Borrowers have taken, are undertaking and propose to take with respect thereto;

 

(d)       except as noted on Schedule 2 attached hereto, Schedule 9.2(b) to the Credit Agreement contains a complete and accurate list of all business locations of Borrowers and Guarantors and all names under which Borrowers and Guarantors currently conduct business; Schedule 2 specifically notes any changes in the names under which any Borrower or Guarantors conduct business;

 

(e)       except as noted on Schedule 3 attached hereto, the undersigned has no knowledge of (i) any federal or state tax liens having been filed against any Borrower, Guarantor or any Collateral, or (ii) any failure of any Borrower or any Guarantors to make required payments of withholding or other tax obligations of any Borrower or any Guarantors during the accounting period to which the attached statements pertain or any subsequent period;

 

(f)       Schedule 5.14 to the Credit Agreement contains a complete and accurate statement of all deposit accounts or investment accounts maintained by Borrowers and Guarantors;

 

 

(g)       except as noted on Schedule 4 attached hereto and Schedule 3.6 to the Credit Agreement, the undersigned has no knowledge of any current, pending or threatened: (i) litigation against the Borrowers or any Guarantors, (ii) inquiries, investigations or proceedings concerning the business affairs, practices, licensing or reimbursement entitlements of Borrowers or any Guarantors, or (iii) default by Borrowers or any Guarantors under any Material Contract to which it is a party;

 

(h)       except as noted on Schedule 5 attached hereto, no Borrower or Guarantor has acquired, by purchase, by the approval or granting of any application for registration (whether or not such application was previously disclosed to Agent by Borrowers) or otherwise, any Intellectual Property that is registered with any United States or foreign Governmental Authority, or has filed with any such United States or foreign Governmental Authority, any new application for the registration of any Intellectual Property, or acquired rights under a license as a licensee with respect to any such registered Intellectual Property (or any such application for the registration of Intellectual Property) owned by another Person, that has not previously been reported to Agent on Schedule 3.17 to the Credit Agreement or any Schedule 5 to any previous Compliance Certificate delivered by Borrower to Agent;

 

(i)       except as noted on Schedule 6 attached hereto, no Borrower or Guarantor has acquired, by purchase or otherwise, any Chattel Paper, Letter of Credit Rights, Instruments, Documents or Investment Property that has not previously been reported to Agent on any Schedule 6 to any previous Compliance Certificate delivered by Borrower Representative to Agent;

 

(j)       except as noted on Schedule 7 attached hereto, no Borrower or Guarantor is aware of any commercial tort claim that has not previously been reported to Agent on any Schedule 7 to any previous Compliance Certificate delivered by Borrower Representative to Agent;

 

(k)       Borrowers and Guarantor are in compliance with the covenants contained in Article 6 of the Credit Agreement, and in any Guarantee constituting a part of the Financing Documents, as demonstrated by the calculation of such covenants below, except as set forth below; in determining such compliance, the following calculations have been made: [See attached worksheets]. Such calculations and the certifications contained therein are true, correct and complete;

 

(l)       [Fixed Charge Coverage Ratio for the Defined Period ending [_______] is [___]:[___]]¹;

 

(m)       [Liquidity as of the date hereof is $[_________]]².

 

The foregoing certifications and computations are made as of ________________, 20__ (end of month) and as of _____________, 20__.

 

¹ Solely to the extent required for Aziyo to make a payment to DNW or HighCape.

 

² Solely to the extent required for Aziyo to make a payment to DNW or HighCape.

 

 

	Sincerely,
	AZIYO BIOLOGICS, INC.
	By:

Name:

Title:

 

 

Exhibit C

 

[Reserved]

 

 

Exhibit D to Credit Agreement (Form of Notice of Borrowing)

 

 

NOTICE OF BORROWING

 

This Notice of Borrowing is given by _____________________, a Responsible Officer of Aziyo Biologics, Inc. (the “Borrower Representative”), pursuant to that certain Amended and Restated Credit and Security Agreement (Term Loan) dated as of July 15, 2019 among the Borrower Representative, and any additional Borrower that may hereafter be added thereto (collectively, “Borrowers”), MidCap Financial Trust, individually as a Lender and as Agent, and the financial institutions or other entities from time to time parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.

 

The undersigned Responsible Officer hereby gives notice to Agent of Borrower Representative’s request to borrow $____________________ of Term Loans on _______________, 20__.

 

The undersigned officer hereby certifies that, both before and after giving effect to the request above (a) each of the conditions precedent set forth in Section 7.2 have been satisfied, (b) all of the representations and warranties contained in the Credit Agreement and the other Financing Documents are true, correct and complete in all material respects as of the date hereof, except to the extent such representation or warranty relates to a specific date, in which case such representation or warranty is true, correct and complete in all material respects as of such earlier date; provided, however, in each case, such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof, and (c) no Default or Event of Default has occurred and is continuing on the date hereof.

 

IN WITNESS WHEREOF, the undersigned officer has executed and delivered this Notice of Borrowing this ____ day of ___________, 20__.

 

	Sincerely,
	AZIYO BIOLOGICS, INC.
	By:

Name:

Title:

 

 

Exhibit F-1 to Credit Agreement (Form of U.S. Tax Compliance Certificate)

 

U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)

 

This U.S. Tax Compliance Certificate is given by _____________________, a Responsible Officer of ________________ (the “Borrower Representative”), pursuant to that certain Amended and Restated Credit and Security Agreement (Term Loan) dated as of ____________, 20__ among the Borrower Representative, ____________________ and any additional Borrower that may hereafter be added thereto (collectively, “Borrowers”), MidCap Financial Trust, individually as a Lender and as Agent, and the financial institutions or other entities from time to time parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.

 

Pursuant to the provisions of Section 2.8(c) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of any Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to any Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished the Agent and the Borrower Representative with a certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower Representative and the Agent, and (2) the undersigned shall have at all times furnished the Borrower Representative and the Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

 

[NAME OF LENDER]
By:
	Name:
	Title:

 

Date: ________ __, 20[ ]

 

 

Exhibit F-2 to Credit Agreement (Form of U.S. Tax Compliance Certificate)

 

U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

 

This U.S. Tax Compliance Certificate is given by _____________________, a Responsible Officer of ________________ (the “Borrower Representative”), pursuant to that certain Amended and Restated Credit and Security Agreement (Term Loan) dated as of ____________, 20__ among the Borrower Representative, ____________________ and any additional Borrower that may hereafter be added thereto (collectively, “Borrowers”), MidCap Financial Trust, individually as a Lender and as Agent, and the financial institutions or other entities from time to time parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.

 

Pursuant to the provisions of Section 2.8(c) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of any Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to any Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

 

[NAME OF PARTICIPANT]
By:
	Name:
	Title:

 

Date: ________ __, 20[ ]

 

 

Exhibit F-3 to Credit Agreement (Form of U.S. Tax Compliance Certificate)

 

U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

 

This U.S. Tax Compliance Certificate is given by _____________________, a Responsible Officer of ________________ (the “Borrower Representative”), pursuant to that certain Amended and Restated Credit and Security Agreement (Term Loan) dated as of ____________, 20__ among the Borrower Representative, ____________________ and any additional Borrower that may hereafter be added thereto (collectively, “Borrowers”), MidCap Financial Trust, individually as a Lender and as Agent, and the financial institutions or other entities from time to time parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.

 

Pursuant to the provisions of Section 2.8(c) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of any Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to any Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

 

[NAME OF PARTICIPANT]
By:
	Name:
	Title:

 

Date: ________ __, 20[ ]

 

 

Exhibit F-4 to Credit Agreement (Form of U.S. Tax Compliance Certificate)

 

U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

 

This U.S. Tax Compliance Certificate is given by _____________________, a Responsible Officer of ________________ (the “Borrower Representative”), pursuant to that certain Amended and Restated Credit and Security Agreement (Term Loan) dated as of ____________, 20__ among the Borrower Representative, ____________________ and any additional Borrower that may hereafter be added thereto (collectively, “Borrowers”), MidCap Financial Trust, individually as a Lender and as Agent, and the financial institutions or other entities from time to time parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.

 

Pursuant to the provisions of Section 2.8(c) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit Agreement or any other Financing Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of any Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to any Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished the Agent and the Borrower Representative with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower Representative and the Agent, and (2) the undersigned shall have at all times furnished the Borrower Representative and the Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

 

[NAME OF LENDER]
By:
	Name:
	Title:

 

Date: ________ __, 20[ ]

 

 

Schedule 2.1 – Amortization

 

Commencing on February 1, 2021 (the “Initial Amortization Start Date”) and continuing on the first day of each calendar month thereafter, Borrower shall pay to Agent as a principal payment on the Term Loan(s) an amount equal to the total principal amount of the Term Loan(s) made to Borrower divided by forty-two (42), for a forty-two (42) month straight-line amortization of equal monthly principal payments; provided, however, Borrower Representative may, on any Business Day during the period beginning on December 1, 2020 and ending on the date that is fifteen (15) days prior to the Initial Amortization Start Date, request in writing that Agent and the Lenders extend the Initial Amortization Start Date (an “IO Extension Request”) by six (6) months, and if the IO Extension Conditions (as defined below) are satisfied to Agent’s and each Lender’s reasonable satisfaction, then the Initial Amortization Start Date shall be extended to August 1, 2021 and the principal payments to be made in respect of the Term Loan(s) shall be in an amount equal to the total principal amount of the Term Loan(s) made to Borrower divided by thirty-six (36), for a thirty-six (36) month straight-line amortization of equal monthly principal payments.

 

For purposes hereof, the “IO Extension Conditions” means the satisfaction of each of the following conditions: (i) the Agent has received evidence satisfactory to it that the Borrower Representative has consummated a Qualified IPO, and (ii) as of the date of the IO Extension Request and the Initial Amortization Start Date (without giving effect to any extension thereof), no Default or Event of Default has occurred and is continuing.

 

Notwithstanding anything to the contrary contained in the foregoing, the entire remaining outstanding principal balance under the Term Loans shall mature and be due and payable upon the Termination Date.

 

 

Schedule 3.1 – Existence, Organizational ID Numbers, Foreign Qualification, Prior Names

 

 

Schedule 3.4 – Capitalization

 

 

Schedule 3.6 – Litigation

 

 

Schedule 3.17 – Material Contracts

 

 

Schedule 3.18 – Environmental Compliance

 

 

Schedule 3.19 – Intellectual Property

 

Patents

 

US Patents - Aziyo Med, LLC

 

 

Schedule 4.9 – Litigation, Governmental Proceedings and Other Notice Events

 

 

Schedule 5.1 – Debt; Contingent Obligations

 

 

Schedule 5.2 – Liens

 

 

Schedule 5.7 – Permitted Investments

 

 

Schedule 5.8 – Affiliate Transactions

 

 

Schedule 5.14 – Deposit Accounts and Securities Accounts

 

 

Schedule 6.1– Minimum Net Product Revenue

 

Defined Period Ending	Minimum Net Product Revenue Amount
June 30, 2019	$25,300,000
July 31, 2019	$25,400,000
August 31, 2019	$25,500,000
September 30, 2019	$26,100,000
October 31, 2019	$26,200,000
November 30, 2019	$26,400,000
December 31, 2019	$28,500,000
January 31, 2020	$28,800,000
February 29, 2020	$29,000,000
March 31, 2020	$29,200,000
April 30, 2020	$29,500,000
May 31, 2020	$30,200,000
June 30, 2020	$30,700,000
July 31, 2020	$31,200,000
August 31, 2020	$31,900,000
September 30, 2020	$32,500,000
October 31, 2020	$33,800,000
November 30, 2020	$34,500,000
December 31, 2020	$35,000,000
January 31, 2021	$35,500,000
February 28, 2021	$35,700,000
March 31, 2021	$36,000,000
April 30, 2021	$36,500,000
May 31, 2021	$37,100,000
June 30, 2021	$37,600,000
July 31, 2021	$37,900,000
August 31, 2021	$38,200,000
September 30, 2021	$38,500,000
October 31, 2021	$38,600,000
November 30, 2021	$38,800,000
December 31, 2021	$40,000,000
January 31, 2022	$40,400,000
February 28, 2022	$40,800,000
March 31, 2022	$41,200,000
April 30, 2022	$41,600,000
May 31, 2022	$42,000,000
June 30, 2022	$42,400,000
July 31, 2022	$42,800,000
August 31, 2022	$43,200,000
September 30, 2022	$43,600,000
October 31, 2022	$44,000,000
November 30, 2022	$44,400,000
December 31, 2022	$44,800,000
January 31, 2023	$45,000,000
February 28, 2023	$45,200,000
March 31, 2023	$45,400,000
April 30, 2023	$45,600,000
May 31, 2023	$45,800,000
June 30, 2023	$46,000,000
July 31, 2023	$46,200,000
August 31, 2023	$46,400,000
September 30, 2023	$46,600,000
October 31, 2023	$46,800,000
November 30, 2023	$47,000,000
December 31, 2023	$47,200,000
January 31, 2024	$47,400,000
February 29, 2024	$47,600,000
March 31, 2024	$47,800,000
April 30, 2024	$48,000,000
May 31, 2024	$48,200,000
June 30, 2024	$48,200,000

 

 

Schedule 7.4 – Post-Closing Requirements

 

Borrowers shall satisfy and complete each of the following obligations, or provide Agent each of the items listed below, as applicable, on or before the date indicated below, all to the satisfaction of Agent in its sole and absolute discretion:

 

None.

 

Borrower’s failure to complete and satisfy any of the above obligations on or before the date indicated above, or Borrower’s failure to deliver any of the above listed items on or before the date indicated above, shall constitute an immediate an automatic Event of Default.

 

 

Schedule 9.1 – Collateral

 

The Collateral consists of all of each Borrower’s assets, including without limitation, all of each Borrower’s right, title and interest in and to the following, whether now owned or hereafter created, acquired or arising:

 

(a)

all goods, Accounts (including health-care insurance receivables), equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles, commercial tort claims (including each such claim listed on Schedule 9.2(d)), documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, securities accounts, fixtures, letter of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located;

 

(b)

all of Borrowers’ books and records relating to any of the foregoing; and

 

(c)

any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.

 

 

Schedule 9.2(b) – Collateral Information

 

Aziyo Biologics, Inc.

 

12510 Prosperity Drive, Suite 370, Silver Spring, MD 20904 (principal place of business)

 

880 Harbour Way South, Suite 100, Richmond, CA 94804

 

Certain collateral is located at various hospital locations in accordance with consignment or other agreements entered in the ordinary course of business

 

Aziyo Med, LLC

 

12510 Prosperity Drive, Suite 370, Silver Spring, MD 20904 (principal place of business)

 

1100 Old Ellis Rd, Suite 1200, Roswell, GA 30076

 

Certain collateral is located at various hospital locations in accordance with consignment or other agreements entered in the ordinary course of business

 

 

Schedule 9.2(d) – Chattel Paper, Letter of Credit Rights, Commercial Tort Claims, Instruments, Documents, Investment Property

 

None.

 

 

 

Exhibit 10.11

 

Execution Version

 

 

AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT (REVOLVING LOAN)

 

dated as of July 15, 2019

 

by and among

 

AZIYO BIOLOGICS, INC.,

 

AZIYO MED, LLC

 

and any additional borrower that hereafter becomes party hereto, each as Borrower, and collectively as Borrowers,

 

and

 

MIDCAP FUNDING IV TRUST,

 

as Agent and as a Lender,

 

and

 

THE ADDITIONAL LENDERS

 

FROM TIME TO TIME PARTY HERETO

 

 

 

 

 

Table of Contents

 

Page

 

Article 1 - DEFINITIONS

1

 

Section 1.1	Certain Defined Terms	1
Section 1.2	Accounting Terms and Determinations	30
Section 1.3	Other Definitional and Interpretive Provisions	31
Section 1.4	Time is of the Essence	31
Article 2 - LOANS		31
Section 2.1	Loans.	31
Section 2.2	Interest, Interest Calculations and Certain Fees	33
Section 2.3	Notes	35
Section 2.4	Reserved.	36
Section 2.5	Reserved.	36
Section 2.6	General Provisions Regarding Payment; Loan Account.	36
Section 2.7	Maximum Interest	36
Section 2.8	Taxes; Capital Adequacy; Mitigation Obligations.	37
Section 2.9	Appointment of Borrower Representative.	41
Section 2.10	Joint and Several Liability; Rights of Contribution; Subordination and Subrogation.	41
Section 2.11	Collections and Lockbox Account	43
Section 2.12	Termination; Restriction on Termination.	45
Article 3 - REPRESENTATIONS AND WARRANTIES		46
Section 3.1	Existence and Power	46
Section 3.2	Organization and Governmental Authorization; No Contravention	46
Section 3.3	Binding Effect	46
Section 3.4	Capitalization	47
Section 3.5	Financial Information	47
Section 3.6	Litigation	47
Section 3.7	Ownership of Property	47
Section 3.8	No Default	47
Section 3.9	Labor Matters	47
Section 3.10	Regulated Entities	48
Section 3.11	Margin Regulations	48
Section 3.12	Compliance With Laws; Anti-Terrorism Laws.	48
Section 3.13	Taxes	48
Section 3.14	Compliance with ERISA.	48
Section 3.15	Consummation of Operative Documents; Brokers	49
Section 3.16	[Reserved]	49
Section 3.17	Material Contracts	49
Section 3.18	Compliance with Environmental Requirements; No Hazardous Materials	49
Section 3.19	Intellectual Property and License Agreements	50
Section 3.20	Solvency	50
Section 3.21	Full Disclosure	50
Section 3.22	Reserved	50
Section 3.23	Subsidiaries	50

 

 

Section 3.24	Reserved	51
Section 3.25	Regulatory Matters.	51
Section 3.26	Accuracy of Schedules	52
Article 4 - AFFIRMATIVE COVENANTS		52
Section 4.1	Financial Statements and Other Reports	52
Section 4.2	Payment and Performance of Obligations	53
Section 4.3	Maintenance of Existence	54
Section 4.4	Maintenance of Property; Insurance.	54
Section 4.5	Compliance with Laws and Material Contracts	55
Section 4.6	Inspection of Property, Books and Records	55
Section 4.7	Use of Proceeds	55
Section 4.8	Estoppel Certificates	56
Section 4.9	Notices of Material Contracts, Litigation and Defaults.	56
Section 4.10	Hazardous Materials; Remediation.	57
Section 4.11	Further Assurances.	57
Section 4.12	Reserved	58
Section 4.13	Power of Attorney	58
Section 4.14	Borrowing Base Collateral Administration	59
Section 4.15	Schedule Updates	59
Section 4.16	Intellectual Property and Licensing.	59
Section 4.17	Regulatory Covenants.	60
Section 4.18	Aziyo Med. Since the date of its formation and at all times on and after the date thereof, Aziyo Med has complied with and shall at all times after the date hereof comply with the following requirements:	61
Article 5 - NEGATIVE COVENANTS		62
Section 5.1	Debt; Contingent Obligations	62
Section 5.2	Liens	63
Section 5.3	Distributions	63
Section 5.4	Restrictive Agreements	63
Section 5.5	Payments and Modifications of Subordinated Debt	63
Section 5.6	Consolidations, Mergers and Sales of Assets; Change in Control	64
Section 5.7	Purchase of Assets, Investments	64
Section 5.8	Transactions with Affiliates	65
Section 5.9	Modification of Organizational Documents	65
Section 5.10	Modification of Certain Agreements	65
Section 5.11	Conduct of Business	65
Section 5.12	Lease Payments	65
Section 5.13	Limitation on Sale and Leaseback Transactions	65
Section 5.14	Deposit Accounts and Securities Accounts; Payroll and Benefits Accounts	65
Section 5.15	Compliance with Anti-Terrorism Laws	66
Section 5.16	Change in Accounting	66

 

 

Section 5.17	Agreements Regarding Receivables	66
Section 5.18	Management Fees	67
Article 6 - FINANCIAL COVENANTS		67
Section 6.1	Minimum Net Product Revenue	67
Section 6.2	Evidence of Compliance	67
Article 7 - CONDITIONS		67
Section 7.1	Conditions to Closing	67
Section 7.2	Conditions to Each Loan	68
Section 7.3	Searches	68
Section 7.4	Post-Closing Requirements	69
Article 8 – Reserved		69
Article 9 - SECURITY AGREEMENT		69
Section 9.1	Generally	69
Section 9.2	Representations and Warranties and Covenants Relating to Collateral.	69
Article 10 - EVENTS OF DEFAULT		73
Section 10.1	Events of Default	73

 

 

Section 10.2	Acceleration and Suspension or Termination of Revolving Loan Commitment	75
Section 10.3	UCC Remedies.	76
Section 10.4	Reserved.	77
Section 10.5	Default Rate of Interest	77
Section 10.6	Setoff Rights	77
Section 10.7	Application of Proceeds.	78
Section 10.8	Waivers.	78
Section 10.9	Injunctive Relief	80
Section 10.10	Marshalling; Payments Set Aside	80
Section 10.11	Transfer of Licenses	80
Article 11 - AGENT		80
Section 11.1	Appointment and Authorization	80
Section 11.2	Agent and Affiliates	81
Section 11.3	Action by Agent	81
Section 11.4	Consultation with Experts	81
Section 11.5	Liability of Agent	81
Section 11.6	Indemnification	81
Section 11.7	Right to Request and Act on Instructions	82
Section 11.8	Credit Decision	82
Section 11.9	Collateral Matters	82
Section 11.10	Agency for Perfection	82
Section 11.11	Notice of Default	83
Section 11.12	Assignment by Agent; Resignation of Agent; Successor Agent.	83
Section 11.13	Payment and Sharing of Payment.	84
Section 11.14	Right to Perform, Preserve and Protect	86
Section 11.15	Additional Titled Agents	86
Section 11.16	Amendments and Waivers.	86
Section 11.17	Assignments and Participations.	87
Section 11.18	Funding and Settlement Provisions Applicable When Non-Funding Lenders Exist	90
Article 12 - MISCELLANEOUS		91
Section 12.1	Survival	91
Section 12.2	No Waivers	91
Section 12.3	Notices.	91
Section 12.4	Severability	92
Section 12.5	Headings	92
Section 12.6	Confidentiality.	92
Section 12.7	Waiver of Consequential and Other Damages	92
Section 12.8	GOVERNING LAW; SUBMISSION TO JURISDICTION.	93
Section 12.9	WAIVER OF JURY TRIAL	93
Section 12.10	Publication; Advertisement.	94
Section 12.11	Counterparts; Integration	94

 

 

Section 12.12	No Strict Construction	94
Section 12.13	Lender Approvals	94
Section 12.14	Expenses; Indemnity	95
Section 12.15	Reinstatement	96
Section 12.16	Successors and Assigns	96
Section 12.17	USA PATRIOT Act Notification	96
Section 12.18	Cross Default and Cross Collateralization.	97

 

 

 

AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT (revolving Loan)

 

This AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT (REVOLVING LOAN) (as the same may be amended, supplemented, restated or otherwise modified from time to time, the “Agreement”) is dated as of July 15, 2019 by and among AZIYO BIOLOGICS, INC., a Delaware corporation (“Aziyo”), AZIYO MED, LLC, a Delaware limited liability company (“Aziyo Med”) and any additional borrower that may hereafter be added to this Agreement (individually as a “Borrower”, and collectively with any entities that become party hereto as Borrower and each of their successors and permitted assigns, the “Borrowers”), MIDCAP FUNDING IV TRUST, a Delaware statutory trust, individually as a Lender, and as Agent, and the financial institutions or other entities from time to time parties hereto, each as a Lender.

 

RECITALS

 

WHEREAS, Agent, Lenders and Borrowers have entered into that certain Credit and Security Agreement (Revolving Loan), dated as of May 31, 2017 (as amended by that certain Amendment No. 1 and Limited Waiver to Credit and Security Agreement (Term Loan), dated as of December 14, 2017 and as further amended, modified, supplemented and restated prior to the date hereof, the “Original Credit Agreement” and as the same is amended hereby and as it may be further amended, modified, supplemented and restated from time to time, the “Credit Agreement”), pursuant to which the Lenders have agreed to make certain advances of money and to extend certain financial accommodations to Borrowers in the amounts and manner set forth in the Credit Agreement;

 

WHEREAS, in connection with the continued working capital and other needs of the Borrowers, Borrowers have requested, among other things, that Agent and Lenders amend certain economic terms, covenants and other provisions of the Original Credit Agreement; and

 

WHEREAS, Agent and Lenders have agreed to the requests of Borrowers on the terms and conditions set forth herein and in the other Financing Documents.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the receipt and sufficiency of which are hereby acknowledged, Borrowers, Lenders and Agent agree to amend and restate the Original Credit Agreement as follows:

 

Article 1 - DEFINITIONS

 

Section 1.1     Certain Defined Terms. The following terms have the following meanings:

 

“Acceleration Event” means the occurrence of an Event of Default (a) in respect of which Agent has declared all or any portion of the Obligations to be immediately due and payable pursuant to Section 10.2, (b) pursuant to Section 10.1(a), and in respect of which Agent has suspended or terminated the Revolving Loan Commitment pursuant to Section 10.2, and/or (c) pursuant to either Section 10.1(e) and/or Section 10.1(f).

 

“Account Debtor” means “account debtor”, as defined in Article 9 of the UCC, and any other obligor in respect of an Account.

 

“Accounts” means, collectively, (a) any right to payment of a monetary obligation, whether or not earned by performance, (b) without duplication, any “account” (as defined in the UCC), any accounts receivable (whether in the form of payments for services rendered or goods sold, rents, license fees or otherwise), any “health-care-insurance receivables” (as defined in the UCC), any “payment intangibles” (as defined in the UCC) and all other rights to payment and/or reimbursement of every kind and description, whether or not earned by performance, (c) all accounts, “general intangibles” (as defined in the UCC), Intellectual Property, rights, remedies, Guarantees, “supporting obligations” (as defined in the UCC), “letter-of-credit rights” (as defined in the UCC) and security interests in respect of the foregoing, all rights of enforcement and collection, all books and records evidencing or related to the foregoing, and all rights under the Financing Documents in respect of the foregoing, (d) all information and data compiled or derived by any Borrower or to which any Borrower is entitled in respect of or related to the foregoing, and (e) all proceeds of any of the foregoing.

 

 

“Additional Titled Agents” has the meaning set forth in Section 11.15.

 

“Additional Tranche” means an additional amount of Revolving Loan Commitment equal to $2,000,000.

 

“Affiliate” means, with respect to any Person, (a) any Person that directly or indirectly controls such Person, (b) any Person which is controlled by or is under common control with such controlling Person, and (c) each of such Person’s (other than, with respect to any Lender, any Lender’s) officers or directors (or Persons functioning in substantially similar roles) and the spouses, parents, descendants and siblings of such officers, directors or other Persons. As used in this definition, the term “control” of a Person means the possession, directly or indirectly, of the power to vote five percent (5%) or more of any class of voting securities of such Person or to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Affiliated Credit Agreement” means that certain Amended and Restated Credit and Security Agreement (Term Loan) (as the same may be amended, restated, supplemented or otherwise modified from time to time), among MCF, as Agent and a lender, the other lenders party thereto and Borrowers pursuant to which such Agent and lenders have extended a term credit facility to Borrowers.

 

“Affiliated Financing Agent” means the “Agent” under and as defined in the Affiliated Credit Agreement.

 

“Affiliated Financing Documents” means the “Financing Documents” as defined in the Affiliated Credit Agreement.

 

“Affiliated Intercreditor Agreement” means that certain Intercreditor Agreement dated as of the Original Closing Date between Agent and the Affiliated Financing Agent, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Affiliated Obligations” means all “Obligations”, as such term is defined in the Affiliated Financing Documents.

 

“Agent” means MidCap Funding IV Trust, in its capacity as administrative agent for itself and for Lenders hereunder, as such capacity is established in, and subject to the provisions of, Article 11, and the successors and assigns of MidCap Funding IV Trust in such capacity.

 

“Anti-Terrorism Laws” means any Laws relating to terrorism or money laundering, including, without limitation, Executive Order No. 13224 (effective September 24, 2001), the USA PATRIOT Act, the Laws comprising or implementing the Bank Secrecy Act, and the Laws administered by OFAC.

 

 

“Applicable Margin” means four and ninety five one hundredths percent (4.95%).

 

“Approved Fund” means any (a) investment company, fund, trust, securitization vehicle or conduit that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the Ordinary Course of Business, or (b) any Person (other than a natural person) which temporarily warehouses loans for any Lender or any entity described in the preceding clause (a) and that, with respect to each of the preceding clauses (a) and (b), is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender, or (iii) a Person (other than a natural person) or an Affiliate of a Person (other than a natural person) that administers or manages a Lender.

 

“Asset Disposition” means any sale, lease, license, transfer, assignment or other consensual disposition by any Credit Party or any Subsidiary thereof of any asset.

 

“Assignment Agreement” means an assignment agreement in form and substance acceptable to Agent.

 

“Aziyo” has the meaning set forth in the introductory paragraph hereto.

 

“Aziyo Med” has the meaning set forth in the introductory paragraph hereto.

 

“Aziyo Med Operating Account” means the Deposit Account maintained by Aziyo Med at Silicon Valley Bank with account number [XXX] in accordance with the terms of Section 4.18.

 

“Aziyo Med Controlled Account” has the meaning set forth in Section 2.11(b).

 

“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as the same may be amended, modified or supplemented from time to time, and any successor statute thereto.

 

“Base LIBOR Rate” means, for each Interest Period, the rate per annum, determined by Agent in accordance with its customary procedures, and utilizing such electronic or other quotation sources as it considers appropriate (rounded upwards, if necessary, to the next 1/100%), to be the rate at which Dollar deposits (for delivery on the first day of such Interest Period or, if such day is not a Business Day on the preceding Business Day) in the amount of $1,000,000 are offered to major banks in the London interbank market on or about 11:00 a.m. (London, England time) two (2) Business Days prior to the commencement of such Interest Period, for a term comparable to such Interest Period, which determination shall be conclusive in the absence of manifest error; provided, however, that Agent may, upon prior written notice to Borrower Representative, choose a reasonably comparable index or source to use as the basis for Base LIBOR Rate.

 

“Base Rate” means a per annum rate of interest equal to the greater of (a) two and one-quarter percent (2.25%) per annum and (b) the rate of interest announced, from time to time, within Wells Fargo Bank, National Association (“Wells Fargo”) at its principal office in San Francisco as its “prime rate,” with the understanding that the “prime rate” is one of Wells Fargo’s base rates (not necessarily the lowest of such rates) and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto and is evidenced by the recording thereof after its announcement in such internal publications as Wells Fargo may designate; provided, however, that Agent may, upon prior written notice to Borrower, choose a reasonably comparable index or source to use as the basis for the Base Rate.

 

“Blocked Person” means any Person: (a) listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (b) owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (c) with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (d) that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224, or (e) that is named a “specially designated national” or “blocked person” on the most current list published by OFAC or other similar list or is named as a “listed person” or “listed entity” on other lists made under any Anti-Terrorism Law.

 

 

“Borrower” and “Borrowers” has the meaning set forth in the introductory paragraph hereto. If there is more than one Person that constitutes a Borrower, then the term “Borrower” shall mean, on a joint and several basis, the singular and the collective reference to any or all entities constituting or comprising Borrower, as the context may require.

 

“Borrower Representative” means Aziyo, in its capacity as Borrower Representative pursuant to the provisions of Section 2.9, or any successor Borrower Representative selected by Borrowers and approved by Agent.

 

“Borrowing Base” means:

 

(a)            the product of (i) eighty-five percent (85%) multiplied by (ii) the aggregate net amount at such time of the Eligible Accounts; plus

 

(b)            the product of (i) fifty percent (50%) multiplied by (ii) the value of the Eligible Inventory, valued at the lower of first-in-first-out cost or market cost, and after factoring in all rebates, discounts and other incentives or rewards associated with the purchase of the applicable Inventory; provided that the Borrowing Base will be automatically adjusted down, if necessary, such that the aggregate availability from Eligible Inventory shall never exceed the lesser of (x) an amount equal to forty percent (40%) of the Borrowing Base and (y) $2,000,000; minus

 

(c)            the amount of any reserves and/or adjustments provided for in this Agreement.

 

“Borrowing Base Certificate” means a certificate, duly executed by a Responsible Officer of Borrower Representative, appropriately completed and in the form attached to this Agreement as Exhibit C.

 

“Business Day” means any day except a Saturday, Sunday or other day on which either the New York Stock Exchange is closed, or on which commercial banks in New York City are authorized by Law to close and, in the case of a Business Day which relates to a Loan bearing interest at a rate based on the LIBOR Rate, a day on which dealings are carried on in the London interbank eurodollar market.

 

“Capital Expenditures” means all liabilities incurred or expenditures made by Borrower or any of its Subsidiaries for the acquisition of fixed assets, or any improvements, substitutions or additions thereto with a useful life of more than one year.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.A. § 9601 et seq., as the same may be amended from time to time.

 

“Change in Control” means any event, transaction, or occurrence as a result of which: (a) the owners of the voting and economic interests of the equity interests of Aziyo as of the Original Closing Date shall collectively cease to, directly or indirectly, own and control at least (i) fifty-one percent (51%) of the voting and economic interests of the equity interests of Aziyo (other than by the sale of Aziyo’s common stock in or following a Qualified IPO; provided that upon the consummation of a Qualified IPO, a Change in Control under this clause (a)(i) shall occur when any “person”  (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Exchange Act), other than the owners of the voting and economic interests of the equity interests of Aziyo as of the Original Closing Date, is or becomes a beneficial owner (within the meaning Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of equity securities of Aziyo, representing thirty-five percent (35%) or more of the combined voting power of Aziyo’s then outstanding securities) and/or (ii) that percentage of the outstanding voting equity interests of Aziyo necessary at all times to elect a majority of the board of directors (or similar governing body) of Aziyo and to direct the management policies and decisions of Aziyo; (b) during any period of twelve consecutive calendar months, individuals who at the beginning of such period constituted the board of directors or board of managers or similar governing Person(s) of each Borrower (together with any new directors or managers whose election by the board of directors or board of managers or similar governing Person(s) of each Borrower was approved by a vote of not less than two-thirds of the directors or managers then still in office who either were directors or managers at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason other than death or disability to constitute a majority of the directors or managers then in office; (c) any Credit Party ceases to own and control, directly or indirectly, all of the economic and voting rights associated with the outstanding securities of each of its Subsidiaries; or (d) the occurrence of any “Change of Control”, “Change in Control”, or terms of similar import under any document or instrument governing or relating to Debt of or equity in such Person. As used herein, “beneficial ownership” shall have the meaning provided in Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934. For the avoidance of doubt, a Qualified IPO shall not constitute a Change in Control.

 

 

“Closing Date” means the date of this Agreement.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form.

 

“Collateral” means all property, now existing or hereafter acquired, mortgaged or pledged to, or purported to be subjected to a Lien in favor of, Agent, for the benefit of Agent and Lenders, pursuant to this Agreement and the Security Documents, including, without limitation, all of the property described in Schedule 9.1 hereto.

 

“Commitment Annex” means Annex A to this Agreement.

 

“Compliance Certificate” means a certificate, duly executed by a Responsible Officer of Borrower Representative, appropriately completed and substantially in the form of Exhibit B hereto.

 

“Consolidated Subsidiary” means, at any date, any Subsidiary the accounts of which would be consolidated with those of “parent” Borrower (or any other Person, as the context may require hereunder) in its consolidated financial statements if such statements were prepared as of such date.

 

“Contingent Obligation” means, with respect to any Person, any direct or indirect liability of such Person: (a) with respect to any Debt of another Person (a “Third Party Obligation”) if the purpose or intent of such Person incurring such liability, or the effect thereof, is to provide assurance to the obligee of such Third Party Obligation that such Third Party Obligation will be paid or discharged, or that any agreement relating thereto will be complied with, or that any holder of such Third Party Obligation will be protected, in whole or in part, against loss with respect thereto; (b) with respect to any undrawn portion of any letter of credit issued for the account of such Person or as to which such Person is otherwise liable for the reimbursement of any drawing; (c) under any Swap Contract, to the extent not yet due and payable; (d) to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement; or (e) for any obligations of another Person pursuant to any Guarantee or pursuant to any agreement to purchase, repurchase or otherwise acquire any obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to preserve the solvency, financial condition or level of income of another Person. The amount of any Contingent Obligation shall be equal to the amount of the obligation so Guaranteed or otherwise supported or, if not a fixed and determinable amount, the maximum amount so Guaranteed or otherwise supported.

 

 

“Controlled Group” means all members of a group of corporations and all members of a group of trades or businesses (whether or not incorporated) under common control which, together with any Borrower, are treated as a single employer under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA and, solely for purposes of Section 412 and 436 of the Code, Section 414(m) or (o) of the Code.

 

“Cook License Agreement” means that certain License Agreement, dated as of the Original Closing Date, among Cook Biotech Incorporated and Aziyo Med, as amended, supplemented or otherwise modified from time to time following the Original Closing Date in accordance with the terms of the Financing Documents.

 

“Cook Supply Agreement” means that certain Material Supply Agreement, dated as of the Original Closing Date, among Cook Biotech Incorporated and Aziyo Med, as amended, supplemented or otherwise modified from time to time following the Original Closing Date in accordance with the terms of the Financing Documents.

 

“CorMatrix” means CorMatrix Cardiovascular, Inc., a Georgia corporation.

 

“Correction” means repair, modification, adjustment, relabeling, destruction or inspection (including patient monitoring) of a product without its physical removal to some other location.

 

“Credit Exposure” means, at any time, any portion of the Revolving Loan Commitment and of any other Obligations that remains outstanding; provided, however, that no Credit Exposure shall be deemed to exist solely due to the existence of contingent indemnification liability, absent the assertion of a claim, or the known existence of a claim reasonably likely to be asserted, with respect thereto.

 

“Credit Party” means each Borrower and each Guarantor; and “Credit Parties” means all such Persons, collectively.

 

“Cross License Agreement” means that certain License Agreement, dated as of the Original Closing Date, by and between CorMatrix and Aziyo Med, as amended, supplemented or otherwise modified from time to time following the Original Closing Date in accordance with the terms of the Financing Documents.

 

“DEA” means the Drug Enforcement Administration of the United States of America, any comparable state or local Governmental Authority, any comparable Governmental Authority in any non-United States jurisdiction, and any successor agency of any of the foregoing.

 

“Debt” of a Person means at any date, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising and paid on a timely basis and in the Ordinary Course of Business, (d) all capital leases of such Person, (e) all non-contingent obligations of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit, banker’s acceptance or similar instrument, (f) all equity securities of such Person subject to repurchase or redemption other than at the sole option of such Person, (g) all obligations secured by a Lien on any asset of such Person, whether or not such obligation is otherwise an obligation of such Person, (h) “earnouts”, purchase price adjustments, profit sharing arrangements, deferred purchase money amounts and similar payment obligations or continuing obligations of any nature of such Person arising out of purchase and sale contracts, (i) all Debt of others Guaranteed by such Person, and (j) off-balance sheet liabilities and/or Pension Plan or Multiemployer Plan liabilities of such Person. Without duplication of any of the foregoing, Debt of Borrowers shall include any and all Loans.

 

 

“Default” means any condition or event which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.

 

“Defaulted Lender” means, so long as such failure shall remain in existence and uncured, any Lender which shall have failed to make any Loan or other credit accommodation, disbursement, settlement or reimbursement required pursuant to the terms of any Financing Document.

 

“Defined Period” means for any given calendar month or date of determination, the twelve (12) month period ending on the last day of such calendar month or if such date of determination is not the last day of a calendar month, the twelve (12) month period immediately preceding any such date of determination.

 

“Deposit Account” means a “deposit account” (as defined in Article 9 of the UCC), an investment account, or other account in which funds are held or invested for credit to or for the benefit of any Borrower.

 

“Deposit Account Control Agreement” means an agreement, in form and substance satisfactory to Agent, among Agent, any Borrower and each financial institution in which such Borrower maintains a Deposit Account, which agreement provides that (a) such financial institution shall comply with instructions originated by Agent directing disposition of the funds in such Deposit Account without further consent by the applicable Borrower, and (b) such financial institution shall agree that it shall have no Lien on, or right of setoff or recoupment against, such Deposit Account or the contents thereof, other than in respect of usual and customary service fees and returned items for which Agent has been given value, in each such case expressly consented to by Agent, and containing such other terms and conditions as Agent may require, including as to any such agreement pertaining to any Lockbox Account, providing that such financial institution shall wire, or otherwise transfer, in immediately available funds, on a daily basis to the Payment Account (or, prior to the time of the initial borrowing of the Revolving Loans, such Deposit Account of Borrower, as Agent may direct in its sole discretion) all funds received or deposited into such Lockbox or Lockbox Account.

 

“Distribution” means as to any Person (a) any dividend or other distribution (whether in cash, securities or other property) on any equity interest in such Person (except those payable solely in its equity interests of the same class), (b) any payment by such Person on account of (i) the purchase, redemption, retirement, defeasance, surrender, cancellation, termination or acquisition of any equity interests in such Person or any claim respecting the purchase or sale of any equity interest in such Person, or (ii) any option, warrant or other right to acquire any equity interests in such Person, (c) any management fees, salaries or other fees or compensation to any Person holding an equity interest in a Borrower or a Subsidiary of a Borrower (other than reasonable and customary (i) payments of salaries to individuals, (ii) directors fees, and (iii) advances and reimbursements to employees or directors, all in the Ordinary Course of Business), an Affiliate of a Borrower or an Affiliate of any Subsidiary of a Borrower, (d) any lease or rental payments to an Affiliate or Subsidiary of a Borrower, or (e) repayments of or debt service on loans or other indebtedness held by any Person holding an equity interest in a Borrower or a Subsidiary of a Borrower, an Affiliate of a Borrower or an Affiliate of any Subsidiary of a Borrower unless permitted under and made pursuant to a Subordination Agreement applicable to such loans or other indebtedness.

 

 

“Dollars” or “$” means the lawful currency of the United States of America.

 

“Donor Network West” means Donor Network West, a California nonprofit corporation.

 

“Donor Network West Note” means that certain Promissory Note issued by Aziyo in favor of Donor Network West, dated as of March 2, 2017 in the original principal amount of $2,068,492.00.

 

“Drug Application” means a new drug application, an abbreviated drug application, or a product license application for any Product, as appropriate, as those terms are defined in the FDCA.

 

“EBITDA” means, for any period, determined on a consolidated basis for Borrower and its Subsidiaries, net income, calculated before interest expense, provision for income taxes, depreciation and amortization expense, gains or losses arising from the sale of capital assets, gains arising from the write-up of assets, any extraordinary gains and any non-cash equity compensation (in each case, to the extent included in determining net income) plus (a) extraordinary losses of Borrower and its Subsidiaries approved by Agent in its sole discretion, and (b) the “Acquiror Buydown Payments” (as defined in the Ligand Royalty Agreement) made pursuant to the terms of the Ligand Royalty Agreement during such period to the extent included in the determination of net income for such period.

 

“Eligible Account” means, subject to the criteria below, an account receivable of a Borrower, which was generated in the Ordinary Course of Business, which was generated originally in the name of a Borrower and not acquired via assignment or otherwise, and which Agent, in its good faith credit judgment and discretion, deems to be an Eligible Account. The net amount of an Eligible Account at any time shall be (a) the face amount of such Eligible Account as originally billed minus all cash collections and other proceeds of such Account received from or on behalf of the Account Debtor thereunder as of such date and any and all returns, rebates, discounts (which may, at Agent’s option, be calculated on shortest terms), credits, allowances or excise taxes of any nature at any time issued, owing, claimed by Account Debtors, granted, outstanding or payable in connection with such Accounts at such time, and (b) adjusted by applying percentages (known as “liquidity factors”) by payor and/or payor class based upon the applicable Borrower’s actual recent collection history for each such payor and/or payor class in a manner consistent with Agent’s underwriting practices and procedures. Such liquidity factors may be adjusted by Agent from time to time as warranted by Agent’s underwriting practices and procedures and using Agent’s good faith credit judgment. Without limiting the generality of the foregoing, no Account shall be an Eligible Account if:

 

(a)            the Account remains unpaid more than ninety (90) days past the claim or invoice date;

 

(b)            the Account is subject to any defense, set-off, recoupment, counterclaim, deduction, discount, credit, chargeback, freight claim, allowance, or adjustment of any kind (but only to the extent of such defense, set-off, recoupment, counterclaim, deduction, discount, credit, chargeback, freight claim, allowance, or adjustment), or the applicable Borrower is not able to bring suit or otherwise enforce its remedies against the Account Debtor through judicial process;

 

(c)            if the Account arises from the sale of goods, any part of any goods the sale of which has given rise to the Account has been returned, rejected, lost, or damaged (but only to the extent that such goods have been so returned, rejected, lost or damaged);

 

(d)            if the Account arises from the sale of goods, the sale was not an absolute, bona fide sale, or the sale was made on consignment or on approval or on a sale-or-return or bill-and-hold or progress billing basis, or the sale was made subject to any other repurchase or return agreement, or the goods have not been shipped to the Account Debtor or its designee or the sale was not made in compliance with applicable Laws;

 

 

(e)            if the Account arises from the performance of services, the services have not actually been performed or the services were undertaken in violation of any law (including, without limitation, the National Organ Transplant Act) or the Account represents a progress billing for which services have not been fully and completely rendered;

 

(f)             to the extent that the Account is not owned by a Borrower (including by reason of its prior sale to Ligand) or such Account or the proceeds thereof constitutes a “Royalty Interest” (as defined in the Ligand Royalty Agreement);

 

(g)           the Account is subject to a Lien (other than Liens in favor of Agent or Liens that have been expressly subordinated to the Liens of Agent);

 

(h)            Agent does not have a first priority, perfected Lien on such Account;

 

(i)             the Account is evidenced by Chattel Paper or an Instrument of any kind, or has been reduced to judgment, unless such Chattel Paper or Instrument has been delivered to Agent;

 

(j)             the Account Debtor is an Affiliate or Subsidiary of a Credit Party, or if the Account Debtor holds any Debt of a Credit Party;

 

(k)            more than fifty percent (50%) of the aggregate balance of all Accounts owing from the Account Debtor obligated on the Account are ineligible under subclause (a) above (in which case all Accounts from such Account Debtor shall be ineligible);

 

(l)             without limiting the provisions of clause (k) above, fifty percent (50%) or more of the aggregate unpaid Accounts from the Account Debtor obligated on the Account are not deemed Eligible Accounts under this Agreement for any reason;

 

(m)           the total unpaid Accounts of the Account Debtor obligated on the Account exceed (i) with respect to Osiris Therapeutics Inc. and all Affiliates of such Account Debtor exceed (A) prior to September 30, 2017, sixty percent (60%) of the net amount of all Eligible Accounts owing from all Account Debtors, (B) between October 1, 2017 and December 31, 2017, fifty percent (50%) of the net amount of all Eligible Accounts owing from all Account Debtors or (C) from and after January 1, 2018 forty percent (40%) of the net amount of all Eligible Accounts owing from all Account Debtors (but only the amount of the Accounts of such Account Debtor exceeding such 60%, 50% or 40% limitation, as applicable, shall be considered ineligible); and (ii) with respect to all other Account Debtors, thirty percent (30%) of the net amount of all Eligible Accounts owing from all Account Debtors (but only the amount of the Accounts of such Account Debtor exceeding such thirty percent (30%) limitation shall be considered ineligible);

 

(n)            any covenant, representation or warranty contained in the Financing Documents with respect to such Account has been breached in any respect;

 

(o)            the Account is unbilled or has not been invoiced to the Account Debtor in accordance with the procedures and requirements of the applicable Account Debtor;

 

(p)            the Account is an obligation of an Account Debtor that is the federal, state or local government or any political subdivision thereof, unless Agent has agreed to the contrary in writing and Agent has received from the Account Debtor the acknowledgement of Agent’s notice of assignment of such obligation pursuant to this Agreement;

 

 

(q)            the Account is an obligation of an Account Debtor that has suspended business, made a general assignment for the benefit of creditors, is unable to pay its debts as they become due or as to which a petition has been filed (voluntary or involuntary) under any law relating to bankruptcy, insolvency, reorganization or relief of debtors,

 

(r)             the Account is an Account as to which any facts, events or occurrences exist which could reasonably be expected to impair the validity, enforceability or collectability of such Account or reduce the amount payable or delay payment thereunder, including, without limitation, the failure of a Borrower to provide goods or services giving rise to such Account a manner that complies in all material respects with all Laws applicable to the payment therefore, or such Accounts have been generated in violation of the National Organ Transplant Act;

 

(s)             the Account Debtor has its principal place of business or executive office outside the United States, except to the extent that the applicable Account is supported or secured by a letter of credit or credit insurance acceptable to Agent;

 

(t)             the Account is payable in a currency other than United States dollars;

 

(u)            the Account Debtor is an individual;

 

(v)            the Borrower owning such Account has not signed and delivered to Agent notices, in the form requested by Agent, directing the Account Debtors to make payment to the applicable Lockbox Account or the Aziyo Med Controlled Account;

 

(w)            the Account includes late charges or finance charges (but only such portion of the Account shall be ineligible);

 

(x)             the Account arises out of the sale of any Inventory upon which any other Person holds, claims or asserts a Lien (other than Liens in favor of Agent or the Affiliated Financing Agent); or

 

(y)            the Account or Account Debtor fails to meet such other specifications and requirements which may from time to time be established by Agent in its good faith credit judgment and discretion.

 

“Eligible Assignee” means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund, and (d) any other Person (other than a natural person) approved by Agent; provided, however, that notwithstanding the foregoing, (x) “Eligible Assignee” shall not include any Borrower or any of a Borrower’s Affiliates, and (y) no proposed assignee intending to assume all or any portion of the Revolving Loan Commitment shall be an Eligible Assignee unless such proposed assignee either already holds a portion of such Revolving Loan Commitment, or has been approved as an Eligible Assignee by Agent.

 

“Eligible Inventory” means Inventory owned by a Borrower and acquired and dispensed by such Borrower in the Ordinary Course of Business that Agent, in its good faith credit judgment and discretion, deems to be Eligible Inventory. Without limiting the generality of the foregoing, no Inventory shall be Eligible Inventory if:

 

(a)            such Inventory is not owned by a Borrower free and clear of all Liens and rights of any other Person (including (i) the rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower’s performance with respect to that Inventory and (ii) liens favor of Ligand pursuant to the terms of the Ligand Royalty Agreement;) except for Agent and Affiliated Financing Agent;

 

 

(b)            such Inventory is placed on consignment or is in transit;

 

(c)            such Inventory is covered by a negotiable document of title, unless such document has been delivered to Agent with all necessary endorsements, free and clear of all Liens except those in favor of Agent;

 

(d)            such Inventory is excess, obsolete, unsalable, shopworn, seconds, damaged, unfit for sale, unfit for further processing, is of substandard quality or is not of good and merchantable quality, free from any defects;

 

(e)            such Inventory consists of raw materials, marketing materials, display items or packing or shipping materials, manufacturing supplies or Work-In-Process;

 

(f)            such Inventory is not subject to a first priority Lien in favor of Agent;

 

(g)            such Inventory consists of goods that can be transported or sold only with licenses that are not readily available;

 

(h)            such Inventory consists of substances defined or designated as hazardous or toxic waste, hazardous or toxic material, hazardous or toxic substance, or similar term, by any environmental law or any Governmental Authority applicable to Borrowers or their business, operations or assets;

 

(i)            such Inventory is not covered by casualty insurance acceptable to Agent;

 

(j)            any covenant, representation or warranty contained in the Financing Documents with respect to such Inventory has been breached in any material respect;

 

(k)            such Inventory is located (i) outside of the continental United States or (ii) on premises where the aggregate amount of all Inventory (valued at cost) of Borrowers located thereon is less than $10,000;

 

(l)            such Inventory is located on premises with respect to which Agent has not received a landlord, warehouseman, bailee or mortgagee letter acceptable in form and substance to Agent;

 

(m)            such Inventory consists of (A) discontinued items, (B) slow-moving or excess items held in inventory, or (C) used items held for resale;

 

(n)            such Inventory does not consist of finished goods;

 

(o)            such Inventory does not meet all standards imposed by any applicable Law (including, without limitation, the National Organ Transportation Act) or by any applicable Governmental Authority, including with respect to its production, distribution, pricing, acquisition or importation (as the case may be);

 

(p)            such Inventory has a remaining shelf life of less than twelve (12) months;

 

(q)            such Inventory is held for rental or lease by or on behalf of Borrowers;

 

(r)            such Inventory is subject to any licensing, patent, royalty, trademark, trade name or copyright agreement with any third parties, which agreement restricts the ability of Agent or any Lender to sell or otherwise dispose of such Inventory (except to the extent such restriction is unenforceable under applicable Law); or

 

 

(s)            such Inventory fails to meet such other specifications and requirements which may from time to time be established by Agent in its good faith credit judgment. Agent and Borrowers agree that Inventory shall be subject to periodic appraisal by Agent and that valuation of Inventory shall be subject to adjustment pursuant to the results of such appraisal. Notwithstanding the foregoing, the valuation of Inventory shall be subject to any legal limitations on sale and transfer of such Inventory.

 

“Environmental Laws” means any and all Laws pertaining to the environment, natural resources, pollution, Hazardous Materials, or, to the extent relating to exposure to substances that are harmful or detrimental to the environment, employee health or safety, including any environmental clean-up Laws which pertain to or impose liability or standards of conduct concerning medical waste or medical products, equipment or supplies.

 

“Equity Investment Documents” means, collectively, (i) the Series A Preferred Stock Purchase Agreement, dated as of the Original Closing Date among Aziyo, HighCape and/or certain Affiliates of HighCape and the other parties thereto (the “Series A Purchase Agreement”), pursuant to which Borrower received $10,500,000 from HighCape and such Affiliates in exchange for issuing equity interests pursuant thereto on or prior to the Original Closing Date and an additional $1,500,000 thereafter, (ii) the Joinder and Acknowledgement Agreement, dated as of the Original Closing Date among Aziyo, MCF and/or certain Affiliates of MCF, pursuant to which MCF and/or such Affiliates joined and became a party to such Series A Purchase Agreement, the Investor Rights Agreement (as defined in the Series A Purchase Agreement) and the ROFR Agreement (as defined in the Series A Purchase Agreement), (iii) the Investor Rights Agreement (as defined in the Series A Purchase Agreement) and (iv) the ROFR Agreement (as defined in the Series A Purchase Agreement).

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as the same may be amended, modified or supplemented from time to time, and any successor statute thereto, and any and all rules or regulations promulgated from time to time thereunder.

 

“ERISA Plan” means any “employee benefit plan”, as such term is defined in Section 3(3) of ERISA (other than a Multiemployer Pension Plan), which any Credit Party or any Subsidiary maintains, sponsors or contributes to, or, in the case of an employee benefit plan which is subject to Section 412 of the Code or Title IV of ERISA, to which any Credit Party or any Subsidiary has any liability, including on account of any member of the Controlled Group, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.

 

“Event of Default” has the meaning set forth in Section 10.1.

 

“Excluded Accounts” has the meaning set forth in Section 5.14(b).

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to Agent, any Lender or any other recipient of any payment to be made by or on behalf of any obligation of Credit Parties hereunder or the Obligations or required to be withheld or deducted from a payment to Agent, such Lender or such recipient (including any interest and penalties thereon): (a) Taxes to the extent imposed on or measured by Agent’s, any Lender’s or such recipient’s net income (however denominated), branch profits Taxes, and franchise Taxes and similar Taxes, in each case, (i) imposed by the jurisdiction (or any political subdivision thereof) under which Agent, such Lender or such recipient is organized, has its principal office or conducts business with respect to entering into any of the Financing Documents or taking any action thereunder or (ii) that are Other Connection Taxes; (b) in the case of a Lender, United States withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in the Loans pursuant to a Law in effect on the date on which (i) such Lender becomes a party to this Agreement other than as a result of an assignment requested by a Credit Party under the terms hereof or (ii) such Lender changes its lending office for funding its Loan, except in each case to the extent that, pursuant to Section 2.8, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender acquired the applicable interest in a Loan or Revolving Loan Commitment or to such Lender immediately before it changed its lending office; (c) Taxes attributable to such Lender’s failure to comply with Section 2.8(c); and (d) any U.S. federal withholding taxes imposed in respect of a Lender under FATCA.

 

 

“FATCA” means Sections 1471 through 1474 of the Code as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future U.S. Treasury regulations or official interpretations thereof and any agreement entered into pursuant to the implementation of Section 1471(b)(1) of the Code, and any intergovernmental agreement between the United States Internal Revenue Service, the U.S. Government and any governmental or taxation authority under any other jurisdiction which agreement’s principal purposes deals with the implement such sections of the Code.

 

“FDA” means the Food and Drug Administration of the United States of America, any comparable state or local Governmental Authority, any comparable Governmental Authority in any non-United States jurisdiction, and any successor agency of any of the foregoing.

 

“FDCA” means the Federal Food, Drug and Cosmetic Act, as amended, 21 U.S.C. Section 301 et seq., and all regulations promulgated thereunder.

 

“Federal Funds Rate” means, for any day, the rate of interest per annum (rounded upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided, however, that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day, and (b) if no such rate is so published on such next preceding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Agent on such day on such transactions as determined by Agent.

 

“Financing Documents” means this Agreement, any Notes, the Security Documents, the Affiliated Intercreditor Agreement, each subordination or intercreditor agreement pursuant to which any Debt and/or any Liens securing such Debt is subordinated to all or any portion of the Obligations and all other documents, instruments and agreements related to the Obligations and heretofore executed, executed concurrently with the Original Credit Agreement or executed at any time and from time to time thereafter, as any or all of the same may be amended, supplemented, restated or otherwise modified from time to time.

 

“Fixed Charge Coverage Ratio” means, for any period, the quotient obtained by dividing (a) the difference between (i) EBITDA for such period, minus (ii) without duplication, the sum of (A) all of Borrower's Unfinanced Capital Expenditures made in such period, and (B) any Distributions paid by Borrower in such period, and (C) cash Taxes paid by Borrower in such period (without benefit of any refund), divided (b) the sum of (i) principal payments on Debt for Money Borrowed in such period plus (ii) cash interest payments paid by Borrower in such period.

 

“Foreign Lender” has the meaning set forth in Section 2.8(c)(i).

 

 

“GAAP” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the United States accounting profession), which are applicable to the circumstances as of the date of determination.

 

“General Intangible” means any “general intangible” as defined in Article 9 of the UCC, and any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas or other minerals before extraction, but including payment intangibles and software.

 

“Good Manufacturing Practices” means current good manufacturing practices, as set forth in 21 C.F.R. Parts 210 and 211.

 

“Governmental Authority” means any nation or government, any state, local or other political subdivision thereof, and any agency, department or Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any corporation or other Person owned or controlled (through stock or capital ownership or otherwise) by any of the foregoing, whether domestic or foreign.

 

“Guarantee” by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise), or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided, however, that the term Guarantee shall not include endorsements for collection or deposit in the Ordinary Course of Business. The term “Guarantee” used as a verb has a corresponding meaning.

 

“Guarantor” means any Credit Party that has executed or delivered, or shall in the future execute or deliver, any Guarantee of any portion of the Obligations.

 

“Hazardous Materials” means (a) any “hazardous substance” as defined in CERCLA, (b) any “hazardous waste” as defined by the Resource Conservation and Recovery Act, (c) asbestos, (d) polychlorinated biphenyls, (e) petroleum and its derivatives, by-products and other hydrocarbons, and (f) any other pollutant, toxic, radioactive, caustic or otherwise hazardous substance regulated under Environmental Laws.

 

“Hazardous Materials Contamination” means contamination (whether now existing or hereafter occurring) of the improvements, buildings, facilities, personalty, soil, groundwater, air or other elements on or of the relevant property by Hazardous Materials, or any derivatives thereof, or on or of any other property as a result of Hazardous Materials, or any derivatives thereof, generated on, emanating from or disposed of in connection with the relevant property.

 

“Healthcare Laws” means all applicable Laws relating to the procurement, development, provision, clinical and non-clinical evaluation or investigation, product approval or clearance, manufacture, production, analysis, distribution, dispensing, importation, exportation, use, handling, quality, reimbursement, sale, labeling, advertising, promotion, or postmarket requirements of any drug, medical device, food, dietary supplement, or other product (including, without limitation, any ingredient or component of, or accessory to, the foregoing products) subject to regulation under the Federal Food, Drug, and Cosmetic Act (21 U.S.C. et seq.), and similar state or foreign laws, controlled substances laws, pharmacy laws, consumer product safety laws, the National Organ Transplant Act or any regulations promulgated thereunder or any state laws and/or regulations of similar import, Medicare, Medicaid, and all laws, policies, procedures, requirements and regulations pursuant to which Permits are issued, in each case, as the same may be amended from time to time.

 

  

“HighCape” means, collectively, HighCape Partners QP, L.P., its Affiliates and their respective related funds and management entities.

 

“HighCape Portfolio Company” means any operating portfolio company of HighCape.

 

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of Borrowers or any other Credit Party under any Financing Documents and (b) to the extent not otherwise described in (a), Other Taxes.

 

“Instrument” means “instrument”, as defined in Article 9 of the UCC.

 

“Intellectual Property” means all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks, trade names, service marks, mask works, rights of use of any name, domain names, or any other similar rights, any applications therefor, whether registered or not, know-how, operating manuals, trade secret rights, clinical and non-clinical data, rights to unpatented inventions, and any claims for damage by way of any past, present, or future infringement of any of the foregoing.

 

“Interest Period” means any period commencing on the first day of a calendar month and ending on the last day of such calendar month.

 

“Inventory” means “inventory” as defined in Article 9 of the UCC, whether now existing or hereafter arising.

 

“Investment” means, with respect to any Person, directly or indirectly, (a) to purchase or acquire any stock or stock equivalents, or any obligations or other securities of, or any interest in, any Person, including the establishment or creation of a Subsidiary, (b) to make or commit to make any acquisition (including through licensing) of (i) of all or substantially all of the assets of another Person, or (ii) any business, business line or product line, division or other unit operation of any Person or any Product or Intellectual Property of any Person (in each case, an “Acquisition”) or (c) make or purchase any advance, loan, extension of credit or capital contribution to, or any other investment in, any Person. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect thereto.

 

“Investment Company Act” means the Investment Company Act of 1940, as amended.

 

“IRS” has the meaning set forth in Section 2.8(c)(i).

 

 

 

“Laws” means any and all federal, state, provincial, territorial, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, codes, injunctions, permits, governmental agreements and governmental restrictions, whether now or hereafter in effect, which are applicable to any Credit Party in any particular circumstance. “Laws” includes, without limitation, Healthcare Laws and Environmental Laws.

 

“Lender” means each of (a) Midcap Funding IV Trust, in its capacity as a lender hereunder, (b) each other Person party hereto in its capacity as a lender hereunder, (c) each other Person that becomes a party hereto as Lender pursuant to Section 11.17, and (d) the respective successors of all of the foregoing, and “Lenders” means all of the foregoing.

 

“LIBOR Rate” means, for each Loan, a per annum rate of interest equal to the greater of (a) two and one-quarter percent (2.25%) and (b) the rate determined by Agent (rounded upwards, if necessary, to the next 1/100th%) by dividing (i) the Base LIBOR Rate for the Interest Period, by (ii) the sum of one minus the daily average during such Interest Period of the aggregate maximum reserve requirement (expressed as a decimal) then imposed under Regulation D of the Board of Governors of the Federal Reserve System (or any successor thereto) for “Eurocurrency Liabilities” (as defined therein).

 

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, in respect of such asset. For the purposes of this Agreement and the other Financing Documents, any Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.

 

“Ligand” means Ligand Pharmaceuticals Incorporated, a Delaware corporation.

 

“Ligand Intercreditor Agreement” means that certain Intercreditor Agreement, dated as of the Original Closing Date, among Ligand, Agent, Affiliated Financing Agent and Borrowers, as amended, supplemented or otherwise modified from time to time in accordance with the terms thereof.

 

“Ligand Parent Guaranty” means that certain Guaranty Agreement, dated as of the Original Closing Date, entered into between Aziyo and Ligand in respect of certain of Aziyo Med’s obligations under the Ligand Royalty Agreement, as amended, supplemented or otherwise modified from time to time in accordance with the terms of this Agreement and the Ligand Intercreditor Agreement.

 

“Ligand Royalty Agreement” means that certain Royalty Agreement, dated as of the Original Closing Date, by and among Aziyo Med and Ligand, pursuant to which Ligand has the right to receive certain payments from Aziyo Med on the terms and conditions set forth therein as amended, supplemented or otherwise modified from time to time on or prior to the Original Closing Date or following the Original Closing Date in accordance with the terms of the Financing Documents.

 

“Ligand Royalty Payments” means the regularly scheduled payments by Aziyo Med to Ligand on a non-accelerated basis pursuant to Section 2.02 of the Ligand Royalty Agreement.

 

“Litigation” means any action, suit or proceeding before any court, mediator, arbitrator or Governmental Authority.

 

“Liquidity” means, as of any date of calculation, the sum of (a) Borrower’s cash and cash equivalents and (b) the Revolving Loan Availability.

 

“Loan Account” has the meaning set forth in Section 2.6(b).

 

 

“Loan(s)” means the Revolving Loans.

 

“Lockbox” has the meaning set forth in Section 2.11.

 

“Lockbox Account” means an account or accounts maintained at the Lockbox Bank into which collections of Accounts are paid, which account or accounts shall be, if requested by Agent, opened in the name of Agent (or a nominee of Agent).

 

“Lockbox Bank” has the meaning set forth in Section 2.11.

 

“Management Agreement” means that certain Management Services Agreement, dated as of January 1, 2016, between HighCape Partners Management, L.P. and Aziyo, as amended from time to time prior to the Closing Date.

 

“Market Withdrawal” means a Person’s Removal or Correction of a distributed product which involves a minor violation that would not be subject to legal action by the FDA or which involves no violation, e.g., normal stock rotation practices, routine equipment adjustments and repairs, etc.

 

“Material Adverse Effect” means with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, a material adverse change in, or a material adverse effect upon, any of (a) the condition (financial or otherwise), operations, business or properties of any of the Credit Parties, (b) the rights and remedies of Agent or Lenders under any Financing Document, or the ability of any Credit Party to perform any of its obligations under any Financing Document to which it is a party, (c) the legality, validity or enforceability of any Financing Document, (d) the existence, perfection or priority of any security interest granted in any Financing Document, (e) the value of any material Collateral, or (f) a material impairment of the prospect of repayment of any portion of the Obligations.

 

“Material Contracts” means (a) the Operative Documents, including the Ligand Royalty Agreement, the Ligand Parent Guaranty and each Subordinated Debt Document, (b) the agreements listed on Schedule 3.17, including the Cook License Agreement , the Cook Supply Agreement and the Cross License Agreement, and (c) (i) each agreement or contract to which a Credit Party is a party relating to Material Intangible Assets or development of Products or Intellectual Property, (ii) any agreement with respect to any Product, the loss of which would materially impair Borrower’s ability to sell or market such Product, and (iii) any agreement or contract to which such Credit Party or its Subsidiaries is a party the termination of which could reasonably be expected to result in a Material Adverse Effect.

 

“Material Intangible Assets” means all of (a) Borrower’s Intellectual Property and (b) license or sublicense agreements or other agreements with respect to rights in Intellectual Property, in each case that are material to the condition (financial or other), business or operations of Borrower, as determined by Agent.

 

“Maturity Date” means July 15, 2024.

 

“Maximum Lawful Rate” has the meaning set forth in Section 2.7.

 

“MCF” means MidCap Financial Trust, a Delaware statutory trust, and its successors and assigns.

 

 

“Medicaid” means, collectively, the healthcare assistance program established by Title XIX of the Social Security Act (42 U.S.C. §§ 1396 et seq.) and any statutes succeeding thereto, all state statutes and plans for medical assistance enacted in connection with such program, and all laws, rules, regulations, manuals, orders, guidelines or requirements (whether or not having the force of Law) pertaining to such program, in each case as the same may be amended, supplemented or otherwise modified from time to time.

 

“Medicare” means, collectively, the health insurance program for the aged and disabled established by Title XVIII of the Social Security Act (42 U.S.C. §§ 1395 et seq.) and any statutes succeeding thereto, and all laws, rules, regulations, manuals, orders or guidelines (whether or not having the force of Law) pertaining to such program, in each case as the same may be amended, supplemented or otherwise modified from time to time.

 

“Minimum Balance” means, at any time, an amount that equals the product of: (a) the average Borrowing Base (or, if less on any given day, the Revolving Loan Commitment) during the immediately preceding month multiplied by (b) the Minimum Balance Percentage for such month.

 

“Minimum Balance Fee” means a fee equal to (a) the positive difference, if any, remaining after subtracting (i) the average end-of-day principal balance of Revolving Loans outstanding during the immediately preceding month (without giving effect to the clearance day calculations referenced above or in Section 2.2(a) from (ii) the Minimum Balance multiplied by (b) the highest interest rate applicable to the Revolving Loans during such month (or, during the existence of an Event of Default, the default rate of interest set forth in Section 10.5(a)).

 

“Minimum Balance Percentage” means forty percent (40%).

 

“Money Borrowed” means, as applied to any Credit Party, without duplication: (a) Debt arising from the lending of money by any other Person to such Credit Party; (b) Debt, whether or not in any such case arising from the lending of money by another Person to such Credit Party, (i) which is represented by notes payable or drafts accepted that evidence extensions of credit, (ii) which constitutes obligations evidenced by bonds, debentures, notes or similar instruments, or (iii) upon which interest charges are customarily paid (other than accounts payable) or that was issued or assumed as full or partial payment for property; (c) Debt under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP; (d) reimbursement obligations with respect to letters of credit or guarantees relating thereto; and (e) Debt of such Credit Party under any guaranty of obligations that would constitute Debt for Money Borrowed under clauses (a) through (d) hereof, if owed directly by such Credit Party.

 

“Multiemployer Plan” means a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA to which any Borrower or any other member of the Controlled Group (or any Person who in the last five years was a member of the Controlled Group) is making or accruing an obligation to make contributions or has within the preceding five plan years (as determined on the applicable date of determination) made contributions.

 

“National Organ Transplant Act” means the National Organ Transplant Act of 1984 (“NOTA”) 42 U.S.C. § 274e, as amended.

 

“Net Product Revenue” means, for any period, (a) the consolidated gross revenues of Borrowers and their Subsidiaries generated solely through the commercial sale of all Products by Borrowers and their Subsidiaries in the Ordinary Course of Business during such period, less (b) (i) sales of Products whose specifications are owned by the customer and are sold through a contract manufacturing services agreement, (ii) sales of sports medicine, cancellous bone and cervical spacer Products, (iii) trade, quantity and cash discounts allowed by Borrower or its Subsidiaries, (iv) discounts, refunds, rebates, charge backs, retroactive price adjustments and any other allowances which effectively reduce net selling price, (v) product returns and allowances, (vi) allowances for shipping or other distribution expenses, (vii) set-offs and counterclaims, and (viii) any other similar and customary deductions used by Borrower or its Subsidiaries in determining net revenues, all, in respect of (a) and (b), as determined in accordance with GAAP and in the Ordinary Course of Business.

 

 

“Notes” has the meaning set forth in Section 2.3.

 

“Notice of Borrowing” means a notice of a Responsible Officer of Borrower Representative, appropriately completed and substantially in the form of Exhibit D hereto.

 

“Obligations” means all obligations, liabilities and indebtedness (monetary (including, without limitation, the payment of interest and other amounts arising after the commencement of any case with respect to any Credit Party under the Bankruptcy Code or any similar statute which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case) or otherwise) of each Credit Party under this Agreement or any other Financing Document, in each case howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due. “Obligations” does not include obligations under any warrants issued to Agent or a Lender.

 

“OFAC” means the U.S. Department of Treasury Office of Foreign Assets Control.

 

“OFAC Lists” means, collectively, the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other restricted Persons maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Executive Orders.

 

“Operative Documents” means the Financing Documents, the Equity Investment Documents, the Subordinated Debt Documents and the Transaction Documents.

 

“Ordinary Course of Business” means, in respect of any transaction involving any Credit Party, the ordinary course of business of such Credit Party, as conducted by such Credit Party in accordance with past practices.

 

“Organizational Documents” means, with respect to any Person other than a natural person, the documents by which such Person was organized (such as a certificate of incorporation, certificate of limited partnership or articles of organization, and including, without limitation, any certificates of designation for preferred stock or other forms of preferred equity) and which relate to the internal governance of such Person (such as by-laws, a partnership agreement or an operating agreement, joint venture agreement, limited liability company agreement or members agreement), including any and all shareholder agreements or voting agreements relating to the capital stock or other equity interests of such Person.

 

“Original Closing Date” means May 31, 2017.

 

“Original Credit Agreement” has the meaning set forth in the recitals hereto.

 

“Other Connection Taxes” means taxes imposed as a result of a present or former connection between Agent or any Lender and the jurisdiction imposing such tax (other than connections arising from Agent or such Lender having executed, delivered, become a party to, performed its obligations under, received payments under, engaged in any other transaction pursuant to or enforced any Financing Document, or sold or assigned an interest in any Loans or any Financing Document).

 

 

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Financing Document, except any such taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.8(i)).

 

“Participant” has the meaning set forth in Section 11.17(b).

 

“Participant Register” has the meaning set forth in Section 11.17(a)(iii).

 

“Payment Account” means the account specified on the signature pages hereof into which all payments by or on behalf of each Borrower to Agent under the Financing Documents shall be made, or such other account as Agent shall from time to time specify by notice to Borrower Representative.

 

“Payroll Account” has the meaning set forth in Section 5.14(b).

 

“PBGC” means the Pension Benefit Guaranty Corporation and any Person succeeding to any or all of its functions under ERISA.

 

“Pension Plan” means any ERISA Plan that is subject to Section 412 of the Code or Title IV of ERISA.

 

“Perfection Certificate” means the Perfection Certificate delivered to Agent as of the Closing Date, together with any amendments thereto required under this Agreement.

 

“Permit” means all licenses, certificates, accreditations, product clearances or approvals, provider numbers or provider authorizations, supplier numbers, marketing authorizations, drug or device authorizations and approvals, other authorizations, franchises, qualifications, accreditations, registrations, permits, consents and approvals of a Credit Party issued or required under Laws applicable to the business of Borrower or any of its Subsidiaries or necessary in the manufacturing, importing, exporting, possession, ownership, warehousing, marketing, promoting, sale, labeling, furnishing, distribution or delivery of goods or services under Laws applicable to the business of Borrower or any of its Subsidiaries. Without limiting the generality of the foregoing, “Permit” includes any Regulatory Required Permit.

 

“Permitted Asset Dispositions” means the following Asset Dispositions; provided, however, that at the time of such Asset Disposition, no Default or Event of Default exists or would result from such Asset Disposition:

 

(a)

dispositions of (i) Inventory in the Ordinary Course of Business and not pursuant to any bulk sale and (ii) equipment that is obsolete, worn out, replaced, is no longer used or useful, unmerchantable, or unsaleable, in each case, in the Ordinary Course of Business;

 

(b)

abandonment or lapse of Intellectual Property (other than any Material Intangible Asset) that is, in the reasonable good faith judgment of a Credit Party, no longer useful in the conduct of the business of the Credit Parties or any of their Subsidiaries;

 

(c)

sales, forgiveness or discounting, on a non-recourse basis and in the Ordinary Course of Business, of past due Accounts (other than Eligible Accounts included in the Borrowing Base) in connection with the collection or compromise thereof of the settlement of delinquent Accounts or in connection with the bankruptcy or reorganization of suppliers or customers in accordance with the applicable terms of this Agreement;

 

 

(d)

Permitted Licenses;

 

(e)

Permitted Distributions; and

 

(f)

other dispositions approved by Agent from time to time in its sole discretion.

 

“Permitted Contest” means a contest maintained in good faith by appropriate proceedings promptly instituted and diligently conducted and with respect to which such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; provided that compliance with the obligation that is the subject of such contest is effectively stayed during such challenge.

 

“Permitted Contingent Obligations” means

 

(a)

Contingent Obligations arising in respect of the Debt under the Financing Documents;

 

(b)

Contingent Obligations resulting from endorsements for collection or deposit in the Ordinary Course of Business;

 

(c)

Contingent Obligations outstanding on the date of this Agreement and set forth on Schedule 5.1 (but not including any refinancings, extensions, increases or amendments to the indebtedness underlying such Contingent Obligations other than extensions of the maturity thereof without any other change in terms);

 

(d)

Contingent Obligations incurred in the Ordinary Course of Business with respect to surety and appeal bonds, performance bonds and other similar obligations not to exceed $250,000 in the aggregate at any time outstanding;

 

(e)

Contingent Obligations arising under indemnity agreements with title insurers to cause such title insurers to issue to Agent mortgagee title insurance policies;

 

(f)

Contingent Obligations arising with respect to customary indemnification obligations in favor of purchasers in connection with dispositions of personal property assets permitted under Section 5.6;

 

(g)

so long as there exists no Event of Default both immediately before and immediately after giving effect to any such transaction, Contingent Obligations existing or arising under any Swap Contract, provided, however, that such obligations are (or were) entered into by Borrower or an Affiliate in the Ordinary Course of Business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person and not for purposes of speculation;

 

(h)

Guarantees by any Credit Party of any Permitted Debt of any Subsidiary that is a Credit Party provided that (x) any such Contingent Obligation is subordinated to the Obligations to the same extent as the Debt to which it relates is subordinated to the Obligations, (y) no Credit Party may incur Contingent Obligations under this clause (h) in respect of Debt incurred by any Person that is not a Borrower or Guarantor and (z) no guaranties shall be provided by Aziyo in respect of the Aziyo Med’s obligations under the Ligand Royalty Agreement; and

 

(i)

other Contingent Obligations not permitted by clauses (a) through (h) above, not to exceed $250,000 in the aggregate at any time outstanding.

 

 

“Permitted Debt” means:

 

(a)

Borrowers’ and its Subsidiaries’ Debt to Agent and each Lender under this Agreement and the other Financing Documents;

 

(b)

Debt incurred as a result of endorsing negotiable instruments received in the Ordinary Course of Business;

 

(c)

purchase money Debt not to exceed $250,000 in the aggregate at any time (whether in the form of a loan or a lease) used solely to acquire equipment used in the Ordinary Course of Business and secured only by such equipment;

 

(d)

Debt existing on the date of this Agreement and described on Schedule 5.1 (but not including any refinancings, extensions, increases or amendments to such Debt other than extensions of the maturity thereof without any other change in terms);

 

(e)

so long as there exists no Event of Default both immediately before and immediately after giving effect to any such transaction, Debt existing or arising under any Swap Contract, provided, however, that such obligations are (or were) entered into by Borrower or an Affiliate in the Ordinary Course of Business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person and not for purposes of speculation;

 

(f)

Debt not to exceed $250,000 in the aggregate at any time outstanding owed to any Person providing property, casualty, liability, or other insurance to the Credit Parties, including to finance insurance premiums, so long as the amount of such Debt is not in excess of the amount of the unpaid cost of, and shall be incurred only to defer the cost of, such insurance for the policy year in which such Debt is incurred and such Debt is outstanding only during such policy year;

 

(g)

trade accounts payable arising and paid on a timely basis and in the Ordinary Course of Business;

 

(h)

Debt of the Credit Parties incurred under the Affiliated Financing Documents; and

 

(i)

Subordinated Debt (including the Ligand Royalty Payments).

 

“Permitted Distributions” means the following Distributions:

 

(a)

dividends by any Subsidiary of any Borrower to such parent Borrower;

 

(b)

dividends payable solely in common stock;

 

(c)

repurchases of stock of former employees, directors or consultants pursuant to stock purchase agreements so long as an Event of Default does not exist at the time of such repurchase and would not exist after giving effect to such repurchase, provided, however, that such repurchase does not exceed $50,000 in the aggregate per fiscal year;

 

(d)

so long as (i) no Event of Default exists at the time of such payment or would exist after giving effect thereto, (ii) Borrower is in pro forma compliance with all of its Obligations hereunder after the making of any such payment, (iii) the payment of such management fees is subordinated to the payment of the Obligations pursuant to the terms of a management fee subordination agreement reasonably satisfactory to Lender and (iv) either (x) the pro forma Fixed Charge Coverage Ratio is greater than 1.20 to 1.00 or (y) Liquidity is greater than $5,000,000, in each case, computed on a pro forma basis as of the last day of the most recent month for which Lender should have received monthly financial statements in accordance with Section 4.1(a) (hereinafter such last day shall be referred to as the “Management Fee Computation Date”), with such pro forma calculation being made for the twelve (12) month period ending as of the Management Fee Computation Date and with the amount of any such payment being included in such computation and being deemed to have been made on the Management Fee Computation Date, payment by Aziyo of, the accrued and unpaid management fees owing to HighCape pursuant to the terms of the Management Agreement in an aggregate amount not to exceed $250,000 per fiscal year.

 

 

“Permitted Investments” means:

 

(a)

[reserved];

 

(b)

Investments shown on Schedule 5.7 and existing on the Closing Date;

 

(c)

Investments consisting of cash and cash equivalents;

 

(d)

Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the Ordinary Course of Business;

 

(e)

Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the Ordinary Course of Business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrowers or their Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrowers’ Board of Directors (or other governing body), but the aggregate of all such loans outstanding may not exceed $250,000 at any time;

 

(f)

Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the Ordinary Course of Business;

 

(g)

Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the Ordinary Course of Business, provided, however, that this subpart (g) shall not apply to Investments of Borrowers in any Subsidiary;

 

(h)

deposits required to be made in the Ordinary Course of Business made to a landlord in the Ordinary Course of Business to secure or support obligations of any Credit Party or any Subsidiary under a lease of real property;

 

(i)

Investments consisting of Deposit Accounts in which Agent has received a Deposit Account Control Agreement;

 

(j)

Investments of cash and cash equivalents by any Borrower in any Subsidiary now owned or hereafter created by such Borrower, which Subsidiary is a Borrower or has provided a Guarantee of the Obligations of the Borrowers which Guarantee is secured by a Lien granted by such Subsidiary to Agent in all or substantially all of its property of the type described in Schedule 9.1 hereto and otherwise made in compliance with Section 4.11(d); provided that no Borrower shall make any Investment in Aziyo Med so long as any obligations of Borrowers under the Ligand Royalty Agreement or obligations of Aziyo under the Ligand Parent Guaranty remain outstanding without Agent’s prior consent; and

 

(k)

so long as no Event of Default exists at the time of such Investment or after giving effect to such Investment, other Investments of cash and cash equivalents in an amount not exceeding $250,000 in the aggregate.

 

 

“Permitted License” means (a) the licenses of patent rights granted by Aziyo Med to CorMatrix on the Closing Date pursuant to the Cross License Agreement, and (b) any non-exclusive license of patent rights of Borrower or its Subsidiaries so long as all such Permitted Licenses are granted to third parties in the Ordinary Course of Business, do not result in a legal transfer of title to the licensed property, and have been granted in exchange for fair consideration.

 

“Permitted Liens” means:

 

(a)

(i) Liens and encumbrances in favor of Agent under the Financing Documents and (ii) Liens and encumbrances in favor of the holders of the Affiliated Financing Documents;

 

(b)

Liens, other than on Collateral that is part of the Borrowing Base, existing on the date hereof and set forth on Schedule 5.2;

 

(c)

Liens on equipment securing Debt permitted under subpart (c) of the definition of Permitted Debt, provided, however, that such Lien attaches concurrently with or within twenty (20) days after the acquisition thereof;

 

(d)

deposits or pledges of cash to secure obligations under workmen’s compensation, social security or similar laws, or under unemployment insurance (but excluding Liens arising under ERISA or, with respect to any Pension Plan or Multiemployer Plan, the Code) pertaining to a Borrower’s or its Subsidiary’s employees, if any;

 

(e)

deposits or pledges of cash to secure bids, tenders, contracts (other than contracts for the payment of money or the deferred purchase price of property or services), leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the Ordinary Course of Business;

 

(f)

carrier’s, warehousemen’s, mechanic’s, workmen’s, materialmen’s or other like Liens on Collateral, other than any Collateral which is part of the Borrowing Base, arising in the Ordinary Course of Business with respect to obligations which are not due, or which are being contested pursuant to a Permitted Contest;

 

(g)

Liens for taxes, assessments or other governmental charges (i) not at the time delinquent or thereafter payable without penalty or (ii) which are the subject of a Permitted Contest;

 

(h)

attachments, appeal bonds, judgments and other similar Liens on Collateral, other than on Collateral that is part of the Borrowing Base, for sums not exceeding $100,000 in the aggregate arising in connection with court proceedings; provided, however, that the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are the subject of a Permitted Contest;

 

 

(i)

easements, zoning restrictions, rights of way, restrictions, minor defects or irregularities in title and other similar Liens on real property not interfering in any material respect with the ordinary conduct of the business of any Credit Party or any Subsidiary; and Liens of landlords and mortgagees of landlords (i) arising by statute or under any lease or related contractual obligation entered into in the Ordinary Course of Business, (ii) on fixtures and movable tangible property located on the real property leased or subleased from such landlord and (iii) for amounts not yet due or that are subject to a Permitted Contest;

 

(j)

Liens that are rights of set-off, bankers’ liens or similar non-consensual Liens relating to deposit or securities accounts in favor of banks, other depositary institutions and securities intermediaries arising in the Ordinary Course of Business;

 

(k)

purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to operating leases or consignments of personal property entered into the Ordinary Course of Business;

 

(l)

any Lien arising under conditional sale, title retention, consignment or similar arrangements for the sale of goods in the Ordinary Course of Business; provided that such Lien attaches only to the goods subject to such sale, title retention, consignment or similar arrangement;

 

(m)

Liens (i) of a collection bank on items in the course of collection arising under Section 4-210 of the UCC or (ii) in favor of a banking or other financial institution arising in the ordinary course of business encumbering deposits or other funds maintained with such financial institution (including the right of setoff) and that are within the general parameters customary in the banking industry (and not securing any Debt for borrowed money);

 

(n)

Liens granted in the Ordinary Course of Business on the unearned portion of insurance premiums securing the financing of insurance premiums to the extent the financing is permitted clause (f) of the definition of Permitted Debt;

 

(o)

Liens in favor of customs and revenue authorities arising as a matter of Law to secure payment of customs duties in connection with the importation of goods;

 

(p)

to the extent constituting a Lien, the granting of a Permitted License; and

 

(q)

Liens granted by Aziyo Med in favor of Ligand under the Ligand Royalty Agreement (as the same is in effect on the Closing Date) to secure Aziyo Med’s obligations under the Ligand Royalty Agreement, including on the Permitted Ligand Account, so long as such Liens remain subject to the Ligand Intercreditor Agreement at all times following the Closing Date.

 

“Permitted Ligand Account” means a Deposit Account maintained by Aziyo Med at Silicon Valley Bank with account number [XXX] so long as such Deposit Account is the “Special Account” under the Ligand Royalty Agreement and is used solely for the purpose of holding amounts in respect of regularly scheduled payments due and owing on a non-accelerated basis under the Ligand Royalty Agreement and permitted to be paid pursuant to this Agreement and the Ligand Intercreditor Agreement and holding and distributing to a Credit Party amounts constituting “Excluded Costs” (as defined in the Ligand Royalty Agreement).

 

 

“Permitted Modifications” means (a) such amendments or other modifications to a Borrower’s or Subsidiary’s Organizational Documents as are required under this Agreement or by applicable Law and disclosed to Agent within thirty (30) days after such amendments or modifications have become effective, and (b) such amendments or modifications to a Borrower’s or Subsidiary’s Organizational Documents (other than those involving a change in the name of a Borrower or Subsidiary or involving a reorganization of a Borrower or Subsidiary under the laws of a different jurisdiction) that would not adversely affect the rights and interests of Agent or Lenders and are disclosed to Agent within thirty (30) days after such amendments or modifications have become effective.

 

“Person” means any natural person, corporation, limited liability company, professional association, limited partnership, general partnership, joint stock company, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any Governmental Authority.

 

“Products” means, from time to time, any products currently manufactured, sold, developed, tested or marketed by any Borrower or any of its Subsidiaries, including without limitation, those products set forth on Schedule 4.17 (as updated from time to time in accordance with Section 4.15); provided, that, for the avoidance of doubt, any new Product not disclosed on Schedule 4.17 shall still constitute a “Product” as herein defined.

 

“Pro Rata Share” means (a) with respect to a Lender’s obligation to make Revolving Loans, the Revolving Loan Commitment Percentage of such Lender, (b) with respect to a Lender’s right to receive payments of principal and interest with respect to Revolving Loans, such Lender’s Revolving Loan Exposure with respect thereto; and (c) for all other purposes (including, without limitation, the indemnification obligations arising under Section 11.6) with respect to any Lender, the percentage obtained by dividing (i) the Revolving Loan Commitment Amount of such Lender (or, in the event the Revolving Loan Commitment shall have been terminated, such Lender’s then existing Revolving Loan Outstandings), by (ii) the sum of the Revolving Loan Commitment (or, in the event the Revolving Loan Commitment shall have been terminated, the then existing Revolving Loan Outstandings) of all Lenders.

 

“Purchase Agreement” means that certain Asset Purchase Agreement, dated as of the Original Closing Date, by and among Borrowers, as purchasers, and CorMatrix and certain subsidiaries thereof as sellers (collectively, “Seller”), pursuant to which Borrower has purchased certain commercial assets from Seller on the terms and conditions as set forth therein.

 

“Qualified IPO” means the issuance and sale by Aziyo of its common stock in an underwritten public offering (other than a public offering pursuant to a registration statement on Form S-8) pursuant to an effective registration statement (whether alone or in connection with a secondary public offering) filed with the SEC in accordance with the Securities Act of 1933, as amended, following which Aziyo’s common stock is listed on a nationally-recognized stock exchange in the United States and in respect of which Aziyo has delivered evidence satisfactory to Agent that Aziyo has received net cash proceeds of not less than $40,000,000 (subject to no clawback, escrow or other terms limiting the Aziyo’s ability to freely use such proceeds).

 

“Recall” means a Person’s Removal or Correction of a marketed product that the FDA considers to be in violation of the laws it administers and against which the FDA would initiate legal action, e.g., seizure.

 

“Registered Intellectual Property” means any patent, registered trademark or servicemark, registered copyright, registered mask work, or any pending application for any of the foregoing.

 

 

“Regulatory Required Permit” means any and all licenses, approvals and permits issued by the FDA, DEA or any other applicable Governmental Authority, including without limitation Drug Applications, necessary for the testing, manufacture, marketing or sale of any Product by any applicable Borrower(s) and its Subsidiaries as such activities are being conducted by such Borrower and its Subsidiaries with respect to such Product at such time and any drug listings and drug establishment registrations under 21 U.S.C. Section 510, registrations issued by DEA under 21 U.S.C. Section 823 (if applicable to any Product), and those issued by State or local governments for the conduct of Borrower’s or any Subsidiary’s business, including without limitation, all licenses, approvals and permits necessary in connection with the removal, transportation, implantation, processing, preservation, quality control, and storage of human tissue.

 

“Removal” means the physical removal of a product from its point of use to some other location for repair, modification, adjustment, relabeling, destruction, or inspection.

 

“Required Lenders” means at any time Lenders holding (a) sixty percent (60%) or more of the sum of the Revolving Loan Commitment (taken as a whole), or (b) if the Revolving Loan Commitment has been terminated, sixty percent (60%) or more of the then aggregate outstanding principal balance of the Loans.

 

“Responsible Officer” means any of the Chief Executive Officer, Chief Financial Officer, Treasurer or any other officer of the applicable Borrower acceptable to Agent.

 

“Revolving Lender” means each Lender having a Revolving Loan Commitment Amount in excess of Zero Dollars ($0) (or, in the event the Revolving Loan Commitment shall have been terminated at any time, each Lender at such time having Revolving Loan Outstandings in excess of Zero Dollars ($0)).

 

“Revolving Loan Availability” means, at any time, the Revolving Loan Limit minus the Revolving Loan Outstandings.

 

“Revolving Loan Commitment” means, as of any date of determination, the aggregate Revolving Loan Commitment Amounts of all Lenders as of such date.

 

“Revolving Loan Commitment Amount” means, as to any Lender, the dollar amount set forth opposite such Lender’s name on the Commitment Annex under the column “Revolving Loan Commitment Amount” (if such Lender’s name is not so set forth thereon, then the dollar amount on the Commitment Annex for the Revolving Loan Commitment Amount for such Lender shall be deemed to be Zero Dollars ($0)), as such amount may be adjusted from time to time by (a) any amounts assigned (with respect to such Lender’s portion of Revolving Loans outstanding and its commitment to make Revolving Loans) pursuant to the terms of any and all effective assignment agreements to which such Lender is a party and (b) any Additional Tranche(s) activated by Borrowers in accordance with the terms of this Agreement. For the avoidance of doubt, the aggregate Revolving Loan Commitment Amount of all Lenders on the Closing Date shall be $      8,000,000 and if the Additional Tranche is fully activated by Borrowers pursuant to the terms of the Agreement such amount shall increase to $10,000,000.

 

“Revolving Loan Commitment Percentage” means, as to any Lender, (a) on the Closing Date, the percentage set forth opposite such Lender’s name on the Commitment Annex under the column “Revolving Loan Commitment Percentage” (if such Lender’s name is not so set forth thereon, then, on the Closing Date, such percentage for such Lender shall be deemed to be zero), and (b) on any date following the Closing Date, the percentage equal to the Revolving Loan Commitment Amount of such Lender on such date divided by the Revolving Loan Commitment on such date.

 

 

“Revolving Loan Exposure” means, with respect to any Lender on any date of determination, the percentage equal to the amount of such Lender’s Revolving Loan Outstandings on such date divided by the aggregate Revolving Loan Outstandings of all Lenders on such date.

 

“Revolving Loan Limit” means, at any time, the lesser of (a) the Revolving Loan Commitment and (b) the Borrowing Base.

 

“Revolving Loan Outstandings” means, at any time of calculation, (a)  the then existing aggregate outstanding principal amount of Revolving Loans, and (b) when used with reference to any single Lender, the then existing outstanding principal amount of Revolving Loans advanced by such Lender.

 

“Revolving Loans” has the meaning set forth in Section 2.1(b).

 

“SEC” means the United States Securities and Exchange Commission.

 

“Securities Account” means a “securities account” (as defined in Article 9 of the UCC), an investment account, or other account in which investment property or securities are held or invested for credit to or for the benefit of any Borrower.

 

“Securities Account Control Agreement” means an agreement, in form and substance satisfactory to Agent, among Agent, any applicable Borrower and each securities intermediary in which such Borrower maintains a Securities Account pursuant to which Agent shall obtain “control” (as defined in Article 9 of the UCC) over such Securities Account.

 

“Security Document” means this Agreement and any other agreement, document or instrument executed concurrently with the Original Credit Agreement or at any time thereafter pursuant to which one or more Credit Parties or any other Person either (a) Guarantees payment or performance of all or any portion of the Obligations, and/or (b) provides, as security for all or any portion of the Obligations, a Lien on any of its assets in favor of Agent for its own benefit and the benefit of the Lenders, as any or all of the same may be amended, supplemented, restated or otherwise modified from time to time.

 

“Solvent” means, with respect to any Person, that such Person (a) owns and will own assets the fair saleable value of which are (i) greater than the total amount of its debts and liabilities (including subordinated and Contingent Obligations), and (ii) greater than the amount that will be required to pay the probable liabilities of its then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to it; (b) has capital that is not unreasonably small in relation to its business as presently conducted or after giving effect to any contemplated transaction; and (c) does not intend to incur and does not believe that it will incur debts beyond its ability to pay such debts as they become due.

 

“Stated Rate” has the meaning set forth in Section 2.7.

 

“Subordinated Debt” means the (a) the Debt or Contingent Obligations (as applicable) under the (i) Ligand Royalty Agreement, (ii) the Ligand Parent Guaranty, and (iii) the Donor Network West Note, and (b) any other Debt of Borrowers incurred pursuant to the terms of the Subordinated Debt Documents and with the prior written consent of Agent, all of which documents must be in form and substance acceptable to Agent in its sole discretion.

 

“Subordinated Debt Documents” means (a) the Ligand Royalty Agreement, (b) the Ligand Parent Guaranty, (c) the Donor Network West Note and (d) any other documents evidencing and/or securing Debt governed by a Subordination Agreement, all of which documents must be in form and substance acceptable to Agent in its sole discretion.

 

 

“Subordination Agreements” means (a) the Ligand Intercreditor Agreement, (b) that certain Debt Subordination Agreement (Donor Network West), dated as of the date hereof, by and among Donor Network West and Agent, as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms of the Financing Documents (the “Debt Subordination Agreement (Donor Network West)”), and (c) each other agreement between Agent and another creditor of Borrowers, as the same may be amended, supplemented, restated or otherwise modified from time to time in accordance with the terms thereof, pursuant to which the Debt owing from any Borrower(s) and/or the Liens securing such Debt granted by any Borrower(s) to such creditor are subordinated in any way to the Obligations and the Liens created under the Security Documents, the terms and provisions of such Subordination Agreements to have been agreed to by and be acceptable to Agent in the exercise of its sole discretion.

 

“Subsidiary” means, with respect to any Person, (a) any corporation of which an aggregate of more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, capital stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of more than fifty percent (50%) of such capital stock whether by proxy, agreement, operation of law or otherwise, and (b) any partnership or limited liability company in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%) or of which any such Person is a general partner or may exercise the powers of a general partner. Unless the context otherwise requires, each reference to a Subsidiary shall be a reference to a Subsidiary of a Borrower.

 

“Swap Contract” means any “swap agreement”, as defined in Section 101 of the Bankruptcy Code, that is obtained by Borrower to provide protection against fluctuations in interest or currency exchange rates, but only if Agent provides its prior written consent to the entry into such “swap agreement”.

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

“Termination Date” means the earlier to occur of (a) the Maturity Date, (b) any date on which Agent accelerates the maturity of the Loans pursuant to Section 10.2, or (c) the termination date stated in any notice of termination of this Agreement provided by Borrowers in accordance with Section 2.12.

 

“Term Loan” has the meaning set forth in the Affiliated Credit Agreement.

 

“Third Party Payor” means Medicare, Medicaid, TRICARE, and other state or federal health care program, Blue Cross and/or Blue Shield, private insurers, managed care plans and any other Person or entity which presently or in the future maintains Third Party Payor Programs.

 

“Third Party Payor Programs” means all payment and reimbursement programs, sponsored by a Third Party Payor, in which a Borrower participates.

 

“Transaction Documents” means the Purchase Agreement, including the exhibits and schedules thereto, and all agreements, documents and instruments executed and delivered pursuant thereto or in connection therewith.

 

 

“TRICARE” means the program administered pursuant to 10 U.S.C. Section 1071 et. seq), Sections 1320a-7 and 1320a-7a of Title 42 of the United States Code and the regulations promulgated pursuant to such statutes.

 

“UCC” means the Uniform Commercial Code of the State of New York or of any other state the laws of which are required to be applied in connection with the perfection of security interests in any Collateral.

 

“Unfinanced Capital Expenditures” means, for any fiscal period, Capital Expenditures made by Borrower and its consolidated Subsidiaries that are not funded by Debt for Money Borrowed (other than Loans made hereunder) or purchase money Debt, in each case incurred by Borrower and its Subsidiaries during such period.

 

“United States” means the United States of America.

 

“U.S. Tax Compliance Certificate” has the meaning set forth in Section 2.8(c)(i).

 

“Withholding Agent” means any Borrower or Agent.

 

“Work-In-Process” means Inventory that is not a product that is finished and approved by a Borrower in accordance with applicable Laws and such Borrower’s normal business practices for release and delivery to customers.

 

Section 1.2     Accounting Terms and Determinations

 

. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder (including, without limitation, determinations made pursuant to the exhibits hereto) shall be made, and all financial statements required to be delivered hereunder shall be prepared on a consolidated basis in accordance with GAAP applied on a basis consistent with the most recent audited consolidated financial statements of each Borrower and its Consolidated Subsidiaries delivered to Agent and each of the Lenders on or prior to the Closing Date. If at any time any change in GAAP would affect the computation of any financial ratio or financial requirement set forth in any Financing Document, and either Borrowers or the Required Lenders shall so request, Agent, the Lenders and Borrowers shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided, however, that until so amended, (a) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (b) Borrowers shall provide to Agent and the Lenders financial statements and other documents required under this Agreement which include a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under Statement of Financial Accounting Standards 159 (or any other Financial Accounting Standard having a similar result or effect) to value any Debt or other liabilities of any Credit Party or any Subsidiary of any Credit Party at “fair value”, as defined therein.

 

 

 

Section 1.3     Other Definitional and Interpretive Provisions. References in this Agreement to “Articles”, “Sections”, “Annexes”, “Exhibits”, or “Schedules” shall be to Articles, Sections, Annexes, Exhibits or Schedules of or to this Agreement unless otherwise specifically provided. Any term defined herein may be used in the singular or plural. “Include”, “includes” and “including” shall be deemed to be followed by “without limitation”. Except as otherwise specified or limited herein, references to any Person include the successors and assigns of such Person. References “from” or “through” any date mean, unless otherwise specified, “from and including” or “through and including”, respectively. Unless otherwise specified herein, the settlement of all payments and fundings hereunder between or among the parties hereto shall be made in lawful money of the United States and in immediately available funds. References to any statute or act shall include all related current regulations and all amendments and any successor statutes, acts and regulations. All amounts used for purposes of financial calculations required to be made herein shall be without duplication. References to any statute or act, without additional reference, shall be deemed to refer to federal statutes and acts of the United States. References to any agreement, instrument or document shall include all schedules, exhibits, annexes and other attachments thereto. As used in this Agreement, the meaning of the term “material” or the phrase “in all material respects” is intended to refer to an act, omission, violation or condition which reflects or could reasonably be expected to result in a Material Adverse Effect. References to capitalized terms that are not defined herein, but are defined in the UCC, shall have the meanings given them in the UCC. All references herein to times of day shall be references to daylight or standard time, as applicable.

 

 

Section 1.4     Time is of the Essence. Time is of the essence in Borrower’s and each other Credit Party’s performance under this Agreement and all other Financing Documents.

 

Article 2 - LOANS

 

Section 2.1     Loans.

 

(a)            Reserved.

 

(b)            Revolving Loans.

 

(i)            Revolving Loans and Borrowings. On the terms and subject to the conditions set forth herein, each Lender severally agrees to make loans to Borrowers from time to time as set forth herein (each a “Revolving Loan”, and collectively, “Revolving Loans”) equal to such Lender’s Revolving Loan Commitment Percentage of Revolving Loans requested by Borrowers hereunder, provided, however, that after giving effect thereto, the Revolving Loan Outstandings shall not exceed the Revolving Loan Limit. Borrowers shall deliver to Agent a Notice of Borrowing with respect to each proposed borrowing of a Revolving Loan, such Notice of Borrowing to be delivered before 1:00 p.m. (Eastern time) two (2) Business Days (or such shorter time as Agent may reasonably agree) prior to the date of such proposed borrowing. Each Borrower and each Revolving Lender hereby authorizes Agent to make Revolving Loans on behalf of Revolving Lenders, at any time in its sole discretion, to pay principal owing in respect of the Loans and interest, fees, expenses and other charges payable by any Credit Party from time to time arising under this Agreement or any other Financing Document. The Borrowing Base shall be determined by Agent based on the most recent Borrowing Base Certificate delivered to Agent in accordance with this Agreement and such other information as may be available to Agent. Without limiting any other rights and remedies of Agent hereunder or under the other Financing Documents, the Revolving Loans shall be subject to Agent’s continuing right to withhold from the Borrowing Base reserves, and to increase and decrease such reserves from time to time, if and to the extent that in Agent’s good faith credit judgment and discretion, such reserves are necessary. Immediately prior to the effectiveness of this Agreement, the outstanding principal balance of the Revolving Loans under the Original Credit Agreement is $3,422,089.46, which amount shall be deemed to have been, and hereby is, converted into a portion of the outstanding principal amount of the Revolving Loans hereunder in like amount without constituting a novation. Each Borrower hereby (x) represents, warrants, agrees, covenants and reaffirms that it has no defense, set off, claim or counterclaim against the Agent and the Lenders with regard to its Obligations in respect of such Revolving Loans and (y) reaffirms its obligation to repay such Revolving Loans in accordance with the terms and provisions of this Agreement and the other Financing Documents.

 

 

(ii)            Mandatory Revolving Loan Repayments and Prepayments.

 

(A)           The Revolving Loan Commitment shall terminate on the Termination Date. On such Termination Date, there shall become due, and Borrowers shall pay, the entire outstanding principal amount of each Revolving Loan, together with accrued and unpaid Obligations pertaining thereto incurred to, but excluding the Termination Date; provided, however, that such payment is made not later than 12:00 12:00 P.M (Eastern time) on the Termination Date.

 

(B)            If at any time the Revolving Loan Outstandings exceed the Revolving Loan Limit, then, on the next succeeding Business Day, Borrowers shall repay the Revolving Loans, in an aggregate amount equal to such excess.

 

(C)            Principal payable on account of Revolving Loans shall be payable by Borrowers to Agent (I) immediately upon the receipt by any Borrower or Agent of any payments on or proceeds from any of the Accounts, to the extent of such payments or proceeds, as further described in Section 2.11 below, and (II) in full on the Termination Date.

 

(iii)            Optional Prepayments. Borrowers may from time to time prepay the Revolving Loans in whole or in part; provided, however, that any such partial prepayment shall be in an amount equal to $100,000 or a higher integral multiple of $25,000. For the avoidance of doubt, nothing in this clause shall permit termination of the Revolving Loan Commitment by Borrower other than in accordance with Section 2.12(b).

 

(iv)            LIBOR Rate.

 

(A)            Except as provided in subsection (C) below, Revolving Loans shall accrue interest at the LIBOR Rate plus the Applicable Margin.

 

(B)            The LIBOR Rate may be adjusted by Agent with respect to any Lender on a prospective basis to take into account any additional or increased costs to such Lender of maintaining or obtaining any eurodollar deposits or increased costs, in each case, due to changes in applicable Law occurring subsequent to the commencement of the then applicable Interest Period, including changes in tax laws (except changes of general applicability in corporate income tax laws) and changes in the reserve requirements imposed by the Board of Governors of the Federal Reserve System (or any successor), which additional or increased costs would increase the cost of funding loans bearing interest based upon the LIBOR Rate; provided, however, that notwithstanding anything in this Agreement to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “change in applicable Law”, regardless of the date enacted, adopted or issued. In any such event, the affected Lender shall give Borrowers and Agent notice of such a determination and adjustment and Agent promptly shall transmit the notice to each other Lender and, upon its receipt of the notice from the affected Lender, Borrowers may, by notice to such affected Lender (I) require such Lender to furnish to Borrowers a statement setting forth the basis for adjusting such LIBOR Rate and the method for determining the amount of such adjustment, or (II) repay the Loans bearing interest based upon the LIBOR Rate with respect to which such adjustment is made.

 

 

(C)            In the event that any change in market conditions or any law, regulation, treaty, or directive, or any change therein or in the interpretation of application thereof, shall at any time after the date hereof, in the reasonable opinion of any Lender, make it unlawful or impractical for such Lender to fund or maintain Loans bearing interest based upon the LIBOR Rate or to continue such funding or maintaining, or to determine or charge interest rates at the LIBOR Rate, such Lender shall give notice of such changed circumstances to Agent and Borrowers and Agent promptly shall transmit the notice to each other Lender and (I) in the case of any outstanding Loans of such Lender bearing interest based upon the LIBOR Rate, the date specified in such Lender’s notice shall be deemed to be the last day of the Interest Period of such Loans, and interest upon such Lender’s Loans thereafter shall accrue interest at Base Rate plus the Applicable Margin, and (II)  such Loans shall continue to accrue interest at Base Rate plus the Applicable Margin until such Lender determines that it would no longer be unlawful or impractical to maintain such Loans at the LIBOR Rate.

 

(D)           Anything to the contrary contained herein notwithstanding, neither Agent nor any Lender is required actually to acquire eurodollar deposits to fund or otherwise match fund any Obligation as to which interest accrues based on the LIBOR Rate.

 

(v)            Restriction on Termination. Notwithstanding any prepayment of the Revolving Loan Outstandings or any other termination of Lenders’ Credit Exposure under this Agreement, Agent and Lenders shall have no obligation to release any of the Collateral securing the Obligations under this Agreement while any portion of the Affiliated Obligations shall remain outstanding.

 

(c)            Additional Tranche. After the Closing Date, so long as no Default or Event of Default exists and subject to the terms of this Agreement, with the prior written consent of Agent and each of the Required Lenders, the Revolving Loan Commitment may be increased upon the written request of Borrower Representative (which such request shall state the aggregate amount of the Additional Tranche requested and shall be made at least thirty (30) days prior to the proposed effective date of such Additional Tranche) to Agent to activate the Additional Tranche; provided, however, that Agent and Lenders shall have no obligation whatsoever to consent to any requested activation of the Additional Tranche and the written consent of Agent and each of the Required Lenders shall be required in order to activate the Additional Tranche. Upon activating the Additional Tranche, each Lender’s Commitment shall increase by a proportionate amount so as to maintain the same Pro Rata Share of the Revolving Loan Commitment as such Lender held immediately prior to such activation.

 

Section 2.2     Interest, Interest Calculations and Certain Fees.

 

(a)            Interest. From and following the Closing Date, except as expressly set forth in this Agreement, Loans and the other Obligations shall bear interest at the sum of the LIBOR Rate plus the Applicable Margin. Interest on the Loans shall be paid in arrears on the first (1st) day of each month and on the maturity of such Loans, whether by acceleration or otherwise. Interest on all other Obligations shall be payable upon demand. For purposes of calculating interest, all funds transferred to the Payment Account for application to any Revolving Loans shall be subject to a five (5) Business Day clearance period and all interest accruing on such funds during such clearance period shall accrue for the benefit of Agent, and not for the benefit of the Lenders. The Borrowers hereby agree that all accrued and unpaid interest, unused line fees, minimum balance fees and collateral management fees due and owing to the “Lenders” or “Agent” (each, as defined in the Original Credit Agreement) as of the Closing Date shall be paid in cash by the Borrowers to the Agent, for the benefit of such Lenders or Agent, on the first (1st) day of the first calendar month following the Closing Date. All Loans made under the Original Credit Agreement shall bear interest at the sum of the LIBOR Rate plus the Applicable Margin starting on and after the Closing Date.

 

 

(b)            Unused Line Fee. From and following the Closing Date, Borrowers shall pay Agent, for the benefit of all Lenders committed to make Revolving Loans, in accordance with their respective Pro Rata Shares, a fee in an amount equal to (1) if the average daily balance of the sum of the Revolving Loan Outstandings during the preceding month is greater than or equal to the Minimum Balance: (i) (A) the Revolving Loan Commitment minus (B) the average daily balance of the sum of the Revolving Loan Outstandings during the preceding month, multiplied by (ii) one half of one percent (0.5%) per annum or (2) if the Minimum Balance is greater than the average daily balance of the sum of the Revolving Loan Outstandings during the preceding month: (i) (A) the Revolving Loan Commitment minus (B) the Minimum Balance, multiplied by (ii) one half of one percent (0.5%) per annum; provided that, notwithstanding the foregoing, no Defaulted Lender shall be entitled to receive its Pro Rata Share of the fee payable in accordance with this Section 2.2(b) and the fee payable by Borrowers pursuant to this subsection shall be reduced by an amount equal to such Defaulted Lender’s Pro Rata Share thereof. The unused line fee shall be paid monthly in arrears on the first day of each month and shall be deemed fully earned when due and payable and, once paid, shall be non-refundable.

 

(c)            Reserved.

 

(d)            Minimum Balance Fee. On the first day of each month, the Borrowers agree to pay to Agent, for the ratable benefit of all Lenders, the sum of the Minimum Balance Fees due for the prior month. The Minimum Balance Fee shall be deemed fully earned when due and payable and, once paid, shall be non-refundable.

 

(e)            Collateral Management Fee. From and following the Closing Date, Borrowers shall pay Agent, for its own account and not for the benefit of any other Lenders, a fee in an amount equal to the product obtained by multiplying (i) the greater of (A) the average end-of-day principal balance of Revolving Loans outstanding during the immediately preceding month and (B) the Minimum Balance, by (ii) one half of one percent (0.5%) per annum. For purposes of calculating the average end-of-day principal balance of Revolving Loans, all funds paid into the Payment Account (or which were required to be paid into the Payment Account hereunder) or otherwise received by Agent for the account of Borrowers shall be subject to a five (5) Business Day clearance period. The collateral management fee shall be payable monthly in arrears on the first day of each calendar month and shall be deemed fully earned when due and payable and, once paid, shall be non-refundable.

 

(f)             [Reserved].

 

(g)            Deferred Revolving Loan Origination Fee. If Lenders’ funding obligations in respect of the Revolving Loan Commitment under this Agreement terminate or are permanently reduced for any reason whether by voluntary termination by Borrowers, by reason of the occurrence of an Event of Default or the automatic termination of the Revolving Loan Commitments (including any automatic termination due to the occurrence of an Event of Default described in Section 10.1(f)) or otherwise) prior to the Maturity Date, Borrowers shall pay to Agent on the date of such reduction, for the benefit of all Lenders committed to make Revolving Loans on the Closing Date, a fee as compensation for the costs of such Lenders being prepared to make funds available to Borrowers under this Agreement, equal to an amount determined by multiplying the amount of the Revolving Loan Commitment so terminated or permanently reduced by the following applicable percentage amount: four percent (4.0%) for the first year following the Closing Date, three percent (3.0%) for the second year following the Closing Date, and two percent (2.0%) thereafter. All fees payable pursuant to this paragraph shall be deemed fully-earned and non-refundable as of the Closing Date.

 

 

(h)            Reserved.

 

(i)             Reserved.

 

(j)             Audit Fees. Borrowers shall pay to Agent, for its own account and not for the benefit of any other Lenders, all reasonable fees and expenses in connection with audits and inspections of Borrowers’ books and records, audits, valuations or appraisals of the Collateral, audits of Borrowers’ compliance with applicable Laws and such other matters as Agent shall deem appropriate, which shall be due and payable on the first Business Day of the month following the date of issuance by Agent of a written request for payment thereof to Borrowers.

 

(k)            Wire Fees. Borrowers shall pay to Agent, for its own account and not for the account of any other Lenders, on written demand, fees for incoming and outgoing wires made for the account of Borrowers, such fees to be based on Agent’s then current wire fee schedule (available upon written request of the Borrowers).

 

(l)             Late Charges. If payments of principal (other than a final installment of principal upon the Termination Date), interest due on the Obligations, or any other amounts due hereunder or under the other Financing Documents are not timely made and remain overdue for a period of five (5) days, Borrowers, without notice or demand by Agent, promptly shall pay to Agent, for its own account and not for the benefit of any other Lenders, as additional compensation to Agent in administering the Obligations, an amount equal to five percent (5.0%) of each delinquent payment.

 

(m)           Computation of Interest and Related Fees. All interest and fees under each Financing Document shall be calculated on the basis of a 360-day year for the actual number of days elapsed. The date of funding of a Loan shall be included in the calculation of interest. The date of payment of a Loan shall be excluded from the calculation of interest. If a Loan is repaid on the same day that it is made, one (1) day’s interest shall be charged.

 

(n)           Automated Clearing House Payments. If Agent (or its designated servicer or trustee on behalf of a securitization vehicle) so elects, monthly payments of principal, interest, fees, expenses or any other amounts due and owing from Borrower to Agent hereunder shall be paid to Agent by Automated Clearing House debit of immediately available funds from the financial institution account designated by Borrower Representative in the Automated Clearing House debit authorization executed by Borrowers or Borrower Representative in connection with this Agreement, and shall be effective upon receipt. Borrowers shall execute any and all forms and documentation necessary from time to time to effectuate such automatic debiting. In no event shall any such payments be refunded to Borrowers.

 

Section 2.3     Notes. The portion of the Loans made by each Lender shall be evidenced, if so requested by such Lender, by one or more promissory notes executed by Borrowers on a joint and several basis (each, a “Note”) in an original principal amount equal to such Lender’s Revolving Loan. Upon activation of the Additional Tranche in accordance with Section 2.1(c) hereof, Borrowers shall deliver to each Lender to whom Borrowers previously delivered a Note, a restated Note evidencing such Lender’s Revolving Loan Commitment Amount.

 

 

Section 2.4     Reserved.

 

Section 2.5     Reserved.

 

Section 2.6     General Provisions Regarding Payment; Loan Account.

 

(a)            All payments to be made by each Borrower under any Financing Document, including payments of principal and interest made hereunder and pursuant to any other Financing Document, and all fees, expenses, indemnities and reimbursements, shall be made without set-off, recoupment or counterclaim. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension (it being understood and agreed that, solely for purposes of calculating financial covenants and computations contained herein and determining compliance therewith, if payment is made, in full, on any such extended due date, such payment shall be deemed to have been paid on the original due date without giving effect to any extension thereto). Any payments received in the Payment Account before 12:00 P.M (Eastern time) on any date shall be deemed received by Agent on such date, and any payments received in the Payment Account at or after 12:00 P.M (Eastern time) on any date shall be deemed received by Agent on the next succeeding Business Day.

 

(b)            Agent shall maintain a loan account (the “Loan Account”) on its books to record Loans and other extensions of credit made by the Lenders hereunder or under any other Financing Document, and all payments thereon made by each Borrower. All entries in the Loan Account shall be made in accordance with Agent’s customary accounting practices as in effect from time to time. The balance in the Loan Account, as recorded in Agent’s books and records at any time shall be conclusive and binding evidence of the amounts due and owing to Agent by each Borrower absent manifest error; provided, however, that any failure to so record or any error in so recording shall not limit or otherwise affect any Borrower’s duty to pay all amounts owing hereunder or under any other Financing Document. Agent shall endeavor to provide Borrowers with a monthly statement regarding the Loan Account (but neither Agent nor any Lender shall have any liability if Agent shall fail to provide any such statement). Unless any Borrower notifies Agent of any objection to any such statement (specifically describing the basis for such objection) within ninety (90) days after the date of receipt thereof, it shall be deemed final, binding and conclusive upon Borrowers in all respects as to all matters reflected therein.

 

Section 2.7     Maximum Interest. In no event shall the interest charged with respect to the Loans or any other Obligations of any Borrower under any Financing Document exceed the maximum amount permitted under the laws of the State of New York or of any other applicable jurisdiction. Notwithstanding anything to the contrary herein or elsewhere, if at any time the rate of interest payable hereunder or under any Note or other Financing Document (the “Stated Rate”) would exceed the highest rate of interest permitted under any applicable law to be charged (the “Maximum Lawful Rate”), then for so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable shall be equal to the Maximum Lawful Rate; provided, however, that if at any time thereafter the Stated Rate is less than the Maximum Lawful Rate, each Borrower shall, to the extent permitted by law, continue to pay interest at the Maximum Lawful Rate until such time as the total interest received is equal to the total interest which would have been received had the Stated Rate been (but for the operation of this provision) the interest rate payable. Thereafter, the interest rate payable shall be the Stated Rate unless and until the Stated Rate again would exceed the Maximum Lawful Rate, in which event this provision shall again apply. In no event shall the total interest received by any Lender exceed the amount which it could lawfully have received had the interest been calculated for the full term hereof at the Maximum Lawful Rate. If, notwithstanding the prior sentence, any Lender has received interest hereunder in excess of the Maximum Lawful Rate, such excess amount shall be applied to the reduction of the principal balance of the Loans or to other amounts (other than interest) payable hereunder, and if no such principal or other amounts are then outstanding, such excess or part thereof remaining shall be paid to Borrowers. In computing interest payable with reference to the Maximum Lawful Rate applicable to any Lender, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made.

 

 

Section 2.8     Taxes; Capital Adequacy; Mitigation Obligations.

 

(a)            All payments of principal and interest on the Loans and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future Taxes, except as required by applicable Law. If any applicable law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable Law and if any such withholding or deduction is in respect of any Indemnified Taxes, then the Borrowers shall pay such additional amount or amounts as is necessary to ensure that the net amount actually received by Agent and each Lender will equal the full amount Agent and such Lender would have received had no such withholding or deduction been required (including, without limitation, such withholdings and deductions applicable to additional sums payable under this Section 2.8). After payment of any Tax by a Borrower to a Governmental Authority pursuant to this Section 2.8, such Borrower shall promptly forward to Agent the original or a certified copy of an official receipt, a copy of the return reporting such payment, or other documentation satisfactory to Agent evidencing such payment to such authority. Borrowers shall timely pay to the relevant Governmental Authority in accordance with applicable Law, or at the option of Agent timely reimburse it for the payment of, any Other Taxes.

 

(b)            The Borrowers shall indemnify Agent and Lenders, within ten (10) days after demand thereof, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.8) payable or paid by Agent or any Lender or required to be withheld or deducted from a payment to Agent or any Lender and any expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes and Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate in reasonable detail as to the amount of such payment or liability delivered to Borrowers by a Lender (with a copy to Agent), or by Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

 

(c)            Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments made under any Financing Document shall deliver to Borrower Representative and Agent, at the time or times prescribed by applicable Law or reasonably requested by Borrower Representative or Agent, such properly completed and executed documentation reasonably requested by Borrower Representative or Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by Borrower Representative or Agent, shall deliver such other documentation prescribed by applicable Law or reasonably requested by Borrowers or Agent as will enable Borrowers or Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Sections 2.8(c)(i), 2.8(c)(ii) and 2.8(e) below) shall not be required if in such Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

 

 

(i)            Each Lender that is not a “United States person” (as such term is defined in Section 7701(a)(30) of the Code) for U.S. federal income tax purposes and is a party hereto on the Closing Date or purports to become an assignee of an interest pursuant to Section 11.17(a) after the Closing Date (unless such Lender was already a Lender hereunder immediately prior to such assignment) (each such Lender a “Foreign Lender”) shall, to the extent permitted by Law, execute and deliver to Borrower Representative and Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower Representative or the Agent) whichever of the following is applicable: (A) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party, (x) with respect to payments of interest under any Financing Document, two (2) properly completed and executed originals of United States Internal Revenue Service (“IRS”) Forms W-8BEN or W-8BEN-E (or successor form) establishing an exemption from, or reduction of, U.S. federal withholding tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Financing Documents, two (2) properly completed and executed originals of IRS Forms W-8BEN or W-8BEN-E (or successor form) establishing an exemption from, or reduction of, U.S. federal withholding tax pursuant to the “business profits” or “other income” article of such tax treaty; (B) two (2) executed originals of Form W-8ECI (or successor form); (C) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit F-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of any Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) two (2) executed originals of IRS Forms W-8BEN or W-8BEN-E (or successor form); (D) to the extent a Foreign Lender is not the beneficial owner, two (2) executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or W-8BEN-E (or successor form), a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-2 or Exhibit F-3, IRS Form W-9 (or successor form), and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-4 on behalf of each such direct and indirect partner; or (E) other applicable forms, certificates or documents prescribed by the IRS. Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify Borrower Representative and Agent in writing of its legal inability to do so. In addition, to the extent permitted by applicable Law, such forms shall be delivered by each Foreign Lender upon the obsolescence or invalidity of any form previously delivered by such Foreign Lender. Each Foreign Lender shall promptly notify Borrower Representative at any time it determines that it is no longer in a position to provide any previously delivered certificate to Borrower Representative (or any other form of certification adopted by the U.S. taxing authorities for such purpose).

 

(ii)            Each Lender that is a “United States person” (as such term is defined in Section 7701(a)(30) of the Code) for U.S. federal income tax purposes and is a party hereto on the Closing Date or purports to become an assignee of an interest pursuant to Section 11.17(a) after the Closing Date (unless such Lender was already a Lender hereunder immediately prior to such assignment) shall, to the extent permitted by Law, provide to Borrower Representative and Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower Representative or the Agent), a properly completed and executed IRS Form W-9 or any successor form certifying as to such Lender’s entitlement to an exemption from U.S. backup withholding and other applicable forms, certificates or documents prescribed by the IRS or reasonably requested by Borrower Representative or Agent. Each such Lender shall promptly notify Borrowers at any time it determines that any certificate previously delivered to Borrower Representative (or any other form of certification adopted by the U.S. governmental authorities for such purposes) is no longer valid.

 

 

(iii)            Any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to Borrower Representative and the Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower Representative or the Agent), executed copies of any other form prescribed by applicable Law as a basis for claiming exemption from or a reduction in U.S. Federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit Borrowers or Agent to determine the withholding or deduction required to be made.

 

(d)            If any Lender determines, in its sole discretion exercised in good faith, that it has received a refund in respect of any Taxes as to which it has been indemnified by any Borrower pursuant to this Section 2.8 (including by the payment of additional amounts pursuant to this Section 2.8), then it shall promptly pay an amount equal to such refund to Borrowers, net of all reasonable out-of-pocket expenses of such Lender or of Agent with respect thereto, including any Taxes; provided, however, that Borrowers, upon the written request of such Lender or Agent, agree to repay any amount paid over to Borrowers to such Lender or to Agent (plus any related penalties, interest or other charges imposed by the relevant Governmental Authority) in the event such Lender or Agent is required, for any reason, to disgorge or otherwise repay such refund. Notwithstanding anything to the contrary in this Section 2.8, in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this Section 2.8(d) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This Section 2.8 shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

 

(e)            If a payment made to a Lender under any Financing Document would be subject to U.S. federal withholding tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to Borrower Representative and Agent at the time or times prescribed by Law and at such time or times reasonably requested by Borrower Representative or Agent such documentation prescribed by applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Borrower Representative or Agent as may be necessary for Borrowers and Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (e), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

(f)            Each Lender shall severally indemnify Agent, within ten (10) days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that any Credit Party has not already indemnified Agent for such Indemnified Taxes and without limiting the obligation of the Credit Parties to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 11.17 relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by Agent in connection with any Financing Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by Agent shall be conclusive absent manifest error. Each Lender hereby authorizes Agent to set off and apply any and all amounts at any time owing to such Lender under any Financing Document or otherwise payable by Agent to such Lender from any other source against any amount due to Agent under this paragraph (f).

 

 

(g)            Each party’s obligations under Section 2.8(a) through (f) shall survive the resignation or replacement of the Agent or any assignment of rights by, or the replacement of, a Lender, and the repayment, satisfaction or discharge of all Obligations hereunder.

 

(h)            If any Lender shall reasonably determine that the adoption or taking effect of, or any change in, any applicable Law regarding capital adequacy, in each instance, after the Closing Date, or any change after the Closing Date in the interpretation, administration or application thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation, administration or application thereof, or the compliance by any Lender or any Person controlling such Lender with any request, guideline or directive regarding capital adequacy (whether or not having the force of Law) of any such Governmental Authority, central bank or comparable agency adopted or otherwise taking effect after the Closing Date, has or would have the effect of reducing the rate of return on such Lender’s or such controlling Person’s capital as a consequence of such Lender’s obligations hereunder to a level below that which such Lender or such controlling Person could have achieved but for such adoption, taking effect, change, interpretation, administration, application or compliance (taking into consideration such Lender’s or such controlling Person’s policies with respect to capital adequacy) then from time to time, upon demand by such Lender (which demand shall be accompanied by a certificate setting forth the basis for such demand and a calculation of the amount thereof in reasonable detail, a copy of which shall be furnished to Agent), Borrowers shall promptly pay to such Lender such additional amount as will compensate such Lender or such controlling Person for such reduction, so long as such amounts have accrued on or after the day which is two hundred seventy (270) days prior to the date on which such Lender first made demand therefor; provided that notwithstanding anything in this Agreement to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “change in applicable Law”, regardless of the date enacted, adopted or issued.

 

(i)             If any Lender requests compensation under either Section 2.1(b)(iv) or Section 2.8(h), or requires Borrowers to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.8, then, upon the written request of Borrower Representative, such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder (subject to the provisions of Section 11.17) to another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or materially reduce amounts payable pursuant to any such Section, as the case may be, in the future, (ii) would not subject such Lender to any unreimbursed cost or expense and (iii) would not otherwise be disadvantageous to such Lender (as determined in its sole good faith discretion). Without limitation of the provisions of Section 12.14, each Borrower hereby agrees to pay all reasonable and documented, out-of-pocket costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

 

Section 2.9     Appointment of Borrower Representative.

 

(a)            Each Borrower hereby irrevocably appoints and constitutes Borrower Representative as its agent and attorney-in-fact to request and receive Loans in the name or on behalf of such Borrower and any other Borrowers, deliver Notices of Borrowing and Borrowing Base Certificates, give instructions with respect to the disbursement of the proceeds of the Loans, give and receive all other notices and consents hereunder or under any of the other Financing Documents and taking all other actions (including in respect of compliance with covenants) in the name or on behalf of any Borrower or Borrowers pursuant to this Agreement and the other Financing Documents. Agent and Lenders may disburse the Loans to such bank account of Borrower Representative or a Borrower or otherwise make such Loans to a Borrower, in each case as Borrower Representative may designate or direct, without notice to any other Borrower. Notwithstanding anything to the contrary contained herein, Agent may at any time and from time to time require that Loans to or for the account of any Borrower be disbursed directly to an operating account of such Borrower.

 

(b)            Borrower Representative hereby accepts the appointment by Borrowers to act as the agent and attorney-in-fact of Borrowers pursuant to this Section 2.9. Borrower Representative shall ensure that the disbursement of any Loans that are at any time requested by or to be remitted to or for the account of a Borrower, shall be remitted or issued to or for the account of such Borrower.

 

(c)            Each Borrower hereby irrevocably appoints and constitutes Borrower Representative as its agent to receive statements on account and all other notices from Agent, Lenders with respect to the Obligations or otherwise under or in connection with this Agreement and the other Financing Documents.

 

(d)            Any notice, election, representation, warranty, agreement or undertaking made or delivered by or on behalf of any Borrower by Borrower Representative shall be deemed for all purposes to have been made or delivered by such Borrower, as the case may be, and shall be binding upon and enforceable against such Borrower to the same extent as if made or delivered directly by such Borrower.

 

(e)            No resignation by or termination of the appointment of Borrower Representative as agent and attorney-in-fact as aforesaid shall be effective, except after ten (10) Business Days’ prior written notice to Agent. If the Borrower Representative resigns under this Agreement, Borrowers shall be entitled to appoint a successor Borrower Representative (which shall be a Borrower and shall be reasonably acceptable to Agent as such successor). Upon the acceptance of its appointment as successor Borrower Representative hereunder, such successor Borrower Representative shall succeed to all the rights, powers and duties of the retiring Borrower Representative and the term “Borrower Representative” means such successor Borrower Representative for all purposes of this Agreement and the other Financing Documents, and the retiring or terminated Borrower Representative’s appointment, powers and duties as Borrower Representative shall be thereupon terminated.

 

Section 2.10      Joint and Several Liability; Rights of Contribution; Subordination and Subrogation.

 

(a)            Borrowers are defined collectively to include all Persons named as one of the Borrowers herein; provided, however, that any references herein to “any Borrower”, “each Borrower” or similar references, shall be construed as a reference to each individual Person named as one of the Borrowers herein. Each Person so named shall be jointly and severally liable for all of the obligations of Borrowers under this Agreement. Each Borrower, individually, expressly understands, agrees and acknowledges, that the credit facilities would not be made available on the terms herein in the absence of the collective credit of all of the Persons named as the Borrowers herein, the joint and several liability of all such Persons, and the cross-collateralization of the collateral of all such Persons. Accordingly, each Borrower individually acknowledges that the benefit to each of the Persons named as one of the Borrowers as a whole constitutes reasonably equivalent value, regardless of the amount of the credit facilities actually borrowed by, advanced to, or the amount of collateral provided by, any individual Borrower. In addition, each entity named as one of the Borrowers herein hereby acknowledges and agrees that all of the representations, warranties, covenants, obligations, conditions, agreements and other terms contained in this Agreement shall be applicable to and shall be binding upon and measured and enforceable individually against each Person named as one of the Borrowers herein as well as all such Persons when taken together. By way of illustration, but without limiting the generality of the foregoing, the terms of Section 10.1 of this Agreement are to be applied to each individual Person named as one of the Borrowers herein (as well as to all such Persons taken as a whole), such that the occurrence of any of the events described in Section 10.1 of this Agreement as to any Person named as one of the Borrowers herein shall constitute an Event of Default even if such event has not occurred as to any other Persons named as the Borrowers or as to all such Persons taken as a whole.

 

 

(b)            Notwithstanding any provisions of this Agreement to the contrary, it is intended that the joint and several nature of the liability of each Borrower for the Obligations and the Liens granted by Borrowers to secure the Obligations, not constitute a Fraudulent Conveyance (as defined below). Consequently, Agent, Lenders and each Borrower agree that if the liability of a Borrower for the Obligations, or any Liens granted by such Borrower securing the Obligations would, but for the application of this sentence, constitute a Fraudulent Conveyance, the liability of such Borrower and the Liens securing such liability shall be valid and enforceable only to the maximum extent that would not cause such liability or such Lien to constitute a Fraudulent Conveyance, and the liability of such Borrower and this Agreement shall automatically be deemed to have been amended accordingly. For purposes hereof, the term “Fraudulent Conveyance” means a fraudulent conveyance under Section 548 of Chapter 11 of Title II of the Bankruptcy Code or a fraudulent conveyance or fraudulent transfer under the applicable provisions of any fraudulent conveyance or fraudulent transfer law or similar law of any state, nation or other governmental unit, as in effect from time to time.

 

(c)            Agent is hereby authorized, without notice or demand (except as otherwise specifically required under this Agreement) and without affecting the liability of any Borrower hereunder, at any time and from time to time, to (i) renew, extend or otherwise increase the time for payment of the Obligations; (ii) with the written agreement of any Borrower, change the terms relating to the Obligations or otherwise modify, amend or change the terms of any Note or other agreement, document or instrument now or hereafter executed by any Borrower and delivered to Agent for any Lender; (iii) accept partial payments of the Obligations; (iv) take and hold any Collateral for the payment of the Obligations or for the payment of any guaranties of the Obligations and exchange, enforce, waive and release any such Collateral; (v) apply any such Collateral and direct the order or manner of sale thereof as Agent, in its sole discretion, may determine; and (vi) settle, release, compromise, collect or otherwise liquidate the Obligations and any Collateral therefor in any manner, all guarantor and surety defenses being hereby waived by each Borrower. Without limitations of the foregoing, with respect to the Obligations, each Borrower hereby makes and adopts each of the agreements and waivers set forth in each Guarantee, the same being incorporated hereby by reference. Except as specifically provided in this Agreement or any of the other Financing Documents, Agent shall have the exclusive right to determine the time and manner of application of any payments or credits, whether received from any Borrower or any other source, and such determination shall be binding on all Borrowers. All such payments and credits may be applied, reversed and reapplied, in whole or in part, to any of the Obligations that Agent shall determine, in its sole discretion, without affecting the validity or enforceability of the Obligations of the other Borrower.

 

(d)            Each Borrower hereby agrees that, except as hereinafter provided, its obligations hereunder shall be unconditional, irrespective of (i) the absence of any attempt to collect the Obligations from any obligor or other action to enforce the same; (ii) the waiver or consent by Agent with respect to any provision of any instrument evidencing the Obligations, or any part thereof, or any other agreement heretofore, now or hereafter executed by a Borrower and delivered to Agent; (iii) failure by Agent to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any security or collateral for the Obligations; (iv) the institution of any proceeding under the Bankruptcy Code, or any similar proceeding, by or against a Borrower or Agent’s election in any such proceeding of the application of Section 1111(b)(2) of the Bankruptcy Code; (v) any borrowing or grant of a security interest by a Borrower as debtor-in-possession, under Section 364 of the Bankruptcy Code; (vi) the disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of Agent’s claim(s) for repayment of any of the Obligations; or (vii) any other circumstance other than payment in full of the Obligations which might otherwise constitute a legal or equitable discharge or defense of a guarantor or surety.

 

 

(e)            Borrowers hereby agree, as between themselves, that to the extent that Agent, on behalf of Lenders, shall have received from any Borrower any Recovery Amount (as defined below), then the paying Borrower shall have a right of contribution against each other Borrower in an amount equal to such other Borrower’s contributive share of such Recovery Amount; provided, however, that in the event any Borrower suffers a Deficiency Amount (as defined below), then the Borrower suffering the Deficiency Amount shall be entitled to seek and receive contribution from and against the other Borrowers in an amount equal to the Deficiency Amount; and provided, further, that in no event shall the aggregate amounts so reimbursed by reason of the contribution of any Borrower equal or exceed an amount that would, if paid, constitute or result in Fraudulent Conveyance. Until all Obligations have been paid and satisfied in full, no payment made by or for the account of a Borrower including, without limitation, (i) a payment made by such Borrower on behalf of the liabilities of any other Borrower, or (ii) a payment made by any other Guarantor under any Guarantee, shall entitle such Borrower, by subrogation or otherwise, to any payment from such other Borrower or from or out of such other Borrower’s property. The right of each Borrower to receive any contribution under this Section 2.10(e) or by subrogation or otherwise from any other Borrower shall be subordinate in right of payment to the Obligations and such Borrower shall not exercise any right or remedy against such other Borrower or any property of such other Borrower by reason of any performance of such Borrower of its joint and several obligations hereunder, until the Obligations have been indefeasibly paid and satisfied in full, and no Borrower shall exercise any right or remedy with respect to this Section 2.10(e) until the Obligations have been indefeasibly paid and satisfied in full. As used in this Section 2.10(e), the term “Recovery Amount” means the amount of proceeds received by or credited to Agent from the exercise of any remedy of the Lenders under this Agreement or the other Financing Documents, including, without limitation, the sale of any Collateral. As used in this Section 2.10(e), the term “Deficiency Amount” means any amount that is less than the entire amount a Borrower is entitled to receive by way of contribution or subrogation from, but that has not been paid by, the other Borrowers in respect of any Recovery Amount attributable to the Borrower entitled to contribution, until the Deficiency Amount has been reduced to Zero Dollars ($0) through contributions and reimbursements made under the terms of this Section 2.10(e) or otherwise.

 

Section 2.11     Collections and Lockbox Account.

 

(a)            Borrowers shall maintain a lockbox (the “Lockbox”) with a United States depository institution designated from time to time by Agent (the “Lockbox Bank”), subject to the provisions of this Agreement, and, subject to Section 7.4, shall execute with the Lockbox Bank a Deposit Account Control Agreement and such other agreements related to such Lockbox as Agent may require. Except as provided in Section 2.11(b), Borrowers shall ensure that all collections of Accounts are paid directly from Account Debtors (i) into the Lockbox for deposit into the Lockbox Account and/or (ii) directly into the Lockbox Account; provided, however, unless Agent shall otherwise direct by written notice to Borrowers, Borrowers shall be permitted to cause Account Debtors who are individuals to pay Accounts directly to Borrowers, which Borrowers shall then administer and apply in the manner required below. All funds deposited into a Lockbox Account shall be transferred into the Payment Account (or, prior to the time of the initial borrowing of the Revolving Loans, such Deposit Account of Borrower, as Agent may direct in its sole discretion) by the close of each Business Day. Notwithstanding the foregoing sentence, during the period beginning on the Closing Date and ending on the date that is sixty (60) days thereafter, Borrower shall be permitted to receive collections of Accounts owing to Aziyo (and not, for the avoidance of doubt, Aziyo Med) in Deposit Account #[XXX] at Alostar Bank; provided that all funds in such Deposit Account are transferred to the Lockbox Account at the end of each business day pursuant to irrevocable standing wire instruction.

 

 

(b)            Notwithstanding the foregoing or anything else to the contrary in this Section 2.11(b), all amounts owed to Aziyo Med in respect of Accounts that are subject to, or potentially subject to, a security interest of Ligand pursuant to the Ligand Royalty Agreement or any other funds constituting “Royalty Interests” (as defined in the Ligand Royalty Agreement) or the proceeds thereof shall be paid into a segregated Deposit Account owned solely by Aziyo Med that is subject to a “springing” Deposit Account Control Agreement (the “Aziyo Med Controlled Account”). Once per calendar week, Aziyo Med shall cause all amounts on deposit in the Aziyo Med Controlled Account required to be transferred by the Ligand Royalty Agreement, and permitted to be so transferred pursuant to the terms of the Ligand Intercreditor Agreement, to be transferred to the Permitted Ligand Account in order to pay the Ligand Royalty Payments in accordance with the terms of the Ligand Intercreditor Agreement.  Once per calendar week (and, for the avoidance of doubt, on the same day as each transfer to the Permitted Ligand Account pursuant to the preceding sentence), Aziyo Med shall transfer all amounts on deposit in the Aziyo Med Controlled Account other than those necessary to pay the Ligand Royalty Payments, in accordance with the previous sentence, to the Lockbox Account.

 

(c)            Notwithstanding anything in any lockbox agreement or Deposit Account Control Agreement to the contrary, Borrowers agree that they shall be liable for any fees and charges in effect from time to time and charged by the Lockbox Bank in connection with the Lockbox, the Lockbox Account, and that Agent shall have no liability therefor. Borrowers hereby indemnify and agree to hold Agent harmless from any and all liabilities, claims, losses and demands whatsoever, including reasonable attorneys’ fees and expenses, arising from or relating to actions of Agent or the Lockbox Bank pursuant to this Section or any lockbox agreement or Deposit Account Control Agreement or similar agreement, except to the extent of such losses arising solely from Agent’s gross negligence or willful misconduct.

 

(d)            Agent shall apply, on a daily basis, all funds transferred into the Payment Account pursuant to this Section 2.11 to reduce the outstanding Revolving Loans in such order of application as Agent shall elect. If as the result of collections of Accounts pursuant to the terms and conditions of this Section, a credit balance exists with respect to the Loan Account, such credit balance shall not accrue interest in favor of Borrowers, but Agent shall transfer such funds into an account designated by Borrower Representative for so long as no Event of Default exists.

 

(e)            To the extent that any collections of Accounts or proceeds of other Collateral are not sent directly to the Lockbox or Lockbox Account but are received by any Borrower, such collections shall be held in trust for the benefit of Agent pursuant to an express trust created hereby and immediately remitted, in the form received, to applicable Lockbox or Lockbox Account. No such funds received by any Borrower shall be commingled with other funds of the Borrowers. Except to the extent otherwise permitted pursuant to this Section 2.11, if any funds received by any Borrower are commingled with other funds of the Borrowers, or are required to be deposited to a Lockbox or Lockbox Account and are not so deposited within five (5) Business Days, then Borrowers shall pay to Agent, for its own account and not for the account of any other Lenders, a compliance fee equal to $500 for each day that any such conditions exist.

 

 

(f)            Borrowers acknowledge and agree that compliance with the terms of this Section is essential, and that Agent and Lenders will suffer immediate and irreparable injury and have no adequate remedy at law, if any Borrower, through acts or omissions, causes or permits Account Debtors to send payments other than to the Lockbox or Lockbox Accounts or if any Borrower fails to promptly deposit collections of Accounts or proceeds of other Collateral in the Lockbox Account as herein required. Accordingly, in addition to all other rights and remedies of Agent and Lenders hereunder, Agent shall have the right to seek specific performance of the Borrowers’ obligations under this Section, and any other equitable relief as Agent may deem necessary or appropriate, and Borrowers waive any requirement for the posting of a bond in connection with such equitable relief.

 

(g)            Borrowers shall not, and Borrowers shall not suffer or permit any Credit Party to, (i) withdraw any amounts from any Lockbox Account, (ii) change the procedures or sweep instructions under the agreements governing any Lockbox Accounts, or (iii) send to or deposit in any Lockbox Account any funds other than payments made with respect to and proceeds of Accounts or other Collateral. Borrowers shall, and shall cause each Credit Party to, cooperate with Agent in the identification and reconciliation on a daily basis of all amounts received in or required to be deposited into the Lockbox Accounts. If more than fifteen percent (15%) of the collections of Accounts received by Borrowers during any given fifteen (15) day period is not identified or reconciled both with respect to the Account Debtor and the Borrower to whom such Account is owed to the reasonable satisfaction of Agent within ten (10) Business Days of receipt, Agent shall not be obligated to make further advances under this Agreement until such amount is identified or is reconciled to the reasonable satisfaction of Agent, as the case may be. In addition, if any such amount cannot be identified or reconciled to the reasonable satisfaction of Agent, Agent may utilize its own staff or, if it deems necessary, engage an outside auditor, in either case at Borrowers’ expense (which in the case of Agent’s own staff shall be in accordance with Agent’s then prevailing customary charges (plus expenses)), to make such examination and report as may be necessary to identify and reconcile such amount.

 

(h)            If any Borrower breaches its obligation to direct payments of the proceeds of the Collateral to the Lockbox Account, Agent, as the irrevocably made, constituted and appointed true and lawful attorney for Borrowers, may, by the signature or other act of any of Agent’s authorized representatives (without requiring any of them to do so), direct any Account Debtor to pay proceeds of the Collateral to Borrowers by directing payment to the Lockbox Account.

 

Section 2.12     Termination; Restriction on Termination.

 

(a)            Termination by Lenders. In addition to the rights set forth in Section 10.2, Agent may, and at the direction of Required Lenders shall, terminate this Agreement without notice upon or after the occurrence and during the continuance of an Event of Default.

 

(b)           Termination by Borrowers. Upon at least ten (10) days’ prior written notice and pursuant to payoff documentation in form and substance satisfactory to Agent and Lenders, Borrowers may, at its option, terminate this Agreement; provided, however, that no such termination shall be effective until Borrowers have complied with Section 2.2 and the terms of any fee letter and paid in full all of the Affiliated Obligations in immediately available funds and terminated the Affiliated Financing Documents. Any notice of termination given by Borrowers shall be irrevocable unless all Lenders otherwise agree in writing and no Lender shall have any obligation to make any Loans on or after the termination date stated in such notice. Borrowers may elect to terminate this Agreement in its entirety only. No section of this Agreement or type of Loan available hereunder may be terminated singly.

 

 

 

(c)            Effectiveness of Termination. All of the Obligations shall be immediately due and payable upon the Termination Date. All undertakings, agreements, covenants, warranties and representations of Borrowers contained in the Financing Documents shall survive any such termination and Agent shall retain their Liens in the Collateral and Agent and each Lender shall retain all of its rights and remedies under the Financing Documents notwithstanding such termination until all Obligations and Affiliated Obligations have been discharged or paid, in full, in immediately available funds, including, without limitation, all Obligations under Section 2.2 and the terms of any fee letter resulting from such termination. Notwithstanding the foregoing or the payment in full of the Obligations, Agent shall not be required to terminate its Liens in the Collateral unless, with respect to any loss or damage Agent may incur as a result of dishonored checks or other items of payment received by Agent from Borrower or any Account Debtor and applied to the Obligations, Agent shall, at its option, (i) have received a written agreement satisfactory to Agent, executed by Borrowers and by any Person whose loans or other advances to Borrowers are used in whole or in part to satisfy the Obligations, indemnifying Agent and each Lender from any such loss or damage or (ii) have retained cash Collateral or other Collateral for such period of time as Agent, in its discretion, may deem necessary to protect Agent and each Lender from any such loss or damage.

 

Article 3 - REPRESENTATIONS AND WARRANTIES

 

To induce Agent and Lenders to enter into this Agreement and to make the Loans and other credit accommodations contemplated hereby, each Borrower hereby represents and warrants to Agent and each Lender that:

 

Section 3.1      Existence and Power. Each Credit Party (a) is an entity as specified on Schedule 3.1, (b) is duly organized, validly existing and in good standing under the laws of the jurisdiction specified on Schedule 3.1 and no other jurisdiction, (c) has the same legal name as it appears in such Credit Party’s Organizational Documents and an organizational identification number (if any), in each case as specified on Schedule 3.1, (d) has all powers to own its assets and has powers and all Permits necessary or desirable in the operation of its business as presently conducted or as proposed to be conducted, except where the failure to have such Permits could not reasonably be expected to have a Material Adverse Effect, and (e) is qualified to do business as a foreign entity in each jurisdiction in which it is required to be so qualified, which jurisdictions as of the Closing Date are specified on Schedule 3.1, except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 3.1, no Credit Party (x) has had, over the five (5) year period preceding the Closing Date, any name other than its current name, or (y) was incorporated or organized under the laws of any jurisdiction other than its current jurisdiction of incorporation or organization.

 

Section 3.2      Organization and Governmental Authorization; No Contravention. The execution, delivery and performance by each Credit Party of the Operative Documents to which it is a party (a) are within its powers, (b) have been duly authorized by all necessary action pursuant to its Organizational Documents, (c) require no further action by or in respect of, or filing with, any Governmental Authority and (d) do not violate, conflict with or cause a breach or a default under (i) any Law applicable to any Credit Party, (ii) any of the Organizational Documents of any Credit Party, or (iii) any agreement or instrument binding upon it, except for such violations, conflicts, breaches or defaults as could not, with respect to this clause (iii), reasonably be expected to have a Material Adverse Effect.

 

Section 3.3      Binding Effect. Each of the Operative Documents to which any Credit Party is a party constitutes a valid and binding agreement or instrument of such Credit Party, enforceable against such Credit Party in accordance with its respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles. Each Financing Document has been duly executed and delivered by each Credit Party party thereto.

 

 

Section 3.4      Capitalization. The authorized equity securities of each of the Credit Parties as of the Closing Date are as set forth on Schedule 3.4. All issued and outstanding equity securities of each of the Credit Parties are duly authorized and validly issued, fully paid, nonassessable, free and clear of all Liens other than Permitted Liens, and such equity securities were issued in compliance with all applicable Laws. The identity of the holders of the equity securities of each of the Credit Parties and the percentage of their fully-diluted ownership of the equity securities of each of the Credit Parties as of the Closing Date is set forth on Schedule 3.4. No shares of the capital stock or other equity securities of any Credit Party, other than those described above, are issued and outstanding as of the Closing Date. Except as set forth in the Equity Investment Documents, as of the Closing Date there are no preemptive or other outstanding rights, options, warrants, conversion rights or similar agreements or understandings for the purchase or acquisition from any Credit Party of any equity securities of any such entity.

 

Section 3.5      Financial Information. All financial statements delivered to Agent by any Credit Party fairly present in all material respects the financial position of such Credit Party as of such date and shall be in conformity with GAAP (and as to unaudited financial statements, subject to normal year-end adjustments and the absence of footnote disclosures). Since December 31, 2018, there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect. Since December 31, 2018, to the knowledge of any Borrower (after the exercise of reasonable due diligence) there has been no material adverse change in the business, operations, properties, prospects or condition (financial or otherwise) of any business, assets or entities being purchased by Borrowers pursuant to the Transaction Documents.

 

Section 3.6      Litigation . Except as set forth on Schedule 3.6 as of the Closing Date, and except as hereafter disclosed to Agent in writing, there is no Litigation pending against, or to such Borrower’s knowledge threatened against, any Credit Party or, to such Borrower’s knowledge, any party to any Operative Document other than a Credit Party. There is no Litigation pending in which an adverse decision could reasonably be expected to have a Material Adverse Effect or which in any manner draws into question the validity of any of the Operative Documents.

 

Section 3.7      Ownership of Property. Each Borrower and its Subsidiaries are the lawful sole owner of, has good and marketable title to and is in lawful possession of, or has valid leasehold interests in, all properties, accounts and other assets (real or personal, tangible, intangible or mixed) purported or reported to be owned or leased (as the case may be) by such Person.

 

Section 3.8      No Default. No Event of Default, or to such Borrower’s knowledge, Default, has occurred and is continuing. No Credit Party is in breach or default under or with respect to any contract, agreement, lease or other instrument to which it is a party or by which its property is bound or affected, which breach or default could reasonably be expected to have a Material Adverse Effect.

 

Section 3.9      Labor Matters. As of the Closing Date, there are no strikes or other labor disputes pending or, to any Borrower’s knowledge, threatened against any Credit Party. Except as could not reasonably be expected to result in a Material Adverse Effect, (a) hours worked and payments made to the employees of each Borrower and each of its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Law dealing with such matters and (b) all payments due from each Borrower and each of its Subsidiaries, or for which any claim may be made against any of them, on account of wages and employee and retiree health and welfare insurance and other benefits have been paid or accrued as a liability on their books, as the case may be. The consummation of the transactions contemplated by the Financing Documents and the other Operative Documents will not give rise to a right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which any Borrower or any Subsidiary is a party or by which it is bound.

 

 

Section 3.10      Regulated Entities. No Credit Party is an “investment company” or a company “controlled” by an “investment company” or a “subsidiary” of an “investment company,” all within the meaning of the Investment Company Act of 1940.

 

Section 3.11      Margin Regulations. None of the proceeds from the Loans have been or will be used, directly or indirectly, for the purpose of purchasing or carrying any “margin stock” (as defined in Regulation U of the Federal Reserve Board), for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any “margin stock” or for any other purpose which might cause any of the Loans to be considered a “purpose credit” within the meaning of Regulation T, U or X of the Federal Reserve Board.

 

Section 3.12      Compliance With Laws; Anti-Terrorism Laws.

 

(a)            Each Credit Party is in compliance with the requirements of all applicable Laws, except for such Laws the noncompliance with which could not reasonably be expected to have a Material Adverse Effect.

 

(b)            None of the Credit Parties and, to the knowledge of the Credit Parties, none of their Affiliates (except for any Person that is an Affiliate of a Credit Party solely due to the fact that it is HighCape Portfolio Company) (i) is in violation of any Anti-Terrorism Law, (ii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law, (iii) is a Blocked Person, or is controlled by a Blocked Person, (iv) is acting or will act for or on behalf of a Blocked Person, (v) is associated with, or will become associated with, a Blocked Person or (vi) is providing, or will provide, material, financial or technical support or other services to or in support of acts of terrorism of a Blocked Person. No Credit Party nor, to the knowledge of any Credit Party, any of its Affiliates (except for any Person that is an Affiliate of a Credit Party solely due to the fact that it is HighCape Portfolio Company) or agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement, (A) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (B) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law.

 

Section 3.13      Taxes. All federal, state and material local tax returns, reports and statements required to be filed by or on behalf of each Credit Party have been filed with the appropriate Governmental Authorities in all jurisdictions in which such returns, reports and statements are required to be filed and, except to the extent subject to a Permitted Contest, all Taxes (including real property Taxes) and other charges shown to be due and payable in respect thereof have been timely paid prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for nonpayment thereof. Except to the extent subject to a Permitted Contest, all material state and local sales and use Taxes required to be paid by each Credit Party have been paid. All federal and state returns have been filed by each Credit Party for all periods for which returns were due with respect to employee income tax withholding, social security and unemployment taxes, and, except to the extent subject to a Permitted Contest, the amounts shown thereon to be due and payable have been paid in full or adequate provisions therefor have been made.

 

Section 3.14      Compliance with ERISA.

 

(a)            Each ERISA Plan (and the related trusts and funding agreements) complies in form and in operation with, has been administered in compliance with, and the terms of each ERISA Plan satisfy, the applicable requirements of ERISA and the Code in all material respects. Each ERISA Plan which is intended to be qualified under Section 401(a) of the Code is so qualified, and the United States Internal Revenue Service has issued a favorable determination letter with respect to each such ERISA Plan which may be relied on currently. No Credit Party has incurred liability for any material excise tax under any of Sections 4971 through 5000 of the Code.

 

 

(b)            Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, each Borrower and each Subsidiary is in compliance with the applicable provisions of ERISA and the provision of the Code relating to ERISA Plans and the regulations and published interpretations therein. During the thirty-six (36) month period prior to the Closing Date or the making of any Loan (i) no steps have been taken to terminate any Pension Plan, and (ii) no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 303(k) of ERISA or Section 430(k) of the Code and no event has occurred that would give rise to a Lien under Section 4068 of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which could result in the incurrence by any Credit Party of any material liability, fine or penalty. No Credit Party has incurred liability to the PBGC (other than for current premiums) with respect to any employee Pension Plan. All contributions (if any) have been made on a timely basis to any Multiemployer Plan that are required to be made by any Credit Party or any other member of the Controlled Group under the terms of the plan or of any collective bargaining agreement or by applicable Law; no Credit Party nor any member of the Controlled Group has withdrawn or partially withdrawn from any Multiemployer Plan, incurred any withdrawal liability with respect to any such plan or received notice of any claim or demand for withdrawal liability or partial withdrawal liability from any such plan, and no condition has occurred which, if continued, could result in a withdrawal or partial withdrawal from any such plan, and no Credit Party nor any member of the Controlled Group has received any notice that any Multiemployer Plan is in reorganization, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of any excise tax, that any such plan is or has been funded at a rate less than that required under Section 412 of the Code, that any such plan is or may be terminated, or that any such plan is or may become insolvent.

 

Section 3.15      Consummation of Operative Documents; Brokers. Except for fees payable to Agent and/or Lenders, no broker, finder or other intermediary has brought about the obtaining, making or closing of the transactions contemplated by the Operative Documents, and no Credit Party has or will have any obligation to any Person in respect of any finder’s or brokerage fees, commissions or other expenses in connection herewith or therewith.

 

Section 3.16      [Reserved]. 

 

Section 3.17      Material Contracts. Except for the Operative Documents and the other agreements set forth on Schedule 3.17, as of the Closing Date there are no Material Contracts. The consummation of the transactions contemplated by the Financing Documents will not give rise to a right of termination in favor of any party to any Material Contract (other than any Credit Party), except for such Material Contracts the noncompliance with which would not reasonably be expected to have a Material Adverse Effect.

 

Section 3.18      Compliance with Environmental Requirements; No Hazardous Materials. Except in each case as set forth on Schedule 3.18:

 

(a)            no notice, notification, demand, request for information, citation, summons, complaint or order has been issued, no complaint has been filed, no penalty has been assessed and no investigation or review is pending, or to such Borrower’s knowledge, threatened by any Governmental Authority or other Person with respect to any (i) alleged violation by any Credit Party of any Environmental Law, (ii) alleged failure by any Credit Party to have any Permits required in connection with the conduct of its business or to comply with the terms and conditions thereof, (iii) any generation, treatment, storage, recycling, transportation or disposal of any Hazardous Materials, or (iv) release of Hazardous Materials; and

 

 

(b)            no property now owned or leased by any Credit Party and, to the knowledge of each Borrower, no such property previously owned or leased by any Credit Party, to which any Credit Party has, directly or indirectly, transported or arranged for the transportation of any Hazardous Materials, is listed or, to such Borrower’s knowledge, proposed for listing, on the National Priorities List promulgated pursuant to CERCLA, or CERCLIS (as defined in CERCLA) or any similar state list or is the subject of federal, state or local enforcement actions or, to the knowledge of such Borrower, other investigations which may lead to claims against any Credit Party for clean-up costs, remedial work, damage to natural resources or personal injury claims, including, without limitation, claims under CERCLA.

 

For purposes of this Section 3.18, each Credit Party shall be deemed to include any business or business entity (including a corporation) that is, in whole or in part, a predecessor of such Credit Party.

 

Section 3.19      Intellectual Property and License Agreements. A list of all Registered Intellectual Property of each Credit Party and all material in-bound license or sublicense agreements, exclusive and material out-bound license or sublicense agreements, or other material rights of any Credit Party to use Intellectual Property (but excluding in-bound licenses of over-the-counter software that is commercially available to the public), as of the Closing Date and, as updated pursuant to Section 4.15, is set forth on Schedule 3.19. Except for Permitted Licenses, each Credit Party is the sole owner of its Intellectual Property free and clear of any Liens other than Permitted Liens. Each patent is valid and enforceable and no part of the Material Intangible Assets has been judged invalid or unenforceable, in whole or in part, and to the best of Borrower’s knowledge, no claim has been made that any part of the Intellectual Property violates the rights of any third party.

 

Section 3.20      Solvency. Each Borrower is, and after giving effect to the Loan advance and the liabilities and obligations of each Borrower under the Operative Documents, will be, Solvent; and each other Credit Party together with Borrower and its Subsidiaries, taken as a whole, is Solvent.

 

Section 3.21      Full Disclosure. None of the material written information (financial or otherwise, but excluding any projections and forward-looking statements, estimates, budgets and industry data of a general nature) furnished by or on behalf of any Credit Party to Agent or any Lender in connection with the consummation of the transactions contemplated by the Operative Documents (in each case, taken as a whole and as modified or supplemented by other information so furnished promptly after the same becomes available) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which such statements were made. All financial projections and forward-looking statements delivered to Agent and the Lenders by the Borrowers have been prepared on the basis of the assumptions stated therein. Such projections represent the Borrowers’ best estimate of the Borrowers’ future financial performance as of the date of delivery and such assumptions are believed by the Borrowers to be fair and reasonable in light of current business conditions at the time of delivery to the Agent, provided that it being understood that such projections are subject to uncertainties and contingencies, many of which are beyond the control of the Borrowers, and the Borrowers can give no assurance that such projections will be attained, that actual results may differ in a material manner from such projections and any failure to meet such projections shall not be deemed to be a breach of any representation or covenant herein.

 

Section 3.22      Reserved.

 

Section 3.23      Subsidiaries. Borrowers do not own any stock, partnership interests, limited liability company interests or other equity securities or Subsidiaries except for Permitted Investments.

 

 

Section 3.24      Reserved.

 

 

Section 3.25      Regulatory Matters.

 

(a)          All of Borrower’s material Products and material Regulatory Required Permits as of the Closing Date are listed on Schedule 4.17.

 

(b)         None of the Borrowers are in violation of any Healthcare Laws in any material respect.

 

(c)          No Borrower is participating in any Third Party Payor Program.

 

(d)         None of the Borrower’s officers, directors, employees, shareholders, their agents or affiliates has made an untrue statement of material fact or fraudulent statement to the FDA or failed to disclose a material fact required to be disclosed to the FDA, committed an act, made a statement, or failed to make a statement that could reasonably be expected to provide a basis for the FDA to invoke its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities,” set forth in 56 Fed. Regulation 46191 (September 10, 1991).

 

(e)          No Borrower has received any written notice that any Governmental Authority, including without limitation the FDA, DEA, the Office of the Inspector General of HHS or the United States Department of Justice has commenced or threatened to initiate any action against a Credit Party, any action to enjoin a Credit Party, their officers, directors, employees, shareholders or their agents and Affiliates (except for any Person that is an Affiliate of a Credit Party solely due to the fact that it is HighCape Portfolio Company), from conducting their businesses at any facility owned or used by them or for any material civil penalty, injunction, seizure or criminal action.

 

(f)           No Borrower has received from the FDA or the DEA, a Warning Letter, Form FDA-483, “Untitled Letter,” other correspondence or notice setting forth allegedly objectionable observations or alleged violations of laws and regulations enforced by the FDA or the DEA, or any comparable correspondence from any state or local authority responsible for regulating drug products and establishments, or any comparable correspondence from any foreign counterpart of the FDA or DEA, or any comparable correspondence from any foreign counterpart of any state or local authority with regard to any Product or the manufacture, processing, packing, or holding thereof.

 

(g)          No Borrower is subject to any proceeding, suit or, to Borrower’s knowledge, investigation by any federal, state or local government or quasi-governmental body, agency, board or authority or any other administrative or investigative body which could result in the revocation, transfer, surrender, suspension or other impairment of the Permits of such Borrower.

 

(h)         Borrower has not engaged in any Recalls, Market Withdrawals, or other forms of product retrieval from the marketplace of any Products.

 

(i)           Each Product, to the extent applicable (a) is not adulterated or misbranded within the meaning of the FDCA; (b) is not an article prohibited from introduction into interstate commerce under the provisions of Sections 404, 505 or 512 of the FDCA; (c) has been, to Borrower’s knowledge after due inquiry, prior to the Closing Date and, thereafter, shall be manufactured, imported, possessed, owned, warehoused, marketed, promoted, sold, labeled, furnished, distributed and marketed and each service has been conducted in accordance with all applicable Permits and Laws; and (d) has been, to Borrower’s knowledge after due inquiry, prior to the Closing Date and, thereafter, shall be manufactured in accordance with Good Manufacturing Practices, except in each case as could not reasonably be expected to result in a Material Adverse Effect.

 

 

(j)           No Borrower is subject to any proceeding, suit or, to Borrowers’ knowledge, investigation by any federal, state or local government or quasi-governmental body, agency, board or authority or any other administrative or investigative body: (i) which may result in the imposition of a fine, alternative, interim or final sanction or which would have a Material Adverse Effect on any Borrower; or (ii) which would reasonably be expected to result in the revocation, transfer, surrender, suspension or other material impairment of any material Permits of Borrower.

 

Section 3.26      Accuracy of Schedules. All information set forth in the Schedules to this Agreement (including Schedule 3.19 and Schedule 4.17) is true, accurate and complete as of the Closing Date, the date of delivery of the last Compliance Certificate and any other subsequent date in which Borrower is requested to update such Schedules. All information set forth in the Perfection Certificate is true, accurate and complete as of the Closing Date and any other subsequent date in which Borrower is requested to update such certificate.

 

Article 4 - AFFIRMATIVE COVENANTS

 

Each Borrower agrees that, so long as any Credit Exposure exists:

 

Section 4.1       Financial Statements and Other Reports. Each Borrower will deliver to Agent:

 

(a)          as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated and consolidating balance sheet, cash flow and income statement covering Borrowers’ and its Consolidated Subsidiaries’ consolidated operations during the period, prepared under GAAP, consistently applied, certified by a Responsible Officer and in a form acceptable to Agent;

 

(b)         [reserved];

 

(c)          as soon as available, but no later than one hundred twenty (120) days after the last day of Borrower’s fiscal year, audited consolidated and consolidating financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm acceptable to Agent in its reasonable discretion;

 

(d)          within five (5) days of delivery or filing thereof, copies of all material statements, reports and notices made available to Borrower’s security holders or to any holders of Subordinated Debt and copies of all reports and other filings made by Borrower with any stock exchange on which any securities of any Borrower are traded and/or the SEC;

 

(e)          a prompt written report of any legal actions pending or threatened against any Borrower or any of its Subsidiaries that could reasonably be expected to result in damages or costs to any Borrower or any of its Subsidiaries of Fifty Thousand Dollars ($50,000) or more;

 

(f)          prompt written notice of an event that materially and adversely affects the value of any Intellectual Property;

 

(g)         within sixty (60) days after the start of each fiscal year, projections for the forthcoming two fiscal years, on a quarterly basis for the current year and on an annual basis for the subsequent year;

 

 

(h)          promptly (and in any event within ten (10) days of any request therefor) such readily available other budgets, sales projections, operating plans and other financial information and information, reports or statements regarding the Borrowers, their business and the Collateral as Agent may from time to time reasonably request;

 

(i)           written notice to Agent promptly, and in any event within five (5) Business Days of a Responsible Officer of a Borrower receiving, becoming aware of or determining that: (i) development, testing, and/or manufacturing of any Product that is material to Borrowers’ business should cease, (ii) the marketing or sales of a Product, which is material to Borrowers’ business and which has been approved for marketing and sale, should cease or such Product should be withdrawn from the marketplace, (iii) any Governmental Authority is conducting an investigation or review of any material Regulatory Required Permit or (iv) any material Regulatory Required Permit has been revoked or withdrawn;

 

(j)           promptly, but in any event within three (3) Business Days, after any Responsible Officer of any Borrower obtains knowledge of the occurrence of any event or change (including, without limitation, any notice of any violation of Healthcare Laws) that has resulted or could reasonably be expected to result in, either in any case or in the aggregate, a Material Adverse Effect, a certificate of a Responsible Officer specifying the nature and period of existence of any such event or change, or specifying the notice given or action taken by such holder or Person and the nature of such event or change, and what action the applicable Credit Party or Subsidiary has taken, is taking or proposes to take with respect thereto;

 

(k)          within thirty (30) days after the last day of each month, a duly completed Compliance Certificate signed by a Responsible Officer setting forth calculations showing (i) cash and cash equivalents of Borrowers and Borrowers and their Consolidated Subsidiaries, and (ii) compliance with the financial covenants set forth in this Agreement;

 

(l)           within ten (10) days after the last day of each month, a duly completed Borrowing Base Certificate signed by a Responsible Officer, with aged listings of accounts receivable and accounts payable (by invoice date); and

 

(m)         within ten (10) Business Days of any reasonable request by Agent, deliver to Agent a schedule of Eligible Accounts denoting the thirty (30) largest Account Debtors during the calendar quarter most recently ended prior thereto; provided that, if no Event of Default has occurred and is continuing, Borrower shall not be required to deliver such a schedule to Agent more than once per calendar month.

 

Section 4.2        Payment and Performance of Obligations.

 

(a)          Each Borrower (i) will pay and discharge, and cause each Subsidiary to pay and discharge, on a timely basis as and when due, all of their respective obligations and liabilities, except for such obligations and/or liabilities (A) that may be the subject of a Permitted Contest, and (B) the nonpayment or nondischarge of which could not reasonably be expected to have a Material Adverse Effect or result in a Lien against any Collateral, except for Permitted Liens, (ii) without limiting anything contained in the foregoing clause (i), pay all amounts due and owing in respect of Taxes (including without limitation, payroll and withholdings tax liabilities) on a timely basis as and when due, and in any case prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for nonpayment thereof, (iii) will maintain, and cause each Subsidiary to maintain, in accordance with GAAP, appropriate reserves for the accrual of all of their respective obligations and liabilities, and (iv) will not breach or permit any Subsidiary to breach, or permit to exist any default under, the terms of any lease, commitment, contract, instrument or obligation to which it is a party, or by which its properties or assets are bound, except for such breaches or defaults which could not reasonably be expected to have a Material Adverse Effect.

 

 

(b)          Upon completion of any Permitted Contest, each Borrower shall, and will cause each Subsidiary to, promptly pay the amount due, if any, except where the failure to pay such amount could not reasonably be expected to have a Material Adverse Effect.

 

Section 4.3        Maintenance of Existence. Each Borrower will preserve, renew and keep in full force and effect, and will cause each Subsidiary to preserve, renew and keep in full force and effect, (a) their respective existence and (b) their respective rights, privileges and franchises necessary or desirable in the normal conduct of business, except with respect to clauses (a) and (b) above in connection with a transaction permitted under Section 5.6, and (c) their respective qualification to do business and good standing in each jurisdiction except, with respect to clause (b) and this clause (c), where the failure to be qualified or in good standing could not reasonably be expected to have a Material Adverse Effect.

 

Section 4.4        Maintenance of Property; Insurance.

 

(a)          Each Borrower will keep, and will cause each Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted. If all or any part of the Collateral useful or necessary in its business, or upon which any Borrowing Base is calculated, becomes damaged or destroyed, each Borrower will, and will cause each Subsidiary to, promptly and completely repair and/or restore the affected Collateral in a good and workmanlike manner, regardless of whether Agent agrees to disburse insurance proceeds or other sums to pay costs of the work of repair or reconstruction.

 

(b)         Upon completion of any Permitted Contest, Borrowers shall, and will cause each Subsidiary to, promptly pay the amount due, if any, and deliver to Agent proof of the completion of the contest and payment of the amount due, if any.

 

(c)          Each Borrower will maintain (i) casualty insurance on all real and personal property on an all risks basis (including the perils of flood, windstorm and quake), covering the repair and replacement cost of all such property and coverage, business interruption and rent loss coverages with extended period of indemnity (for the period required by Agent from time to time) and indemnity for extra expense, in each case without application of coinsurance and with agreed amount endorsements, (ii) general and professional liability insurance (including products/completed operations liability coverage), and (iii) such other insurance coverage, in each case against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons; provided, however, that, in no event shall such insurance be in amounts or with coverage less than, or with carriers with qualifications inferior to, any of the insurance or carriers in existence as of the Closing Date (or required to be in existence after the Closing Date under a Financing Document). All such insurance shall be provided by insurers having an A.M. Best policyholders rating reasonably acceptable to Agent.

 

(d)          On or prior to the Closing Date, and at all times thereafter, each Borrower will cause Agent to be named as an additional insured, assignee and lender loss payee, as applicable, on each insurance policy required to be maintained pursuant to this Section 4.4 pursuant to endorsements in form and substance acceptable to Agent. Borrowers shall deliver to Agent and the Lenders (i) on the Closing Date, a certificate from Borrowers’ insurance broker dated such date showing the amount of coverage as of such date, and that such policies will include effective waivers (whether under the terms of any such policy or otherwise) by the insurer of all claims for insurance premiums against all loss payees and additional insureds and all rights of subrogation against all loss payees and additional insureds, and that if all or any part of such policy is canceled, terminated or expires, the insurer will forthwith give notice thereof to each additional insured, assignee and loss payee and that no cancellation, reduction in amount or material change in coverage thereof shall be effective until at least thirty (30) days after receipt by each additional insured, assignee and loss payee of written notice thereof, (ii) on an annual basis, and upon the request of any Lender through Agent from time to time full information as to the insurance carried, (iii) within five (5) days of receipt of notice from any insurer, a copy of any notice of cancellation, nonrenewal or material change in coverage from that existing on the date of this Agreement, (iv) forthwith, notice of any cancellation or nonrenewal of coverage by any Borrower, and (v) at least sixty (60) days prior to expiration of any policy of insurance, evidence of renewal of such insurance upon the terms and conditions herein required.

 

 

(e)          In the event any Borrower fails to provide Agent with evidence of the insurance coverage required by this Agreement, Agent may purchase insurance at Borrowers’ expense to protect Agent’s interests in the Collateral. This insurance may, but need not, protect such Borrower’s interests. The coverage purchased by Agent may not pay any claim made by such Borrower or any claim that is made against such Borrower in connection with the Collateral. Such Borrower may later cancel any insurance purchased by Agent, but only after providing Agent with evidence that such Borrower has obtained insurance as required by this Agreement. If Agent purchases insurance for the Collateral, Borrowers will be responsible for the costs of that insurance to the fullest extent provided by law, including interest and other charges imposed by Agent in connection with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance may be added to the Obligations. The costs of the insurance may be more than the cost of insurance such Borrower is able to obtain on its own.

 

Section 4.5        Compliance with Laws and Material Contracts. Each Borrower will comply, and cause each Subsidiary to comply, with the requirements of all applicable Laws and Material Contracts, except to the extent that failure to so comply could not reasonably be expected to (a) have a Material Adverse Effect, or (b) result in any Lien upon either (i) a material portion of the assets of any such Person in favor of any Governmental Authority, or (ii) any Collateral which is part of the Borrowing Base.

 

Section 4.6        Inspection of Property, Books and Records. Each Borrower will keep, and will cause each Subsidiary to keep, proper books of record substantially in accordance with GAAP in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Subsidiary to permit, at the sole cost of the applicable Borrower or any applicable Subsidiary, representatives of Agent and of any Lender to visit and inspect any of their respective properties, to examine and make abstracts or copies from any of their respective books and records, to conduct a collateral audit and analysis of their respective operations and the Collateral (each a “Collateral Audit”), to evaluate and make physical verifications and appraisals of the Inventory and other Collateral in any manner and through any medium that Agent considers advisable, to verify the amount and age of the Accounts, the identity and credit of the respective Account Debtors, to review the billing practices of Borrowers and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants as often as may reasonably be desired. In the absence of a Default or an Event of Default, Agent or any Lender exercising any rights pursuant to this Section 4.6 shall give the applicable Borrower or any applicable Subsidiary commercially reasonable prior notice of such exercise. No notice shall be required during the existence and continuance of any Default or any time during which Agent reasonably believes a Default exists.

 

Section 4.7        Use of Proceeds. Borrowers shall use the proceeds of Loans solely for (a) transaction fees incurred in connection with the Financing Documents and the payment in full on the Closing Date of certain existing Debt, and (b) for working capital needs of Borrowers and their Subsidiaries. No portion of the proceeds of the Loans will be used for family, personal, agricultural or household use.

 

 

Section 4.8        Estoppel Certificates. After written request by Agent, Borrowers, within fifteen (15) days and at their expense, will furnish Agent with a statement, duly acknowledged and certified, setting forth (a) the amount of the original principal amount of the Notes, and the unpaid principal amount of the Notes, (b) the rate of interest of the Notes, (c) the date payments of interest and/or principal were last paid, (d) any offsets or defenses to the payment of the Obligations, and if any are alleged, the nature thereof, (e) that the Notes and this Agreement have not been modified or if modified, giving particulars of such modification, and (f) that there has occurred and is then continuing no Default or if such Default exists, the nature thereof, the period of time it has existed, and the action being taken to remedy such Default. After written request by Agent, Borrowers, within fifteen (15) days and at their expense, will furnish Agent with a certificate, signed by a Responsible Officer of Borrowers, updating all of the representations and warranties contained in this Agreement and the other Financing Documents and certifying that all of the representations and warranties contained in this Agreement and the other Financing Documents, as updated pursuant to such certificate, are true, accurate and complete as of the date of such certificate.

 

Section 4.9        Notices of Material Contracts, Litigation and Defaults.

 

(a)          Borrower shall provide (i) five (5) Business Days written notice to Agent after any Borrower or Subsidiary (1) executes and delivers any amendment, consent, waiver or other modification to any Material Contract which is material and adverse to (x) Agent or Lenders, (y) Borrowers or their Subsidiaries, or (z) which could reasonably be expected to have a Material Adverse Effect or (2)  receives or delivers any notice of termination or default or similar notice in connection with any Material Contract and (ii) at such time as the Schedules are required to be updated pursuant to Section 4.15, notice of the execution of any new Material Contract and/or any new material amendment, consent, waiver or other modification to any Material Contract not previously disclosed (which, for the avoidance of doubt, may be included as an updated to Schedule 3.17).

 

(b)          Borrowers shall promptly (but in any event within three (3) Business Days) provide written notice to Agent (i) of any litigation or governmental proceedings pending or threatened (in writing) against Borrowers or other Credit Party which would reasonably be expected to have a Material Adverse Effect with respect to Borrowers or any other Credit Party or which in any manner calls into question the validity or enforceability of any Financing Document, (ii) upon any Borrower becoming aware of the existence of any Default or Event of Default, (iii) of any strikes or other labor disputes pending or, to any Borrower’s knowledge, threatened against any Credit Party, (iv) if there is any infringement or claim of infringement by any other Person with respect to any Intellectual Property rights of any Credit Party that could reasonably be expected to have a Material Adverse Effect, or if there is any claim by any other Person that any Credit Party in the conduct of its business is infringing on the Intellectual Property rights of others, and (v) of all returns, recoveries, disputes and claims that involve more than $50,000. Borrowers represent and warrant that Schedule 4.9 sets forth a complete list of all matters existing as of the Closing Date for which notice could be required under this Section and all litigation or governmental proceedings pending or threatened (in writing) against Borrowers or other Credit Party as of the Closing Date.

 

(c)          Borrower shall, and shall cause each Credit Party, to provide such further information (including copies of such documentation) as Agent or any Lender shall reasonably request with respect to any of the events or notices described in clauses (a) and (b) above. From the date hereof and continuing through the termination of this Agreement, Borrower shall, and shall cause each Credit Party to, make available to Agent and each Lender, without expense to Agent or any Lender, each Credit Party’s officers, employees and agents and books, to the extent that Agent or any Lender may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against Agent or any Lender with respect to any Collateral or relating to a Credit Party.

 

 

Section 4.10      Hazardous Materials; Remediation.

 

(a)          If any release or disposal of Hazardous Materials shall occur or shall have occurred on any real property or any other assets of any Borrower or any other Credit Party, such Borrower will cause, or direct the applicable Credit Party to cause, the prompt containment and removal of such Hazardous Materials and the remediation of such real property or other assets as is necessary to comply with all Environmental Laws and Healthcare Laws and to preserve the value of such real property or other assets. Without limiting the generality of the foregoing, each Borrower shall, and shall cause each other Credit Party to, comply with each Environmental Law and Healthcare Law requiring the performance at any real property by any Borrower or any other Credit Party of activities in response to the release or threatened release of a Hazardous Material.

 

(b)          Borrowers will provide Agent within thirty (30) days after written demand therefor with a bond, letter of credit or similar financial assurance evidencing to the reasonable satisfaction of Agent that sufficient funds are available to pay the cost of removing, treating and disposing of any Hazardous Materials or Hazardous Materials Contamination and discharging any assessment which may be established on any property as a result thereof, such demand to be made, if at all, upon Agent’s reasonable business determination that the failure to remove, treat or dispose of any Hazardous Materials or Hazardous Materials Contamination, or the failure to discharge any such assessment could reasonably be expected to have a Material Adverse Effect.

 

Section 4.11      Further Assurances.

 

(a)          Each Borrower will, and will cause each Subsidiary to, at its own cost and expense, promptly and duly take, execute, acknowledge and deliver all such further acts, documents and assurances as may from time to time be necessary or as Agent or the Required Lenders may from time to time reasonably request in order to carry out the intent and purposes of the Financing Documents and the transactions contemplated thereby, including all such actions to (i) establish, create, preserve, protect and perfect a first priority Lien (subject only to the Affiliated Intercreditor Agreement and to Permitted Liens) in favor of Agent for itself and for the benefit of the Lenders on the Collateral (including Collateral acquired after the Original Closing Date), and (ii) unless Agent shall agree otherwise in writing, cause all Subsidiaries of Borrowers to be jointly and severally obligated with the other Borrowers under all covenants and obligations under this Agreement, including the obligation to repay the Obligations.

 

(b)          Upon receipt of an affidavit (which shall contain customary indemnification provisions in favor of Borrower) of an authorized representative of Agent or a Lender as to the loss, theft, destruction or mutilation of any Note or any other Financing Document which is not of public record, and, in the case of any such mutilation, upon surrender and cancellation of such Note or other applicable Financing Document, Borrowers will issue, in lieu thereof, a replacement Note or other applicable Financing Document, dated the date of such lost, stolen, destroyed or mutilated Note or other Financing Document in the same principal amount thereof and otherwise of like tenor.

 

(c)          Upon the request of Agent, Borrowers shall obtain a landlord’s agreement or mortgagee agreement, as applicable, from the lessor of each leased property or mortgagee of owned property with respect to any business location where any portion of the Collateral with an aggregate value in excess of $250,000 included in or proposed to be included in the Borrowing Base, or the records relating to such Collateral and/or software and equipment relating to such records or Collateral, is stored or located, which agreement or letter shall be reasonably satisfactory in form and substance to Agent, Borrowers and such landlord. Borrowers shall timely and fully pay and perform its obligations under all leases and other agreements with respect to each leased location where any Collateral, or any records related thereto, is or may be located.

 

 

(d)            Borrower shall provide Agent with at least ten (10) days (or such shorter period as Agent may accept in its sole discretion) prior written notice of its intention to create (or to the extent permitted under this Agreement, acquire) a new Subsidiary. Upon the formation (or to the extent permitted under this Agreement, acquisition) of a new Subsidiary, Borrowers shall promptly (but in any event within ten (10) Business Days of such formation): (i) pledge, have pledged or cause or have caused to be pledged to Agent pursuant to a pledge agreement in form and substance satisfactory to Agent, all of the outstanding shares of equity interests or other equity interests of such new Subsidiary owned directly or indirectly by any Borrower, along with undated stock or equivalent powers for such certificates, executed in blank; (ii) unless Agent shall agree otherwise in writing, cause the new Subsidiary to take such other actions (including entering into or joining any Security Documents) as are necessary or advisable in the reasonable opinion of Agent in order to grant Agent, acting on behalf of the Lenders, a first priority Lien (subject to the Affiliated Intercreditor Agreement) on all real and personal property of such Subsidiary in existence as of such date and in all after acquired property, which first priority Liens are required to be granted pursuant to this Agreement; (iii) unless Agent shall agree otherwise in writing, cause such new Subsidiary to either (at the election of Agent) become a Borrower hereunder with joint and several liability for all obligations of Borrowers hereunder and under the other Financing Documents pursuant to a joinder agreement or other similar agreement in form and substance satisfactory to Agent or to become a Guarantor of the obligations of Borrowers hereunder and under the other Financing Documents pursuant to a guaranty and suretyship agreement in form and substance satisfactory to Agent; and (iv) cause the new Subsidiary to deliver certified copies of such Subsidiary’s certificate or articles of incorporation, together with good standing certificates, by-laws (or other operating agreement or governing documents), resolutions of the Board of Directors or other governing body, approving and authorizing the execution and delivery of the Security Documents, incumbency certificates and to execute and/or deliver such other documents and legal opinions or to take such other actions as may be requested by Agent, in each case, in form and substance satisfactory to Agent.

 

Section 4.12      Reserved.

 

Section 4.13      Power of Attorney. Each of the authorized representatives of Agent is hereby irrevocably made, constituted and appointed the true and lawful attorney for Borrowers (without requiring any of them to act as such) with full power of substitution to do the following: (a) after the occurrence and during the continuance of an Event of Default ,endorse the name of Borrowers upon any and all checks, drafts, money orders, and other instruments for the payment of money that are payable to Borrowers and constitute collections on Borrowers’ Accounts; (b) if an Event of Default has occurred and is continuing and so long as Agent has provided not less than three (3) Business Days’ prior written notice to Borrower to perform the same and Borrower has failed to take such action, execute in the name of Borrowers any schedules, assignments, instruments, documents, and statements that Borrowers are obligated to give Agent under this Agreement; (c) after the occurrence and during the continuance of an Event of Default, take any action Borrowers are required to take under this Agreement; (d) so long as Agent has provided not less than three (3) Business Days’ prior written notice to Borrower to perform the same and Borrower has failed to take such action, do such other and further acts and deeds in the name of Borrowers that Agent may deem necessary or desirable to enforce any Account or other Collateral or perfect Agent’s security interest or Lien in any Collateral; and (e) after the occurrence and during the continuance of an Event of Default, do such other and further acts and deeds in the name of Borrowers that Agent may deem necessary or desirable to enforce its rights with regard to any Account or other Collateral. This power of attorney shall be irrevocable and coupled with an interest.

 

 

Section 4.14      Borrowing Base Collateral Administration.

 

(a)          All data and other information relating to Accounts and other intangible Collateral shall at all times be kept by Borrowers, at their respective principal offices and shall not be moved from such locations without (i) providing prior written notice to Agent, and (ii) obtaining the prior written consent of Agent, which consent shall not be unreasonably withheld.

 

(b)          Borrowers shall provide prompt written notice to each Person who either is currently an Account Debtor or becomes an Account Debtor at any time following the date of this Agreement that directs each Account Debtor to make payments into the Lockbox, and hereby authorizes Agent, upon Borrowers’ failure to send such notices within ten (10) days after the date of this Agreement (or ten (10) days after the Person becomes an Account Debtor), to send any and all similar notices to such Person. Agent reserves the right to notify Account Debtors that Agent has been granted a Lien upon all Accounts.

 

(c)          Borrowers will conduct a physical count of the Inventory at least twice per year and at such other times as Agent reasonably requests, and Borrowers shall provide to Agent a written accounting of such physical count in form and substance satisfactory to Agent. Each Borrower will use commercially reasonable efforts to at all times keep its Inventory in good and marketable condition. In addition to the foregoing, from time to time, Agent may require Borrowers to obtain and deliver to Agent appraisal reports in form and substance and from appraisers reasonably satisfactory to Agent stating the then current fair market values of all or any portion of Inventory owned by each Borrower or any Subsidiaries.

 

(d)         In addition to the foregoing, from time to time, Agent may require Borrowers to obtain and deliver to Agent appraisal reports in form and substance and from appraisers reasonably satisfactory to Agent stating the then current fair market values of all Collateral.

 

Section 4.15      Schedule Updates. At, or within two (2) Business Days following each Collateral Audit (but in no event more than once per calendar quarter), Borrower shall deliver to Agent updates to the Schedules correcting all information that has become outdated, inaccurate, incomplete or misleading in any material respects; provided, however, (i) with respect to any proposed updates to the Schedules involving Permitted Liens, Permitted Debt or Permitted Investments, Agent will replace the respective Schedule attached hereto with such proposed update only if such updated information is consistent with the definitions of and limitations herein pertaining to Permitted Liens, Permitted Debt or Permitted Investments and (ii) with respect to any proposed updates to such Schedules involving other matters, Agent will replace the applicable portion of such Schedules attached hereto with such proposed update upon Agent’s approval thereof.

 

Section 4.16      Intellectual Property and Licensing.

 

(a)          Together with each Compliance Certificate required to be delivered pursuant to Section 4.1 to the extent (i) Borrower acquires and/or develops any new Registered Intellectual Property, (ii) Borrower enters into or becomes bound by any additional material in-bound license or sublicense agreement, any additional material exclusive out-bound license or sublicense agreement or other material agreement with respect to rights in Intellectual Property (other than over-the-counter software that is commercially available to the public), or (iii) there occurs any other material change in Borrower’s Registered Intellectual Property, in-bound licenses or sublicenses or exclusive out-bound licenses or sublicenses from that listed on Schedule 3.19 together with such Compliance Certificate, deliver to Agent an updated Schedule 3.19 reflecting such updated information. With respect to any updates to Schedule 3.19 involving exclusive out-bound licenses or sublicenses, such licenses shall be consistent with the definitions of and limitations herein pertaining to Permitted Licenses.

 

 

(b)          If Borrower obtains any Registered Intellectual Property (other than copyrights, mask works and related applications, which are addressed below), Borrower shall promptly notify Agent and execute such documents and provide such other information (including, without limitation, copies of applications) and take such other actions as Agent shall request in its good faith business judgment to perfect and maintain a first priority perfected security interest in favor of Agent, for the ratable benefit of Lenders, in such Registered Intellectual Property.

 

(c)          Borrower shall take such steps as Agent requests to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for (x) all licenses or agreements to be deemed “Collateral” and for Agent to have a security interest in it that might otherwise be restricted or prohibited by Law or by the terms of any such license or agreement, whether now existing or entered into in the future, and (y) Agent to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Agent’s rights and remedies under this Agreement and the other Financing Documents.

 

(d)          Borrower shall own, or be licensed to use or otherwise have the right to use, all Material Intangible Assets. Borrower shall cause all Registered Intellectual Property to be duly and properly registered, filed or issued in the appropriate office and jurisdictions for such registrations, filings or issuances, except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect. Borrower shall at all times conduct its business without infringement or claim of infringement of any Intellectual Property rights of others. Borrower shall (i) protect, defend and maintain the validity and enforceability of its Material Intangible Assets (ii) promptly advise Agent in writing of material infringements of its Material Intangible Assets, or of a material claim of infringement by Borrower on the Intellectual Property rights of others; and (iii) not allow any of Borrower’s Material Intangible Assets to be abandoned, invalidated, forfeited or dedicated to the public or to become unenforceable. Borrower shall not become a party to, nor become bound by, any material license or other agreement with respect to which Borrower is the licensee that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or other property.

 

Section 4.17      Regulatory Covenants.

 

(a)          Borrowers shall have, and shall ensure that it and each of its Subsidiaries has, each material Permit and other rights from, and have made all declarations and filings with, all applicable Governmental Authorities, all self-regulatory authorities and all courts and other tribunals necessary to engage in the ownership, management and operation of the business or the assets of any Borrower. Borrower shall ensure that all such Permits are valid and in full force and effect and Borrowers are in material compliance with the terms and conditions of all such Permits in all material respects.

 

(b)          Borrower will maintain in full force and effect, and free from restrictions, probations, conditions or known conflicts which would materially impair the use or operation of Borrowers’ business and assets, all material Permits necessary under Healthcare Laws to carry on the business of Borrowers as it is conducted on the Closing Date in all material respects.

 

(c)          In connection with the development, testing, manufacture, marketing or sale of each and any material Product by any Borrower, Borrower shall comply in all material respects with all material Regulatory Required Permits at all times issued by any Governmental Authority, specifically including the FDA, with respect to such development, testing, manufacture, marketing or sales of such Product by Borrower as such activities are at any such time being conducted by Borrower.

 

 

 

(d)           Borrower will timely file or caused to be timely filed (after giving effect to any extension duly obtained), all material notifications, reports, submissions, Permit renewals and reports required by Healthcare Laws (which reports will be materially accurate and complete in all respects and not misleading in any respect and shall not remain open or unsettled).

 

(e)           If, after the Closing Date, Borrower determines to manufacture, sell, develop, test or market any new material Product or obtains any new material Regulatory Required Permit, Borrower shall deliver prior written notice to Agent of such determination (which shall include a brief description of such Product or Regulatory Required Permit) and, at such time as the Schedules are required to be updated pursuant to Section 4.15, shall provide an updated Schedule 4.17 (and copies of such Permits as Agent may request) reflecting updates related to such determination.

 

Section 4.18          Aziyo Med. Since the date of its formation and at all times on and after the date thereof, Aziyo Med has complied with and shall at all times after the date hereof comply with the following requirements:

 

(a)           Aziyo Med does not have and will not have any assets other than (i) the assets acquired by it and its rights under the Purchase Agreement, including all Accounts generated through the sale of Products acquired under such Purchase Agreement and payments made to Aziyo Med in respect thereof (the “Aziyo Med Purchased Assets”), (ii) its rights under a Ligand Royalty Agreement and (iii) de minimis cash necessary to pay fees and costs associated with maintaining its legal existence and good standing in its respective jurisdiction of formation, each in accordance with Section 4.2 of this Agreement;

 

(b)           Aziyo Med is not engaged and will not engage in any business unrelated to (i) the performance of its obligations under the Purchase Agreement, (ii) its ownership and operation of the Aziyo Med Purchased Assets, and (iii) the performance of its obligations under the Ligand Royalty Agreement, and (iv) the performance of its obligations under the Financing Documents and the Affiliated Financing Documents;

 

(c)           Aziyo Med has not entered into and will not enter into any contract or agreement with any Affiliate of such entity, any constituent party of such entity or any Affiliate of any constituent party, except upon terms and conditions, that have been, are and shall be intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than any such party;

 

(d)           Aziyo Med has not incurred and will not incur any Debt or Contingent Obligations other than the Obligations incurred under the Financing Documents, the Affiliated Obligations and its obligations under the Ligand Royalty Agreement;

 

(e)            Aziyo Med has not made and will not make any loans or advances to any third party (including any affiliate or constituent party or any affiliate of any constituent party) and has not and shall not acquire obligations or securities of its Affiliates or any constituent party;

 

(f)            Aziyo Med has done or caused to be done and will do all things necessary to observe organizational formalities and preserve its existence and will not, nor will such entity permit any constituent party to, amend, modify or otherwise change the organizational documents of such entity or such constituent party without the prior written consent of Agent;

 

(g)           Aziyo Med has been and will be, and at all times has held itself out and will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate of such entity, any constituent party of such entity or any Affiliate of any constituent party), shall correct any known misunderstanding regarding its status as a separate entity, shall conduct business in its own name, shall not identify itself or any of its Affiliates as a division or part of the other;

 

 

(h)           Aziyo Med has not engaged, sought or consented to and will not engage in, seek or consent to any dissolution, winding up, liquidation, consolidation, merger, sale of all or substantially all of its assets, transfer of its equity interests or amendment of its operating documents with respect to the matters set forth in this Section 4.18;

 

(i)            except as expressly provided in Section 2.11(b) with respect to payments made from the Aziyo Med Controlled Account to the Lockbox Account, Aziyo Med has not commingled and will not commingle its funds and other assets with those of any Affiliate or constituent party, or any Affiliate of any constituent party, or any other person;

 

(j)            Aziyo Med will not own or maintain any Deposit Accounts or Securities Accounts other than the Aziyo Med Controlled Account, the Permitted Ligand Account, the Aziyo Med Operating Account, and any other Deposit Account or Securities Account that has been opened with the consent of Agent; provided, however, that Aziyo Med shall not hold funds in the Aziyo Med Operating Account in excess of the amount necessary to fund its current operating expenses (taking into account their revenue from other sources) incurred in connection with its business as permitted to be undertaken pursuant to this Section 4.18.

 

(k)           Aziyo Med has and will maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any Affiliate or constituent party, or any Affiliate of any constituent party, or any other Person and has held and will hold its assets in its own name;

 

(l)            Aziyo Med has not and will not assume or guarantee or become obligated for the debts of any other Person or hold out its credit as being available to satisfy the obligations of any other Person except as permitted pursuant to this Agreement;

 

(m)           Aziyo Med has maintained and will maintain its financial statements, accounting records and other entity documents separate from any other Person and has not permitted and will not permit its assets to be listed as assets on the financial statement of any other entity except as required by GAAP;

 

(n)           Aziyo Med has not pledged and will not pledge its assets for the benefit of any other Person, except as permitted pursuant to this Agreement; and

 

(o)           Aziyo Med has not identified and will not identify its partners, members or shareholders, or any Affiliate of any of them, as a division or part of it and has not identified itself and shall not identify itself as a division of any other Person.

 

Article 5 - NEGATIVE COVENANTS

 

Each Borrower agrees that, so long as any Credit Exposure exists:

 

Section 5.1             Debt; Contingent Obligations. No Borrower will, or will permit any Subsidiary to, directly or indirectly, create, incur, assume, guarantee or otherwise become or remain directly or indirectly liable with respect to, any Debt, except for Permitted Debt. No Borrower will, or will permit any Subsidiary to, directly or indirectly, create, assume, incur or suffer to exist any Contingent Obligations, except for Permitted Contingent Obligations.

 

 

Section 5.2             Liens. No Borrower will, or will permit any Subsidiary to, directly or indirectly, create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except for Permitted Liens.

 

Section 5.3             Distributions. No Borrower will, or will permit any Subsidiary to, directly or indirectly, declare, order, pay, make or set apart any sum for any Distribution, except for Permitted Distributions.

 

Section 5.4             Restrictive Agreements. No Borrower will, or will permit any Subsidiary to, directly or indirectly (a) enter into or assume any agreement (other than the Financing Documents, the Affiliated Financing Documents, and any agreements for purchase money debt permitted under clause (c) of the definition of Permitted Debt) prohibiting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired, or (b) create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind (except as provided by the Financing Documents and the Affiliated Financing Documents) on the ability of any Subsidiary to: (i) pay or make Distributions to any Borrower or any Subsidiary; (ii) pay any Debt owed to any Borrower or any Subsidiary; (iii) make loans or advances to any Borrower or any Subsidiary; or (iv) transfer any of its property or assets to any Borrower or any Subsidiary; provided that (1) the foregoing shall not apply to restrictions or conditions imposed by Law, by this Agreement or any other Financing Document, (2) restrictions or conditions imposed by any agreement relating to secured Debt permitted by this Agreement if such restrictions and conditions apply only to the property or assets securing such Debt, (3) customary provisions in leases and subleases restricting the assignment thereof or the assets governed thereby and (4)  any agreement in connection with an Asset Disposition permitted by Section 5.6 pending consummation of such Asset Disposition solely to the extent it relates only to property being sold in such Permitted Asset Disposition.

 

Section 5.5             Payments and Modifications of Subordinated Debt. No Borrower will, or will permit any Subsidiary to, directly or indirectly:

 

(a)           declare, pay, make or set aside any amount for payment in respect of Subordinated Debt, except for payments made in full compliance with and expressly permitted under any applicable Subordination Agreement;

 

(b)           declare, pay, make or set aside any amount for payment in respect of Ligand Royalty Payments or otherwise pursuant to the Ligand Royalty Agreement or the Ligand Parent Guaranty except, in each case, in accordance with the terms of the Ligand Royalty Agreement and the Ligand Intercreditor Agreement;

 

(c)           amend or otherwise modify the terms of any Subordinated Debt, except for amendments or modifications made in full compliance with any applicable Subordination Agreement;

 

(d)           declare, pay, make or set aside any amount for payment in respect of any Debt hereinafter incurred that, by its terms, or by separate agreement, is subordinated to the Obligations (including Subordinated Debt), except for payments made in full compliance with and expressly permitted under the subordination provisions applicable thereto and any applicable Subordination Agreement;

 

(e)           prior to making any payment to the holders of Subordinated Debt that are permitted under the Debt Subordination Agreement (Donor Network West) and solely to the extent requested by Agent, Agent shall have received a certificate from a Responsible Officer of Borrower setting for the amount of such payments and certifying that the conditions payment in Section 5 of the Debt Subordination Agreement (Donor Network West), as applicable, have been satisfied and providing such detail as to the financial calculations set forth therein as Agent may reasonable request; or

 

 

(f)            unless provided otherwise in any applicable Subordination Agreement, amend or otherwise modify the terms of any such Debt if the effect of such amendment or modification is to (i) increase the interest rate or fees on, or change the manner or timing of payment of, such Debt, (ii) accelerate or shorten the dates upon which payments of principal or interest are due on, or the principal amount of, such Debt, (iii) change in a manner adverse to any Credit Party or Agent any event of default or add or make more restrictive any covenant with respect to such Debt, (iv) change the prepayment provisions of such Debt or any of the defined terms related thereto, (v) change the subordination provisions thereof (or the subordination terms of any guaranty thereof), or (vi) change or amend any other term if such change or amendment would materially increase the obligations of the obligor or confer additional material rights on the holder of such Debt in a manner adverse to Borrowers, any Subsidiaries, Agent or Lenders. Borrowers shall, prior to entering into any such amendment or modification, deliver to Agent reasonably in advance of the execution thereof, any final or execution form copy thereof.

 

Section 5.6             Consolidations, Mergers and Sales of Assets; Change in Control.

 

(a)           No Borrower will, or will permit any Subsidiary to, directly or indirectly (i) consolidate or merge or amalgamate with or into any other Person other than (A) consolidations or mergers among Borrowers (other than Aziyo Med), (B) consolidations or mergers among a Guarantor and a Borrower (other than Aziyo Med) so long as the Borrower is the surviving entity, (C) consolidations or mergers among Guarantors, and (D) consolidations or mergers among Subsidiaries that are not Credit Parties, or (ii) consummate any Asset Dispositions other than Permitted Asset Dispositions.

 

(b)           Prior to the termination of the Ligand Royalty Agreement and the Ligand Parent Guaranty, Aziyo Med shall not transfer any of its assets to Aziyo except for cash and cash equivalents (i) constituting Permitted Distributions, (ii) that are permitted or required to be transferred by Aziyo Med to Aziyo pursuant to Section 2.11(b), or (iii) constituting Excluded Costs (as such term is defined in the Ligand Royalty Agreement).

 

(c)           No Borrower will suffer or permit to occur any Change in Control with respect to itself, any Subsidiary or any Guarantor.

 

Section 5.7             Purchase of Assets, Investments. No Borrower will, or will permit any Subsidiary to, directly or indirectly:

 

(a)           (i) make any Acquisition or enter into any agreement to make an Acquisition other than a Permitted Investment or (ii) acquire or own or enter into any agreement to acquire or own any other Investment other than Permitted Investments,

 

(b)           without limiting clause (a), otherwise acquire or enter into any agreement to acquire any assets other than (i) in the Ordinary Course of Business, (ii) constituting capital expenditures, and (iii) constituting replacement assets purchased with proceeds of property insurance policies, awards or other compensation with respect to any eminent domain, condemnation or similar proceeding and for which the requirements set forth in Section 2.2(a)(ii)(B) have been satisfied; or

 

(c)           engage or enter into any agreement to engage in any joint venture or partnership with any other Person.

 

 

Section 5.8             Transactions with Affiliates. Except (a) as otherwise disclosed on Schedule 5.8, (b) for Permitted Distributions, and (c) for transactions that are disclosed to Agent in advance of being entered into, are not prohibited by Section 4.18 and which contain terms that are no less favorable to the applicable Borrower or any Subsidiary, as the case may be, than those which might be obtained from a third party not an Affiliate of any Credit Party, no Borrower will, or will permit any Subsidiary to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of any Borrower.

 

Section 5.9             Modification of Organizational Documents. No Borrower will, or will permit any Subsidiary to, directly or indirectly, amend or otherwise modify any Organizational Documents of such Person, except for Permitted Modifications.

 

Section 5.10           Modification of Certain Agreements. No Borrower will, or will permit any Subsidiary to, directly or indirectly, (i) amend or otherwise modify any Material Contract, which amendment or modification in any case: (a) is contrary to the terms of this Agreement or any other Financing Document or (b) could reasonably be expected to be adverse to the rights, interests or privileges of Agent or the Lenders or their ability to enforce the same; or (ii) without the prior written consent of Agent, amend or otherwise modify any Affiliated Financing Document. Each Borrower shall, prior to entering into any amendment or other modification of any of the foregoing documents, deliver to Agent reasonably in advance of the execution thereof, any final or execution form copy of amendments or other modifications to such documents, and such Borrower agrees not to take, nor permit any of its Subsidiaries to take, any such action with respect to any such documents without obtaining such approval from Agent.

 

Section 5.11           Conduct of Business. No Borrower will, or will permit any Subsidiary to, directly or indirectly, engage in any line of business other than those businesses engaged in on the Closing Date and businesses reasonably related thereto. No Borrower will, or will permit any Subsidiary to, other than in the Ordinary Course of Business, change its normal billing payment and reimbursement policies and procedures with respect to its Accounts (including, without limitation, the amount and timing of finance charges, fees and write-offs).

 

Section 5.12           Lease Payments. No Borrower will, or will permit any Subsidiary to, directly or indirectly, incur or assume (whether pursuant to a Guarantee or otherwise) any liability for rental payments except in the Ordinary Course of Business.

 

Section 5.13           Limitation on Sale and Leaseback Transactions. No Borrower will, or will permit any Subsidiary to, directly or indirectly, enter into any arrangement with any Person whereby, in a substantially contemporaneous transaction, any Borrower or any Subsidiaries sells or transfers all or substantially all of its right, title and interest in an asset and, in connection therewith, acquires or leases back the right to use such asset.

 

Section 5.14           Deposit Accounts and Securities Accounts; Payroll and Benefits Accounts.

 

(a)           No Borrower will, or will permit any Subsidiary to, directly or indirectly, establish any new Deposit Account or Securities Account without prior written notice to Agent, and unless Agent, such Borrower or such Subsidiary and the bank, financial institution or securities intermediary at which the account is to be opened enter into a Deposit Account Control Agreement or Securities Account Control Agreement prior to or concurrently with the establishment of such Deposit Account or Securities Account.

 

 

(b)           Borrowers represent and warrant that Schedule 5.14 lists all of the Deposit Accounts and Securities Accounts of each Borrower. The provisions of this Section requiring Deposit Account Control Agreements shall not apply to (i) Deposit Accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrowers’ employees and identified to Agent by Borrowers as such (each, a “Payroll Account”); provided, however, that the aggregate balance in such accounts does not exceed the amount necessary to make the immediately succeeding payroll, payroll tax or benefit payment (or such minimum amount as may be required by any requirement of Law with respect to such accounts) and (ii) the Permitted Ligand Account (the Deposit Accounts referred to in clauses (i)-(ii), collectively, the “Excluded Accounts”).

 

(c)           At all times that any Obligations or Affiliated Obligations remain outstanding following the date that is thirty (30) days following the Closing Date, Borrower shall maintain one or more separate Payroll Accounts to hold any and all amounts to be used for payroll, payroll taxes and other employee wage and benefit payments, and shall not commingle any monies allocated for such purposes with funds in any other Deposit Account.

 

Section 5.15           Compliance with Anti-Terrorism Laws. Agent hereby notifies Borrowers that pursuant to the requirements of Anti-Terrorism Laws, and Agent’s policies and practices, Agent is required to obtain, verify and record certain information and documentation that identifies Borrowers and its principals, which information includes the name and address of each Borrower and its principals and such other information that will allow Agent to identify such party in accordance with Anti-Terrorism Laws. No Borrower will, or will permit any Subsidiary to, directly or indirectly, knowingly enter into any Material Contracts with any Blocked Person or any Person listed on the OFAC Lists. Each Borrower shall immediately notify Agent if such Borrower has knowledge that any Borrower, any additional Credit Party or any of their respective Affiliates (except for any Person that is an Affiliate of a Credit Party solely due to the fact that it is HighCape Portfolio Company) or agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement is or becomes a Blocked Person or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is arraigned and held over on charges involving money laundering or predicate crimes to money laundering. No Borrower will, or will permit any Subsidiary to, directly or indirectly, (i) conduct any business or engage in any transaction or dealing with any Blocked Person, including, without limitation, the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law.

 

Section 5.16           Change in Accounting. No Borrower shall, and no Borrower shall suffer or permit any of its Subsidiaries to, (i) make any significant change in accounting treatment or reporting practices, except as required by GAAP or as otherwise consented to be Agent (in its reasonable discretion) or (ii) change the fiscal year or method for determining fiscal quarters of any Credit Party or of any consolidated Subsidiary of any Credit Party.

 

Section 5.17           Agreements Regarding Receivables. No Borrower may backdate, postdate or redate any of its invoices. No Borrower may make any sales on extended dating or credit terms beyond that customary in such Borrower’s industry and consented to in advance by Agent. In addition to the Borrowing Base Certificate to be delivered in accordance with this Agreement, Borrower Representative shall notify Agent promptly upon any Borrower’s learning thereof, in the event any Eligible Account becomes ineligible for any reason, other than the aging of such Account, and of the reasons for such ineligibility. Borrower Representative shall also notify Agent promptly of all material disputes and claims with respect to the Accounts of any Borrower, and such Borrower will settle or adjust such material disputes and claims at no expense to Agent; provided, however, no Borrower may, without Agent’s consent, grant (a) any discount, credit or allowance in respect of its Accounts (i) which is outside the ordinary course of business or (ii) which discount, credit or allowance exceeds an amount equal to $100,000 in the aggregate with respect to any individual Account of (b) any materially adverse extension, compromise or settlement to any customer or account debtor with respect to any then Eligible Account. Nothing permitted by this Section 5.16, however, may be construed to alter in any the criteria for Eligible Accounts or Eligible Inventory provided in Section 1.1.

 

 

Section 5.18           Management Fees. No Borrower shall, nor shall it permit any Subsidiary to, directly or indirectly, pay or become obligated to pay any management, consulting, professional or similar advisory fees or other amounts to or for the account of any holder of equity interests in such Borrower of Subsidiary or any or any Affiliate thereof, except the payment of management fees to HighCape pursuant to the Management Agreement solely to the extent constituting a Permitted Distribution

 

Article 6 - FINANCIAL COVENANTS

 

Section 6.1             Minimum Net Product Revenue. Borrower shall not permit its consolidated Net Product Revenue for any Defined Period, as tested monthly, to be less than the minimum amount set forth on Schedule 6.1 for such Defined Period. A breach of a financial covenant contained in this Section 6.1 shall be deemed to have occurred as of any date of determination by Agent or as of the last day of any specified Defined Period, regardless of when the financial statements reflecting such breach are delivered to Agent.

 

Section 6.2             Evidence of Compliance. Borrowers shall furnish to Agent, as required by Section 4.1, a Compliance Certificate as evidence of (x) the monthly cash and cash equivalents of Borrowers and Borrowers and their Consolidated Subsidiaries, (y) as applicable, of Borrowers’ compliance with the covenants in this Article, and (z) that no Event of Default specified in this Article has occurred. The Compliance Certificate shall include, without limitation, (a) a statement and report, in form and substance reasonably satisfactory to Agent, detailing Borrowers’ calculations, and (b) if requested by Agent, back-up documentation (including, without limitation, bank statements, invoices, receipts and other evidence of costs incurred during such quarter as Agent shall reasonably require) evidencing the propriety of the calculations.

 

Article 7 - CONDITIONS

 

Section 7.1             Conditions to Closing. The obligation of each Lender to make the initial Loans on the Closing Date shall be subject to the receipt by Agent of each agreement, document and instrument set forth on the closing checklist prepared by Agent or its counsel, each

in form and substance satisfactory to Agent, and such other closing deliverables reasonably requested by Agent and Lenders, and to the satisfaction of the following conditions precedent, each to the satisfaction of Agent and Lenders and their respective counsel in their sole discretion:

 

(a)           the receipt by Agent of executed counterparts of this Agreement, the other Financing Documents and the Affiliated Financing Documents;

 

(b)           the payment of all fees, expenses and other amounts due and payable under each Financing Document; and

 

(c)           since December 31, 2018, the absence of any material adverse change in any aspect of the business, operations, properties, prospects or condition (financial or otherwise) of any Credit Party or any Seller, or any event or condition which could reasonably be expected to result in such a material adverse change.

 

 

Each Lender, by delivering its signature page to this Agreement, shall be deemed to have acknowledged receipt of, and consented to and approved, each Financing Document, each additional Operative Document and each other document, agreement and/or instrument required to be approved by Agent, Required Lenders or Lenders, as applicable, on the Closing Date.

 

Section 7.2             Conditions to Each Loan. The obligation of the Lenders to make a Loan or an advance in respect of any Loan, is subject to the satisfaction of the following additional conditions:

 

(a)           (i) in the case of the initial borrowing of Revolving Loans, receipt by Agent of a Notice of Borrowing and the initial Borrowing Base Certificate in form and substance reasonably satisfactory to Agent and (ii) in the case of each subsequent borrowing of a Revolving Loan, receipt by Agent of a Notice of Borrowing and updated Borrowing Base Certificate in form and substance reasonable satisfactory to Agent;

 

(b)           the fact that, immediately after such borrowing and after application of the proceeds thereof or after such issuance, the Revolving Loan Outstandings will not exceed the Revolving Loan Limit;

 

(c)           the fact that, immediately before and after such advance, no Default or Event of Default shall have occurred and be continuing;

 

(d)           for Loans made on the Closing Date, the fact that the representations and warranties of each Credit Party contained in the Financing Documents shall be true, correct and complete on and as of the Closing Date, except to the extent that any such representation or warranty relates to a specific date in which case such representation or warranty shall be true and correct as of such earlier date;

 

(e)           for Loans made after the Closing Date, the fact that the representations and warranties of each Credit Party contained in the Financing Documents shall be true, correct and complete in all material respects on and as of the date of such borrowing or issuance, except to the extent that any such representation or warranty relates to a specific date in which case such representation or warranty shall be true and correct in all material respects as of such earlier date; provided, however, in each case, such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and

 

(f)            the fact that no adverse change in the condition (financial or otherwise), properties, business or operations of Borrowers or any other Credit Party shall have occurred and be continuing with respect to Borrowers or any Credit Party since the date of this Agreement.

 

Each giving of a Notice of Borrowing hereunder and each acceptance by any Borrower of the proceeds of any Loan made hereunder shall be deemed to be (y) a representation and warranty by each Borrower on the date of such notice or acceptance as to the facts specified in this Section, and (z) a restatement by each Borrower that each and every one of the representations made by it in any of the Financing Documents is true and correct as of such date (except to the extent that such representations and warranties expressly relate solely to an earlier date).

 

Section 7.3             Searches. Before the Closing Date, and thereafter (as and when determined by Agent in its discretion), Agent shall have the right to perform, all at Borrowers’ expense, the searches described in clauses (a), (b), and (c) below against Borrowers and any other Credit Party, the results of which are to be consistent with Borrowers’ representations and warranties under this Agreement and the satisfactory results of which shall be a condition precedent to all advances of Loan proceeds: (a) UCC searches with the Secretary of State of the jurisdiction in which the applicable Person is organized; (b) judgment, pending litigation, federal tax lien, personal property tax lien, and corporate and partnership tax lien searches, in each jurisdiction searched under clause (a) above; and (c) searches of applicable corporate, limited liability company, partnership and related records to confirm the continued existence, organization and good standing of the applicable Person and the exact legal name under which such Person is organized.

 

 

Section 7.4             Post-Closing Requirements. Borrowers shall complete each of the post-closing obligations and/or provide to Agent each of the documents, instruments, agreements and information listed on Schedule 7.4 attached hereto on or before the date set forth for each such item thereon, each of which shall be completed or provided in form and substance satisfactory to Agent.

 

Article 8 – Reserved

 

Article 9 - SECURITY AGREEMENT

 

Section 9.1             Generally. As security for the payment and performance of the Obligations, and for the payment and performance of all obligations under the Affiliated Financing Documents (if any) and without limiting any other grant of a Lien and security interest in any Security Document, Borrowers hereby assign and grant to Agent, for the benefit of itself and Lenders, and, subject only to the Affiliated Intercreditor Agreement and Permitted Liens (if applicable), a continuing first priority Lien on and security interest in, upon, and to the personal property set forth on Schedule 9.1 attached hereto and made a part hereof.

 

Section 9.2             Representations and Warranties and Covenants Relating to Collateral.

 

(a)           The security interest granted pursuant to this Agreement constitutes a valid and, to the extent such security interest is required to be perfected by this Agreement and any other Financing Document, continuing perfected security interest in favor of Agent in all Collateral subject, for the following Collateral, to the occurrence of the following: (i) in the case of all Collateral in which a security interest may be perfected by filing a financing statement under the UCC, the completion of the filings and other actions specified on Schedule 9.2(b) (which, in the case of all filings and other documents referred to on such schedule, have been delivered to Agent in completed and duly authorized form), (ii) with respect to any Deposit Account, the execution of Deposit Account Control Agreements, (iii) in the case of letter-of-credit rights that are not supporting obligations of Collateral, the execution of a contractual obligation granting control to Agent over such letter-of-credit rights, (iv) in the case of electronic chattel paper, the completion of all steps necessary to grant control to Agent over such electronic chattel paper, (v) in the case of all certificated stock, debt instruments and investment property, the delivery thereof to Agent of such certificated stock, debt instruments and investment property consisting of instruments and certificates, in each case properly endorsed for transfer to Agent or in blank, (vi) in the case of all investment property not in certificated form, the execution of control agreements with respect to such investment property and (vii) in the case of all other instruments and tangible chattel paper that are not certificated stock, debt instructions or investment property, the delivery thereof to Agent of such instruments and tangible chattel paper. Such security interest shall be prior to all other Liens on the Collateral except for Permitted Liens. Except to the extent not required pursuant to the terms of this Agreement, all actions by each Credit Party necessary or desirable to protect and perfect the Lien granted hereunder on the Collateral have been duly taken.

 

(b)           Schedule 9.2(b) sets forth (i) each chief executive office and principal place of business of each Borrower and each of their respective Subsidiaries, and (ii) all of the addresses (including all warehouses) at which any of the Collateral is located and/or books and records of Borrowers regarding any Collateral or any of Borrower’s assets, liabilities, business operations or financial condition are kept, which such Schedule 9.2(b) indicates in each case which Borrower(s) have Collateral and/or books located at such address, and, in the case of any such address not owned by one or more of the Borrowers(s), indicates the nature of such location (e.g., leased business location operated by Borrower(s), third party warehouse, consignment location, processor location, etc.) and the name and address of the third party owning and/or operating such location.

 

 

(c)           Without limiting the generality of Section 3.2, except as indicated on Schedule 3.19 with respect to any rights of any Borrower as a licensee under any license of Intellectual Property owned by another Person, and except for the filing of financing statements under the UCC, no authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or consent of any other Person is required for (i) the grant by each Borrower to Agent of the security interests and Liens in the Collateral provided for under this Agreement and the other Security Documents (if any), or (ii) the exercise by Agent of its rights and remedies with respect to the Collateral provided for under this Agreement and the other Security Documents or under any applicable Law, including the UCC and neither any such grant of Liens in favor of Agent or exercise of rights by Agent shall violate or cause a default under any agreement between any Borrower and any other Person relating to any such collateral, including any license to which a Borrower is a party, whether as licensor or licensee, with respect to any Intellectual Property, whether owned by such Borrower or any other Person.

 

(d)           As of the Closing Date, except as set forth on Schedule 9.2(d), no Borrower has any ownership interest in any Chattel Paper (as defined in Article 9 of the UCC), letter of credit rights, commercial tort claims, Instruments, documents or investment property (other than equity interests in any Subsidiaries of such Borrower disclosed on Schedule 3.4), and Borrowers shall give notice to Agent promptly (but in any event not later than the delivery by Borrowers of the next Compliance Certificate required pursuant to Section 4.1 above) upon the acquisition by any Borrower of any such Chattel Paper, letter of credit rights, commercial tort claims, Instruments, documents, investment property. No Person other than Agent or (if applicable) any Lender has “control” (as defined in Article 9 of the UCC) over any Deposit Account, investment property (including Securities Accounts and commodities account), letter of credit rights or electronic chattel paper in which any Borrower has any interest (except for such control arising by operation of law in favor of any bank or securities intermediary or commodities intermediary with whom any Deposit Account, Securities Account or commodities account of Borrowers is maintained).

 

(e)           Borrowers shall not, and shall not permit any Credit Party to, take any of the following actions or make any of the following changes unless Borrowers have given at least five (5) Business Days’ prior written notice to Agent of Borrowers’ intention to take any such action (which such written notice shall include an updated version of any Schedule impacted by such change) and have executed any and all documents, instruments and agreements and taken any other actions which Agent may request after receiving such written notice in order to protect and preserve the Liens, rights and remedies of Agent with respect to the Collateral: (i) change the legal name or organizational identification number of any Borrower as it appears in official filings in the jurisdiction of its organization, (ii) change the jurisdiction of incorporation or formation of any Borrower or Credit Party or allow any Borrower or Credit Party to designate any jurisdiction as an additional jurisdiction of incorporation for such Borrower or Credit Party, or change the type of entity that it is, or (iii) change its chief executive office, principal place of business, or the location of its books and records or move any Collateral to or place any Collateral on any location that is not then listed on the Schedules and/or establish any business location at any location that is not then listed on the Schedules.

 

 

(f)            Borrowers shall not adjust, settle or compromise the amount or payment of any Account, or release wholly or partly any Account Debtor, or allow any credit or discount thereon (other than adjustments, settlements, compromises, credits and discounts in the Ordinary Course of Business, made while no Default exists and in amounts which are not material with respect to the Account and which, after giving effect thereto, do not cause the Borrowing Base to be less than the Revolving Loan Outstandings) without the prior written consent of Agent. Without limiting the generality of this Agreement or any other provisions of any of the Financing Documents relating to the rights of Agent after the occurrence and during the continuance of an Event of Default, Agent shall have the right at any time after the occurrence and during the continuance of an Event of Default to: (i) exercise the rights of Borrowers with respect to the obligation of any Account Debtor to make payment or otherwise render performance to Borrowers and with respect to any property that secures the obligations of any Account Debtor or any other Person obligated on the Collateral, and (ii) adjust, settle or compromise the amount or payment of such Accounts.

 

(g)           Without limiting the generality of Sections 9.2(c) and 9.2(e):

 

(i)           Borrowers shall deliver to Agent all tangible Chattel Paper and all Instruments and documents owned by any Borrower and constituting part of the Collateral duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Agent. Borrowers shall provide Agent with “control” (as defined in Article 9 of the UCC) of all electronic Chattel Paper owned by any Borrower and constituting part of the Collateral by having Agent identified as the assignee on the records pertaining to the single authoritative copy thereof and otherwise complying with the applicable elements of control set forth in the UCC. Borrowers also shall deliver to Agent all security agreements securing any such Chattel Paper and securing any such Instruments. Borrowers will mark conspicuously all such Chattel Paper and all such Instruments and documents with a legend, in form and substance satisfactory to Agent, indicating that such Chattel Paper and such instruments and documents are subject to the security interests and Liens in favor of Agent created pursuant to this Agreement and the Security Documents. Borrowers shall comply with all the provisions of Section 5.14 with respect to the Deposit Accounts and Securities Accounts of Borrowers.

 

(ii)          Borrowers shall deliver to Agent all letters of credit on which any Borrower is the beneficiary and which give rise to letter of credit rights owned by such Borrower which constitute part of the Collateral in each case duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Agent. Borrowers shall take any and all actions as may be necessary or desirable, or that Agent may request, from time to time, to cause Agent to obtain exclusive “control” (as defined in Article 9 of the UCC) of any such letter of credit rights in a manner acceptable to Agent.

 

(iii)          Borrowers shall promptly advise Agent upon any Borrower becoming aware that it has any interests in any commercial tort claim that constitutes part of the Collateral, which such notice shall include descriptions of the events and circumstances giving rise to such commercial tort claim and the dates such events and circumstances occurred, the potential defendants with respect such commercial tort claim and any court proceedings that have been instituted with respect to such commercial tort claims, and Borrowers shall, with respect to any such commercial tort claim, execute and deliver to Agent such documents as Agent shall request to perfect, preserve or protect the Liens, rights and remedies of Agent with respect to any such commercial tort claim.

 

 

(iv)         Except for Accounts and Inventory in an aggregate amount of $25,000, no Accounts or Inventory or other Collateral and no books and records and/or software and equipment of the Borrowers regarding any of the Collateral or any of the Borrower’s assets, liabilities, business operations or financial condition shall at any time be located at any leased location or in the possession or control of any warehouse, consignee, bailee or any of Borrowers’ agents or processors, without prior written notice to Agent and the receipt by Agent, of warehouse receipts, consignment agreements, landlord waivers, or bailee waivers (as applicable) satisfactory to Agent prior to the commencement of such lease or of such possession or control (as applicable). Borrower has notified Agent that Collateral and books and records are currently located at the locations set forth on Schedule 9.2(b). Borrowers shall, upon the request of Agent, notify any such landlord, warehouse, consignee, bailee, agent or processor of the security interests and Liens in favor of Agent created pursuant to this Agreement and the Security Documents, instruct such Person to hold all such Collateral for Agent’s account subject to Agent’s instructions and shall obtain an acknowledgement from such Person that such Person holds the Collateral for Agent’s benefit.

 

(v)          Borrowers shall cause all equipment and other tangible Personal Property other than Inventory to be maintained and preserved in the same condition, repair and in working order as when new, ordinary wear and tear excepted, and shall promptly make or cause to be made all repairs, replacements and other improvements in connection therewith that are necessary or desirable to such end. Upon request of Agent, Borrowers shall promptly deliver to Agent any and all certificates of title, applications for title or similar evidence of ownership of all such tangible Personal Property and shall cause Agent to be named as lienholder on any such certificate of title or other evidence of ownership. Borrowers shall not permit any such tangible Personal Property to become fixtures to real estate unless such real estate is subject to a Lien in favor of Agent.

 

(vi)         Each Borrower hereby authorizes Agent to file without the signature of such Borrower one or more UCC financing statements relating to liens on personal property relating to all or any part of the Collateral, which financing statements may list Agent as the “secured party” and such Borrower as the “debtor” and which describe and indicate the collateral covered thereby as all or any part of the Collateral under the Financing Documents (including an indication of the collateral covered by any such financing statement as “all assets” of such Borrower now owned or hereafter acquired), in such jurisdictions as Agent from time to time determines are appropriate, and to file without the signature of such Borrower any continuations of or corrective amendments to any such financing statements, in any such case in order for Agent to perfect, preserve or protect the Liens, rights and remedies of Agent with respect to the Collateral. Each Borrower also ratifies its authorization for Agent to have filed in any jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

 

(vii)        As of the Closing Date, no Borrower holds, and after the Closing Date Borrowers shall promptly notify Agent in writing upon creation or acquisition by any Borrower of, any Collateral which constitutes a claim against any Governmental Authority, including, without limitation, the federal government of the United States or any instrumentality or agency thereof, the assignment of which claim is restricted by any applicable Law, including, without limitation, the federal Assignment of Claims Act and any other comparable Law. Upon the request of Agent, Borrowers shall take such steps as may be necessary or desirable, or that Agent may request, to comply with any such applicable Law.

 

(viii)       Borrowers shall furnish to Agent from time to time any statements and schedules further identifying or describing the Collateral and any other information, reports or evidence concerning the Collateral as Agent may reasonably request from time to time.

 

(h)           Any obligation of any Credit Party in this Agreement that requires (or any representation or warranty hereunder to the extent that it would have the effect of requiring) delivery of Collateral (including any endorsements related thereto) to, or the possession of Collateral with, Agent shall be deemed complied with and satisfied (or, in the case of any representation or warranty hereunder, shall be deemed to be true) if such delivery of Collateral is made to, or such possession of Collateral is with, the Affiliated Financing Agent.

 

 

Article 10 - EVENTS OF DEFAULT

 

Section 10.1           Events of Default. For purposes of the Financing Documents, the occurrence of any of the following conditions and/or events, whether voluntary or involuntary, by operation of law or otherwise, shall constitute an “Event of Default”:

 

(a)           (i) any Credit Party shall fail to pay when due any principal, interest, premium or fee under any Financing Document or any other amount payable under any Financing Document, or (ii) there shall occur any default in the performance of or compliance with any of the following sections of this Agreement: Section 2.11, Section 4.1, Section 4.2(b), Section 4.4(c), Section 4.6, 4.9, 4.16, 4.17, 4.18, Article 5, Article 6 or Section 7.4;

 

(b)           any Credit Party defaults in the performance of or compliance with any term contained in this Agreement or in any other Financing Document (other than occurrences described in other provisions of this Section 10.1 for which a different grace or cure period is specified or for which no grace or cure period is specified and thereby constitute immediate Events of Default) and such default is not remedied by the Credit Party or waived by Agent within fifteen (15) days after the earlier of (i) receipt by Borrower Representative of notice from Agent or Required Lenders of such default, or (ii) actual knowledge of any Borrower or any other Credit Party of such default;

 

(c)           any representation, warranty, certification or statement made by any Credit Party or any other Person in any Financing Document or in any certificate, financial statement or other document delivered pursuant to any Financing Document is incorrect in any respect (or in any material respect if such representation, warranty, certification or statement is not by its terms already qualified as to materiality) when made (or deemed made);

 

(d)           (i) failure of any Credit Party to pay when due or within any applicable grace period any principal, interest or other amount on Debt (other than the Loans), or the occurrence of any breach, default, condition or event with respect to any Debt (other than the Loans), if the effect of such failure or occurrence is to cause or to permit the holder or holders of any such Debt, or to cause, Debt or other liabilities having an individual principal amount in excess of $250,000 or having an aggregate principal amount in excess of $250,000 to become or be declared due prior to its stated maturity, or (ii) the occurrence of any breach or default under any terms or provisions of any Subordinated Debt Document or under any agreement subordinating the Subordinated Debt to all or any portion of the Obligations or the occurrence of any event requiring the prepayment of any Subordinated Debt;

 

(e)           any Credit Party or any Subsidiary of a Borrower shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing;

 

(f)            an involuntary case or other proceeding shall be commenced against any Credit Party or any Subsidiary of a Borrower seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of forty-five (45) days; or an order for relief shall be entered against any Credit Party or any Subsidiary of a Borrower under applicable federal bankruptcy, insolvency or other similar law in respect of (i) bankruptcy, liquidation, winding-up, dissolution or suspension of general operations, (ii) composition, rescheduling, reorganization, arrangement or readjustment of, or other relief from, or stay of proceedings to enforce, some or all of the debts or obligations, or (iii) possession, foreclosure, seizure or retention, sale or other disposition of, or other proceedings to enforce security over, all or any substantial part of the assets of such Credit Party or Subsidiary;

 

 

(g)           (i) institution of any steps by any Person to terminate a Pension Plan if as a result of such termination any Credit Party or any member of the Controlled Group could be required to make a contribution to such Pension Plan, or could incur a liability or obligation to such Pension Plan, in excess of $250,000, (ii) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 303(k) of ERISA or Section 430(k) of the Code or an event occurs that could reasonably be expected to give rise to a Lien under Section 4068 of ERISA, or (iii) there shall occur any withdrawal or partial withdrawal from a Multiemployer Plan and the withdrawal liability (without unaccrued interest) to Multiemployer Plans as a result of such withdrawal (including any outstanding withdrawal liability that any Credit Party or any member of the Controlled Group have incurred on the date of such withdrawal) exceeds $250,000;

 

(h)           one or more judgments or orders for the payment of money (not paid or fully covered by insurance maintained in accordance with the requirements of this Agreement and as to which the relevant insurance company has acknowledged coverage) aggregating in excess of $250,000 shall be rendered against any or all Credit Parties and either (i) enforcement proceedings shall have been commenced by any creditor upon any such judgments or orders, or (ii) there shall be any period of twenty (20) consecutive days during which a stay of enforcement of any such judgments or orders, by reason of a pending appeal, bond or otherwise, shall not be in effect;

 

(i)            any Lien created by any of the Security Documents shall at any time fail to constitute a valid and perfected Lien on all of the Collateral purported to be encumbered thereby, subject to no prior or equal Lien except Permitted Liens, or any Credit Party shall so assert;

 

(j)            the institution by any Governmental Authority of criminal proceedings against any Credit Party;

 

(k)           a default or event of default occurs under any Guarantee of any portion of the Obligations;

 

(l)            any Borrower makes any payment on account of any Debt that has been subordinated to any of the Obligations, other than payments specifically permitted by the terms of such subordination;

 

(m)          if any Borrower is or becomes an entity whose equity is registered with the SEC, and/or is publicly traded on and/or registered with a public securities exchange, such Borrower’s equity fails to remain registered with the SEC in good standing, and/or such equity fails to remain publicly traded on and registered with a public securities exchange;

 

(n)           the occurrence of a Material Adverse Effect;

 

 

(o)           (i) the voluntary withdrawal or institution of any action or proceeding by the FDA or similar Governmental Authority to order the withdrawal of any Product or Product category from the market or to enjoin Borrower, its Subsidiaries or any representative of Borrower or its Subsidiaries from manufacturing, marketing, selling or distributing any Product or Product category, (ii) the institution of any action or proceeding by any FDA or any other Governmental Authority to revoke, suspend, reject, withdraw, limit, or restrict any Regulatory Required Permit held by Borrower, its Subsidiaries or any representative of Borrower or its Subsidiaries, which, in each case, has or could reasonably be expected to result in Material Adverse Effect, (iii) the commencement of any enforcement action against Borrower, its Subsidiaries or any representative of Borrower or its Subsidiaries (with respect to the business of Borrower or its Subsidiaries) by FDA or any other Governmental Authority which has or could reasonably be expected to result in a Material Adverse Effect, or (iv) the occurrence of adverse test results in connection with a Product which could result in Material Adverse Effect;

 

(p)           any Credit Party materially breaches, or otherwise materially defaults under, (i) the Cook License Agreement, the Cook Supply Agreement or Cross License Agreement or (ii) any other Material Contract (after any applicable grace period contained therein) the loss of which could be reasonably expected to result in a Material Adverse Effect, or any such Material Contract referred to in clauses (i) or (ii) shall be terminated by a third party or parties party thereto prior to the expiration thereof;

 

(q)           any Credit Party breaches, or defaults under, the Ligand Royalty Agreement or the Ligand Parent Guaranty or there occurs any Remedies Event (as defined in the Ligand Royalty Agreement);

 

(r)            there shall occur any default or event of default under the Affiliated Financing Documents;

 

(s)           the introduction of, or any change in, any law or regulation governing or affecting the healthcare industry, including, without limitation, any Healthcare Laws, which could reasonably be expected to have a material adverse effect on Borrowers’ business, condition (financial or otherwise), prospects or properties; or

 

(t)            any of the Operative Documents shall for any reason fail to constitute the valid and binding agreement of any party thereto, or any Credit Party shall so assert, in each case, unless such Operative Document terminates pursuant to the terms and conditions thereof without any breach or default thereunder by any Credit Party thereto.

 

All cure periods provided for in this Section 10.1 shall run concurrently with any cure period provided for in any applicable Financing Documents under which the default occurred.

 

Section 10.2          Acceleration and Suspension or Termination of Revolving Loan Commitment. Upon the occurrence and during the continuance of an Event of Default, Agent may, and shall if requested by Required Lenders, (a) by notice to Borrower Representative suspend or terminate the Revolving Loan Commitment and the obligations of Agent and the Lenders with respect thereto, in whole or in part (and, if in part, each Lender’s Revolving Loan Commitment shall be reduced in accordance with its Pro Rata Share), and/or (b) by notice to Borrower Representative declare all or any portion of the Obligations to be, and the Obligations shall thereupon become, immediately due and payable, with accrued interest thereon, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower and Borrowers will pay the same; provided, however, that in the case of any of the Events of Default specified in Section 10.1(e) or 10.1(f) above, without any notice to any Borrower or any other act by Agent or the Lenders, the Revolving Loan Commitment and the obligations of Agent and the Lenders with respect thereto shall thereupon immediately and automatically terminate and all of the Obligations shall become immediately and automatically due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower and Borrowers will pay the same.

 

 

 

Section 10.3         UCC Remedies.

 

(a)            Upon the occurrence of and during the continuance of an Event of Default under this Agreement or the other Financing Documents, Agent, in addition to all other rights, options, and remedies granted to Agent under this Agreement or at law or in equity, may exercise, either directly or through one or more assignees or designees, all rights and remedies granted to it under all Financing Documents and under the UCC in effect in the applicable jurisdiction(s) and under any other applicable law; including, without limitation:

 

(i)           the right to take possession of, send notices regarding, and collect directly the Collateral, with or without judicial process;

 

(ii)          the right to (by its own means or with judicial assistance) enter any of Borrowers’ premises and take possession of the Collateral, or render it unusable, or to render it usable or saleable, or dispose of the Collateral on such premises in compliance with subsection (iii) below and to take possession of Borrowers’ original books and records, to obtain access to Borrowers’ data processing equipment, computer hardware and software relating to the Collateral and to use all of the foregoing and the information contained therein in any manner Agent deems appropriate, without any liability for rent, storage, utilities, or other sums, and Borrowers shall not resist or interfere with such action (if Borrowers’ books and records are prepared or maintained by an accounting service, contractor or other third party agent, Borrowers hereby irrevocably authorize such service, contractor or other agent, upon notice by Agent to such Person that an Event of Default has occurred and is continuing, to deliver to Agent or its designees such books and records, and to follow Agent’s instructions with respect to further services to be rendered);

 

(iii)         the right to require Borrowers at Borrowers’ expense to assemble all or any part of the Collateral and make it available to Agent at any place designated by Lender;

 

(iv)         the right to notify postal authorities to change the address for delivery of Borrowers’ mail to an address designated by Agent and to receive, open and dispose of all mail addressed to any Borrower; and/or

 

(v)          the right to enforce Borrowers’ rights against Account Debtors and other obligors, including, without limitation, (i) the right to collect Accounts directly in Agent’s own name (as agent for Lenders) and to charge the collection costs and expenses, including attorneys’ fees, to Borrowers, and (ii) the right, in the name of Agent or any designee of Agent or Borrowers, to verify the validity, amount or any other matter relating to any Accounts by mail, telephone, telegraph or otherwise, including, without limitation, verification of Borrowers’ compliance with applicable Laws. Borrowers shall cooperate fully with Agent in an effort to facilitate and promptly conclude such verification process. Such verification may include contacts between Agent and applicable federal, state and local regulatory authorities having jurisdiction over the Borrowers’ affairs, all of which contacts Borrowers hereby irrevocably authorize.

 

(b)           Each Borrower agrees that a notice received by it at least ten (10) days before the time of any intended public sale, or the time after which any private sale or other disposition of the Collateral is to be made, shall be deemed to be reasonable notice of such sale or other disposition. If permitted by applicable law, any perishable Collateral which threatens to speedily decline in value or which is sold on a recognized market may be sold immediately by Agent without prior notice to Borrowers. At any sale or disposition of Collateral, Agent may (to the extent permitted by applicable law) purchase all or any part of the Collateral, free from any right of redemption by Borrowers, which right is hereby waived and released. Each Borrower covenants and agrees not to interfere with or impose any obstacle to Agent’s exercise of its rights and remedies with respect to the Collateral. Agent shall have no obligation to clean-up or otherwise prepare the Collateral for sale. Agent may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. Agent may sell the Collateral without giving any warranties as to the Collateral. Agent may specifically disclaim any warranties of title or the like. This procedure will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. If Agent sells any of the Collateral upon credit, Borrowers will be credited only with payments actually made by the purchaser, received by Agent and applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, Agent may resell the Collateral and Borrowers shall be credited with the proceeds of the sale. Borrowers shall remain liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all Obligations.

 

 

(c)           Without restricting the generality of the foregoing and for the purposes aforesaid, each Borrower hereby appoints and constitutes Agent its lawful attorney-in-fact with full power of substitution in the Collateral, upon the occurrence and during the continuance of an Event of Default, to (i) use unadvanced funds remaining under this Agreement or which may be reserved, escrowed or set aside for any purposes hereunder at any time, or to advance funds in excess of the face amount of the Notes, (ii) pay, settle or compromise all existing bills and claims, which may be Liens or security interests, or to avoid such bills and claims becoming Liens against the Collateral, (iii) execute all applications and certificates in the name of such Borrower and to prosecute and defend all actions or proceedings in connection with the Collateral, and (iv) do any and every act which such Borrower might do in its own behalf; it being understood and agreed that this power of attorney in this subsection (c) shall be a power coupled with an interest and cannot be revoked.

 

(d)           Agent and each Lender is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrowers’ labels, mask works, rights of use of any name, any other Intellectual Property and advertising matter, and any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Agent’s exercise of its rights under this Article, Borrowers’ rights under all licenses (whether as licensor or licensee) and all franchise agreements inure to Agent’s and each Lender’s benefit.

 

Section 10.4         Reserved.

 

Section 10.5         Default Rate of Interest. At the election of Agent or Required Lenders, after the occurrence of an Event of Default and for so long as it continues, the Loans and other Obligations shall bear interest at rates that are four percent (4.0%) per annum in excess of the rates otherwise payable under this Agreement; provided, however, that in the case of any Event of Default specified in Section 10.1(e) or 10.1(f) above, such default rates shall apply immediately and automatically without the need for any election or action of any kind on the part of Agent or any Lender.

 

Section 10.6         Setoff Rights. During the continuance of any Event of Default, each Lender is hereby authorized by each Borrower at any time or from time to time, with reasonably prompt subsequent notice to such Borrower (any prior or contemporaneous notice being hereby expressly waived) to set off and to appropriate and to apply any and all (a) balances held by such Lender or any of such Lender’s Affiliates at any of its offices for the account of such Borrower or any of its Subsidiaries (regardless of whether such balances are then due to such Borrower or its Subsidiaries), and (b) other property at any time held or owing by such Lender to or for the credit or for the account of such Borrower or any of its Subsidiaries, against and on account of any of the Obligations; except that no Lender shall exercise any such right without the prior written consent of Agent. Any Lender exercising a right to set off shall purchase for cash (and the other Lenders shall sell) interests in each of such other Lender’s Pro Rata Share of the Obligations as would be necessary to cause all Lenders to share the amount so set off with each other Lender in accordance with their respective Pro Rata Share of the Obligations. Each Borrower agrees, to the fullest extent permitted by law, that any Lender and any of such Lender’s Affiliates may exercise its right to set off with respect to the Obligations as provided in this Section 10.6.

 

 

Section 10.7         Application of Proceeds.

 

(a)           Notwithstanding anything to the contrary contained in this Agreement, upon the occurrence and during the continuance of an Event of Default, each Borrower irrevocably waives the right to direct the application of any and all payments at any time or times thereafter received by Agent from or on behalf of such Borrower or any Guarantor of all or any part of the Obligations, and, as between Borrowers on the one hand and Agent and Lenders on the other, Agent shall have the continuing and exclusive right to apply and to reapply any and all payments received against the Obligations in such manner as Agent may deem advisable notwithstanding any previous application by Agent.

 

(b)           Following the occurrence and continuance of an Event of Default, but absent the occurrence and continuance of an Acceleration Event, Agent shall apply any and all payments received by Agent in respect of the Obligations, and any and all proceeds of Collateral received by Agent, in such order as Agent may from time to time elect.

 

(c)           Notwithstanding anything to the contrary contained in this Agreement, if an Acceleration Event shall have occurred, and so long as it continues, Agent shall apply any and all payments received by Agent in respect of the Obligations, and any and all proceeds of Collateral received by Agent, in the following order: first, to all fees, costs, indemnities, liabilities, obligations and expenses incurred by or owing to Agent with respect to this Agreement, the other Financing Documents or the Collateral; second, to all fees, costs, indemnities, liabilities, obligations and expenses incurred by or owing to any Lender with respect to this Agreement, the other Financing Documents or the Collateral; third, to accrued and unpaid interest on the Obligations (including any interest which, but for the provisions of the Bankruptcy Code, would have accrued on such amounts); fourth, to the principal amount of the Obligations outstanding; and fifth to any other indebtedness or obligations of Borrowers owing to Agent or any Lender under the Financing Documents. Any balance remaining shall be delivered to Borrowers or to whomever may be lawfully entitled to receive such balance or as a court of competent jurisdiction may direct. In carrying out the foregoing, (y) amounts received shall be applied in the numerical order provided until exhausted prior to the application to the next succeeding category, and (z) each of the Persons entitled to receive a payment in any particular category shall receive an amount equal to its Pro Rata Share of amounts available to be applied pursuant thereto for such category.

 

Section 10.8         Waivers.

 

(a)           Except as otherwise provided for in this Agreement and to the fullest extent permitted by applicable law, each Borrower waives: (i) presentment, demand and protest, and notice of presentment, dishonor, intent to accelerate, acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all Financing Documents, the Notes or any other notes, commercial paper, accounts, contracts, documents, Instruments, Chattel Paper and Guarantees at any time held by Lenders on which any Borrower may in any way be liable, and hereby ratifies and confirms whatever Lenders may do in this regard; (ii) all rights to notice and a hearing prior to Agent’s or any Lender’s taking possession or control of, or to Agent’s or any Lender’s replevy, attachment or levy upon, any Collateral or any bond or security which might be required by any court prior to allowing Agent or any Lender to exercise any of its remedies; and (iii) the benefit of all valuation, appraisal and exemption Laws. Each Borrower acknowledges that it has been advised by counsel of its choices and decisions with respect to this Agreement, the other Financing Documents and the transactions evidenced hereby and thereby.

 

 

(b)           Each Borrower for itself and all its successors and assigns, (i) agrees that its liability shall not be in any manner affected by any indulgence, extension of time, renewal, waiver, or modification granted or consented to by Lender; (ii) consents to any indulgences and all extensions of time, renewals, waivers, or modifications that may be granted by Agent or any Lender with respect to the payment or other provisions of the Financing Documents, and to any substitution, exchange or release of the Collateral, or any part thereof, with or without substitution, and agrees to the addition or release of any Borrower, endorsers, guarantors, or sureties, or whether primarily or secondarily liable, without notice to any other Borrower and without affecting its liability hereunder; (iii) agrees that its liability shall be unconditional and without regard to the liability of any other Borrower, Agent or any Lender for any tax on the indebtedness; and (iv) to the fullest extent permitted by law, expressly waives the benefit of any statute or rule of law or equity now provided, or which may hereafter be provided, which would produce a result contrary to or in conflict with the foregoing.

 

(c)           To the extent that Agent or any Lender may have acquiesced in any noncompliance with any requirements or conditions precedent to the closing of the Loans or to any subsequent disbursement of Loan proceeds, such acquiescence shall not be deemed to constitute a waiver by Agent or any Lender of such requirements with respect to any future disbursements of Loan proceeds and Agent may at any time after such acquiescence require Borrowers to comply with all such requirements. Any forbearance by Agent or Lender in exercising any right or remedy under any of the Financing Documents, or otherwise afforded by applicable law, including any failure to accelerate the maturity date of the Loans, shall not be a waiver of or preclude the exercise of any right or remedy nor shall it serve as a novation of the Notes or as a reinstatement of the Loans or a waiver of such right of acceleration or the right to insist upon strict compliance of the terms of the Financing Documents. Agent’s or any Lender’s acceptance of payment of any sum secured by any of the Financing Documents after the due date of such payment shall not be a waiver of Agent’s and such Lender’s right to either require prompt payment when due of all other sums so secured or to declare a default for failure to make prompt payment. The procurement of insurance or the payment of taxes or other Liens or charges by Agent as the result of an Event of Default shall not be a waiver of Agent’s right to accelerate the maturity of the Loans, nor shall Agent’s receipt of any condemnation awards, insurance proceeds, or damages under this Agreement operate to cure or waive any Credit Party’s default in payment of sums secured by any of the Financing Documents.

 

(d)           Without limiting the generality of anything contained in this Agreement or the other Financing Documents, each Borrower agrees that if an Event of Default is continuing (i) Agent and Lenders shall not be subject to any “one action” or “election of remedies” law or rule, and (ii) all Liens and other rights, remedies or privileges provided to Agent or Lenders shall remain in full force and effect until Agent or Lenders have exhausted all remedies against the Collateral and any other properties owned by Borrowers and the Financing Documents and other security instruments or agreements securing the Loans have been foreclosed, sold and/or otherwise realized upon in satisfaction of Borrowers’ obligations under the Financing Documents.

 

(e)           Nothing contained herein or in any other Financing Document shall be construed as requiring Agent or any Lender to resort to any part of the Collateral for the satisfaction of any of Borrowers’ obligations under the Financing Documents in preference or priority to any other Collateral, and Agent may seek satisfaction out of all of the Collateral or any part thereof, in its absolute discretion in respect of Borrowers’ obligations under the Financing Documents. In addition, Agent shall have the right from time to time to partially foreclose upon any Collateral in any manner and for any amounts secured by the Financing Documents then due and payable as determined by Agent in its sole discretion, including, without limitation, the following circumstances: (i) in the event any Borrower defaults beyond any applicable grace period in the payment of one or more scheduled payments of principal and/or interest, Agent may foreclose upon all or any part of the Collateral to recover such delinquent payments, or (ii) in the event Agent elects to accelerate less than the entire outstanding principal balance of the Loans, Agent may foreclose all or any part of the Collateral to recover so much of the principal balance of the Loans as Lender may accelerate and such other sums secured by one or more of the Financing Documents as Agent may elect. Notwithstanding one or more partial foreclosures, any unforeclosed Collateral shall remain subject to the Financing Documents to secure payment of sums secured by the Financing Documents and not previously recovered.

 

 

(f)           To the fullest extent permitted by law, each Borrower, for itself and its successors and assigns, waives in the event of foreclosure of any or all of the Collateral any equitable right otherwise available to any Credit Party which would require the separate sale of any of the Collateral or require Agent or Lenders to exhaust their remedies against any part of the Collateral before proceeding against any other part of the Collateral; and further in the event of such foreclosure each Borrower does hereby expressly consent to and authorize, at the option of Agent, the foreclosure and sale either separately or together of each part of the Collateral.

 

Section 10.9         Injunctive Relief. The parties acknowledge and agree that, in the event of a breach or threatened breach of any Credit Party’s obligations under any Financing Documents, Agent and Lenders may have no adequate remedy in money damages and, accordingly, shall be entitled to an injunction (including, without limitation, a temporary restraining order, preliminary injunction, writ of attachment, or order compelling an audit) against such breach or threatened breach, including, without limitation, maintaining any cash management and collection procedure described herein. However, no specification in this Agreement of a specific legal or equitable remedy shall be construed as a waiver or prohibition against any other legal or equitable remedies in the event of a breach or threatened breach of any provision of this Agreement. Each Credit Party waives, to the fullest extent permitted by law, the requirement of the posting of any bond in connection with such injunctive relief. By joining in the Financing Documents as a Credit Party, each Credit Party specifically joins in this Section as if this Section were a part of each Financing Document executed by such Credit Party.

 

Section 10.10       Marshalling; Payments Set Aside. Neither Agent nor any Lender shall be under any obligation to marshal any assets in payment of any or all of the Obligations. To the extent that Borrower makes any payment or Agent enforces its Liens or Agent or any Lender exercises its right of set-off, and such payment or the proceeds of such enforcement or set-off is subsequently invalidated, declared to be fraudulent or preferential, set aside, or required to be repaid by anyone, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or set-off had not occurred.

 

Section 10.11       Transfer of Licenses. In the event any Permit is terminated or in the event of foreclosure or other acquisition of any location owned or leased by Borrower, any Inventory or other Collateral by Agent or its designee or any purchaser at a foreclosure sale, Borrower shall cooperate with Agent to cause all Permits to be reissued or transferred to Agent or Agent’s designee, including, without limitation, any subsequent purchaser.

 

Article 11 - AGENT

 

Section 11.1         Appointment and Authorization. Each Lender hereby irrevocably appoints and authorizes Agent to enter into each of the Financing Documents to which it is a party (other than this Agreement) on its behalf and to take such actions as Agent on its behalf and to exercise such powers under the Financing Documents as are delegated to Agent by the terms thereof, together with all such powers as are reasonably incidental thereto. Subject to the terms of Section 11.16 and to the terms of the other Financing Documents, Agent is authorized and empowered to amend, modify, or waive any provisions of this Agreement or the other Financing Documents on behalf of Lenders. The provisions of this Article 11 are solely for the benefit of Agent and Lenders and neither any Borrower nor any other Credit Party shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement, Agent shall act solely as agent of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for any Borrower or any other Credit Party. Agent may perform any of its duties hereunder, or under the Financing Documents, by or through its agents, servicers, trustees, investment managers or employees.

 

 

Section 11.2         Agent and Affiliates. Agent shall have the same rights and powers under the Financing Documents as any other Lender and may exercise or refrain from exercising the same as though it were not Agent, and Agent and its Affiliates may lend money to, invest in and generally engage in any kind of business with each Credit Party or Affiliate of any Credit Party as if it were not Agent hereunder.

 

Section 11.3         Action by Agent. The duties of Agent shall be mechanical and administrative in nature. Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender. Nothing in this Agreement or any of the Financing Documents is intended to or shall be construed to impose upon Agent any obligations in respect of this Agreement or any of the Financing Documents except as expressly set forth herein or therein.

 

Section 11.4         Consultation with Experts. Agent may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts.

 

Section 11.5         Liability of Agent. Neither Agent nor any of its directors, officers, agents, trustees, investment managers, servicers or employees shall be liable to any Lender for any action taken or not taken by it in connection with the Financing Documents, except that Agent shall be liable with respect to its specific duties set forth hereunder but only to the extent of its own gross negligence or willful misconduct in the discharge thereof as determined by a final non-appealable judgment of a court of competent jurisdiction. Neither Agent nor any of its directors, officers, agents, trustees, investment managers, servicers or employees shall be responsible for or have any duty to ascertain, inquire into or verify (a) any statement, warranty or representation made in connection with any Financing Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements specified in any Financing Document; (c) the satisfaction of any condition specified in any Financing Document; (d) the validity, effectiveness, sufficiency or genuineness of any Financing Document, any Lien purported to be created or perfected thereby or any other instrument or writing furnished in connection therewith; (e) the existence or non-existence of any Default or Event of Default; or (f) the financial condition of any Credit Party. Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, facsimile or electronic transmission or similar writing) believed by it to be genuine or to be signed by the proper party or parties. Agent shall not be liable for any apportionment or distribution of payments made by it in good faith and if any such apportionment or distribution is subsequently determined to have been made in error the sole recourse of any Lender to whom payment was due but not made, shall be to recover from other Lenders any payment in excess of the amount to which they are determined to be entitled (and such other Lenders hereby agree to return to such Lender any such erroneous payments received by them).

 

Section 11.6         Indemnification. Each Lender shall, in accordance with its Pro Rata Share, indemnify Agent (to the extent not reimbursed by Borrowers) upon demand against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from Agent’s gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction) that Agent may suffer or incur in connection with the Financing Documents or any action taken or omitted by Agent hereunder or thereunder. If any indemnity furnished to Agent for any purpose shall, in the opinion of Agent, be insufficient or become impaired, Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against even if so directed by Required Lenders until such additional indemnity is furnished.

 

 

Section 11.7         Right to Request and Act on Instructions. Agent may at any time request instructions from Lenders with respect to any actions or approvals which by the terms of this Agreement or of any of the Financing Documents Agent is permitted or desires to take or to grant, and if such instructions are promptly requested, Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person for refraining from any action or withholding any approval under any of the Financing Documents until it shall have received such instructions from Required Lenders or all or such other portion of the Lenders as shall be prescribed by this Agreement. Without limiting the foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting under this Agreement or any of the other Financing Documents in accordance with the instructions of Required Lenders (or all or such other portion of the Lenders as shall be prescribed by this Agreement) and, notwithstanding the instructions of Required Lenders (or such other applicable portion of the Lenders), Agent shall have no obligation to take any action if it believes, in good faith, that such action would violate applicable Law or exposes Agent to any liability for which it has not received satisfactory indemnification in accordance with the provisions of Section 11.6.

 

Section 11.8         Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under the Financing Documents.

 

Section 11.9         Collateral Matters. Lenders irrevocably authorize Agent, at its option and in its discretion, to (a) release any Lien granted to or held by Agent under any Security Document (i) upon termination of the Revolving Loan Commitment and payment in full of all Obligations; or (ii) constituting property sold or disposed of as part of or in connection with any disposition permitted under any Financing Document (it being understood and agreed that Agent may conclusively rely without further inquiry on a certificate of a Responsible Officer as to the sale or other disposition of property being made in full compliance with the provisions of the Financing Documents); and (b) subordinate any Lien granted to or held by Agent under any Security Document to a Permitted Lien that is allowed to have priority over the Liens granted to or held by Agent pursuant to the definition of “Permitted Liens”. Upon request by Agent at any time, Lenders will confirm Agent’s authority to release and/or subordinate particular types or items of Collateral pursuant to this Section 11.9.

 

Section 11.10       Agency for Perfection. Agent and each Lender hereby appoint each other Lender as agent for the purpose of perfecting Agent’s security interest in assets which, in accordance with the Uniform Commercial Code in any applicable jurisdiction, can be perfected by possession or control. Should any Lender (other than Agent) obtain possession or control of any such assets, such Lender shall notify Agent thereof, and, promptly upon Agent’s request therefor, shall deliver such assets to Agent or in accordance with Agent’s instructions or transfer control to Agent in accordance with Agent’s instructions. Each Lender agrees that it will not have any right individually to enforce or seek to enforce any Security Document or to realize upon any Collateral for the Loan unless instructed to do so by Agent (or consented to by Agent), it being understood and agreed that such rights and remedies may be exercised only by Agent.

 

 

Section 11.11       Notice of Default. Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default except with respect to defaults in the payment of principal, interest and fees required to be paid to Agent for the account of Lenders, unless Agent shall have received written notice from a Lender or a Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. Agent will notify each Lender of its receipt of any such notice. Agent shall take such action with respect to such Default or Event of Default as may be requested by Required Lenders (or all or such other portion of the Lenders as shall be prescribed by this Agreement) in accordance with the terms hereof. Unless and until Agent has received any such request, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interests of Lenders.

 

Section 11.12       Assignment by Agent; Resignation of Agent; Successor Agent.

 

(a)           Agent may at any time assign its rights, powers, privileges and duties hereunder to (i) another Lender or an Affiliate of Agent or any Lender or any Approved Fund, or (ii) any Person to whom Agent, in its capacity as a Lender, has assigned (or will assign, in conjunction with such assignment of agency rights hereunder) 50% or more of its Loan, in each case without the consent of the Lenders or Borrowers. Following any such assignment, Agent shall endeavor to give notice to the Lenders and Borrowers. Failure to give such notice shall not affect such assignment in any way or cause the assignment to be ineffective. An assignment by Agent pursuant to this subsection (a) shall not be deemed a resignation by Agent for purposes of subsection (b) below.

 

(b)           Without limiting the rights of Agent to designate an assignee pursuant to subsection (a) above, Agent may at any time give notice of its resignation to the Lenders and Borrowers. Upon receipt of any such notice of resignation, Required Lenders shall have the right to appoint a successor Agent. If no such successor shall have been so appointed by Required Lenders and shall have accepted such appointment within ten (10) Business Days after the retiring Agent gives notice of its resignation, then the retiring Agent may on behalf of the Lenders, appoint a successor Agent; provided, however, that if Agent shall notify Borrowers and the Lenders that no Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice from Agent that no Person has accepted such appointment and, from and following delivery of such notice, (i) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Financing Documents, and (ii) all payments, communications and determinations provided to be made by, to or through Agent shall instead be made by or to each Lender directly, until such time as Required Lenders appoint a successor Agent as provided for above in this paragraph.

 

(c)           Upon (i) an assignment permitted by subsection (a) above, or (ii) the acceptance of a successor’s appointment as Agent pursuant to subsection (b) above, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder and under the other Financing Documents (if not already discharged therefrom as provided above in this paragraph). The fees payable by Borrowers to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between Borrowers and such successor. After the retiring Agent’s resignation hereunder and under the other Financing Documents, the provisions of this Article and Section 11.12 shall continue in effect for the benefit of such retiring Agent and its sub-agents in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting or was continuing to act as Agent.

 

 

Section 11.13       Payment and Sharing of Payment.

 

(a)           Revolving Loan Advances, Payments and Settlements; Interest and Fee Payments.

 

(i)            Agent shall have the right, on behalf of Revolving Lenders to disburse funds to Borrowers for all Revolving Loans requested or deemed requested by Borrowers pursuant to the terms of this Agreement. Agent shall be conclusively entitled to assume, for purposes of the preceding sentence, that each Revolving Lender, other than any Non-Funding Lenders, will fund its Pro Rata Share of all Revolving Loans requested by Borrowers. Each Revolving Lender shall reimburse Agent on demand, in accordance with the provisions of the immediately following paragraph, for all funds disbursed on its behalf by Agent pursuant to the first sentence of this clause (i), or if Agent so requests, each Revolving Lender will remit to Agent its Pro Rata Share of any Revolving Loan before Agent disburses the same to a Borrower. If Agent elects to require that each Revolving Lender make funds available to Agent, prior to a disbursement by Agent to a Borrower, Agent shall advise each Revolving Lender by telephone, facsimile or e-mail of the amount of such Revolving Lender’s Pro Rata Share of the Revolving Loan requested by such Borrower no later than noon (Eastern time) on the date of funding of such Revolving Loan, and each such Revolving Lender shall pay Agent on such date such Revolving Lender’s Pro Rata Share of such requested Revolving Loan, in same day funds, by wire transfer to the Payment Account, or such other account as may be identified by Agent to Revolving Lenders from time to time. If any Lender fails to pay the amount of its Pro Rata Share of any funds advanced by Agent pursuant to the first sentence of this clause (i) within one (1) Business Day after Agent’s demand, Agent shall promptly notify Borrower Representative, and Borrowers shall immediately repay such amount to Agent. Any repayment required by Borrowers pursuant to this Section 11.13 shall be accompanied by accrued interest thereon from and including the date such amount is made available to a Borrower to but excluding the date of payment at the rate of interest then applicable to Revolving Loans. Nothing in this Section 11.13 or elsewhere in this Agreement or the other Financing Documents shall be deemed to require Agent to advance funds on behalf of any Lender or to relieve any Lender from its obligation to fulfill its commitments hereunder or to prejudice any rights that Agent or any Borrower may have against any Lender as a result of any default by such Lender hereunder.

 

(ii)           On a Business Day of each week as selected from time to time by Agent, or more frequently (including daily), if Agent so elects (each such day being a “Settlement Date”), Agent will advise each Revolving Lender by telephone, facsimile or e-mail of the amount of each such Revolving Lender’s percentage interest of the Revolving Loan balance as of the close of business of the Business Day immediately preceding the Settlement Date. In the event that payments are necessary to adjust the amount of such Revolving Lender’s actual percentage interest of the Revolving Loans to such Lender’s required percentage interest of the Revolving Loan balance as of any Settlement Date, the Revolving Lender from which such payment is due shall pay Agent, without setoff or discount, to the Payment Account before 1:00 p.m. (Eastern time) on the Business Day following the Settlement Date the full amount necessary to make such adjustment. Any obligation arising pursuant to the immediately preceding sentence shall be absolute and unconditional and shall not be affected by any circumstance whatsoever. In the event settlement shall not have occurred by the date and time specified in the second preceding sentence, interest shall accrue on the unsettled amount at the rate of interest then applicable to Revolving Loans.

 

(iii)          On each Settlement Date, Agent shall advise each Revolving Lender by telephone, facsimile or e-mail of the amount of such Revolving Lender’s percentage interest of principal, interest and fees paid for the benefit of Revolving Lenders with respect to each applicable Revolving Loan, to the extent of such Revolving Lender’s Revolving Loan Exposure with respect thereto, and shall make payment to such Revolving Lender before 1:00 p.m. (Eastern time) on the Business Day following the Settlement Date of such amounts in accordance with wire instructions delivered by such Revolving Lender to Agent, as the same may be modified from time to time by written notice to Agent; provided, however, that, in the case such Revolving Lender is a Defaulted Lender, Agent shall be entitled to set off the funding short-fall against that Defaulted Lender’s respective share of all payments received from any Borrower.

 

 

(iv)         On the Closing Date, Agent, on behalf of Lenders, may elect to advance to Borrowers the full amount of the initial Loans to be made on the Closing Date prior to receiving funds from Lenders, in reliance upon each Lender’s commitment to make its Pro Rata Share of such Loans to Borrowers in a timely manner on such date. If Agent elects to advance the initial Loans to Borrower in such manner, Agent shall be entitled to receive all interest that accrues on the Closing Date on each Lender’s Pro Rata Share of such Loans unless Agent receives such Lender’s Pro Rata Share of such Loans before 3:00 p.m. (Eastern time) on the Closing Date.

 

(v)          It is understood that for purposes of advances to Borrowers made pursuant to this Section 11.13, Agent will be using the funds of Agent, and pending settlement, (A) all funds transferred from the Payment Account to the outstanding Revolving Loans shall be applied first to advances made by Agent to Borrowers pursuant to this Section 11.13, and (B) all interest accruing on such advances shall be payable to Agent.

 

(vi)          The provisions of this Section 11.13(a) shall be deemed to be binding upon Agent and Lenders notwithstanding the occurrence of any Default or Event of Default, or any insolvency or bankruptcy proceeding pertaining to any Borrower or any other Credit Party.

 

(b)            Reserved.

 

(c)            Return of Payments.

 

(i)            If Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has been or will be received by Agent from a Borrower and such related payment is not received by Agent, then Agent will be entitled to recover such amount from such Lender on demand without setoff, counterclaim or deduction of any kind, together with interest accruing on a daily basis at the Federal Funds Rate.

 

(ii)           If Agent determines at any time that any amount received by Agent under this Agreement must be returned to any Borrower or paid to any other Person pursuant to any insolvency law or otherwise, then, notwithstanding any other term or condition of this Agreement or any other Financing Document, Agent will not be required to distribute any portion thereof to any Lender. In addition, each Lender will repay to Agent on demand any portion of such amount that Agent has distributed to such Lender, together with interest at such rate, if any, as Agent is required to pay to any Borrower or such other Person, without setoff, counterclaim or deduction of any kind.

 

(d)            Defaulted Lenders. The failure of any Defaulted Lender to make any payment required by it hereunder shall not relieve any other Lender of its obligations to make payment, but neither any other Lender nor Agent shall be responsible for the failure of any Defaulted Lender to make any payment required hereunder. Notwithstanding anything set forth herein to the contrary, a Defaulted Lender shall not have any voting or consent rights under or with respect to any Financing Document or constitute a “Lender” (or be included in the calculation of “Required Lenders” hereunder) for any voting or consent rights under or with respect to any Financing Document.

 

 

(e)            Sharing of Payments. If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Loan (other than pursuant to the terms of Section 2.8(d)) in excess of its Pro Rata Share of payments entitled pursuant to the other provisions of this Section 11.13, such Lender shall purchase from the other Lenders such participations in extensions of credit made by such other Lenders (without recourse, representation or warranty) as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter required to be returned or otherwise recovered from such purchasing Lender, such portion of such purchase shall be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such return or recovery, without interest. Each Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this clause (e) may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 10.6) with respect to such participation as fully as if such Lender were the direct creditor of Borrowers in the amount of such participation). If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this clause (e) applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this clause (e) to share in the benefits of any recovery on such secured claim.

 

Section 11.14       Right to Perform, Preserve and Protect. If any Credit Party fails to perform any obligation hereunder or under any other Financing Document, Agent itself may, but shall not be obligated to, cause such obligation to be performed at Borrowers’ expense. Agent is further authorized by Borrowers and the Lenders to make expenditures from time to time which Agent, in its reasonable business judgment, deems necessary or desirable to (a) preserve or protect the business conducted by Borrowers, the Collateral, or any portion thereof, and/or (b) enhance the likelihood of, or maximize the amount of, repayment of the Loan and other Obligations. Each Borrower hereby agrees to reimburse Agent on demand for any and all costs, liabilities and obligations incurred by Agent pursuant to this Section 11.14. Each Lender hereby agrees to indemnify Agent upon demand for any and all costs, liabilities and obligations incurred by Agent pursuant to this Section 11.14, in accordance with the provisions of Section 11.6.

 

Section 11.15       Additional Titled Agents. Except for rights and powers, if any, expressly reserved under this Agreement to any bookrunner, arranger or to any titled agent named on the cover page of this Agreement, other than Agent (collectively, the “Additional Titled Agents”), and except for obligations, liabilities, duties and responsibilities, if any, expressly assumed under this Agreement by any Additional Titled Agent, no Additional Titled Agent, in such capacity, has any rights, powers, liabilities, duties or responsibilities hereunder or under any of the other Financing Documents. Without limiting the foregoing, no Additional Titled Agent shall have nor be deemed to have a fiduciary relationship with any Lender. At any time that any Lender serving as an Additional Titled Agent shall have transferred to any other Person (other than any Affiliates) all of its interests in the Loan, such Lender shall be deemed to have concurrently resigned as such Additional Titled Agent.

 

Section 11.16       Amendments and Waivers.

 

(a)           No provision of this Agreement or any other Financing Document may be amended, waived or otherwise modified unless such amendment, waiver or other modification is in writing and is signed or otherwise approved by Borrowers, the Required Lenders and any other Lender to the extent required under Section 11.16(b).

 

(b)           In addition to the required signatures under Section 11.16(a), no provision of this Agreement or any other Financing Document may be amended, waived or otherwise modified unless such amendment, waiver or other modification is in writing and is signed or otherwise approved by the following Persons:

 

 

(i)            if any amendment, waiver or other modification would increase a Lender’s funding obligations in respect of any Loan, by such Lender; and/or

 

(ii)            if the rights or duties of Agent are affected thereby, by Agent;

 

provided, however, that, in each of (i) and (ii) above, no such amendment, waiver or other modification shall, unless signed or otherwise approved in writing by all the Lenders directly affected thereby, (A) reduce the principal of, rate of interest on or any fees with respect to any Loan or forgive any principal, interest (other than default interest) or fees (other than late charges) with respect to any Loan; (B) postpone the date fixed for, or waive, any payment (other than any mandatory prepayment pursuant to Section 2.1(b)(ii)) of principal of any Loan, or of interest on any Loan (other than default interest) or any fees provided for hereunder (other than late charges) or postpone the date of termination of any commitment of any Lender hereunder; (C) change the definition of the term Required Lenders or the percentage of Lenders which shall be required for Lenders to take any action hereunder; (D) release all or substantially all of the Collateral, authorize any Borrower to sell or otherwise dispose of all or substantially all of the Collateral, release any Guarantor of all or any portion of the Obligations or its Guarantee obligations with respect thereto, or consent to a transfer of any of the Intellectual Property, except, in each case with respect to this clause (D), as otherwise may be provided in this Agreement or the other Financing Documents (including in connection with any disposition permitted hereunder); (E) amend, waive or otherwise modify this Section 11.16(b) or the definitions of the terms used in this Section 11.16(b) insofar as the definitions affect the substance of this Section 11.16(b); (F) consent to the assignment, delegation or other transfer by any Credit Party of any of its rights and obligations under any Financing Document or release any Borrower of its payment obligations under any Financing Document, except, in each case with respect to this clause (F), pursuant to a merger or consolidation permitted pursuant to this Agreement; or (G) amend any of the provisions of Section 10.7 or amend any of the definitions Pro Rata Share, Revolving Loan Commitment, Revolving Loan Commitment Amount, Revolving Loan Commitment Percentage or that provide for the Lenders to receive their Pro Rata Shares of any fees, payments, setoffs or proceeds of Collateral hereunder. It is hereby understood and agreed that all Lenders shall be deemed directly affected by an amendment, waiver or other modification of the type described in the preceding clauses (C), (D), (E), (F) and (G) of the preceding sentence.

 

Section 11.17       Assignments and Participations.

 

(a)           Assignments.

 

(i)            Any Lender may at any time assign to one or more Eligible Assignees all or any portion of such Lender’s Loan together with all related obligations of such Lender hereunder. Except as Agent may otherwise agree, the amount of any such assignment (determined as of the date of the applicable Assignment Agreement or, if a “Trade Date” is specified in such Assignment Agreement, as of such Trade Date) shall be in a minimum aggregate amount equal to $1,000,000 or, if less, the assignor’s entire interests in the outstanding Loan; provided, however, that, in connection with simultaneous assignments to two or more related Approved Funds, such Approved Funds shall be treated as one assignee for purposes of determining compliance with the minimum assignment size referred to above. Borrowers and Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned to an Eligible Assignee until Agent shall have received and accepted an effective Assignment Agreement executed, delivered and fully completed by the applicable parties thereto and a processing fee of $3,500 to be paid by the assigning Lender; provided, however, that only one processing fee shall be payable in connection with simultaneous assignments to two or more related Approved Funds.

 

 

(ii)           From and after the date on which the conditions described above have been met, (A) such Eligible Assignee shall be deemed automatically to have become a party hereto and, to the extent of the interests assigned to such Eligible Assignee pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder, and (B) the assigning Lender, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment Agreement, shall be released from its rights and obligations hereunder (other than those that survive termination pursuant to Section 12.1). Upon the request of the Eligible Assignee (and, as applicable, the assigning Lender) pursuant to an effective Assignment Agreement, each Borrower shall execute and deliver to Agent for delivery to the Eligible Assignee (and, as applicable, the assigning Lender) Notes in the aggregate principal amount of the Eligible Assignee’s Loan (and, as applicable, Notes in the principal amount of that portion of the principal amount of the Loan retained by the assigning Lender). Upon receipt by the assigning Lender of such Note, the assigning Lender shall return to Borrower Representative any prior Note held by it.

 

(iii)          Agent, acting solely for this purpose as an agent of Borrower, shall maintain at the office of its servicer located in Bethesda, Maryland a copy of each Assignment Agreement delivered to it and a register for the recordation of the names and addresses of each Lender, and the commitments of, and principal amount of the Loan owing to, such Lender pursuant to the terms hereof (the “Register”). The entries in such Register shall be conclusive, absent manifest effort, and Borrower, Agent and Lenders may treat each Person whose name is recorded therein pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. Such Register shall be available for inspection by Borrower and any Lender, at any reasonable time upon reasonable prior notice to Agent. Each Lender that sells a participation shall, acting solely for this purpose as an agent of Borrower maintain a register on which it enters the name and address of each participant and the principal amounts (and stated interest) of each participant’s interest in the Obligations (each, a “Participant Register”). The entries in the Participant Registers shall be conclusive, absent manifest error. Each Participant Register shall be available for inspection by Borrower and Agent at any reasonable time upon reasonable prior notice to the applicable Lender; provided, that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant's interest in any commitments, loans, letters of credit or its other obligations under any Financing Document) to any Person (including Borrower) except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. For the avoidance of doubt, Agent (in its capacity as Agent) shall have no responsibility for maintaining a participant register.

 

(iv)          Notwithstanding the foregoing provisions of this Section 11.17(a) or any other provision of this Agreement, any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided, however, that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

(v)           Notwithstanding the foregoing provisions of this Section 11.17(a) or any other provision of this Agreement, Agent has the right, but not the obligation, to effectuate assignments of Loan via an electronic settlement system acceptable to Agent as designated in writing from time to time to the Lenders by Agent (the “Settlement Service”). At any time when Agent elects, in its sole discretion, to implement such Settlement Service, each such assignment shall be effected by the assigning Lender and proposed assignee pursuant to the procedures then in effect under the Settlement Service, which procedures shall be consistent with the other provisions of this Section 11.17(a). Each assigning Lender and proposed Eligible Assignee shall comply with the requirements of the Settlement Service in connection with effecting any assignment of Loan pursuant to the Settlement Service. With the prior written approval of Agent, Agent’s approval of such Eligible Assignee shall be deemed to have been automatically granted with respect to any transfer effected through the Settlement Service. Assignments and assumptions of the Loan shall be effected by the provisions otherwise set forth herein until Agent notifies Lenders of the Settlement Service as set forth herein.

 

 

(b)           Participations. Any Lender may at any time, without the consent of, or notice to, any Borrower or Agent, sell to one or more Persons (other than any Borrower or any Borrower’s Affiliates) participating interests in its Loan, commitments or other interests hereunder (any such Person, a “Participant”). In the event of a sale by a Lender of a participating interest to a Participant, (i) such Lender’s obligations hereunder shall remain unchanged for all purposes, (ii) Borrowers and Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations hereunder, and (iii) all amounts payable by each Borrower shall be determined as if such Lender had not sold such participation and shall be paid directly to such Lender. Each Borrower agrees that if amounts outstanding under this Agreement are due and payable (as a result of acceleration or otherwise), each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement; provided, however, that such right of set-off shall be subject to the obligation of each Participant to share with Lenders, and Lenders agree to share with each Participant, as provided in Section 11.5.

 

(c)           Replacement of Lenders. Within thirty (30) days after: (i) receipt by Agent of notice and demand from any Lender for payment of additional costs as provided in Section 2.8(d), which demand shall not have been revoked, (ii) any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.8(a), (iii) any Lender is a Defaulted Lender, and the circumstances causing such status shall not have been cured or waived; or (iv) any failure by any Lender to consent to a requested amendment, waiver or modification to any Financing Document in which Required Lenders have already consented to such amendment, waiver or modification but the consent of each Lender, or each Lender affected thereby, is required with respect thereto (each relevant Lender in the foregoing clauses (i) through (iv) being an “Affected Lender”) each of Borrower Representative and Agent may, at its option, notify such Affected Lender and, in the case of Borrowers’ election, Agent, of such Person’s intention to obtain, at Borrowers’ expense, a replacement Lender (“Replacement Lender”) for such Lender, which Replacement Lender shall be an Eligible Assignee and, in the event the Replacement Lender is to replace an Affected Lender described in the preceding clause (iv), such Replacement Lender consents to the requested amendment, waiver or modification making the replaced Lender an Affected Lender. In the event Borrowers or Agent, as applicable, obtains a Replacement Lender within ninety (90) days following notice of its intention to do so, the Affected Lender shall sell, at par, and assign all of its Loan and funding commitments hereunder to such Replacement Lender in accordance with the procedures set forth in Section 11.17(a); provided, however, that (A) Borrowers shall have reimbursed such Lender for its increased costs and additional payments for which it is entitled to reimbursement under Section 2.8(a) or Section 2.8(d), as applicable, of this Agreement through the date of such sale and assignment, and (B) Borrowers shall pay to Agent the $3,500 processing fee in respect of such assignment. In the event that a replaced Lender does not execute an Assignment Agreement pursuant to Section 11.17(a) within five (5) Business Days after receipt by such replaced Lender of notice of replacement pursuant to this Section 11.17(c) and presentation to such replaced Lender of an Assignment Agreement evidencing an assignment pursuant to this Section 11.17(c), such replaced Lender shall be deemed to have consented to the terms of such Assignment Agreement, and any such Assignment Agreement executed by Agent, the Replacement Lender and, to the extent required pursuant to Section 11.17(a), Borrowers, shall be effective for purposes of this Section 11.17(c) and Section 11.17(a). Upon any such assignment and payment, such replaced Lender shall no longer constitute a “Lender” for purposes hereof, other than with respect to such rights and obligations that survive termination as set forth in Section 12.1.

 

 

(d)           Credit Party Assignments. No Credit Party may assign, delegate or otherwise transfer any of its rights or other obligations hereunder or under any other Financing Document without the prior written consent of Agent and each Lender.

 

Section 11.18       Funding and Settlement Provisions Applicable When Non-Funding Lenders Exist. So long as Agent has not waived the conditions to the funding of Loans set forth in Section 7.2 or Section 2.1, any Lender may deliver a notice to Agent stating that such Lender shall cease making Revolving Loans due to the non-satisfaction of one or more conditions to funding Loans set forth in Section 7.2 or Section 2.1, and specifying any such non-satisfied conditions. Any Lender delivering any such notice shall become a non-funding Lender (a “Non-Funding Lender”) for purposes of this Agreement commencing on the Business Day following receipt by Agent of such notice, and shall cease to be a Non-Funding Lender on the date on which such Lender has either revoked the effectiveness of such notice or acknowledged in writing to each of Agent the satisfaction of the condition(s) specified in such notice, or Required Lenders waive the conditions to the funding of such Loans giving rise to such notice by Non-Funding Lender. Each Non-Funding Lender shall remain a Lender for purposes of this Agreement to the extent that such Non-Funding Lender has Revolving Loan Outstanding in excess of Zero Dollars ($0); provided, however, that during any period of time that any Non-Funding Lender exists, and notwithstanding any provision to the contrary set forth herein, the following provisions shall apply:

 

(a)           For purposes of determining the Pro Rata Share of each Revolving Lender under clause (c) of the definition of such term, each Non-Funding Lender shall be deemed to have a Revolving Loan Commitment Amount as in effect immediately before such Lender became a Non-Funding Lender.

 

(b)           Except as provided in clause (a) above, the Revolving Loan Commitment Amount of each Non-Funding Lender shall be deemed to be Zero Dollars ($0).

 

(c)           The Revolving Loan Commitment at any date of determination during such period shall be deemed to be equal to the sum of (i) the aggregate Revolving Loan Commitment Amounts of all Lenders, other than the Non-Funding Lenders as of such date plus (ii) the aggregate Revolving Loan Outstandings of all Non-Funding Lenders as of such date.

 

(d)           Agent shall have no right to make or disburse Revolving Loans for the account of any Non-Funding Lender pursuant to Section 2.1(b)(i) to pay interest, fees, expenses and other charges of any Credit Party.

 

(e)           To the extent that Agent applies proceeds of Collateral or other payments received by Agent to repayment of Revolving Loans pursuant to Section 10.7, such payments and proceeds shall be applied first in respect of Revolving Loans made at the time any Non-Funding Lenders exist, and second in respect of all other outstanding Revolving Loans.

 

 

 

Article 12 - MISCELLANEOUS

 

Section 12.1     Survival. All agreements, representations and warranties made herein and in every other Financing Document shall survive the execution and delivery of this Agreement and the other Financing Documents and the other Operative Documents. The provisions of Section 2.10 and Articles 11 and 12 shall survive the payment of the Obligations (both with respect to any Lender and all Lenders collectively) and any termination of this Agreement and any judgment with respect to any Obligations, including any final foreclosure judgment with respect to any Security Document, and no unpaid or unperformed, current or future, Obligations will merge into any such judgment.

 

Section 12.2     No Waivers. No failure or delay by Agent or any Lender in exercising any right, power or privilege under any Financing Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein and therein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Any reference in any Financing Document to the “continuing” nature of any Event of Default shall not be construed as establishing or otherwise indicating that any Borrower or any other Credit Party has the independent right to cure any such Event of Default, but is rather presented merely for convenience should such Event of Default be waived in accordance with the terms of the applicable Financing Documents.

 

Section 12.3     Notices.

 

(a)            All notices, requests and other communications to any party hereunder shall be in writing (including prepaid overnight courier, facsimile transmission or similar writing) and shall be given to such party at its address, facsimile number or e-mail address set forth on the signature pages hereof (or, in the case of any such Lender who becomes a Lender after the date hereof, in an assignment agreement or in a notice delivered to Borrower Representative and Agent by the assignee Lender forthwith upon such assignment) or at such other address, facsimile number or e-mail address as such party may hereafter specify for the purpose by notice to Agent and Borrower Representative; provided, however, that notices, requests or other communications shall be permitted by electronic means only in accordance with the provisions of Section 12.3(b) and (c). Each such notice, request or other communication shall be effective (i) if given by facsimile, when such notice is transmitted to the facsimile number specified by this Section and the sender receives a confirmation of transmission from the sending facsimile machine, or (ii) if given by mail, prepaid overnight courier or any other means, when received or when receipt is refused at the applicable address specified by this Section 12.3(a).

 

(b)            Notices and other communications to the parties hereto may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved from time to time by Agent, provided, however, that the foregoing shall not apply to notices sent directly to any Lender if such Lender has notified Agent that it is incapable of receiving notices by electronic communication. Agent or Borrower Representative may, in their discretion, agree to accept notices and other communications to them hereunder by electronic communications pursuant to procedures approved by it, provided, however, that approval of such procedures may be limited to particular notices or communications.

 

(c)            Unless Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgment from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgment), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor, provided, however, that if any such notice or other communication is not sent or posted during normal business hours, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day.

 

 

Section 12.4     Severability. In case any provision of or obligation under this Agreement or any other Financing Document shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

 

Section 12.5     Headings. Headings and captions used in the Financing Documents (including the Exhibits, Schedules and Annexes hereto and thereto) are included for convenience of reference only and shall not be given any substantive effect.

 

Section 12.6     Confidentiality.

 

(a)            Each Credit Party agrees (i) not to transmit or disclose provisions of any Financing Document to any Person (other than to Borrowers’ advisors, directors and officers on a need-to-know basis or as otherwise may be required by Law) without Agent’s prior written consent, (ii) to inform all Persons of the confidential nature of the Financing Documents and to direct them not to disclose the same to any other Person and to require each of them to be bound by these provisions.

 

(b)            Agent and each Lender shall hold all non-public information regarding the Credit Parties and their respective businesses identified as such by Borrowers and obtained by Agent or any Lender pursuant to the requirements hereof in accordance with such Person’s customary and reasonable procedures for handling information of such nature, except that disclosure of such information may be made (i) to their respective agents, employees, Subsidiaries, Affiliates, attorneys, auditors, professional consultants, rating agencies, insurance industry associations and portfolio management services, (ii) to prospective transferees or purchasers of any interest in the Loans, Agent or a Lender, provided, however, that any such Persons are bound by obligations of confidentiality, (iii) as required by Law, subpoena, judicial order or similar order and in connection with any litigation, (iv) as may be required in connection with the examination, audit or similar investigation of such Person, and (v) to a Person that is a trustee, investment advisor or investment manager, collateral manager, servicer, noteholder or secured party in a Securitization (as hereinafter defined) in connection with the administration, servicing and reporting on the assets serving as collateral for such Securitization. For the purposes of this Section, “Securitization” means (A) the pledge of the Loans as collateral security for loans to a Lender, or (B) a public or private offering by a Lender or any of its Affiliates or their respective successors and assigns, of securities which represent an interest in, or which are collateralized, in whole or in part, by the Loans. Confidential information shall include only such information identified as such at the time provided to Agent and shall not include information that either: (y) is in the public domain, or becomes part of the public domain after disclosure to such Person through no fault of such Person, or (z) is disclosed to such Person by a Person other than a Credit Party, provided, however, Agent does not have actual knowledge that such Person is prohibited from disclosing such information. The obligations of Agent and Lenders under this Section 12.6 shall supersede and replace the obligations of Agent and Lenders under any confidentiality agreement in respect of this financing executed and delivered by Agent or any Lender prior to the date hereof.

 

Section 12.7     Waiver of Consequential and Other Damages

 

. To the fullest extent permitted by applicable law, no Borrower shall assert, and each Borrower hereby waives, any claim against any Indemnitee (as defined below), on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of this Agreement, any other Financing Document or any agreement or instrument contemplated hereby or thereby, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Financing Documents or the transactions contemplated hereby or thereby.

 

 

Section 12.8     GOVERNING LAW; SUBMISSION TO JURISDICTION.

 

(a)            THIS AGREEMENT, EACH NOTE AND EACH OTHER FINANCING DOCUMENT, AND ALL DISPUTES AND OTHER MATTERS RELATING HERETO OR THERETO OR ARISING THEREFROM (WHETHER SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW). EACH BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN THE STATE OF NEW YORK IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON SUCH BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

(b)            Each Borrower, Agent and each Lender agree that each Loan (including those made on the Closing Date) shall be deemed to be made in, and the transactions contemplated hereunder and in any other Financing Document shall be deemed to have been performed in, the State of Maryland.

 

Section 12.9     WAIVER OF JURY TRIAL.

 

(a)            EACH BORROWER, AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH BORROWER, AGENT AND EACH LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH BORROWER, AGENT AND EACH LENDER WARRANTS AND REPRESENTS THAT IT HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

(b)            In the event any such action or proceeding is brought or filed in any United States federal court sitting in the State of California or in any state court of the State of California, and the waiver of jury trial set forth in Section 12.9(a) hereof is determined or held to be ineffective or unenforceable, the parties agree that all actions or proceedings shall be resolved by reference to a private judge sitting without a jury, pursuant to California Code of Civil Procedure Section 638, before a mutually acceptable referee or, if the parties cannot agree, a referee selected by the Presiding Judge of the Los Angeles County, California. Such proceeding shall be conducted in Los Angeles County, California, with California rules of evidence and discovery applicable to such proceeding. In the event any actions or proceedings are to be resolved by judicial reference, any party may seek from any court having jurisdiction thereover any prejudgment order, writ or other relief and have such prejudgment order, writ or other relief enforced to the fullest extent permitted by Law notwithstanding that all actions or proceedings are otherwise subject to resolution by judicial reference.

 

 

Section 12.10     Publication; Advertisement.

 

(a)            Publication. No Credit Party will directly or indirectly publish, disclose or otherwise use in any public disclosure, advertising material, promotional material, press release or interview, any reference to the name, logo or any trademark of Agent or any of its Affiliates or any reference to this Agreement or the financing evidenced hereby, in any case except (i) as required by Law, subpoena or judicial or similar order, in which case the applicable Credit Party shall give Agent prior written notice of such publication or other disclosure, or (ii) with Agent’s prior written consent.

 

(b)            Advertisement. Each Lender and each Credit Party hereby authorizes Agent to publish the name of such Lender and Credit Party, the existence of the financing arrangements referenced under this Agreement, the primary purpose and/or structure of those arrangements, the amount of credit extended under each facility, the title and role of each party to this Agreement, and the total amount of the financing evidenced hereby in any “tombstone”, comparable advertisement or press release which Agent elects to submit for publication. In addition, each Lender and each Credit Party agrees that Agent may provide lending industry trade organizations with information necessary and customary for inclusion in league table measurements after the Closing Date. With respect to any of the foregoing, Agent shall provide Borrowers with an opportunity to review and confer with Agent regarding the contents of any such tombstone, advertisement or information, as applicable, prior to its submission for publication and, following such review period, Agent may, from time to time, publish such information in any media form desired by Agent, until such time that Borrowers shall have requested Agent cease any such further publication.

 

Section 12.11     Counterparts; Integration. This Agreement and the other Financing Documents may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Signatures by facsimile or by electronic mail delivery of an electronic version of any executed signature page shall bind the parties hereto. This Agreement and the other Financing Documents constitute the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.

 

Section 12.12     No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

 

Section 12.13     Lender Approvals. Unless expressly provided herein to the contrary, any approval, consent, waiver or satisfaction of Agent or Lenders with respect to any matter that is the subject of this Agreement, the other Financing Documents may be granted or withheld by Agent and Lenders in their sole and absolute discretion and credit judgment.

 

 

Section 12.14     Expenses; Indemnity

 

(a)            Borrowers hereby agree to promptly pay (i) all costs and expenses of Agent (including, without limitation, the fees, costs and expenses of counsel to, and independent appraisers and consultants retained by Agent) in connection with the examination, review, due diligence investigation, documentation, negotiation, closing and syndication of the transactions contemplated by the Financing Documents, in connection with the performance by Agent of its rights and remedies under the Financing Documents and in connection with the continued administration of the Financing Documents including (A) any amendments, modifications, consents and waivers to and/or under any and all Financing Documents, and (B) any periodic public record searches conducted by or at the request of Agent (including, without limitation, title investigations, UCC searches, fixture filing searches, judgment, pending litigation and tax lien searches and searches of applicable corporate, limited liability, partnership and related records concerning the continued existence, organization and good standing of certain Persons); (ii) without limitation of the preceding clause (i), all costs and expenses of Agent in connection with the creation, perfection and maintenance of Liens pursuant to the Financing Documents; (iii) without limitation of the preceding clause (i), all costs and expenses of Agent in connection with (A) protecting, storing, insuring, handling, maintaining or selling any Collateral, (B) any litigation, dispute, suit or proceeding relating to any Financing Document, and (C) any workout, collection, bankruptcy, insolvency and other enforcement proceedings under any and all of the Financing Documents; (iv) without limitation of the preceding clause (i), all costs and expenses of Agent in connection with Agent’s reservation of funds in anticipation of the funding of the initial Loans to be made hereunder; and (v) all costs and expenses incurred by Lenders in connection with any litigation, dispute, suit or proceeding relating to any Financing Document and in connection with any workout, collection, bankruptcy, insolvency and other enforcement proceedings under any and all Financing Documents, whether or not Agent or Lenders are a party thereto. If Agent or any Lender uses in-house counsel for any of these purposes, Borrowers further agree that the Obligations include reasonable charges for such work commensurate with the fees that would otherwise be charged by outside legal counsel selected by Agent or such Lender for the work performed.

 

(b)            Each Borrower hereby agrees to indemnify, pay and hold harmless Agent and Lenders and the officers, directors, employees, trustees, agents, investment advisors and investment managers, collateral managers, servicers, and counsel of Agent and Lenders (collectively called the “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the fees and disbursements of counsel for such Indemnitee) in connection with any investigative, response, remedial, administrative or judicial matter or proceeding, whether or not such Indemnitee shall be designated a party thereto and including any such proceeding initiated by or on behalf of a Credit Party, and the reasonable expenses of investigation by engineers, environmental consultants and similar technical personnel and any commission, fee or compensation claimed by any broker (other than any broker retained by Agent or Lenders) asserting any right to payment for the transactions contemplated hereby, which may be imposed on, incurred by or asserted against such Indemnitee as a result of or in connection with the transactions contemplated hereby or by the other Operative Documents (including (i)(A) as a direct or indirect result of the presence on or under, or escape, seepage, leakage, spillage, discharge, emission or release from, any property now or previously owned, leased or operated by Borrower, any Subsidiary or any other Person of any Hazardous Materials, (B) arising out of or relating to the offsite disposal of any materials generated or present on any such property, or (C) arising out of or resulting from the environmental condition of any such property or the applicability of any governmental requirements relating to Hazardous Materials, whether or not occasioned wholly or in part by any condition, accident or event caused by any act or omission of Borrower or any Subsidiary, and (ii) proposed and actual extensions of credit under this Agreement) and the use or intended use of the proceeds of the Loans, except that Borrower shall have no obligation hereunder to an Indemnitee with respect to any liability resulting from the gross negligence or willful misconduct of such Indemnitee, as determined by a final non-appealable judgment of a court of competent jurisdiction. To the extent that the undertaking set forth in the immediately preceding sentence may be unenforceable, Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under applicable Law to the payment and satisfaction of all such indemnified liabilities incurred by the Indemnitees or any of them.

 

 

(c)            Notwithstanding any contrary provision in this Agreement, the obligations of Borrowers under this Section 12.14 shall survive the payment in full of the Obligations and the termination of this Agreement. NO INDEMNITEE SHALL BE RESPONSIBLE OR LIABLE TO THE BORROWERS OR TO ANY OTHER PARTY TO ANY FINANCING DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

 

(d)            Each Borrower for itself and all endorsers, guarantors and sureties and their heirs, legal representatives, successors and assigns, hereby further specifically waives any rights that it may have under Section 1542 of the California Civil Code (to the extent applicable), which provides as follows: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR,” and further waives any similar rights under applicable Laws.

 

Section 12.15     Reinstatement. This Agreement shall remain in full force and effect and continue to be effective should any petition or other proceeding be filed by or against any Credit Party for liquidation or reorganization, should any Credit Party become insolvent or make an assignment for the benefit of any creditor or creditors or should an interim receiver, receiver, receiver and manager or trustee be appointed for all or any significant part of any Credit Party’s assets, and shall continue to be effective or to be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a fraudulent preference reviewable transaction or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

 

Section 12.16     Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Borrowers and Agent and each Lender and their respective successors and permitted assigns.

 

Section 12.17     USA PATRIOT Act Notification. Agent (for itself and not on behalf of any Lender) and each Lender hereby notifies Borrowers that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record certain information and documentation that identifies Borrowers, which information includes the name and address of Borrower and such other information that will allow Agent or such Lender, as applicable, to identify Borrowers in accordance with the USA PATRIOT Act.

 

 

Section 12.18     Cross Default and Cross Collateralization.

 

(a)            Cross-Default. As stated under Section 10.1 hereof, an Event of Default under any of the Affiliated Financing Documents shall be an Event of Default under this Agreement. In addition, a Default or Event of Default under any of the Financing Documents shall be a Default under the Affiliated Financing Documents.

 

(b)            Cross Collateralization. Borrowers acknowledge and agree that the Collateral securing this Loan, also secures the Affiliated Obligations.

 

(c)            Consent. Each Borrower authorizes Agent, without giving notice to any Borrower or obtaining the consent of any Borrower and without affecting the liability of any Borrower for the Affiliated Obligations directly incurred by the Borrowers, from time to time to:

 

(i)            compromise, settle, renew, extend the time for payment, change the manner or terms of payment, discharge the performance of, decline to enforce, or release all or any of the Affiliated Obligations; grant other indulgences to any Borrowers in respect thereof; or modify in any manner any documents relating to the Affiliated Obligations;

 

(ii)           declare all Affiliated Obligations due and payable upon the occurrence and during the continuance of an Event of Default;

 

(iii)          take and hold security for the performance of the Affiliated Obligations of any Borrowers and exchange, enforce, waive and release any such security;

 

(iv)          apply and reapply such security and direct the order or manner of sale thereof as Agent, in its sole discretion, may determine;

 

(v)           release, surrender or exchange any deposits or other property securing the Affiliated Obligations or on which Agent at any time may have a Lien; release, substitute or add any one or more endorsers or guarantors of the Affiliated Obligations of any Borrowers; or compromise, settle, renew, extend the time for payment, discharge the performance of, decline to enforce, or release all or any obligations of any such endorser or guarantor or other Person who is now or may hereafter be liable on any Affiliated Obligations or release, surrender or exchange any deposits or other property of any such Person;

 

(vi)          apply payments received by Lender from Borrower to any Obligations or Affiliated Obligations, as permitted in accordance with the terms of this Agreement and in such order as Lender shall determine, in its sole discretion; and

 

(vii)         assign the Affiliated Financing Documents in whole or in part.

 

Section 12.19     Existing Agreements Superseded; Exhibits and Schedules.

 

(a)            The Original Credit Agreement, including the schedules thereto, is superseded by this Agreement, including the schedules hereto, which has been executed in amendment, restatement and modification of, but not in novation or extinguishment of, the obligations under the Original Credit Agreement. It is the express intention of the parties hereto to reaffirm the indebtedness and other obligations created under the Original Credit Agreement. Any and all outstanding amounts under the Original Credit Agreement including, but not limited to principal, accrued interest, fees (except as otherwise provided herein) and other charges, as of the Closing Date shall be carried over and deemed outstanding under this Agreement.

 

 

 

(b)            Each Credit Party reaffirms its obligations under each Financing Document to which it is a party, including but not limited to the Security Documents and the schedules thereto.

 

(c)            Each Credit Party acknowledges and confirms that (i) the Liens and security interests granted pursuant to the Financing Documents secure the indebtedness, liabilities and obligations of the Borrowers and the other Credit Parties to Agent and the Lenders under the Original Credit Agreement, as amended and restated hereby, and that the term “Obligations” as used in the Financing Documents (or any other term used therein to describe or refer to the indebtedness, liabilities and obligations of the Borrowers to Agent and the Lenders) includes, without limitation, the indebtedness, liabilities and obligations of the Borrowers under this Agreement and the Notes to be delivered hereunder, if any, and under the Original Credit Agreement, as amended and restated hereby, as the same further may be amended, restated, supplemented and/or modified from time to time, and (ii) the grants of Liens under and pursuant to the Financing Documents shall continue unaltered, and each other Financing Document shall continue in full force and effect in accordance with its terms unless otherwise amended by the parties thereto, and the parties hereto hereby ratify and confirm the terms thereof as being in full force and effect and unaltered by this Agreement and all references in the any of the Financing Documents to the “Credit Agreement” shall be deemed to refer to this Amended and Restated Credit Agreement.

 

(d)            Nothing herein contained shall be construed as a substitution or novation of the obligations outstanding under the Original Credit Agreement or the other Financing Documents. Nothing in this Agreement shall be construed as a release or other discharge of any Borrower or any other Credit Party from its obligations and liabilities under the Original Credit Agreement or the other Financing Documents. On the Closing Date, any and all references in any Financing Documents to the Original Credit Agreement shall be deemed to be amended to refer to this Agreement.

 

[SIGNATURES APPEAR ON FOLLOWING PAGES]

 

 

IN WITNESS WHEREOF, intending to be legally bound, each of the parties have caused this Agreement to be executed day and year first above mentioned.

 

BORROWERS:	AZIYO BIOLOGICS, INC.
	By:	/s/ Jeffrey Hamet
	Name: Jeffrey Hamet
	Title: Treasurer
	AZIYO MED, LLC
	By:	/s/ Jeffrey Hamet
	Name: Jeffrey Hamet
	Title: Treasurer
	Address for Borrowers:
	c/o Aziyo Biologics, Inc.
	12510 Prosperity Drive, Suite 370
	Silver Spring, Maryland 20904
	Attn: [XXX]
	Facsimile:
	E-mail: [XXX]
	with a copy to:
	Shipman & Goodwin LLP
	One Constitution Plaza
	Hartford, Connecticut 06103
	Attn: [XXX]
	Facsimile: 860-251-5311
	E-mail: [XXX]

 

 

AGENT:	MIDCAP FUNDING IV TRUST
	By: Apollo Capital Management, L.P.,
	its investment manager
	By: Apollo Capital Management GP, LLC,
	its general partner
	By:	Maurice Amsellem
	Name: Maurice Amsellem
	Title: Authorized Signatory
	Address:
	c/o MidCap Financial Services, LLC, as servicer
	7255 Woodmont Avenue, Suite 200
	Bethesda, Maryland 20814
	Attn: Account Manager for Aziyo transaction
	Facsimile: 301-941-1450
	E-mail: notices@midcapfinancial.com
	with a copy to:
	c/o MidCap Financial Services, LLC, as servicer
	7255 Woodmont Avenue, Suite 200
	Bethesda, Maryland 20814
	Attn: General Counsel
	Facsimile: 301-941-1450
	E-mail: legalnotices@midcapfinancial.com
	Payment Account Designation:
	Wells Fargo Bank, N.A. (McLean, VA)
	ABA #: [XXX] Account Name: MidCap Funding IV Trust – Collections
	Account #: [XXX]
	Attention: Account Manager for Aziyo transaction

 

 

LENDER:	MIDCAP FUNDING IV TRUST
	By: Apollo Capital Management, L.P.,
	its investment manager
	By: Apollo Capital Management GP, LLC,
	its general partner
		By:	/s/ Maurice Amsellem
		Name: Maurice Amsellem
		Title: Authorized Signatory
	Address:
	c/o MidCap Financial Services, LLC, as servicer
	7255 Woodmont Avenue, Suite 200
	Bethesda, Maryland 20814
	Attn: Account Manager for Aziyo transaction
	Facsimile: 301-941-1450
	E-mail: notices@midcapfinancial.com
	with a copy to:
	c/o MidCap Financial Services, LLC, as servicer
	7255 Woodmont Avenue, Suite 200
	Bethesda, Maryland 20814
	Attn: General Counsel
	Facsimile: 301-941-1450
	E-mail: legalnotices@midcapfinancial.com

 

 

 

 

ANNEXES, EXHIBITS AND SCHEDULES

 

ANNEXES
Annex A	Commitment Annex
EXHIBITS
Exhibit A	[Reserved]
Exhibit B	Form of Compliance Certificate
Exhibit C	Borrowing Base Certificate
Exhibit D	Form of Notice of Borrowing
Exhibit F-1	Form of U.S. Tax Compliance Certificate
Exhibit F-2	Form of U.S. Tax Compliance Certificate
Exhibit F-3	Form of U.S. Tax Compliance Certificate
Exhibit F-4	Form of U.S. Tax Compliance Certificate
SCHEDULES
Schedule 3.1	Existence, Organizational ID Numbers, Foreign Qualification, Prior Names
Schedule 3.4	Capitalization
Schedule 3.6	Litigation
Schedule 3.17	Material Contracts
Schedule 3.18	Environmental Compliance
Schedule 3.19	Intellectual Property
Schedule 4.9	Litigation, Governmental Proceedings and Other Notice Events
Schedule 4.17	Products and Permits
Schedule 5.1	Debt; Contingent Obligations
Schedule 5.2	Liens
Schedule 5.7	Permitted Investments
Schedule 5.8	Affiliate Transactions
Schedule 5.14	Deposit Accounts and Securities Accounts
Schedule 6.1	Minimum Net Product Revenue
Schedule 7.4	Post-Closing Obligations
Schedule 9.1	Collateral
Schedule 9.2(b)	Location of Collateral
Schedule 9.2(d)	Chattel Paper, Letter of Credit Rights, Commercial Tort Claims, Instruments, Documents, Investment Property

 

 

Annex A to Credit Agreement (Commitment Annex)

 

Lender		Revolving Loan Commitment Amount				Revolving Loan Commitment Percentage
MidCap Funding IV Trust		$	8,000,000				100	%
TOTALS		$	8,000,000				100	%

 

 

Exhibit A to Credit Agreement (Reserved)

 

 

Exhibit B to Credit Agreement (Form of Compliance Certificate)

 

COMPLIANCE CERTIFICATE

 

This Compliance Certificate is given by _____________________, a Responsible Officer of Aziyo Biologics, Inc. (the “Borrower Representative”), pursuant to that certain Amended and Restated Credit and Security Agreement (Revolving Loan), dated as of July 15, 2019 among the Borrower Representative and any additional Borrower that may hereafter be added thereto (collectively, “Borrowers”), MidCap Financial Trust, individually as a Lender and as Agent, and the financial institutions or other entities from time to time parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.

 

The undersigned Responsible Officer hereby certifies to Agent and Lenders that:

 

(a)         the financial statements delivered with this certificate in accordance with Section 4.1 of the Credit Agreement fairly present in all material respects the results of operations and financial condition of Borrowers and their Consolidated Subsidiaries as of the dates and the accounting period covered by such financial statements;

 

(b)         the representations and warranties of each Credit Party contained in the Financing Documents are true, correct and complete in all material respects on and as of the date hereof, except to the extent that any such representation or warranty relates to a specific date in which case such representation or warranty shall be true and correct in all material respects as of such earlier date; provided, however, in each case, such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof;

 

(c)         I have reviewed the terms of the Credit Agreement and have made, or caused to be made under my supervision, a review in reasonable detail of the transactions and conditions of Borrowers and their Consolidated Subsidiaries during the accounting period covered by such financial statements, and such review has not disclosed the existence during or at the end of such accounting period, and I have no knowledge of the existence as of the date hereof, of any condition or event that constitutes a Default or an Event of Default, except as set forth in Schedule 1 hereto, which includes a description of the nature and period of existence of such Default or an Event of Default and what action Borrowers have taken, are undertaking and propose to take with respect thereto;

 

(d)         except as noted on Schedule 2 attached hereto, Schedule 9.2(b) to the Credit Agreement contains a complete and accurate list of all business locations of Borrowers and Guarantors and all names under which Borrowers and Guarantors currently conduct business; Schedule 2 specifically notes any changes in the names under which any Borrower or Guarantors conduct business;

 

(e)         except as noted on Schedule 3 attached hereto, the undersigned has no knowledge of (i) any federal or state tax liens having been filed against any Borrower, Guarantor or any Collateral, or (ii) any failure of any Borrower or any Guarantors to make required payments of withholding or other tax obligations of any Borrower or any Guarantors during the accounting period to which the attached statements pertain or any subsequent period;

 

(f)          Schedule 5.14 to the Credit Agreement contains a complete and accurate statement of all deposit accounts or investment accounts maintained by Borrowers and Guarantors;

 

 

(g)         except as noted on Schedule 4 attached hereto and Schedule 3.6 to the Credit Agreement, the undersigned has no knowledge of any current, pending or threatened: (i) litigation against the Borrowers or any Guarantors, (ii) inquiries, investigations or proceedings concerning the business affairs, practices, licensing or reimbursement entitlements of Borrowers or any Guarantors, or (iii) default by Borrowers or any Guarantors under any Material Contract to which it is a party;

 

(h)         except as noted on Schedule 5 attached hereto, no Borrower or Guarantor has acquired, by purchase, by the approval or granting of any application for registration (whether or not such application was previously disclosed to Agent by Borrowers) or otherwise, any Intellectual Property that is registered with any United States or foreign Governmental Authority, or has filed with any such United States or foreign Governmental Authority, any new application for the registration of any Intellectual Property, or acquired rights under a license as a licensee with respect to any such registered Intellectual Property (or any such application for the registration of Intellectual Property) owned by another Person, that has not previously been reported to Agent on Schedule 3.17 to the Credit Agreement or any Schedule 5 to any previous Compliance Certificate delivered by Borrower to Agent;

 

(i)          except as noted on Schedule 6 attached hereto, no Borrower or Guarantor has acquired, by purchase or otherwise, any Chattel Paper, Letter of Credit Rights, Instruments, Documents or Investment Property that has not previously been reported to Agent on any Schedule 6 to any previous Compliance Certificate delivered by Borrower Representative to Agent;

 

(j)          except as noted on Schedule 7 attached hereto, no Borrower or Guarantor is aware of any commercial tort claim that has not previously been reported to Agent on any Schedule 7 to any previous Compliance Certificate delivered by Borrower Representative to Agent;

 

(k)         Borrowers and Guarantor are in compliance with the covenants contained in Article 6 of the Credit Agreement, and in any Guarantee constituting a part of the Financing Documents, as demonstrated by the calculation of such covenants below, except as set forth below; in determining such compliance, the following calculations have been made: [See attached worksheets]. Such calculations and the certifications contained therein are true, correct and complete;

 

(l)          [Fixed Charge Coverage Ratio for the Defined Period ending [_______] is [___]:[___]]¹;

 

(m)        [Liquidity as of the date hereof is $[_________]]².

 

The foregoing certifications and computations are made as of ________________, 20__ (end of month) and as of _____________, 20__.

 

¹ Solely to the extent required for Aziyo to make a payment to DNW or HighCape.

 

² Solely to the extent required for Aziyo to make a payment to DNW or HighCape.

 

 

	Sincerely,
	AZIYO BIOLOGICS, INC.

 

By:

Name:

Title:

 

 

Exhibit C to Credit Agreement (Borrowing Base Certificate)

 

[See attached.]

 

 

Exhibit D to Credit Agreement (Form of Notice of Borrowing)

 

NOTICE OF BORROWING

 

This Notice of Borrowing is given by _____________________, a Responsible Officer of Aziyo Biologics, Inc. (the “Borrower Representative”), pursuant to that certain Amended and Restated Credit and Security Agreement (Revolving Loan), dated as of July 15, 2019 among the Borrower Representative, and any additional Borrower that may hereafter be added thereto (collectively, “Borrowers”), MidCap Financial Trust, individually as a Lender and as Agent, and the financial institutions or other entities from time to time parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.

 

The undersigned Responsible Officer hereby gives notice to Agent of Borrower Representative’s request to borrow $____________________ of Revolving Loans on _______________, 20__. Attached is a Borrowing Base Certificate complying in all respects with the Credit Agreement and confirming that, after giving effect to the requested advance, the Revolving Loan Outstandings will not exceed the Revolving Loan Limit.

 

The undersigned officer hereby certifies that, both before and after giving effect to the request above (a) each of the conditions precedent set forth in Section 7.2 have been satisfied, (b) all of the representations and warranties contained in the Credit Agreement and the other Financing Documents are true, correct and complete in all material respects as of the date hereof, except to the extent such representation or warranty relates to a specific date, in which case such representation or warranty is true, correct and complete in all material respects as of such earlier date; provided, however, in each case, such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof, and (c) no Default or Event of Default has occurred and is continuing on the date hereof.

 

IN WITNESS WHEREOF, the undersigned officer has executed and delivered this Notice of Borrowing this ____ day of ___________, 20__.

 

	Sincerely,
	AZIYO BIOLOGICS, INC.

 

By:

Name:

Title:

 

 

Exhibit F-1 to Credit Agreement (Form of U.S. Tax Compliance Certificate)

 

U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)

 

This U.S. Tax Compliance Certificate is given by _____________________, a Responsible Officer of ________________ (the “Borrower Representative”), pursuant to that certain Amended and Restated Credit and Security Agreement (Revolving Loan), dated as of July 15, 2019 among the Borrower Representative,                               and any additional Borrower that may hereafter be added thereto (collectively, “Borrowers”), MidCap Financial Trust, individually as a Lender and as Agent, and the financial institutions or other entities from time to time parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.

 

Pursuant to the provisions of Section 2.8(c) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of any Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to any Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished the Agent and the Borrower Representative with a certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower Representative and the Agent, and (2) the undersigned shall have at all times furnished the Borrower Representative and the Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

 

[NAME OF LENDER]
By:
	Name:
	Title:

 

Date: ________ __, 20[ ]

 

 

Exhibit F-2 to Credit Agreement (Form of U.S. Tax Compliance Certificate)

 

U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

 

This U.S. Tax Compliance Certificate is given by _____________________, a Responsible Officer of ________________ (the “Borrower Representative”), pursuant to that certain Amended and Restated Credit and Security Agreement (Revolving Loan), dated as of July 15, 2019 among the Borrower Representative,                                      and any additional Borrower that may hereafter be added thereto (collectively, “Borrowers”), MidCap Financial Trust, individually as a Lender and as Agent, and the financial institutions or other entities from time to time parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.

 

Pursuant to the provisions of Section 2.8(c) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of any Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to any Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

 

[NAME OF PARTICIPANT]
By:
	Name:
	Title:

 

Date: ________ __, 20[ ]

 

 

Exhibit F-3 to Credit Agreement (Form of U.S. Tax Compliance Certificate)

 

U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

 

This U.S. Tax Compliance Certificate is given by _____________________, a Responsible Officer of ________________ (the “Borrower Representative”), pursuant to that certain Amended and Restated Credit and Security Agreement (Revolving Loan), dated as of July 15, 2019 among the Borrower Representative,                                        and any additional Borrower that may hereafter be added thereto (collectively, “Borrowers”), MidCap Financial Trust, individually as a Lender and as Agent, and the financial institutions or other entities from time to time parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.

 

Pursuant to the provisions of Section 2.8(c) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of any Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to any Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

 

[NAME OF PARTICIPANT]
By:
	Name:
	Title:

 

Date: ________ __, 20[ ]

 

 

Exhibit F-4 to Credit Agreement (Form of U.S. Tax Compliance Certificate)

 

U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

 

This U.S. Tax Compliance Certificate is given by _____________________, a Responsible Officer of ________________ (the “Borrower Representative”), pursuant to that certain Amended and Restated Credit and Security Agreement (Revolving Loan), dated as of July 15, 2019 among the Borrower Representative,                                    and any additional Borrower that may hereafter be added thereto (collectively, “Borrowers”), MidCap Financial Trust, individually as a Lender and as Agent, and the financial institutions or other entities from time to time parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.

 

Pursuant to the provisions of Section 2.8(c) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit Agreement or any other Financing Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of any Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to any Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished the Agent and the Borrower Representative with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower Representative and the Agent, and (2) the undersigned shall have at all times furnished the Borrower Representative and the Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

 

[NAME OF LENDER]
By:

Name:

Title:

 

Date: ________ __, 20[ ]

 

 

Schedule 3.1 – Existence, Organizational ID Numbers, Foreign Qualification, Prior Names

 

 

Schedule 3.4 – Capitalization

 

 

Schedule 3.6 – Litigation

 

 

Schedule 3.17 – Material Contracts

 

 

Schedule 3.18 – Environmental Compliance

 

 

Schedule 3.19 – Intellectual Property

 

  

Schedule 4.9 – Litigation, Governmental Proceedings and Other Notice Events

 

 

Schedule 5.1 – Debt; Contingent Obligations

 

 

Schedule 5.2 – Liens

 

 

Schedule 5.7 – Permitted Investments

 

 

Schedule 5.8 – Affiliate Transactions

 

 

Schedule 5.14 – Deposit Accounts and Securities Accounts

 

 

Schedule 6.1– Minimum Net Product Revenue

 

Defined Period Ending		Minimum Net Product Revenue Amount
June 30, 2019		$	25,300,000
July 31, 2019		$	25,400,000
August 31, 2019		$	25,500,000
September 30, 2019		$	26,100,000
October 31, 2019		$	26,200,000
November 30, 2019		$	26,400,000
December 31, 2019		$	28,500,000
January 31, 2020		$	28,800,000
February 29, 2020		$	29,000,000
March 31, 2020		$	29,200,000
April 30, 2020		$	29,500,000
May 31, 2020		$	30,200,000
June 30, 2020		$	30,700,000
July 31, 2020		$	31,200,000
August 31, 2020		$	31,900,000
September 30, 2020		$	32,500,000
October 31, 2020		$	33,800,000
November 30, 2020		$	34,500,000
December 31, 2020		$	35,000,000
January 31, 2021		$	35,500,000
February 28, 2021		$	35,700,000
March 31, 2021		$	36,000,000
April 30, 2021		$	36,500,000
May 31, 2021		$	37,100,000
June 30, 2021		$	37,600,000
July 31, 2021		$	37,900,000
August 31, 2021		$	38,200,000
September 30, 2021		$	38,500,000
October 31, 2021		$	38,600,000
November 30, 2021		$	38,800,000
December 31, 2021		$	40,000,000
January 31, 2022		$	40,400,000
February 28, 2022		$	40,800,000

 

 

March 31, 2022		$	41,200,000
April 30, 2022		$	41,600,000
May 31, 2022		$	42,000,000
June 30, 2022		$	42,400,000
July 31, 2022		$	42,800,000
August 31, 2022		$	43,200,000
September 30, 2022		$	43,600,000
October 31, 2022		$	44,000,000
November 30, 2022		$	44,400,000
December 31, 2022		$	44,800,000
January 31, 2023		$	45,000,000
February 28, 2023		$	45,200,000
March 31, 2023		$	45,400,000
April 30, 2023		$	45,600,000
May 31, 2023		$	45,800,000
June 30, 2023		$	46,000,000
July 31, 2023		$	46,200,000
August 31, 2023		$	46,400,000
September 30, 2023		$	46,600,000
October 31, 2023		$	46,800,000
November 30, 2023		$	47,000,000
December 31, 2023		$	47,200,000
January 31, 2024		$	47,400,000
February 29, 2024		$	47,600,000
March 31, 2024		$	47,800,000
April 30, 2024		$	48,000,000
May 31, 2024		$	48,200,000
June 30, 2024		$	48,200,000

 

 

Schedule 7.4 – Post-Closing Requirements

 

Borrowers shall satisfy and complete each of the following obligations, or provide Agent each of the items listed below, as applicable, on or before the date indicated below, all to the satisfaction of Agent in its sole and absolute discretion:

 

None.

 

Borrower’s failure to complete and satisfy any of the above obligations on or before the date indicated above, or Borrower’s failure to deliver any of the above listed items on or before the date indicated above, shall constitute an immediate an automatic Event of Default.

 

 

Schedule 9.1 – Collateral

 

The Collateral consists of all of each Borrower’s assets, including without limitation, all of each Borrower’s right, title and interest in and to the following, whether now owned or hereafter created, acquired or arising:

 

(a)

all goods, Accounts (including health-care insurance receivables), equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles, commercial tort claims (including each such claim listed on Schedule 9.2(d)), documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, securities accounts, fixtures, letter of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located;

 

(b)

all of Borrowers’ books and records relating to any of the foregoing; and

 

(c)

any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.

 

 

Schedule 9.2(b) – Collateral Information

 

Aziyo Biologics, Inc.

 

12510 Prosperity Drive, Suite 370, Silver Spring, MD 20904 (principal place of business)

 

880 Harbour Way South, Suite 100, Richmond, CA 94804

 

Certain collateral is located at various hospital locations in accordance with consignment or other agreements entered in the ordinary course of business

 

Aziyo Med, LLC

 

12510 Prosperity Drive, Suite 370, Silver Spring, MD 20904 (principal place of business)

 

1100 Old Ellis Rd, Suite 1200, Roswell, GA 30076

 

Certain collateral is located at various hospital locations in accordance with consignment or other agreements entered in the ordinary course of business

 

 

Schedule 9.2(d) – Chattel Paper, Letter of Credit Rights, Commercial Tort Claims, Instruments, Documents, Investment Property

 

None.

 

 

 

Exhibit 10.12

 

AZIYO BIOLOGICS, INC.

 

NOTE PURCHASE AGREEMENT

 

THIS NOTE PURCHASE AGREEMENT (this “Agreement”), dated as of April 2, 2020, by and between Aziyo Biologics, Inc., a Delaware corporation (the “Company”) and each of the persons and entities set forth on Schedule A attached hereto (each, an “Investor”).

 

WHEREAS, the Company desires to issue and sell to each of the Investors a Note (as defined below) and each of the Investors desires to purchase a Note from the Company on the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants and conditions set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1.              Sale of the Notes; Closings.

 

1.1           Sale of the Notes. Subject to the terms and conditions set forth in this Agreement, at each Closing (as defined below), the Company shall issue and sell to each Investor, and each Investor shall purchase from the Company, a Subordinated Convertible Promissory Note in the form attached hereto as Exhibit A (each, a “Note”) in the principal amount set forth opposite such Investor’s name on Schedule A attached hereto for such Closing.

 

1.2           Closings.

 

(a)               The initial closing of the purchase and sale of the Notes shall take place remotely via the exchange of the requisite documents and signatures at 1:00 p.m. Eastern time on the date hereof (such time, date and place are referred to in this Agreement as the “Initial Closing”). At the Initial Closing, the Company shall deliver to each Investor a Note in the principal amount set forth opposite such Investor’s name on Schedule A attached hereto, duly executed by the Company, against delivery to the Company by such Investor of the amount set forth opposite such Investor’s name on Schedule A attached hereto payable in immediately available funds by wire transfer to an account designated by the Company.

 

(b)               Commencing after the date of the Initial Closing, in one closing or in a series of separate closings (each, a “Subsequent Closing” and collectively, the “Subsequent Closings”), the Company shall have the right to issue and sell Notes to any Investor hereunder and/or any other person or entity that is an “accredited investor” as such term is defined under the Securities Act of 1933, as amended (the “Securities Act”) unless and until the aggregate principal amount of all Notes issued by the Company under this Agreement equals $1,000,000.00. Each Subsequent Closing of the purchase and sale of Notes shall take place remotely via the exchange of the requisite documents and signatures at 1:00 p.m. Eastern time on the date of such Subsequent Closing. At each Subsequent Closing (if any) (i) Schedule A shall be revised to reflect any sales of additional Notes made at such Subsequent Closing (without the consent of the Investors) and (ii) the Company and each purchaser of Notes at a Subsequent Closing that is not already a party to this Agreement shall execute and deliver to the Company a counterpart signature page hereto, whereupon such person or entity shall become an “Investor” hereunder (without the consent of the Investors). At each Subsequent Closing, the Company shall deliver to each Investor a Note in the principal amount set forth opposite such Investor’s name on Schedule A attached hereto, duly executed by the Company, against delivery to the Company by such Investor of the amount set forth opposite such Investor’s name on Schedule A attached hereto payable in immediately available funds by wire transfer to an account designated by the Company. The Initial Closing and the Subsequent Closings are sometimes referred to as a “Closing” or collectively as the “Closings.”

 

 

2.              Representations and Warranties of the Company. The Company represents and warrants to the Investors purchasing Notes at a Closing that the statements contained in this Section 2 are true, complete and correct as of such Closing.

 

2.1           Organization and Good Standing. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted and as currently proposed to be conducted.

 

2.2           Authorization. All action on the part of the Company and its officers, directors and stockholders necessary for the authorization, execution and delivery of, and performance under, this Agreement and the Notes has been taken.

 

2.3           Enforceability. Each of this Agreement and the Notes constitutes a valid and legally binding obligation of the Company, enforceable in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally or by equitable principles and (b) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

 

2.4           Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal or state governmental authority or any other natural person, corporation, limited partnership, general partnership, limited liability company, joint stock company, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity (each, a “Person”) is required in connection with the consummation of the transactions contemplated by this Agreement and the Notes except for compliance with notice filings and other requirements under federal and applicable state securities laws, which compliance, the Company covenants and agrees will occur within the appropriate time periods therefor.

 

2.5           Compliance with Law and Instruments. The execution, delivery, and performance of and compliance with this Agreement and the Notes and the issuance and sale of the Notes will not, with or without the passage of time or giving of notice (a) conflict with any provision of the Company’s certificate of incorporation or bylaws; (b) conflict in any material respect with any law, rule or regulation, or any judgment, decree or order of any court or other governmental agency or instrumentality to which the Company is a party; or (c) conflict in any material respect with the terms of any material agreement, contract, indenture or other instrument to which the Company is a party.

 

 

2.6           Offering Exemption. Based in part on the representations of the Investors set forth in Section 3 below, the offer, sale and issuance of the Notes in conformity with the terms of this Agreement are exempt from the registration requirements of the Securities Act and are exempt from the qualification and registration requirements of applicable state securities laws.

 

3.              Representations and Warranties of the Investors. Each Investor purchasing Notes at a Closing, severally and not jointly, represents and warrants to the Company as of such Closing as follows:

 

(a)           The Investor has all requisite power and authority to execute and deliver this Agreement and the Note and perform its obligations under this Agreement and the Note. All action on the part of the Investor necessary for the authorization, execution, delivery and performance of all obligations of the Investor under this Agreement and the Note has been taken. Each of this Agreement and the Note constitutes the valid and legally binding obligation of the Investor, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally or by equitable principles and (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

 

(b)           The Note will be acquired by the Investor for its own account for investment purposes and not with a view to, or for sale in connection with, any distribution. The Investor does not presently have any contract, undertaking or agreement with any Person to sell, transfer or grant participation rights in any Note to any Person.

 

(c)           The Investor is an “accredited investor” within the meaning of Rule 501(a) promulgated under the Securities Act.

 

(d)           The Investor understands that the Notes are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Investor must hold the Note indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Investor acknowledges that the Company has no obligation to register or qualify the Note for resale. The Investor further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Note, and on requirements relating to the Company which are outside of the Investor’s control, and which the Company is under no obligation, and may not be able, to satisfy.

 

 

(e)           A Legend substantially in the following form will be placed on each certificate representing the Note:

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS IN ACCORDANCE WITH APPLICABLE REGISTRATION REQUIREMENTS OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. This certificate must be surrendered to the coMPANY or its transfer agent as a condition precedent to the sale, TRANSFER, pledge OR hypothecation of any interest in any of the securities represented hereby.

 

4.              Miscellaneous.

 

4.1           Survival. All representations and warranties made by any party in this Agreement, the Notes or pursuant hereto or thereto shall survive the Closings hereunder.

 

4.2           Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any Investor. Any attempted assignment made in contravention of this Agreement shall be null and void and of no force or effect.

 

4.3           Entire Agreement. This Agreement and the documents, schedules and exhibits referred to herein constitute the entire agreement among the parties and supersede all prior communications, representations, understandings and agreements of the parties with respect to the subject matter hereof and thereof. No party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein. All schedules and exhibits hereto are hereby incorporated herein by reference. Nothing in this Agreement, express or implied, is intended to confer upon any third party any rights, remedies, obligations or liabilities under or by reason of this Agreement.

 

4.4           General Interpretation. The terms of this Agreement have been negotiated by the parties hereto and the language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent. This Agreement shall be construed without regard to any presumption or rule requiring construction against the party causing such instrument or any portion thereof to be drafted, or in favor of the party receiving a particular benefit under this Agreement. No rule of strict construction will be applied against any Person.

 

4.5           Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Delaware, as applicable to contracts executed and delivered in Delaware between Delaware residents and which are to be performed wholly within Delaware, without regard to principles of conflicts of law.

 

 

4.6           Counterparts; Electronic Signatures. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same document. This Agreement may be executed by facsimile or other electronic signatures.

 

4.7           Section Headings. The section headings are for the convenience of the parties and in no way alter, modify, amend, limit or restrict the contractual obligations of the parties.

 

4.8           Severability. If any term or provision of this Agreement is determined to be illegal, unenforceable or invalid in whole or in part for any reason, such illegal, unenforceable or invalid provisions or part thereof shall be stricken from this Agreement, and such provision shall not affect the legality, enforceability or validity of the remainder of this Agreement. If any provision of this Agreement or part thereof is stricken in accordance with the provisions of this Section, then such stricken provision shall be replaced, to the extent possible, with a legal, enforceable and valid provision that is as similar in tenor to the stricken provision as is legally possible.

 

4.9           Notices. All notices required or permitted under this Agreement or the Notes shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by electronic mail, when directed to an electronic mail address at which the Company or the Investor has consented to receive notice, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. Notices shall be sent (i) if to an Investor, to its address or electronic mail address as set forth on Schedule A attached hereto or at such other address or electronic mail address as such Investor shall have furnished to the Company and the other Investors in writing or (ii) if to the Company, at the Company’s address or electronic mail address set forth below its signature to this Agreement or at such other address or electronic mail address as the Company shall have furnished to the Investors in writing.

 

4.10         Amendments. Except as otherwise expressly set forth in this Agreement, any term of this Agreement may be amended, either retroactively or prospectively, with the written consent of the Company and the holders of Notes representing at least a majority of the aggregate principal amount outstanding under all of the Notes issued pursuant to this Agreement (the “Majority Holders”). Any party’s rights under this Agreement may be waived at any time by the written consent of such party. Any amendment effected in accordance with this Section 4.10 shall be binding upon each Investor, each future holder of Notes and the Company. Each Investor acknowledges and agrees that, by the operation of this Section 4.10, the Majority Holders have the right and power to diminish or eliminate all rights of an Investor under this Agreement even without the consent of such Investor. Notwithstanding any of the foregoing, this Agreement may be amended to add a party as an Investor hereunder in connection with each Subsequent Closing and Schedule A shall be revised to reflect the sales of additional Notes made at such Subsequent Closing, in each case, without the consent of any Investor, by delivery to the Company of a counterpart signature page to this Agreement and such amendment shall take effect at such Subsequent Closing and such party shall thereafter be deemed an Investor for all purposes hereunder.

 

 

4.11         Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neutral forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.

 

4.12         Expenses. The Company and the Investors shall each pay their own expenses incurred in connection with the transactions contemplated by this Agreement.

 

[Signatures on following pages]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first written above.

 

	AZIYO BIOLOGICS, INC.
	By:		/s/ Jeffrey D. Hamet
		Name:	Jeffrey D. Hamet
		Title:	Vice President, Finance and Treasurer

 

	Address:	12510 Prosperity Drive
		Suite 370
		Silver Spring, MD 20904
	Email Address: [XXX]

 

[SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT]

 

 

INVESTORS:

 

		HIGHCAPE PARTNERS QP, L.P.
		By:	HighCape Partners GP, L.P., its general partner
		By:	HighCape Partner GP, LLC, its general partner
		By:	/s/ William Matthew Zuga
			Name:	William Matthew Zuga
			Title:	Managing Member
		HIGHCAPE PARTNERS, L.P.
		By:	HighCape Partners GP, L.P., its general partner
		By:	HighCape Partner GP, LLC, its general partner
		By:	/s/ William Matthew Zuga
			Name:	William Matthew Zuga
			Title:	Managing Member

 

[SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT]

 

 

	DEERFIELD PRIVATE DESIGN FUND III, L.P.
	By:	Deerfield Mgmt III, L.P. General Partner
	By:	J.E. Flynn Capital III, LLC General Partner
	By:	/s/ David J. Clark
		Name:	David J. Clark
		Title:	Authorized Signatory

 

[SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT]

 

 

SCHEDULE A

 

Initial Closing: April 2, 2020

 

Name and Address of Investor	Principal Amount of Note
HighCape Partners QP, L.P. 10751 Falls Road Suite 300 Baltimore, MD 21093	$614,026.00
HighCape Partners, L.P. 10751 Falls Road Suite 300 Baltimore, MD 21093	$8,268.00
TOTAL:	$622,294.00

 

 

Subsequent Closing: April 21, 2020

 

Name and Address of Investor	Principal Amount of Note
Deerfield Private Design Fund III, L.P. 780 Third Avenue, 37th Floor New York, NY 10017 Attn: [XXX]	$377,706.00
TOTAL:	$377,706.00

 

Subsequent Closing: April 29, 2020

 

Name and Address of Investor	Principal Amount of Note
HighCape Partners QP, L.P. 10751 Falls Road Suite 300 Baltimore, MD 21093	$986,713.00
HighCape Partners, L.P. 10751 Falls Road Suite 300 Baltimore, MD 21093	$13,287.00
TOTAL:	$1,000,000.00

 

 

EXHIBIT A

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS IN ACCORDANCE WITH APPLICABLE REGISTRATION REQUIREMENTS OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. This certificate must be surrendered to the coMPANY or its transfer agent as a condition precedent to the sale, TRANSFER, pledge OR hypothecation of any interest in any of the securities represented hereby.

 

AZIYO BIOLOGICS, INC.

 

SUBORDINATED CONVERTIBLE PROMISSORY NOTE

 

$__________

[●], 2020

 

1.              Principal and Interest.

 

This Subordinated Convertible Promissory Note (this “Note”) is issued pursuant to that certain Note Purchase Agreement, dated as of April 2, 2020, by and between Aziyo Biologics, Inc., a Delaware corporation (the “Company”) and each of the persons and entities set forth on Schedule A attached thereto (the “Agreement”). Capitalized terms used herein but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Agreement.

 

The Company hereby promises to pay to _______________ (the “Payee”), in lawful money of the United States at the address of Payee, the unpaid principal amount of $[●] and all accrued but unpaid interest on this Note ON DEMAND at the request of the Majority Holders at any time after [_____] __, 2025 (the “Maturity Date”). Interest shall accrue from the date of this Note on the outstanding amount hereof at the rate of five percent (5%) per annum, computed on the actual number of days elapsed until all of the amounts under this Note have been paid in full and a year of three hundred sixty five (365) days. This Note may not be prepaid by the Company without Payee’s prior written consent.

 

Upon payment in full or conversion of all amounts payable hereunder pursuant to Section 1 or 2 hereof, this Note shall be surrendered to the Company for cancellation.

 

 

2.              Conversion.

 

(a)           The outstanding principal of, and all accrued but unpaid interest on, this Note automatically (without any additional action required of the Payee) shall be converted into the Company’s shares of capital stock issued in a Qualified Financing (the “Qualified Securities”) upon the closing of an issuance of the Company’s shares of capital stock to one or more investors that results in gross cash proceeds to the Company of at least Three Million Dollars ($3,000,000) (a “Qualified Financing”). The number of Qualified Securities to be issued in connection with the conversion of this Note under this Section 2(a) shall equal (i) the sum of the outstanding principal amount of, and all accrued but unpaid interest on, this Note divided by (ii) the cash purchase price per Qualified Security paid by the investors in the Qualified Financing. Upon any conversion of this Note under this Section 2(a), at the Company’s request, Payee hereby agrees to execute and deliver to the Company any documents and instruments entered into by the other investors in the Qualified Financing.

 

(b)           Upon any conversion of this Note, Payee shall surrender this Note, duly endorsed, at the principal office of the Company. The Company shall, as soon as practicable thereafter, issue and deliver to Payee a certificate or certificates for the number of Qualified Securities to which Payee shall be entitled upon such conversion.

 

(c)           No fractional shares shall be issued upon conversion of this Note. In lieu of the Company issuing any fractional share to Payee upon the conversion of this Note, the Company shall pay to Payee an amount in cash equal to the product obtained by multiplying the then fair market value of one (1) Qualified Security as determined by the Board by the fraction otherwise issuable.

 

3.              Subordination.

 

(a)           Extent of Subordination. All amounts (including all principal, interest, premiums and other payments) payable by the Company pursuant to this Note (the “Subordinated Debt”) are and shall be subordinated and junior in right of payment to the prior payment in full in cash of the Senior Debt (as defined below) to the extent and in the manner set forth herein. Each holder of Senior Debt, whether now outstanding or hereafter arising, shall be deemed to have acquired Senior Debt in reliance upon the provisions contained herein.

 

(b)          Definitions.

 

“Bank Debt” means, collectively, all principal of, and interest and premium (if any) on, indebtedness of, and all fees, expenses, indemnities and all other obligations of and amounts payable by, the Company pursuant to the Senior Debt Documents.

 

“Revolving Loan Agreement” means that certain Amended and Restated Credit and Security Agreement (Revolving Loan), dated as of July 15, 2019, by and among the Company, Aziyo Med, LLC (“Subsidiary”), MidCap Financial Trust (“MidCap”), and the other parties thereto, as amended.

 

 

“Senior Debt” means, collectively, (i) the Bank Debt, as from time to time amended, modified, renewed, refinanced, assigned, replaced, increased or otherwise supplemented, and (ii) any and all indebtedness, liabilities and obligations incurred to assign, refinance, or replace the Bank Debt.

 

“Senior Debt Documents” means, collectively, the Term Loan Agreement, the Revolving Loan Agreement, and any and all agreements, documents and instruments executed by the Company in connection therewith, and any and all agreements, documents, instruments and guarantees executed by the Company evidencing or otherwise pertaining to Bank Debt (and including, without limitation, any and all agreements, documents and instruments pertaining to Senior Debt incurred to refinance Bank Debt), in each case as amended, modified, refinanced, assigned, replaced, supplemented or restated from time to time.

 

“Term Loan Agreement” means that certain Amended and Restated Credit and Security Agreement (Term Loan), dated as of July 15, 2019, by and among the Company, Subsidiary, MidCap, and the other parties thereto, as amended.

 

(c)           Payment Suspension. Notwithstanding any provision contained in this Note to the contrary, and in addition to any other limitations set forth herein, no payment of principal, interest or any other amount due with respect to the Subordinated Debt shall be made or received, and the Payee shall not exercise any right of set-off or recoupment with respect to the Subordinated Debt, until all Senior Debt shall have been paid in full in cash and all commitments to lend in respect thereof have terminated. Notwithstanding any provision contained in this Note to the contrary, the Company may issue shares upon conversion of this Note in accordance with Section 2.

 

(d)          Payment Held in Trust. All payments or distributions upon or with respect to the Subordinated Debt which are received by the Payee in violation of or contrary to the provisions of Section 3(c) shall be received in trust for the benefit of the holders of the Senior Debt and shall be paid over upon demand to such holders in the same form as so received (with all necessary endorsements) to be applied to the payment of the Senior Debt.

 

(e)           Rights Not Subordinated. The provisions hereof are for the purpose of defining the relative rights of the holders of Senior Debt on the one hand and the Payee on the other hand, and nothing herein shall impair (as among the Company, the Payee, as the holder of the Subordinated Debt, and the other creditors of the Company, other than the holders of the Senior Debt), the Company’s obligation to the Payee, as the holder of the Subordinated Debt, to pay to such Payee the full amount of the Subordinated Debt in accordance with the terms of this Note. No provision hereof shall be deemed to subordinate, to any extent, any claim or right of any holder of the Subordinated Debt to any claim against the Company by any creditor or any other Person except to the extent expressly provided herein.

 

(f)           No Action. Except as expressly provided in this Section 3(f), until the Senior Debt shall have been paid and performed in full in cash and the termination of all loan commitments under the Senior Debt Documents, the Payee, as the holder of the Subordinated Debt, shall not take or continue any action, or exercise any rights, remedies or powers under the terms of this Note, or exercise or continue to exercise any other right or remedy at law or equity that Payee might otherwise possess as the holder of the Subordinated Debt, to collect any amount due and payable in respect of this Note or the Subordinated Debt, including, without limitation, the acceleration of this Note or the Subordinated Debt, the commencement of any action to enforce payment or foreclosure on any lien or security interest, the filing of any petition in bankruptcy or the taking advantage of any other insolvency law of any jurisdiction.

 

 

(g)          No Contest. As the holder of the Subordinated Debt, Payee hereby covenants and agrees that it will not, and will not encourage any other Person to, at any time, contest the validity, perfection, priority or enforceability of the provisions hereof, the Senior Debt, the Senior Debt Documents or the security interests or liens granted to the lenders pursuant thereto.

 

4.              Governing Law. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of Delaware, as applicable to contracts executed and delivered in Delaware between Delaware residents and which are to be performed wholly within Delaware, without regard to principles of conflicts of law.

 

5.              Amendment. Any term of this Note may be amended, either retroactively or prospectively, with the written consent of the Company and the Majority Holders. Any party’s rights under this Note may be waived at any time by the written consent of such party. Any amendment effected in accordance with this Section 5 shall be binding upon Payee, each holder of each Note and the Company. The Payee acknowledges and agrees by accepting this Note that, by the operation of this Section 5, the Majority Holders have the right and power to diminish or eliminate all rights of Payee under this Note even without the consent of Payee.

 

6.              Severability. If any term or provision of this Note is determined to be illegal, unenforceable or invalid in whole or in part for any reason, such illegal, unenforceable or invalid provisions or part thereof shall be stricken from this Note, and such provision shall not affect the legality, enforceability or validity of the remainder of this Note. If any provision of this Note or part thereof is stricken in accordance with the provisions of this Section, then such stricken provision shall be replaced, to extent possible, with a legal, enforceable and valid provision that is as similar in tenor to the stricken provision as is legally possible.

 

7.              No Transfers of this Note. Neither this Note nor any of the rights, interests or obligations hereunder shall be assigned by the Payee. Any attempted assignment made in contravention of this Note shall be null and void and of no force or effect.

 

8.              Payments on Non-Business Days. If any payment hereunder shall be due on a day that is not a business day, the date for payment shall be extended to the next succeeding business day and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension.

 

9.              Counterparts; Electronic Signatures. This Note may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same document. This Note may be executed by facsimile or other electronic signatures.

 

[Signatures on following page]

 

 

IN WITNESS WHEREOF, Aziyo Biologics, Inc. has caused this Subordinated Convertible Promissory Note to be duly executed and delivered by its proper and duly authorized officer as of the date first written above.

 

AZIYO BIOLOGICS, INC.
By:
	Name:
	Title:
ACKNOWLEDGED AND AGREED TO BY PAYEE:
[INVESTOR]
By:
	Name:
	Title:

 

 

 

Exhibit 10.13

 

AZIYO BIOLOGICS, INC.

 

AMENDMENT TO NOTE PURCHASE AGREEMENT

 

This AMENDMENT TO NOTE PURCHASE AGREEMENT (this “Amendment”) is entered into as of April 29, 2020 by and between Aziyo Biologics, Inc., a Delaware corporation (the “Company”) and each of the other persons and entities signatory hereto (the “Investors”).

 

WHEREAS, the Company and the Investors are parties to that certain Note Purchase Agreement, dated as of April 2, 2020, by and between the Company and each of the persons and entities set forth on Schedule A attached thereto (the “Existing Agreement”);

 

WHEREAS, pursuant to Section 4.10 of the Existing Agreement, any term of the Existing Agreement may be amended with the written consent of the Company and the Majority Holders;

 

WHEREAS, the Investors constitute the Majority Holders; and

 

WHEREAS, the Company and the Investors desire to amend the Existing Agreement as more particularly set forth herein

 

NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, and pursuant to the Existing Agreement, the parties hereto hereby agree to amend the Existing Agreement as follows:

 

1.       Capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed to such terms in the Existing Agreement.

 

2.       Amendments.

 

2.1.       Definitions. Any reference to “the Agreement” or “this Agreement” in the Existing Agreement shall mean the Existing Agreement, as amended by this Amendment.

 

2.2.       Amendment to Section 2.3. The reference to “$1,000,000.00” in Section 1.2(b) of the Existing Agreement is hereby amended and replaced with “$3,000,000.00”.

 

3.       Effect of Amendment. Except as expressly provided herein, the parties acknowledge that (a) no terms or provisions of the Existing Agreement are modified or changed by this Amendment; and (b) the terms and provisions of the Existing Agreement shall continue in full force and effect.

 

4.       Counterparts; Electronic Signatures. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same document. This Amendment may be executed by facsimile or electronic transmission signatures (including .pdf copies).

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the date first written above.

 

	AZIYO BIOLOGICS, INC.
	By:	/s/ Jeffrey D. Hamet
		Name:	Jeffrey D. Hamet
		Title:	Vice President, Finance and Treasurer
	Address:		12510 Prosperity Drive
			Suite 370
			Silver Spring, MD 20904
	Email Address: [XXX]

 

 

	INVESTORS:
	HIGHCAPE PARTNERS QP, L.P.
	By:	HighCape Partners GP, L.P., its general partner
	By:	HighCape Partner GP, LLC, its general partner
	By:	/s/ William Matthew Zuga
		Name:	William Matthew Zuga
		Title:	Managing Member
	HIGHCAPE PARTNERS, L.P.
	By:	HighCape Partners GP, L.P., its general partner
	By:	HighCape Partner GP, LLC, its general partner
	By:	/s/ William Matthew Zuga
		Name:	William Matthew Zuga
		Title:	Managing Member

 

 

Exhibit 10.14

 

Silicon Valley Bank

 

U.S. Small Business Administration

Paycheck Protection Program

Note

 

SBA Loan No.	6608117303
SBA Loan Name	Borrower Legal Name	Aziyo Biologics, Inc.
	DBA
Date	5/7/2020
Loan Amount	$ 2995265
Interest Rate	1.0% per annum
Borrower	Aziyo Biologics, Inc.
Operating Company	Not applicable
Lender	Silicon Valley Bank

 

1.       PROMISE TO PAY.

 

In return for the Loan, Borrower promises to pay to the order of Lender the amount of $ 2995265 Dollars, interest on the unpaid principal balance, and all other amounts required by this Note.

 

2.       DEFINITIONS.

 

“Collateral” means any property taken as security for payment of this Note or any guarantee of this Note.

 

“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act.

 

“Guarantor” means each person or entity that signs a guarantee of payment of this Note.

 

“Loan” means the loan evidenced by this Note.

 

“Loan Documents” means the documents related to this loan signed by Borrower, any Guarantor, or anyone who pledges collateral.

 

“Paycheck Protection Program” means loan program created by Section 1102 of the CARES Act.

 

 

“Per Annum” means for a year deemed to be comprised of 360 days.

 

“SBA” means the Small Business Administration, an Agency of the United States of America.

 

3.

PAYMENT TERMS: Borrower must make all payments at the place Lender designates. The payment terms for this Note are:

 

A.

Conditions Precedent to Disbursement of Loan Proceeds.

 

Before the funding of the Loan, the following conditions must be satisfied:

 

1.       Lender has approved the request for the Loan.

 

2.       Lender has received approval from SBA to fund the Loan.

 

B.

No Payments During Deferral Period. There shall be no payments due by Borrower during the six-month period beginning on the date of this Note (the “Deferral Period”). However, during the Deferral Period interest will accrue at the Interest Rate on the unpaid principal balance computed on the basis of the actual number of days elapsed in a year of 360 days.

 

C.

Principal and Interest Payments. Commencing one month after the expiration of the Deferral Period, and continuing on the same day of each month thereafter until the Maturity Date, Borrower shall pay to Lender monthly payments of principal and interest, each in such equal amount required to fully amortize the principal amount outstanding on the Note on the last day of the Deferral Period by the Maturity Date.

 

D.

Maturity Date. On the date which is twenty-four (24) months from the date of this Note (the “Maturity Date”), Borrower shall pay to Lender any and all unpaid principal plus accrued and unpaid interest plus interest accrued during the Deferral Period. This Note will mature on the Maturity Date.

 

E.

Not a Business Day. If any payment is due on a date for which there is no numerical equivalent in a particular calendar month then it shall be due on the last day of such month. If any payment is due on a day that is a Saturday, Sunday or any other day on which California chartered banks are authorized to be closed, the payment will be made on the next business day.

 

F.

Payment Allocation. Payments shall be allocated among principal and interest at the discretion of Lender unless otherwise agreed or required by applicable law (including the CARES Act). Notwithstanding, in the event the Loan, or any portion thereof, is forgiven pursuant to the Paycheck Protection Program under the federal CARES Act, the amount so forgiven shall be applied to principal.

 

F.

Prepayments. Borrower may prepay this Note at any time without payment of any penalty or premium.

 

 

G.

Borrower Certifications.

 

Borrower certifies to Lender as follows:

 

1.

Current economic uncertainty makes this Loan necessary to support the ongoing operations of Borrower.

 

2.

Loan funds will be used by Borrower to retain its workers and maintain its payroll or make its mortgage payments, lease payments, and utility payments.

 

3.

For the period beginning on February 15, 2020 and ending on December 31, 2020, Borrower did not receive, and agrees it will not apply for or receive, another loan under the Paycheck Protection Program.

 

4.

Borrower was in operation on February 15, 2020 and (i) had employees for whom it paid salaries and payroll taxes or (ii) paid independent contractors as reported on a 1099-Misc.

 

5.

Borrower has reviewed and understands Sections 1102 and 1106 of the CARES Act and the related guidelines and has completed the Application, including Borrower’s eligibility in conformity with those provisions.

 

6.

Borrower has taken its “affiliates” (as defined by the SBA) into account when determining the number of employees and the total amount of loans permitted under the Paycheck Protection Program.

 

7.

Borrower is a small business concern or is otherwise eligible to receive a covered loan.

 

8.

The person who has completed and signed the application, this Note and the Loan Documents has been validly authorized by Borrower to enter into borrowings on behalf of Borrower.

 

H.           Agreements.

 

Borrower understands and agrees, and waives and releases Lender, its affiliates and their respective directors, officers, agents and employees, as follows:

 

1.

The Loan will be made under the SBA’s Paycheck Protection Program. Accordingly, this Note and the other Loan Documents must be submitted to and approved by the SBA. There is limited funding available under the Paycheck Protection Program and accordingly, all applications submitted will not be approved by the SBA.

 

2.

Lender is participating in the Payroll Protection Program to help businesses impacted by the economic impact from COVID-19. However, Lender anticipates high volumes and there may be processing delays and system failures along with other issues that interfere with submission of Borrower’s application to SBA. Lender does not represent or guarantee that it will submit the application while SBA funding remains available under the Payroll Protection Program or at all. Borrower hereby agrees that Lender is not responsible or liable to Borrower or any of its affiliates (i) if the Lender does not submit Borrower’s application to the SBA until after the date that SBA stops approving applications under the Paycheck Protection Program, for any reason or (ii) if the application is not processed by Lender. Borrower forever releases and waives any claims against Lender, its affiliates and their respective directors, officers, agents and employees concerning failure to obtain the Loan. This release and waiver applies to, but is not limited to, any claims concerning Lender’s (i) pace, manner or systems for processing or prioritizing applications, or (ii) representations by Lender regarding the application process, the Paycheck Protection Program, or availability of funding. This agreement to release and waiver supersedes any prior communications, understandings, agreements or communications on the issues set forth herein.

 

 

3.

Forgiveness of the Loan is only available for principal that is used for the limited purposes that expressly qualify for forgiveness under SBA requirements, and that to obtain forgiveness, Borrower must request forgiveness from the Lender, provide documentation in accordance with the SBA requirements, and certify that the amounts Borrower is requesting to be forgiven qualify under those requirements. Borrower also understands that Borrower shall remain responsible under the Loan for any amounts not forgiven, and that interest payable under the Loan will not be forgiven, but that the SBA may pay the Loan interest on forgiven amounts.

 

4.

Forgiveness of the Loan is not automatic and Borrower must request forgiveness of the Loan from Lender. Borrower is not relying on Lender for its understanding of the requirements for forgiveness such as eligible expenditures, necessary records/documentation, or possible reductions due to changes in number of employees or compensation. Borrower agrees that will consult the SBA’s program materials and consult with its own counsel regarding the criteria forgiveness.

 

5.

The Loan Documents are subject to review, and Borrower may not receive the Loan. The Loan also remains subject to availability of funds under the SBA’s Payment Protection Program, and to the SBA issuing an SBA loan number.

 

6.

Borrower’s liability under this Note will continue with respect to any amounts SBA may pay Bank based on an SBA guarantee of this Note. Any agreement with Bank under which SBA may guarantee this Note does not create any third party rights or benefits for Borrower and, if SBA pays Bank under such an agreement, SBA or Bank may then seek recovery from Borrower of amounts paid by SBA.

 

7.

Lender reserves the right to modify the Note Amount based on documentation received from Borrower.

 

8.

Borrower’s execution of this Note has been duly authorized by all necessary actions of its governing body. The person signing this Note is duly authorized to do so on behalf of Borrower.

 

9.

This Note shall not be governed by any existing or future credit agreement or loan agreement with Lender. The liabilities guaranteed pursuant to any existing or future guaranty in favor of Lender shall not include this Note. The liabilities secured by any existing or future security instrument in favor of Lender shall not include the Loan.

 

 

10.

The proceeds of the Loan will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments, as specified under the Paycheck Protection Program Rule. Borrower understands that if the funds are knowingly used for unauthorized purposes, the federal government may hold Borrower legally liable, such as for charges of fraud.

 

Electronic Execution of Loan Documents.

 

The words “execution,” “signed,” “signature” and words of like import in this Note and any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.

 

4.    DEFAULT:

 

Borrower is in default under this Note if Borrower does not make a payment when due under this Note, or if Borrower or Operating Company:

 

A.

Fails to do anything required by this Note and other Loan Documents;

 

B.

Defaults on any other loan with Lender;

 

C.

Does not preserve, or account to Lender’s satisfaction for, any of the Collateral or its proceeds;

 

D.

Does not disclose, or anyone acting on their behalf does not disclose, any material fact to Lender or SBA;

 

E.

Makes, or anyone acting on their behalf makes, a materially false or misleading representation to Lender or SBA;

 

F.

Defaults on any loan or agreement with another creditor, if Lender believes the default may materially affect Borrower’s ability to pay this Note;

 

G.

Fails to pay any taxes when due;

 

H.

Becomes the subject of a proceeding under any bankruptcy or insolvency law;

 

I.

Has a receiver or liquidator appointed for any part of their business or property;

 

J.

Makes an assignment for the benefit of creditors;

 

K.

Has any adverse change in financial condition or business operation that Lender believes may materially affect Borrower’s ability to pay this Note;

 

L.

Reorganizes, merges, consolidates, or otherwise changes ownership or business structure without Lender’s prior written consent; or

 

 

M.

Becomes the subject of a civil or criminal action that Lender believes may materially affect Borrower’s ability to pay this Note.

 

5.    LENDER’S RIGHTS IF THERE IS A DEFAULT.

 

Without notice or demand and without giving up any of its rights, Lender may:

 

A.

Require immediate payment of all amounts owing under this Note;

 

B.

Collect all amounts owing from any Borrower or Guarantor;

 

C.

File suit and obtain judgment.

 

D.

Take possession of any Collateral; or

 

E.

Sell, lease, or otherwise dispose of, any Collateral at public or private sale, with or without advertisement.

 

6.    LENDER’S GENERAL POWERS.

 

Without notice and without Borrower’s consent, Lender may:

 

A.

Bid on or buy the Collateral at its sale or the sale of another lienholder, at any price it chooses;

 

B.

Incur expenses to collect amounts due under this Note, enforce the terms of this Note or any other Loan Document, and preserve or dispose of the Collateral. Among other things, the expenses may include payments for property taxes, prior liens, insurance, appraisals, environmental remediation costs, and reasonable attorney’s fees and costs. If Lender incurs such expenses, it may demand immediate repayment from Borrower or add the expenses to the principal balance;

 

C.

Release anyone obligated to pay this Note;

 

D.

Compromise, release, renew, extend or substitute any of the Collateral; and

 

E.

Take any action necessary to protect the Collateral or collect amounts owing on this Note.

 

7.    WHEN FEDERAL LAW APPLIES; GOVERNING LAW; FORUM SELECTION.

 

When SBA is the holder, this Note will be interpreted and enforced under federal law, including SBA regulations. Lender or SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Note, Borrower may not claim or assert against SBA any local or state law to deny any obligation, defeat any claim of SBA, or preempt federal law.

 

 

8.    SUCCESSORS AND ASSIGNS.

 

Under this Note, Borrower and Operating Company includes its successors, and Lender includes its successors and assigns.

 

9.    GENERAL PROVISIONS.

 

A.

All individuals and entities signing this Note are jointly and severally liable.

 

B.

Borrower waives all suretyship defenses.

 

C.

Borrower must sign all documents necessary at any time to comply with the Loan Documents and to enable Lender to acquire, perfect, or maintain Lender’s liens on Collateral.

 

D.

Lender may exercise any of its rights separately or together, as many times and in any order it chooses. Lender may delay or forgo enforcing any of its rights without giving up any of them. E. Borrower may not use an oral statement of Lender or SBA to contradict or alter the written terms of this Note.

 

E.

If any part of this Note is unenforceable, all other parts remain in effect.

 

F.

To the extent allowed by law, Borrower waives all demands and notices in connection with this Note, including presentment, demand, protest, and notice of dishonor. Borrower also waives any defenses based upon any claim that Lender did not obtain any guarantee; did not obtain, perfect, or maintain a lien upon Collateral; impaired Collateral; or did not obtain the fair market value of Collateral at a sale.

 

10.  STATE-SPECIFIC PROVISIONS:

 

If the SBA is not the holder, this Note shall be governed by and construed in accordance with the laws of the State of California where the main office of Lender is located. MATTERS REGARDING INTEREST TO BE CHARGED BY LENDER AND THE EXPORTATION OF INTEREST SHALL BE GOVERNED BY FEDERAL LAW (INCLUDING WITHOUT LIMITATION 12 U.S.C. SECTIONS 85 AND 1831(u) AND THE LAW OF THE STATE OF CALIFORNIA. Borrower agrees that any legal action or proceeding with respect to any of its obligations under this Note may be brought by Lender in any state or federal court located in the State of California, as Lender in its sole discretion may elect. Borrower submits to and accepts in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of those courts. Borrower waives any claim that the State of California is not a convenient forum or the proper venue for any such suit, action or proceeding. The extension of credit that is the subject of this Note is being made by Lender in California.

 

 

11.  BORROWER’S NAME(S) AND SIGNATURE(S).

 

BORROWER CERTIFIES THAT THE INFORMATION PROVIDED IN THIS APPLICATION AND THE INFORMATION PROVIDED IN ALL SUPPORTING DOCUMENTS AND FORMS IS TRUE AND ACCURATE IN ALL MATERIAL RESPECTS. BORROWER UNDERSTANDS THAT KNOWINGLY MAKING A FALSE STATEMENT TO OBTAIN A GUARANTEED LOAN FROM SBA IS PUNISHABLE UNDER THE LAW, INCLUDING UNDER 18 USC 1001 AND 3571 BY IMPRISONMENT OF NOT MORE THAN FIVE YEARS AND/OR A FINE OF UP TO $250,000; UNDER 15 USC 645 BY IMPRISONMENT OF NOT MORE THAN TWO YEARS AND/OR A FINE OF NOT MORE THAN $5,000; AND, IF SUBMITTED TO A FEDERALLY INSURED INSTITUTION, UNDER 18 USC 1014 BY IMPRISONMENT OF NOT MORE THAN THIRTY YEARS AND/OR A FINE OF NOT MORE THAN $1,000,000.

 

By signing below, each individual or entity becomes obligated under this Note as Borrower.

Funds will be credited to your Deposit

Account Number ending in:

 

5366	BORROWER:
	By:	/s/ Jeffrey Hamet
	Name:	Jeffrey Hamet
	Title:	Authorized Signer
	Date:	5/7/2020

 

 

 

Exhibit 10.15

 

EXECUTION VERSION

 

 

ROYALTY AGREEMENT

 

dated as of

 

May 31, 2017

 

by and between

 

AZIYO MED, LLC

 

and

 

LIGAND PHARMACEUTICALS INCORPORATED

 

 

TABLE OF CONTENTS

 

Page

 

ARTICLE I - Definitions					1
SECTION 1.01.		Defined Terms.			1
ARTICLE II - Payments by the Company;					9
SECTION 2.01.		Buydown Payment.			9
SECTION 2.02.		Periodic Royalties.			9
SECTION 2.03.		Milestone Payments.			10
SECTION 2.04.		Consent to Sale Transaction; No Assumed Obligations.			11
ARTICLE III - Representations and Warranties of the Company					11
SECTION 3.01.		Organization.			11
SECTION 3.02.		Authorization.			11
SECTION 3.03.		Governmental Authorization.			11
SECTION 3.04.		Ownership.			11
SECTION 3.05.		Litigation.			12
SECTION 3.06.		Compliance with Laws.			12
SECTION 3.07.		Conflicts.			12
SECTION 3.08.		Current Indebtedness.			13
SECTION 3.09.		Financial Statements.			13
ARTICLE IV - Representations and Warranties of Ligand					13
SECTION 4.01.		Organization.			13
SECTION 4.02.		No Assignment; Authorization.			13
SECTION 4.03.		Conflicts.			13
ARTICLE V - Covenants					14
SECTION 5.01.		Access; Information.			14
SECTION 5.02.		Confidentiality; Press Release.			15
SECTION 5.03.		Efforts; Further Assurance.			15
SECTION 5.04.		Remedies Event.			15
SECTION 5.05.		Indebtedness; Sale of Revenue Interests.			16
SECTION 5.06.		Remittance of Funds to Accounts.			16
ARTICLE VI - Term and Termination					16
SECTION 6.01.		Term.			16
SECTION 6.02.		Extension of the Term.			16
SECTION 6.03.		Effect of Termination.			17

 

 

ARTICLE VII					17
SECTION 7.01.		Survival.			17
SECTION 7.02.		Notices.			17
SECTION 7.03.		Successors and Assigns.			18
SECTION 7.04.		Indemnification.			19
SECTION 7.05.		No Implied Representations and Warranties.			20
SECTION 7.06.		Independent Nature of Relationship.			20
SECTION 7.07.		Entire Agreement.			20
SECTION 7.08.		Amendments; No Waivers.			21
SECTION 7.09.		Interpretation.			21
SECTION 7.10.		Headings and Captions.			21
SECTION 7.11.		Counterparts; Effectiveness			21
SECTION 7.12.		Severability			21
SECTION 7.13.		Expenses.			21
SECTION 7.14.		Governing Law; Jurisdiction.			22
ARTICLE VIII - Intercreditor Matters and Guarantee					22
SECTION 8.01.		Ligand Interests; Recharacterization.			22
SECTION 8.02.		Other Ligand Security.			23
SECTION 8.03.		Priority.			24
SECTION 8.04.		Other Intercreditor Matters.			24
SECTION 8.05.		Control Agreements.			24
SECTION 8.06.		Termination or Release.			24
ARTICLE IX - Remedies					25
SECTION 9.01.		Remedies.			25
SECTION 9.02.		Acceleration.			25

 

 

ROYALTY AGREEMENT

 

This ROYALTY AGREEMENT (as amended, supplemented or otherwise modified from time to time, this “Agreement”) is dated as of May 31, 2017, by and between AZIYO MED, LLC, a Delaware limited liability company (the “Company”); and LIGAND PHARMACEUTICALS INCORPORATED, a Delaware corporation (“Ligand”).

 

RECITALS

 

Whereas, the Company wishes (i) to acquire from CorMatrix Cardiovascular, Inc. (the “Seller”) all of its assets related or applicable to, or used in connection with, its business of developing, manufacturing and commercializing the Products described herein (the “Sale Transaction”), and (ii) in connection with such Sale Transaction, to obtain the consent of Ligand to the Sale Transaction and enter into an agreement with Ligand setting forth the obligations of the Company to Ligand with respect to such acquired interests and the sale of the Products; and

 

Whereas, as a condition precedent to Ligand’s entering into this Agreement, Aziyo Biologics, Inc., a Delaware corporation and the parent of the Company (the “Guarantor”), has agreed to enter into a Guaranty Agreement guarantying the obligations of the Company under Section 2.01, in substantially the form attached hereto as Exhibit A;

 

NOW, THEREFORE, in consideration of the mutual covenants, agreements and representations and warranties set forth herein, the parties hereto agree as follows:

 

ARTICLE I - Definitions

 

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below:

 

“Affiliate” shall mean any Person that controls, is controlled by, or is under common control with another Person. For purposes of this definition, “control” shall mean direct or indirect ownership of a majority of the stock or other equity interests having the right to vote for the election of directors or other members of the governing body of the entity.

 

“Applicable Royalty Percentage” shall mean (i) prior to the first $5,000,000 payment of the Buydown Payment, twenty percent (20.0%) or (ii) following such payment, five percent (5.0%), provided that if the second $5,000,000 installment of the Buydown Payment is not made on or before December 15, 2017, then the Applicable Royalty Percentage shall be twenty percent (20.0%) from December 15, 2017, until such second payment is made.

 

“Asset Purchase Agreement” shall mean that certain Asset Purchase Agreement, dated as of May 31, 2017, by and among the Seller, the Company and the Guarantor setting forth the terms and conditions of the Sale Transaction.

 

“Audit Costs” shall mean, with respect to any audit of the books and records of the Company or its Subsidiaries with respect to amounts payable or paid under this Agreement, the reasonable out-of-pocket cost of such audit, including all fees, costs and expenses incurred in connection therewith.

 

 

“Bankruptcy Event”^. shall mean the occurrence of any proceeding being instituted by or against the Company seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property, or the Company taking any action to authorize any of the actions set forth above. Notwithstanding the foregoing, if such proceeding is instituted against the Company, no Bankruptcy Event shall have occurred unless such proceeding remains undismissed, undischarged or unbonded for a period of sixty (60) days.

 

“Books” shall mean all of the books and records of a Person, including ledgers, federal and state tax returns, records regarding the Person’s assets or liabilities, the General Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.

 

“Business Day” shall mean any day other than a Saturday, a Sunday, any day which is a legal holiday under the laws of the State of New York, or any day on which banking institutions located in the State of New York are required by law or other governmental action to close.

 

“Buydown Payment” shall have the meaning set forth in Section 2.01(a).

 

“CanGaroo Product Change of Control” shall mean the first to occur of any Product Change of Control in respect of the CanGaroo Products.

 

“Collateral” means the Royalty Related Collateral and the General Collateral.

 

“Company” shall have the meaning set forth in the preamble.

 

“Company Change of Control” shall mean, with respect to the Company, the first to occur of any of the following transactions:

 

(a)            the acquisition by any Person or group (within the meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) of beneficial ownership of any capital stock of the Company, if after such acquisition, such Person or group would be the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, but assuming that any convertible securities owned by such Person or group or any controlled affiliates thereof are immediately exercisable), directly or indirectly, of securities of the Company representing a majority of the voting power of the Company;

 

(b)            a merger or consolidation of the Company, with any other Person, other than a merger or consolidation which would result in the Company's voting securities outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) a majority of voting power of the Company immediately after such merger or consolidation; or

 

 

(c)            the bona fide sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Company or any of its Subsidiaries of all or substantially all the assets of the Company and its Subsidiaries, taken as a whole.

 

“Confidential Information” shall mean, as it relates to the Company and its Affiliates and any of the Products, the Intellectual Property related to any of the Products, confidential business information, financial data and other like information (including ideas, research and development, know-how, formulas, schematics, compositions, technical data, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), inventory, ideas, algorithms, processes, computer software programs or applications (in both source code and object code form), client lists and tangible or intangible proprietary information or material, or such other information that either Party identifies to the other as confidential or the nature of which or the circumstances of the disclosure of which would reasonably indicate that such information is confidential or proprietary. Notwithstanding the foregoing definition, Confidential Information shall not include information that (a) is already in the public domain at the time the information is disclosed, (b) thereafter becomes lawfully obtainable from other sources who, to the knowledge of the recipient, have no obligation of confidentiality, (c) can be shown to have been independently developed by the recipient or its representatives without reference to any Confidential Information of the other Party or (d) is required to be disclosed under laws, rules and regulations of any Governmental Authority applicable to the Company or its Affiliates or Ligand or its Affiliates, as the case may be, or pursuant to the rules and regulations of any securities exchange or trading system or pursuant to any other laws, rules or regulations of any Governmental Authority having jurisdiction over the Company and its Affiliates or Ligand and its Affiliates.

 

“Depository Bank” shall mean Silicon Valley Bank.

 

“Effective Date” shall mean the date of the closing of the Sale Transaction.

 

“Excluded Assets” shall mean (i) any deposit accounts exclusively used by the Company for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of the Company’s employees, (ii) the Permitted CD Collateral Accounts (as defined in the MidCap Credit Facility), (iii) any fee interest in owned or leased real property (including fixtures related thereto), (iv) any “intent to use” trademark application for which a statement of use has not been filed with the United States Patent and Trademark Office, (v) any motor vehicles or other assets subject to certificates of title, (vi) any equity interests of subsidiaries that are not wholly-owned subsidiaries to the extent a security interest on such equity interests is prohibited by the organizational or joint venture documents relating to such equity interests, (vii) any voting equity interests of foreign subsidiaries in excess of 65% of the outstanding voting equity interests of such subsidiaries and (viii) any assets over which the granting of a security interest in such assets would be prohibited by applicable law or contract or that would require governmental consent, approval, license or authorization, in each case after giving effect to Section 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code in the applicable jurisdiction or any other applicable law or principle of equity.

 

 

“Excluded Costs” shall mean the following items to the extent permitted by generally accepted accounting principles: (i) value added or any other similar transaction taxes accrued on sales invoices, (ii) sales discounts and all kinds of rebates, (iii) any orders or parts thereof which are subsequently returned to the Company (or an Affiliate, agent or sublicensee thereof, as applicable) and refunded to the customer or wholesaler, (iv) charges for late payment collected from customers, registration charges and other service charges and (v) applicable shipping charges.

 

“Existing Liens” shall mean (i) any liens or other security interests upon any assets of the Company for the benefit of the lenders and other secured parties under the MidCap Credit Facility, and (ii) the rights of the Seller and Cook Biotech Incorporation, an Indiana corporation, under the respective cross license agreements entered into by the Company and each of them in connection with the Sale Transaction, as they may be amended or modified from time to time.

 

“Fiscal Quarter” shall mean each three (3) month period commencing January 1, April l, July 1 or October 1, provided however that (a) the first Fiscal Quarter after the Effective Date shall commence on the day after the Effective Date and continue to the end of the first full Fiscal Quarter thereafter and (b) the last Fiscal Quarter of the Term shall end upon the expiration or termination of this Agreement.

 

“Fiscal Year” shall mean the calendar year.

 

“General Collateral” shall have the meaning set forth in Section 8.02.

 

“Governmental Authority” shall mean any government, court, regulatory or administrative agency or commission, or other governmental authority, agency or instrumentality, whether foreign, federal, state or local (domestic or foreign).

 

“Guarantor” shall have the meaning set forth in the Recitals.

 

“Intellectual Property” shall mean all proprietary information; technical data; laboratory notebooks; clinical data; priority rights; trade secrets; know-how; confidential information; inventions (whether patentable or unpatentable and whether or not reduced to practice or claimed in a pending patent application); Patents; registered or unregistered trademarks, trade names, service marks, including all goodwill associated therewith; registered and unregistered copyrights and all applications thereof; in each case that are owned, controlled by, generated by, issued to, licensed to, licensed by or hereafter acquired by or licensed by the Company or any of its Subsidiaries.

 

“Intercreditor Agreement” shall mean that certain Intercreditor Agreement, by and among the MidCap Credit Facility Agent, Ligand and the Company, dated as of May 31, 2017, as it may be amended, supplemented or otherwise modified from time to time.

 

“Knowledge of the Company” shall mean the current actual knowledge, information or belief held by Lode Debrabandere, Kevin Rakin and Michelle LeRoux Williams after reasonable inquiry by such person into the relevant subject matter.

 

 

“Ligand” shall have the meaning set forth in the preamble.

 

“Ligand Account” shall mean the following account (or such other account as Ligand may designate in writing (such designation to be made at least two (2) Business Days prior to any payment owing to Ligand under this Agreement)):

 

Ligand Pharmaceuticals, Inc.
[XXX]
Account No. [XXX]
Routing No. [XXX]

 

“Ligand Purchase Agreement” shall mean the Interest Purchase Agreement, dated as of May 3, 2016, between the Seller and Ligand.

 

“Losses” shall mean collectively, any and all claims, damages, losses, judgments, awards, penalties, liabilities, costs and expenses (including reasonable attorneys' fees and expenses) incurred in connection with defending any action, suit or proceeding.

 

“Main Account” shall mean the deposit account maintained by the Company at the Depository Bank with account number [XXX].

 

“Material Adverse Change"” shall mean, with respect to the Company and its Subsidiaries, any event, change, circumstance, occurrence, effect or state of facts that has caused or is reasonably likely to cause a material adverse change in the business, operations, assets or financial condition of the Company and its Subsidiaries, taken as a whole.

 

“Material Adverse Effect” shall mean (a) the effect of a Material Adverse Change, (b) a material adverse effect on the validity or enforceability of this Agreement, (c) the inability or failure of the Company to make the payments provided in this Agreement, (d) a material adverse effect on the ability of the Company to perform any of its other material obligations under this Agreement or (e) any material adverse effect on the Products or the ability of the Company and its Subsidiaries to distribute, market and/or sell the Products.

 

“MidCap Credit Facility” shall mean that certain Credit and Security Agreement (Revolving Loan) and that certain Credit and Security Agreement (Term Loan), as each may be amended, amended and restated, supplemented or otherwise modified as of the date hereof, and as each may be further amended, amended and restated. supplemented or otherwise modified from time to time as permitted by the Intercreditor Agreement, by and among the Company and the Guarantor, as Borrowers (as defined therein), MidCap Credit Facility Agent and the Lenders (as defined therein) party thereto.

 

“MidCap Credit Facility Agent” shall mean MidCap Financial Trust, a Delaware statutory trust, in its capacity as administrative agent under the MidCap Credit Facility or any successor thereto in such capacity.

 

 

“Minimum Annual Royalty” shall mean with respect to (a) calendar year 2017, zero, (b) calendar year 2018, $1,250,000, (c) calendar year 2019, $2,200,000, and (d) calendar year 2020 and each calendar year thereafter during the Term, $2,750,000; provided, however, that for the final Fiscal Year of the Term, the “Minimum Annual Royalty” shall mean the applicable Minimum Annual Royalty multiplied by the fraction of such Fiscal Year that is within the Term; provided, further, that if any Product, or any product enumerated in the definition of any Product (or in any Schedule referenced in any such definition), is divested as a result of a Product Change of Control or if any Product is withdrawn from the market for regulatory or safety reasons, the Minimum Annual Royalty shall be reduced by an amount that is the product of (a) the applicable Minimum Annual Royalty for the Fiscal Year in which such Product Change of Control or withdrawal takes place and for each Fiscal Year thereafter times (b) the fraction representing (x) the total sales of such Product or enumerated product subject to such Product Change of Control or withdrawal in the twelve (12) calendar months immediately preceding such Product Change of Control or withdrawal over (y) the aggregate total sales of all Products in the twelve (12) calendar months immediately preceding such Product Change of Control or withdrawal. For the avoidance of doubt, the Minimum Annual Royalty shall be adjusted according to the foregoing proviso immediately as of any Product Change of Control or withdrawal.

 

“Minimum Quarterly Payment” shall mean, with respect to any Fiscal Quarter during the Term, an amount equal to the difference between (i) the applicable Minimum Quarterly Royalty and (ii) the aggregate Monthly Royalties paid to Ligand with respect to such Fiscal Quarter.

 

“Minimum Quarterly Royalty” shall mean the applicable Minimum Annual Royalty divided by four; provided, however, that for the final Fiscal Quarter of the Term, the “Minimum Quarterly Royalty” shall mean the applicable Minimum Annual Royalty divided by four multiplied by the fraction of such Fiscal Quarter that is within the Term.

 

“Minimum Quarterly Royalty Overpayment” shall have the meaning set forth in Section 2.02(b)(ii).

 

“Monthly Report” shall mean, with respect to the relevant Payment Month of the Company, a report showing (a) the gross revenues of the Products for such Payment Month, (b) the Net Sales Proceeds for such Payment Month, (c) the Excluded Costs for such Payment Month, and (d) a reasonable calculation of the amount to which Ligand is entitled for such Payment Month pursuant to Section 2.02(a) of this Agreement.

 

“Monthly Royalty” shall mean, with respect to each Payment Month, the amount due to Ligand pursuant to Section 2.02(a) for such Payment Month.

 

“Net Sales Proceeds” shall mean the aggregate amount of sales proceeds received by the Company (or an Affiliate, agent or sublicensee thereof, as applicable) and its Subsidiaries for Products in any Payment Month during the Term, less Excluded Costs.

 

“Obligations” shall mean any and all payment obligations of the Company under this Agreement.

 

“Pari Passu Collateral” shall have the meaning set forth in the Intercreditor Agreement.

 

 

“Parties” shall mean Ligand, the Company and any other Person from time to time made party to this Agreement, each a “Party.”

 

“Patent” shall mean all patents, patent rights, patent applications, patent disclosures and invention disclosures issued or filed, together with all reissues, divisions, continuations, revisions, term extensions, substitutes, supplementary protection certificates, reexaminations, inter-partes reviews, post-grant oppositions or similar post-grant review proceedings, including the inventions claimed in any of the foregoing and any priority rights arising therefrom, that are issued or filed prior to the date hereof or during the remainder of the Term, which are owned by the Company or any Subsidiary.

 

“Payment Month” shall mean each month-long period commencing on the first day of each calendar month during the Term, provided however that (a) the first Payment Month after the Effective Date shall commence on the day after the Effective Date and continue until the end of the first full Payment Month thereafter and (b) the last Payment Month of the Term shall end upon the expiration or termination of this Agreement.

 

“Permitted Liens” shall mean (i) the Existing Liens, (ii) the security interests granted to Ligand pursuant to Article VIII, and (iii) any liens for taxes or other governmental charges arising by operation of law in the ordinary course of business for sums which are not yet due and payable.

 

“Permitted Transaction” shall mean any transaction (a) contemplated by the MidCap Credit Facility, as in effect on the Effective Date, or any refinancing facility with respect thereto and (b) during the Term whereby the Company incurs, creates, assumes or permits to exist any indebtedness for borrowed money; provided that such transaction (x) does not, except to the extent expressly contemplated by Section 8.06, result in any security interest granted hereunder ceasing to be a valid and perfected security interest and (y) could not reasonably be expected to impair the ability of the Company to comply with the requirements to make the payments set forth in Section 2.01, Section 2.02 or Section 2.03.

 

“Person” shall mean an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, but not including a government or political subdivision or any agency or instrumentality of such government or political subdivision.

 

“Product Change of Control” shall mean, with respect to any Product, or any product enumerated in the definition of any Product (or in any Schedule referenced in any such definition), any sale or other transfer by the Company of substantially all of the assets primarily used to commercialize such Product or such enumerated product or of the exclusive right to commercialize such Product or such enumerated product.

 

 

“Products” shall mean (a) SIS tissue sheet products that were (i) marketed or sold by the Seller under the trade name CorMatrix Carotid Repair, CorMatrix Vascular Repair, CorMatrix Pericardial Repair & Reconstruction, Tyke or CorMatrix Cardiac Tissue Repair and (ii) described in a Section 510(k) premarket notification cleared by the FDA on or prior to the Closing Date, (b) SIS encasement structures for encapsulation of any cardiac implantable electronic device (CIED) that were (i) marketed or sold by the Seller under the trade name CanGaroo or CorMatrix CanGaroo and (ii) described in a Section 510(k) premarket notification cleared by the FDA on or prior to the Closing Date (the “CanGaroo Products”), and (c) any products substantially similar in design and application to the Products specified in clauses (a) and (b) commercialized after the Closing Date during the Term, including in each case specified in clauses (a) - (c), any modifications and improvements made to the tissue sheet structures or the encasement structures of such Products that are to be commercialized for the applications in the Aziyo Fields of Use, as defined in the Asset Purchase Agreement. For the purposes hereof, the term “Products” shall also mean and include (x) CanGaroo Products for encasement of neurologic devices and other subcutaneous implantable device applications, and (y) CanGaroo Products composed of SIS plus antibiotics. Schedule A sets forth a complete list of all of the Products at the Closing Date.

 

“Recharacterization” shall have the meaning set forth in the recitals to the Intercreditor Agreement.

 

“Regulatory Agency” shall mean a Governmental Authority with responsibility for the approval of the marketing and sale of surgical implants or other regulation of surgical implants.

 

“Regulatory Approvals” shall mean all approvals (including, without limitation, where applicable, pricing and reimbursement approval and schedule classifications), product and/or establishment licenses, registrations or authorizations of any Governmental Authority necessary for the manufacture, use, storage, import, export, transport, offer for sale, or sale of any of the Products.

 

“Remedies Event” shall mean (x) a Bankruptcy Event, (y) a failure by the Company to make a payment pursuant to Section 2,01, Section 2.02 or Section 2.03, provided that no such failure shall constitute a Remedies Event unless such failure shall remain uncured for thirty (30) days or (z) an Event of Default (as defined in the MidCap Credit Facility) under the MidCap Credit Facility.

 

“Royalty Interests” shall mean the right to receive on a monthly basis cash in an amount equal to the product of the Applicable Royalty Percentage multiplied by the Net Sales Proceeds during the Term, pursuant to the terms and conditions of this Agreement. For the avoidance of doubt, Royalty Interests shall not constitute accounts or payment intangibles (as each term is defined in the UCC) giving rise to such cash amounts.

 

“Royalty Related Collateral” means (a) any accounts (as defined in Article 9 of the UCC) with respect to the Products and the proceeds of such accounts, (b) the Special Account, (c) any intellectual property acquired by the Company from the Seller and necessary for the production, marketing or sale of the Products, including those set forth on Schedule B hereto and (c) any Equipment and Inventory (as defined in Article 9 of the UCC) used in connection with the production of any Product.

 

“Sale Transaction” shall have the meaning set forth in the Recitals.

 

“SEC” shall mean the U.S. Securities and Exchange Commission.

 

 

“SIS” shall mean a solid sheet extracellular matrix composition prepared from intestinal tissue.

 

“Special Account” shall mean the deposit account maintained by the Company at the Depository Bank with account number [XXX].

 

“Subsidiary” shall mean, with respect to the Company, a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the voting power (other than securities or interests having such power only by reason of the happening of a contingency) are at the time owned beneficially or of record by the Company.

 

“Sweep Event” shall have the meaning set forth in the Intercreditor Agreement.

 

“Term” shall have the meaning set forth in Section 6.01.

 

“Third Party” shall mean any Person other than Ligand and any Affiliate of Ligand or the Company or any Subsidiary of the Company.

 

“Transfer” shall have the meaning set forth in Section 8.06(c).

 

“UCC” shall mean the Uniform Commercial Code as in effect in the State of New York from time to time.

 

ARTICLE II - Payments by the Company;

 

SECTION 2.01. Buydown Payment.

 

The Company shall make a payment to Ligand in the amount of $10,000,000 (the “Buydown Payment”) in two (2) installments, the first installment in the amount of $5,000,000 payable within thirty (30) days after the Effective Date but no later than June 30, 2017, and the second installment in the amount of $5,000,000 payable on or before December 15, 2017, each of which shall be paid by wire transfer of immediately available funds to the Ligand Account.

 

SECTION 2.02. Periodic Royalties.

 

(a)            Monthly Royalties. The Company shall pay to Ligand, by wire transfer of immediately available funds (i) within thirty (30) days after the end of each Payment Month, an amount equal to the Applicable Royalty Percentage multiplied by the Net Sales Proceeds (if any) received by the Company during such Payment Month, and (ii) on the Closing Date, the monthly royalty amounts due and owing by Seller under the Ligand Purchase Agreement for the Payment Months of March and April 2017 and when due the monthly royalty amount of Seller thereunder for the Payment Month of May 2017.

 

 

(b)         Minimum Quarterly Payments.

 

(i)            Subject to clause (b)(ii), if, with respect to any Fiscal Quarter that begins after December 31, 2017, the sum of (1) the aggregate Monthly Royalties paid to Ligand during the Fiscal Year that includes such Fiscal Quarter plus (2) the Minimum Quarterly Payments made to Ligand during such Fiscal Year is less than the Minimum Quarterly Royalty multiplied by the number of completed Fiscal Quarters in such Fiscal Year, then the Company shall pay to Ligand, by wire transfer of immediately available funds within thirty (30) days after the end of such Fiscal Quarter, an amount equal to the difference between (A) the Minimum Quarterly Royalty multiplied by the number of completed Fiscal Quarters in such Fiscal Year and (B) the sum of (1) the aggregate Monthly Royalties paid to Ligand with respect to such Fiscal Year plus (2) the Minimum Quarterly Payments made to Ligand with respect to such Fiscal Year.

 

(ii)            Notwithstanding clause (b)(i), if, with respect to any Fiscal Year that begins after December 31, 2017 in respect of which any Minimum Quarterly Payment was made to Ligand, the aggregate Monthly Royalties paid in respect of such Fiscal Year exceed the applicable Minimum Annual Royalty (the amount of any such Minimum Quarterly Payments made in any such Fiscal Year, the “Minimum Royalty Overpayment”), then any subsequent payment obligation owing by the Company pursuant to this Agreement shall be automatically reduced and offset in the amount of such Minimum Royalty Overpayment until such Minimum Royalty Overpayment is extinguished.

 

(c)          Payments to Ligand.

 

(i)            Within thirty (30) days following the end of each Payment Month, the Company shall disburse from the Special Account to the Ligand Account an amount equal to the amount to which Ligand is entitled pursuant to Section 2.02(a) of this Agreement (if any) for such Payment Month.

 

(ii)            Within sixty (60) days following the end of each Fiscal Quarter, the Company shall remit by wire transfer of immediately available funds to the Ligand Account an amount equal to the amount to which Ligand is entitled pursuant to Section 2.02(b) of this Agreement (if any) for such Fiscal Quarter.

 

(iii)            If, after any Sweep Event occurs, the "notice of exclusive control" giving rise to such Sweep Event is revoked prior to a Bankruptcy Event, to the extent any Minimum Quarterly Royalty came due and was not paid pursuant to [Section 2.1(b)] of the lntercreditor Agreement prior to such revocation, the Company shall pay such Minimum Quarterly Royalty within thirty (30) days of such revocation.

 

SECTION 2.03. Milestone Payments.

 

(a)           If and when the aggregate amount of Net Sales Proceeds received by the Company during the Term equals $100,000,000, the Company shall pay $5,000,000 to Ligand, which payment shall be made within forty-five (45) days thereof by wire transfer of immediately available funds to the Ligand Account.

 

 

(b)            If and when the aggregate amount of Net Sales Proceeds received by the Company during the Term equals $300,000,000 or the occurrence of a CanGaroo Product Change of Control during the Term, whichever is sooner, the Company shall pay an additional $5,000,000 to Ligand, which payment shall be made within forty-five (45) days thereof by wire transfer of immediately available funds to Ligand Account.

 

SECTION 2.04. Consent to Sale Transaction; No Assumed Obligations.

 

Ligand hereby consents to the Sale Transaction on the terms and conditions set forth in the Asset Purchase Agreement. Notwithstanding any provision in this Agreement or any other writing to the contrary, Ligand acknowledges and agrees that (i) Ligand does not have any right, title or interest in or to any of the Products or any other assets acquired the Company in the Sales Transaction, except for its interest in and to the Royalty Interests (and the security interests granted to Ligand hereunder) during the Term, all as set forth herein, and (ii) neither the Company nor any of its Affiliates have assumed or agreed to pay any liabilities or other obligations of the Seller or any of its Affiliates to Ligand or its Affiliates of whatever nature, whether presently in existence or arising or asserted hereafter, including without limitation, any obligations or liabilities of the Seller or its Affiliates under the Ligand Purchase Agreement. All such liabilities and obligations shall be retained by and remain obligations and liabilities of the Seller and its Affiliates.

 

ARTICLE III - Representations and Warranties of the Company

 

SECTION 3.01. Organization. The Company is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has all limited liability company power and all licenses, authorizations, consents and approvals required to carry on its business as proposed to be conducted in connection with this Agreement. The Company has no Subsidiaries.

 

SECTION 3.02. Authorization. The Company has all necessary power and authority to enter into, execute and deliver this Agreement and to perform all of the obligations to be performed by it hereunder and to consummate the transactions contemplated hereunder. This Agreement has been duly authorized, executed and delivered by the Company and constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally or general equitable principles.

 

SECTION 3.03. Governmental Authorization. The execution and delivery by the Company of this Agreement, and the performance by the Company of its obligations hereunder, does not require any notice to, action or consent by, or in respect of, or filing with, any Governmental Authority.

 

SECTION 3.04. Ownership.

 

(a)          As of the date hereof, the Company owns or holds a valid license under all of the Intellectual Property and the Regulatory Approvals which it currently purports to own related to any of the Products, free and clear of all liens, except Permitted Liens. As of the date hereof, the Company has not granted, nor does there exist, any lien on the Products except Permitted Liens.

 

 

(b)          There is no filed and served on the Company or, to the Knowledge of the Company, threatened against the Company in writing any action, suit, proceeding, investigation or claim by any Person to which the Company is a party that claims that the Intellectual Property or the manufacture, use, marketing, sale, offer for sale, importation or distribution of any Product infringes on any Person’s trade secrets or other intellectual property. The Company has not received any written communication containing an offer to license to the Company, or a request that the Company consider whether it wishes to obtain a license, under any intellectual property owned by a third party, in each case, to make, use or sell a Product. To the Knowledge of the Company, without any independent investigation or inquiry, there are no pending unlicensed patent applications owned by any other Person that if a patent were to issue thereon without modification or amendment, would limit or prohibit, in any material respect, the manufacture, use or sale of any Product.

 

SECTION 3.05. Litigation. As of the date hereof, there is no (a) action, suit, arbitration proceeding, claim, investigation or other proceeding pending or, to the Knowledge of the Company, threatened against the Company or (b) any governmental inquiry pending or, to the Knowledge of the Company, threatened against the Company, in each case with respect to clause (a) or (b) above, which, if adversely determined, would question the validity of, or could reasonably be expected to have a material adverse effect on the transactions contemplated by this Agreement or could reasonably be expected to have a Material Adverse Effect. As of the date hereof, there is no action, suit, arbitration proceeding, claim, investigation or other proceeding pending or, to the Knowledge of the Company, threatened in writing against the Company relating to any of the Products, the Intellectual Property related to any of the Products or the Regulatory Approvals.

 

SECTION 3.06. Compliance with Laws. To the Knowledge of the Company, the Company (a) is not in violation of, has not violated and is not under investigation with respect to, and (b) has not been threatened to be charged with or been given written notice of any violation of, any law, rule, ordinance or regulation of, or any judgment, order, writ, decree, permit or license entered by any Governmental Authority applicable to the Company which would reasonably be expected to have a Material Adverse Effect.

 

SECTION 3.07. Conflicts. Neither the execution and delivery of this Agreement nor the performance or consummation of the transactions contemplated hereby by the Company will: (a) contravene, conflict with, result in a breach or violation of, constitute a default under, or accelerate the performance provided by, in any material respects any provision of (i) any law, rule, ordinance or regulation of any Governmental Authority, or any judgment, order, writ, decree, permit or license of any Governmental Authority, to which the Company or any of its assets or properties are subject or bound or (ii) any contract, agreement, commitment or instrument to which the Company is a party or by which the Company, or any of its assets or property’s is bound or committed; (b) contravene, conflict with, result in a breach or violation of, constitute a default under, or accelerate the performance provided by, any provisions of the certificate of formation or limited liability company agreement (or other organizational or constitutional documents) of the Company; (c) require any notification to, filing with, or consent of, any Person or Governmental Authority, except such consents that have been obtained at or prior to the date hereof; or (d) give rise to any right of termination, cancellation or acceleration of any right or obligation of the Company or to a loss of any right of the Company to distribute, market and/or sell any of the Products, except, in the case of clause (a), (c) or (d) above, for any such breaches, defaults or other occurrences that would not, individually or in the aggregate, have a Material Adverse Effect.

 

 

SECTION 3.08. Current Indebtedness. Other than as set forth on Schedule 3.08, there is no indebtedness (other than trade indebtedness in the ordinary course of business) for borrowed money of the Company.

 

SECTION 3.09. Financial Statements. All financial statements for the Company and Guarantor delivered to Ligand fairly present, in conformity with generally accepted accounting principles, in all material respects, the consolidated financial condition and consolidated results of operations of the Company and Guarantor.

 

ARTICLE IV - Representations and Warranties of Ligand

 

SECTION 4.01. Organization. Ligand is a corporation duly incorporated and validly existing under the laws of the State of Delaware.

 

SECTION 4.02. No Assignment; Authorization. Ligand has not assigned, transferred, pledged, granted a security interest in or otherwise disposed of any of its obligations or rights under the Ligand Purchase Agreement, or any right, title or interest in or to the Products, any Intellectual Property related to the Products or any revenues related to the Products, except as provided herein, and has all necessary power and authority to enter into, execute and deliver this Agreement and to perform all of the obligations to be performed by it hereunder and to consummate the transactions contemplated hereunder. This Agreement has been duly authorized, executed and delivered by Ligand and constitutes the valid and binding obligation of Ligand, enforceable against Ligand in accordance with its respective terms, subject, as to enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally or general equitable principles.

 

SECTION 4.03. Conflicts. Neither the execution and delivery of this Agreement nor the performance or consummation of the transactions contemplated hereby by Ligand will: (a) contravene, conflict with, result in a breach or violation of, constitute a default under, or accelerate the performance provided by, in any material respects any provision of (i) any law, rule or regulation of any Governmental Authority, or any judgment, order, writ, decree, permit or license of any Governmental Authority, to which Ligand or any of its assets or properties may be subject or bound or (ii) any contract, agreement, commitment or instrument to which Ligand is a party or by which Ligand or any of its assets or properties is bound or committed; (b) contravene, conflict with, result in a breach or violation of, constitute a default under, or accelerate the performance provided by, any provisions of the certificate of incorporation or bylaws (or other organizational or constitutional documents) of Ligand; or (c) require any notification to, filing with, or consent of, any Person or Governmental Authority, except, in the case of the foregoing clause (a) or (c), for any such breaches, defaults or other occurrences that would not, individually or in the aggregate, have a material adverse effect on the ability of Ligand to perform any of its obligations under this Agreement.

 

 

ARTICLE V - Covenants

 

SECTION 5.01. Access; Information.

 

(a)          Maintenance of Books and Records. During the Term, the Company shall keep and maintain, or cause to be kept and maintained, at all times books of account and records consistent with good business practices and customary industry standards adequate to correctly reflect all payments paid and/or payable to Ligand with respect to the Products.

 

(b)          Inspection Rights. During the Term, Ligand shall have the right to designate a Third Party independent public accounting firm (the “Ligand Representative”) to visit the Company’s and its Subsidiaries’ offices and properties where the Company and its Subsidiaries keep and maintain their books and records relating or pertaining to the Products for the purpose of conducting an audit of such books and records with respect the payments due and payable to Ligand under Section 2.02 or Section 2.03, and to inspect and audit such books and records for such purpose, during normal business hours, and, upon at least ten (10) Business Days’ written notice given by Ligand to the Company, the Company will provide such Ligand Representative reasonable access to such books and records; provided, however, such inspection and audit rights may only be exercised by Ligand once in each calendar year.

 

(c)          Audit Costs. In the event any audit of the books and records of the Company and its Subsidiaries relating to the the gross revenues of the Products or Net Sales Proceeds conducted by Ligand and/or any of Ligand’s representatives reveals that the amounts paid to Ligand hereunder for the period of such audit have been understated by more than ten percent (10%) of the undisputed amounts due for the period subject to such audit, then the Audit Costs in respect of such audit shall be borne by the Company; and in all other cases, such Audit Costs shall be borne by Ligand.

 

(d)          Monthly Reports. During the Term, the Company shall, promptly after the end of each Payment Month of the Company (but in no event later than thirty (30) days following the end of such Payment Month), produce and deliver to Ligand a Monthly Report for such Payment Month.

 

(e)          Periodic Reports. The Company shall deliver to Ligand the following financial statements:

 

(i)            Within forty-five (45) days after the end of each Fiscal Quarter after the Effective Date, copies of the unaudited financial statements of the Company for such Fiscal Quarter; and

 

(ii)            Within one hundred twenty (120) days after the end of each Fiscal Year after the Effective Date, copies of the audited consolidated financial statements of the Guarantor and the Company for such Fiscal Year.

 

 

(f)           Notice of Deposits Following a Sweep Event. Following a Sweep Event, on the first Business Day of each week, the Company shall provide Ligand with notice of the amount and the source of all deposits made during the preceding week into the Main Account.

 

SECTION 5.02. Confidentiality; Press Release.

 

(a)            All Confidential Information furnished by the Company or Seller to Ligand or by Ligand to the Company in connection with this Agreement and the transactions contemplated hereby, as well as the terms, conditions and provisions of this Agreement, shall be kept confidential by Ligand and the Company. Notwithstanding the foregoing, (i) the Company and Ligand may disclose such Confidential Information to their partners, directors, employees, managers, officers, investors, bankers, advisors, trustees and representatives, (ii) the Company may disclose the terms, conditions and provisions of this Agreement to any Third Party in connection with (and only in connection with) a transaction with such Third Party that could reasonably be expected to result in (X) a Company Change of Control, (Y) a Product Change of Control or (Z) a sale by the Company of a Subsidiary, division, product line, or other significant portion of its business, and (iii) the Company and Ligand may disclose such Confidential Information as may otherwise be required by applicable law, including filing this Agreement with the SEC; provided, in the case of the foregoing clauses (i) and (ii) that such Persons and such Third Parties shall be informed of the confidential nature of such information and shall be obligated to keep such information confidential pursuant to the terms of this Section 5.02(a); provided, further, that in the case of the foregoing clause (iii) Ligand shall provide at least five (5) Business Days’ notice to the Company of any filing with the SEC and consider in good faith a request for confidential treatment of any portion of this Agreement prior to filing with the SEC.

 

(b)            Notwithstanding the foregoing clause (a), Ligand may make a press release or other announcement or public disclosure concerning this Agreement, provided that such press release shall be (x) subject to prior review by the Company and (y) in form and substance reasonably satisfactory to the Company taking into account any commercial sensitivities of the Company.

 

SECTION 5.03. Efforts; Further Assurance. Subject to the terms and conditions of this Agreement, each of Ligand and the Company will use its commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary under applicable laws and regulations to consummate the transactions contemplated by this Agreement. Ligand and the Company agree to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be reasonably necessary in order to consummate or implement expeditiously the transactions contemplated by this Agreement.

 

SECTION 5.04. Remedies Event. During the Term, if a Remedies Event shall have occurred and be continuing, subject to the Intercreditor Agreement, the Company shall not, without the consent of Ligand, make a distribution to its member or members, or retire any indebtedness for borrowed money, other than in connection with a Permitted Transaction, or engage in any transaction that would result in a Company Change of Control.

 

 

SECTION 5.05. Indebtedness; Sale of Revenue Interests. Prior to the time that the Buydown Payment is paid in full, unless Ligand shall otherwise consent in writing, the Company shall not, other than in connection with any Permitted Transaction, (x) incur, create, assume or permit to exist any indebtedness for borrowed money of the Company other than indebtedness of the Company as of the Effective Date or (y) sell, assign, transfer or convey any interests in the revenues generated by the Products to any Third Party other than by the terms of this Agreement.

 

SECTION 5.06. Remittance of Funds to Accounts.

 

(a)          Weekly Sweep to Special Account. The Company shall instruct the Depository Bank to sweep any funds arising from the Royalty Interests contained in the Main Account, no less frequently than once every week, into the Special Account, in accordance with further instructions to be provided by the Company on a weekly basis, it being understood that, in respect of the sweep contemplated under this Section 5.06(a), at the end of each Payment Month, the Company may retain from disbursement from the Special Account to Ligand any Excluded Costs deriving from any week covered by such Payment Month so long as such Excluded Costs are reflected in the Monthly Report in respect of such Payment Month.

 

(b)          Special Account. The funds in the Special Account shall be held in trust solely for the benefit of Ligand. The Company shall not take any action with respect to the Special Account other than making (i) the instructions to the Depository Bank necessary to effectuate the sweep contemplated in clause (a) of this Section 5.06, (y) any adjustment (and corresponding withdrawal of excess funds) for Excluded Costs as necessary to reconcile the balance of the Special Account with the amount to which Ligand is entitled pursuant to Section 2.02(a), provided that such adjustment shall occur only in accordance with and upon delivery of a Monthly Report calculating such Excluded Costs and (z) any disbursement of funds from the Special Account to the Ligand Account in accordance with Section 2.02(c)(i).

 

ARTICLE VI - Term and Termination

 

SECTION 6.01. Term. This Agreement shall commence on the Effective Date and shall continue through and including the tenth anniversary of the Effective Date (the “Term”).

 

SECTION 6.02. Extension of the Term. If any payments are accrued hereunder on or prior to the end of the Term and are required to be made by one of the Parties hereunder, this Agreement shall remain in full force and effect until any and all such payments have been made in full. Upon expiration or termination of this Agreement in accordance with its terms, all right, title and interest in and to the Royalty Interests shall automatically revert to the Company (and the security interests granted to Ligand hereunder shall automatically terminate), and Ligand will have no further rights in or with respect to the Royalty Interests or other Collateral and all other rights and interests of Ligand hereunder shall terminate (other than any contingent indemnification obligations with respect to which no claim has been made).

 

 

SECTION 6.03. Effect of Termination. In the event of the termination of this Agreement pursuant to Section 6.02, this Agreement shall forthwith become void, impose no liability on the part of any Party hereto or its Affiliates, directors, officers, stockholders, partners, managers or members and have no effect other than the provisions of this Section 6.03, and Section 5.02, Section 6.02 and Article VII hereof, which shall survive any such termination.

 

ARTICLE VII Miscellaneous

 

SECTION 7.01. Survival. All representations and warranties made herein or in any other writing delivered pursuant hereto shall survive the execution and delivery of this Agreement and shall continue to survive until the expiration or termination of this Agreement in accordance with Article VI.

 

SECTION 7.02. Notices. All notices, consents, waivers and communications hereunder given by any Party to the other shall be in writing (including facsimile transmission) and delivered personally, by telegraph, telecopy, telex or facsimile, by a recognized overnight courier, or by dispatching the same by certified or registered mail, return receipt requested, with postage prepaid, in each case addressed (with a copy by email):

 

If to Ligand to:

 

Ligand Pharmaceuticals Incorporated

11119 North Torrey Pines Road, Suite 200

La Jolla, CA 92037

Attention: [XXX]

Email: [XXX]

 

With a copy to:

 

Latham & Watkins LLP

12670 High Bluff Drive

San Diego, CA 92130

Attention: [XXX]

Email: [XXX]

 

If to the Company to:

 

Aziyo Med, LLC

12510 Prosperity Drive, Suite 370

Silver Spring, MD 20904

Attention: [XXX]

Email: [XXX]

 

 

With a copy to:

 

Shipman & Goodwin LLP

One Constitution Plaza

Hartford, CT 06103

Attention: [XXX]

Email: [XXX]

 

or to such other address or addresses as Ligand or the Company may from time to time designate by notice as provided herein, except that notices of changes of address shall be effective only upon receipt. All such notices, consents, waivers and communications shall: (a) when posted by certified or registered mail, postage prepaid, return receipt requested, be effective three (3) Business Days after dispatch, (b) when telegraphed, telecopied, telexed or facsimiled, be effective upon receipt by the transmitting party of confirmation of complete transmission, or (c) when delivered by a recognized overnight courier or in person, be effective upon receipt when hand delivered.

 

SECTION 7.03. Successors and Assigns.

 

(a)         The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

 

(b)         Upon the consent of Ligand (which consent may not be unreasonably withheld, delayed or conditioned for any proposed assignment to any reasonably creditworthy proposed assignee), the Company may assign all or any applicable part of its rights and obligations under this Agreement in respect of any Product Change of Control, subject to the assumption by such proposed assignee of the obligations set forth in Section 2.01 and Section 2.02 with respect to such Product.

 

(c)          Solely upon the consent of the Company (which consent may not be unreasonably withheld, delayed or conditioned, other than in respect of any proposed assignment to any direct competitor of the Company, in respect of which such consent may be granted or withheld by the Company in its sole discretion), Ligand may assign any of its obligations or rights under this Agreement without restriction; provided that, notwithstanding the foregoing, Ligand may assign its rights and/or delegate its obligations under this Agreement to an Affiliate, to any Person in a transaction in which Ligand also assigns all of its right, title and interest in all or substantially all of its assets to the same party contemporaneous with the assignment of this Agreement, or to a successor, whether by way of merger, sale of stock or otherwise, without the Company's prior written consent. In advance of any proposed assignment by Ligand to any proposed assignee, Ligand shall provide to the Company any information concerning such proposed assignment and such proposed assignee as may be reasonably requested by the Company.

 

 

SECTION 7.04. Indemnification.

 

(a)          The Company hereby indemnifies and holds Ligand and its Affiliates and any of their respective partners, directors, managers, members, officers, employees and agents (each, a “Ligand Indemnified Party”) harmless from and against any and all Losses incurred or suffered by any Ligand Indemnified Party arising out of any breach of any representation or warranty made by the Company in this Agreement.

 

(b)           Ligand hereby indemnifies and holds the Company, its Affiliates and any of their respective partners, directors, managers, officers, employees and agents (each, a “Company Indemnified Party”) harmless from and against any and all Losses incurred or suffered by a Company Indemnified Party arising out of any breach of any representation or warranty made by Ligand in this Agreement.

 

(c)            If any claim, demand, action or proceeding (including any investigation by any Governmental Authority) shall be brought or alleged against an indemnified party in respect of which indemnity is to be sought against an indemnifying party pursuant to the preceding paragraphs, the indemnified party shall, promptly after receipt of notice of the commencement of any such claim, demand, action or proceeding, notify the indemnifying party in writing of the commencement of such claim, demand, action or proceeding, enclosing a copy of all papers served, if any; provided, that the omission to so notify such indemnifying party will not relieve the indemnifying party from any liability that it may have to any indemnified party under the foregoing provisions of this Section 7.04 unless, and only to the extent that, such omission results in the forfeiture of, or has a material adverse effect on the exercise or prosecution of, substantive rights or defenses by the indemnifying party. In case any such action is brought by a third party against an indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 7.04 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. In any such proceeding by a third party, an indemnified party shall have the right to retain its own counsel, but the reasonable fees and expenses of such counsel shall be at the expense of such indemnified party unless the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel. It is agreed that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate law firm (in addition to local counsel where necessary) for all such indemnified parties. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding.

 

 

 

(d)            Ligand's sole remedy shall be to recover any monetary damages associated with a breach of a representation or warranty made by the Company in this Agreement, subject to the other terms and provisions contained in this Agreement.

 

SECTION 7.05.  No Implied Representations and Warranties. Each Party acknowledges and agrees that, other than the representations and warranties specifically contained in this Agreement, there are no representations or warranties of either Party or any other Person either expressed or implied with respect to the Products or the Sale Transaction or the other transactions contemplated hereby. Without limiting the foregoing, Ligand acknowledges and agrees that (a) Ligand and its Affiliates, together with its and its Affiliates’ representatives, have made their own investigation of the Products, the Intellectual Property related to the Products and the Regulatory Approvals and are not relying on any implied warranties or upon any other representation or warranty whatsoever, including any representation or warranty as to the future amount or potential value of the Products or Net Sales Proceeds, the amount of any payments by the Company hereunder or as to the creditworthiness of the Company and (b) except as expressly set forth in any representation or warranty in this Agreement, Ligand shall have no claim or right to indemnification by the Company pursuant to Section 7.04 (or otherwise) with respect to any information, documents or materials furnished by the Company or Seller or any of their respective representatives to Ligand, any of its Affiliates, or any of its or its Affiliates’ representatives, including any information, documents or material made available to Ligand, its Affiliates or any of its and its Affiliates’ representatives in any data room, presentation, management presentation, interview or any other form relating to the transactions contemplated hereby.

 

SECTION 7.06.  Independent Nature of Relationship. (a)    The relationship between the Company and Ligand is solely that of obligor and obligee, and neither Ligand nor the Company has any fiduciary or other special relationship with the other or any of their respective Affiliates. Nothing contained herein shall be deemed to constitute the Company and Ligand as a partnership, an association, a joint venture or other kind of entity or legal form for any purposes, including any tax purposes.

 

(b)            No officer or employee or agent of Ligand will be located at the premises of the Company or any of its Affiliates, except in connection with an audit performed pursuant to Section 5.01. No officer, manager or employee of Ligand shall engage in any commercial activity with the Company or any of its Affiliates other than as contemplated herein or as otherwise separately agreed in writing.

 

(c)            Ligand and/or any of its Affiliates shall not at any time obligate the Company, or impose on the Company any obligation, in any manner or respect to any Person not a party hereto. The Company and/or any of its Affiliates shall not at any time obligate Ligand, or impose on Ligand any obligation, in any manner or respect to any Person not a party hereto.

 

SECTION 7.07. Entire Agreement. This Agreement, together with the Exhibits and Schedules hereto (which are incorporated herein by reference), constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements (including any term sheet), understandings and negotiations, both written and oral, between the Parties with respect to the subject matter of this Agreement. Notwithstanding any other provision set forth herein, neither Seller nor Guarantor is assuming any obligation or liability under the Ligand Purchase Agreement. No representation, inducement, promise, understanding, condition or warranty not set forth herein has been made or relied upon by either Party hereto. Neither this Agreement, nor any provision hereof, is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder or in respect hereof.

 

 

SECTION 7.08. Amendments; No Waivers.

 

(a)            Neither this Agreement nor any term or provision hereof may be amended, changed or modified except with the written consent of all Parties. No waiver of any right hereunder shall be effective unless such waiver is signed in writing by the Party against whom such waiver is sought to be enforced.

 

(b)            No failure or delay by either Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

 

SECTION 7.09. Interpretation. When a reference is made in this Agreement to an Article, Section, Schedule or Exhibit, such reference shall be to an Article, Section, Schedule or Exhibit to this Agreement unless otherwise indicated. The words “include”, “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.” Neither Party shall be or be deemed to be the drafter of this Agreement for the purposes of construing this Agreement against one Party or the other.

 

SECTION 7.10. Headings and Captions. The headings and captions in this Agreement are for convenience and reference purposes only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.

 

SECTION 7.11. Counterparts; Effectiveness. This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. Any counterpart may be executed by facsimile or pdf signature and such facsimile or pdf signature shall be deemed an original.

 

SECTION 7.12. Severability. If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions shall nevertheless be given full force and effect.

 

SECTION 7.13. Expenses. Each of Ligand and the Company will pay all of its own fees and expenses in connection with entering into and consummating the transactions contemplated by this Agreement.

 

 

SECTION 7.14. Governing Law; Jurisdiction.

 

(a)            This Agreement shall be governed by, and construed, interpreted and enforced in accordance with, the laws of the State of New York, without giving effect to the principles of conflicts of law thereof.

 

(b)            Any legal action or proceeding with respect to this Agreement may be brought in any state or federal court of competent jurisdiction in the State of New York, County of New York. By execution and delivery of this Agreement, each Party hereby irrevocably consents to and accepts, for itself and in respect of its property, generally and unconditionally the exclusive jurisdiction of such courts. Each Party hereby further irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such jurisdiction in respect of this Agreement.

 

(c)            Each Party hereby irrevocably consents to the service of process out of any of the courts referred to in clause (b) of this Section 7.14 in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at its address set forth in this Agreement. Each Party hereby irrevocably waives any objection to such service of process and further irrevocably waives and agrees not to plead or claim in any suit, action or proceeding commenced hereunder that service of process was in any way invalid or ineffective. Nothing herein shall affect the right of a party to serve process on the other Party in any other manner permitted by law.

 

ARTICLE VIII - Intercreditor Matters and Guarantee

 

SECTION 8.01. Ligand Interests; Recharacterization.

 

(a)            Notwithstanding anything herein to the contrary, it is the intention of the Parties that the Royalty Interests are owned by Ligand, and such Royalty Interests shall be treated as the property of Ligand for all purposes, other than federal and state income tax purposes. The provisions of this Agreement shall be construed to further these intentions of the Parties.

 

(b)            The Royalty Interests and any amounts received by the Company in respect of the Royalty Interests and, without limiting the foregoing, any cash deposited into the Special Account in accordance with the terms hereof and any cash deposited into the Main Account in respect of or consisting of the Royalty Interests (subject to any adjustments for Excluded Costs) is not, and is not intended to be, the property of the Company (or, in the event of a Bankruptcy Event, any estate created thereby by operation of applicable law or otherwise) but is possessed by the Company in trust solely on behalf of Ligand pending disbursement to Ligand or as otherwise provided in Section 5.06, in each case, as contemplated hereby.

 

(c)            If, notwithstanding subparagraph (b), the Royalty Interests are subject to a Recharacterization, the Parties intend that the Company shall be deemed hereunder to have granted, and the Company does hereby grant, to Ligand a first priority security interest in favor of Ligand, to secure the obligations to make the payments under Section 2.01, Section 2.02, and Section 2.03, including in respect of any acceleration thereof pursuant to Section 9.02, in the Royalty Interests and all proceeds and products thereof, and the Special Account and any cash or other funds, amounts or financial assets held therein or credited thereto.

 

 

(d)            No other liens or security interests (including any liens or security interests in favor of the MidCap Credit Facility Agent) shall exist on the Special Account or the cash or other funds, amounts or financial assets held therein or credited thereto other than any customary liens of the Depository Bank.

 

(e)            lf, notwithstanding clause (b), the conveyance of the Royalty Interests is subject to a Recharacterization, the Parties intend that the Company shall be deemed hereunder to have granted, and the Company does hereby grant (subject to the priorities specified in the Intercreditor Agreement) a security interest in favor of Ligand, to secure the obligations to make payments under Section 2.01, Section 2.02, and Section 2.03, including for the avoidance of doubt any acceleration of any payments pursuant to Section 9.02, in the Pari Passu Collateral.

 

SECTION 8.02. Other Ligand Security.

 

(a)            In addition to the special rights and security interests provided in Section 8.01, as security for the Company’s payment obligations in respect of any Minimum Quarterly Royalties payable hereunder (including in respect of any acceleration thereof pursuant to Section 9.02), the Company hereby grants (subject to the priorities specified in the Intercreditor Agreement) a security interest in all of the following assets of the Company that constitute “Collateral” under the MidCap Credit Facility (the “General Collateral”):

 

(i)            All goods, Accounts (including health-care insurance receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles, commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, investment accounts, commodity accounts and other Collateral Accounts, all certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located (each capitalized term in this clause (i) not otherwise defined in this Agreement or the MidCap Credit Facility, as defined in the UCC); and

 

(ii)            all the Company's Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.

 

(b)            Notwithstanding the foregoing, no security interest is or will be granted pursuant to this Agreement in any right, title or interest of the Company under or in, and “Collateral” shall not include, any Excluded Assets.

 

 

SECTION 8.03. Priority. (a)  Pursuant and subject to the Intercreditor Agreement, the security interest granted in Section 8.01(c) shall be for all purposes senior in right to any other lien other than any customary liens of the Depository Bank.

 

(b)            Pursuant and subject to the Intercreditor Agreement, the security interest granted in Section 8.01(e) shall be pari passu with the Existing Liens.

 

(c)            Pursuant and subject to the Intercreditor Agreement, the security interest granted in Section 8.02 shall be for all purposes junior and subordinate (on a "silent second" basis) to the Existing Liens.

 

SECTION 8.04. Other Intercreditor Matters. Ligand acknowledges that, the MidCap Credit Facility Agent will not file any partial UCC-3 termination statement in respect of the liens held by the MidCap Credit Facility Agent or otherwise release any of its Collateral (as such term is defined under the MidCap Credit Facility) under the MidCap Credit Facility. However, the Intercreditor Agreement shall contain an express acknowledgement by the MidCap Credit Facility Agent that it has no security interest in or other rights in respect of the Special Account or any cash held therein.

 

SECTION 8.05. Control Agreements.

 

(a)            The Company agrees, with respect to the Special Account (upon request of Ligand), to use commercially reasonable efforts to cause the Depository Bank to agree to comply at any time with instructions from Ligand to the Depository Bank directing the disposition of funds from time to time credited to the Special Account, without further consent of the Company, pursuant to a customary deposit account control agreement in form and substance satisfactory to Ligand. However, Ligand shall not give any such instructions or withhold any withdrawal rights from the Company, unless a Remedies Event has occurred and is continuing.

 

(b)            Nothing herein is intended to affect or shall be construed as affecting the rights of the MidCap Credit Facility Agent under any deposit account control agreement in favor of it in respect of the Main Account.

 

SECTION 8.06. Termination or Release.

 

(a)            Upon receipt by Ligand of an aggregate amount of $15,027,342 on or after the Closing Date pursuant to this Agreement, all right, title and interest in and to the Royalty Interest and the Collateral shall automatically revert to the Company, and Ligand will have no further rights in or with respect to the Royalty Interest or the Collateral and all security interests granted hereunder shall terminate and be released; provided, however, the other terms and conditions of this Agreement shall remain in full force and effect, including without limitation, the Company’s obligation to make the payments described in Article II during the remainder of the Term.

 

(b)            Upon the withdrawal of any Excluded Costs or other amounts from the Special Account in accordance with the terms hereof, Ligand's security interest in such amounts granted pursuant to Section 8.01(c) shall be automatically terminated and released.

 

 

(c)            Subject to the Intercreditor Agreement, upon the sale, lease, transfer, assignment or other disposition (a “Transfer”) of any assets of the Company (other than the Royalty Interests and the Royalty Related Collateral) permitted under the MidCap Credit Facility, all of Ligand's security interests in such assets shall be automatically terminated and released.

 

(d)            Subject to the Intercreditor Agreement, at the Company's request, Ligand shall subordinate its liens and other rights with respect to any such assets or property or terminate and release its liens with respect to any such assets or property (in each case other than the Royalty Interests and the Royalty Related Collateral) in connection with any Permitted Transaction.

 

(e)            Upon the termination of the MidCap Credit Facility (or, if the MidCap Credit Facility is refinanced by another debt facility secured by all Collateral (other than the Royalty Interests and the Royalty Related Collateral), upon the termination of such refinancing debt facility), Ligand's security interest in all Collateral (other than the Royalty Interests and the Royalty Related Collateral) shall automatically be terminated and released.

 

(f)             In connection with any termination or release pursuant to this Section 8.06, Ligand shall execute and deliver to the Company all documents that the Company shall reasonably request to evidence such termination or release. Ligand further agrees that with respect to any deposit account (other than the Special Account) over which it has control, it shall not give any instruction to the applicable bank until a Remedies Event has occurred and is continuing.

 

ARTICLE IX - Remedies

 

SECTION 9.01. Remedies. If any Remedies Event shall occur and be continuing, subject to the terms of the Intercreditor Agreement, Ligand may exercise all rights and remedies of a secured party under the UCC or under any other applicable law and in equity, provided that Ligand shall exercise any such remedy against the Special Account prior to the exercise of any such remedy against any other Collateral.

 

SECTION 9.02. Acceleration. If any Remedies Event shall occur and be continuing, subject to the terms of the Intercreditor Agreement, upon notice to the Company, Ligand may declare all Minimum Quarterly Royalties required to be paid by the Company from the date of such Remedies Event until the expiration of the Term to be due and payable forthwith, whereupon the same shall immediately become due and payable.

 

[Remainder of this page intentionally left blank]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Royalty Agreement to be duly executed by their respective authorized officers as of the day and year first above written to become effective on the Effective Date.

 

	AZIYO MED, LLC
	By	/s/ Jeffrey D. Hamet
		Name: Jeffrey D. Hamet
		Title: Vice President, Finance and Treasurer

 

[Signature Page to the Royalty Agreement]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written to become effective on the Effective Date.

 

	LIGAND PHARMACEUTICALS, INCORPORATED
	By	/s/ Charles Berkman
		Name: Charles Berman
		Title: VP, General Counsel & Secretary

 

[Signature Page to the Royalty Agreement]

 

 

Exhibit A 

to the Royalty Agreement

 

GUARANTY AGREEMENT

 

 

Schedule A 

to the Royalty Agreement

 

PRODUCTS

 

Aziyo Fields of Use	Product Applications
SIS for the repair of the pericardial sac	CorMatrix® ECM® for Pericardial Closure
SIS for repair of myocardial tissue	CorMatrix® ECM® for Cardiac Tissue Repair
SIS to repair Carotid Arteries	CorMatrix® ECM® for Carotid Repair
Co-Exclusive Vascular Patch using SIS to repair the wall of peripheral veins and arteries	CorMatrix® ECM® for Vascular Repair
SIS for repair of myocardial tissue	CorMatrix® TYKE® Patch, Pledget and Intracardiac or TYKE® Patch, Pledget and Intracardiac
SIS pouch devices into which implantable cardiac pacemaker or defibrillator devices are inserted	CorMatrix® CanGaroo®  ECM® Envelope or CanGaroo® ECM® Envelope

 

 

Schedule B 

to the Royalty Agreement

 

ROYALTY RELATED COLLATERAL

 

US Patents and Patent Applications

 

 

Non-US Patents and Patent Applications

 

 

Schedule 3.08

to the Royalty Agreement

 

MidCap Credit Facility:

 

Credit and Security Agreement (Revolving Loan) providing for a revolving loan in the maximum principal amount of $8,000,000.

 

Credit and Security Agreement (Term Loan) providing for a term loan in the maximum principal amount of $12,000,000.

 

 

Exhibit 10.16

 

LICENSE AGREEMENT

 

THIS LICENSE AGREEMENT (this “Agreement”) is made and entered into as of May 31, 2017, by and between COOK BIOTECH INCORPORATED, an Indiana corporation with its principal office at 1425 Innovation Place, West Lafayette, Indiana 47906 (“Cook”), and AZIYO MED, LLC, a Delaware limited liability company with its principal office at 12510 Prosperity Drive, Suite 370, Silver Spring, Maryland 20904 (“Aziyo”).

 

W I T N E S E T H:

 

WHEREAS, Cook and CorMatrix Cardiovascular, Inc., a Georgia corporation with its principal office at 1100 Old Ellis Rd., Roswell, Georgia 30076 (“CorMatrix”), are parties to a Cross License Agreement dated November 23, 2004, as amended by a First Amendment dated December 3, 2010, a Third Amendment dated November 14, 2012, and a Fifth Amendment dated March 25, 2014, there being no Second or Fourth Amendments, and a further amendment on an even date herewith, (collectively, the “CorMatrix Agreement”), which includes certain intellectual property rights related to extracellular matrices;

 

WHEREAS, Aziyo desires to acquire as of the Effective Date certain Specific Licensed Products that are covered by the CorMatrix Agreement in order to have certain rights pertaining to such Specific Licensed Products in the Aziyo Fields of Use;

 

WHEREAS, CorMatrix has agreed to sell all of its rights in, to and under the Specific Licensed Products to Aziyo and to allow Aziyo to obtain a license from Cook pertaining to such Specific Licensed Products (the “Sale Transaction”); and

 

WHEREAS, Cook agrees to license Aziyo under the Cook Patents pertaining to such Specific Licensed Products instead of and in place of CorMatrix in the Aziyo Fields of Use, under the conditions stated herein;

 

NOW, THEREFORE, for and in consideration of the mutual covenants and the premises herein contained, the parties, intending to be legally bound, hereby agree as follows.

 

ARTICLE 1. DEFINITIONS

 

The following terms as used herein shall have the following meaning:

 

“Affiliates” means any corporation, partnership or other business entity which is directly or indirectly controlled by or under common control with Aziyo or Cook or any entity which directly or indirectly controls Aziyo or Cook, as the case may be. “Control” as used herein means the ownership, directly or indirectly, of greater than fifty percent (50%) of the voting power of such entity.

 

“Agreement” or “License Agreement” means this Agreement, including Exhibits A and B attached hereto.

 

 

“CorMatrix Agreement” has the meaning set forth in the recitals.

 

“Aziyo Fields of Use” means:

 

(a)        the use of SIS for the repair of myocardial tissue, and for the repair of the pericardial sac. By way of clarification, the Aziyo Fields of Use do include placing the SIS patch material directly into or onto myocardial tissue but do not include the use of SIS for the repair or replacement of the coronary arteries, or for epicardial infarct repair;

 

(b)       the use of SIS for all Atrial Septal Defect (ASD) and Ventricular Septal Defect (VSD) repair, except for the transvascular approach to ASD and VSD repair;

 

(c)       the use of SIS to repair carotid arteries in an open surgery but not the use of SIS in conjunction with a stent or other frame; and for clarity, “open surgery” for purposes of this subparagraph (c) does not include (i) any form of percutaneous access (using a cut down or not) to or through a carotid artery using SIS, including but not limited to any vascular patching via percutaneous delivery (e.g. as in the repair of punctures created by percutaneous access devices), (ii) any form of indirect access to the carotid artery through a vascular vessel using SIS, or (iii) any form of access to or through a carotid artery over or through a device using SIS (e.g. transcatheter access);

 

(d)       the use of SIS to patch repair the wall of peripheral veins and arteries, other than carotid arteries, using a sheet form patch product in open surgery and where a surface of the implanted patch forms part of the blood contacting lumen of the vein or artery, but not including the use of SIS in conjunction is with a stent or other frame; and for clarity, (i) “open surgery” for purposes of this subparagraph (d) does not include (a) any form of percutaneous access (using a cut-down or not) to or through a vein or artery using SIS, including but not limited to any vascular patching via percutaneous delivery (e.g. as in the repair of punctures created by percutaneous access devices), (b) any form of indirect access to the vein or artery through a vascular vessel using SIS, or (c) any form of access to or through a vein or artery over or through a device using SIS (e.g. transcatheter access), and (ii) patch repair shall be limited to patch repair as specified above only and does not include the creation or use of a vessel or conduit made out of SIS and does not include any use of SIS to replace or repair any valve; and

 

(e)       SIS pouch devices into which implantable cardiac pacemaker or defibrillator devices are to be inserted at the point of care for subcutaneous implantation in human patients.

 

“Cook Patents” means the patent applications and patents that are identified in Exhibit E of the CorMatrix Agreement as of the Effective Date and specifically including the patent applications and patents that are listed in Exhibit A of this Agreement, as it may be amended from time to time by mutual agreement of the Parties, together with all divisionals, continuations-in-part, continuations, reissues, reexaminations and foreign counterparts of such applications.

 

“Effective Date” has the meaning set forth in Section 6.1.

 

 

“License” has the meaning set forth in Section 2.1(a).

 

“Specific Licensed Products” means the specific regulatory-approved products listed in Exhibit B of this Agreement for their regulatory-approved indications.

 

“Licensed Territory” means the world.

 

“Sale Transaction” has the meaning set forth in the recitals.

 

“SIS” means a composition of solid extracellular matrix composition prepared from intestinal tissue.

 

“Valid Enforceable Claim” means any claim in force or bona fide pending claim contained in the Cook Patents unless held invalid or unenforceable by a court of competent jurisdiction and of last resort or by any inferior court of competent jurisdiction, tribunal or agency from which no appeal is taken.

 

ARTICLE 2. GRANT OF LICENSES/COVENANT

 

2.1       Cook License Grant to Aziyo.

 

(a)       Cook hereby grants to Aziyo an exclusive (subject to Section 2.1(b)) worldwide right and license to all of Cook’s rights under the Cook Patents to make, have made, use, offer for sale, sell and import the Specific Licensed Products for the Aziyo Fields of Use in the Licensed Territory during the term of this Agreement (the “License”). This License shall be royalty-free as to Specific Licensed Products utilizing SIS material purchased by Aziyo from Cook. Aziyo shall have the right to grant sublicenses of the rights granted herein upon prior written approval from Cook, which approval will not be unreasonably withheld.

 

(b)       Aziyo acknowledges and agrees that Cook shall have co-exclusive rights as set forth in the CorMatrix Agreement to the Vascular Patch product recited in Exhibit B that uses SIS to repair the wall of peripheral veins and arteries as specified in subparagraph (d) of the definition of “Aziyo Fields of Use” above, and that Cook’s continuing license of CorMatrix in a field corresponding to such subparagraph (d) under the CorMatrix Agreement shall not be taken into account in any way in determining Cook’s exploitation of Cook’s co-exclusive rights.

 

2.2       Covenant. Cook agrees that to the extent that Cook has or acquires patents other than the Cook Patents, where such patents have an earliest claimed application priority date prior to the Effective Date (“Other Patents”), Cook covenants not to sue Aziyo for infringement of such Other Patents for Aziyo’s marketing, distribution, sale and use of the Specific Licensed Products in the Aziyo Fields of Use for Specific Licensed Products purchased by Aziyo from Cook under the Supply Agreement between Aziyo and Cook.

 

ARTICLE 3. ENFORCEMENT

 

3.1       First Right of Aziyo to Notify and Initiate Proceedings. Aziyo shall have the first right, but not the obligation, to notify any infringer and/or initiate legal proceedings to abate any infringement in the Aziyo Fields of Use by a third-party product that is the same as a Specific Licensed Product. All fees, costs and expenses incurred therein and all damages or other monies obtained therefrom shall be the responsibility of and belong to Aziyo.

 

 

3.2       Notification regarding Infringements and Initial Consultation. Cook and Aziyo each agree to notify the other in writing in the event that they become aware of an infringement or apparent infringement of one or more Cook Patents in the Aziyo Fields of Use by a third-party product that is the same as a Specific Licensed Product, and to initially consult to consider what if any action should be taken. This agreement to consult shall not in any way modify the rights of Aziyo to first initiate proceedings hereunder as per Section 3.1.

 

3.3       Additional Rights/Obligations of the Parties

 

3.3.1       In the event that Aziyo has not initiated legal proceedings within six (6) months after providing or receiving notice under Section 3.2 above, for an infringement or apparent infringement of one or more Cook Patents, then Cook may initiate such legal proceedings on its own behalf; and, reasonably promptly thereafter, Aziyo may elect to join in those legal proceedings (in a manner other than in name only, if applicable) and upon Aziyo doing so each party shall bear its own fees, costs and expenses incurred in the legal proceedings except that court costs and expenses for any joint filings shall be apportioned one-half to each party, and each party will be apportioned one-half (1/2) of the damages or other monies awarded in those legal proceedings.

 

3.3.2       If legal proceedings are initiated under this Article 3 by any Party, each Party will be reasonably cooperative with the other Party, whether joining or not, in the conduct of the legal proceedings (for example including, to the extent possible, having its employees testify when requested, making available the relevant records, papers and information, samples and the like, and being joined in name only).

 

3.3.3       If a Party does not join in a legal proceeding initiated by the other Party under this Article 3 (in a manner other than in name only, if applicable), then any damages or other monies awarded in the suit shall belong to, and all fees, costs and expenses incurred in the suit shall be the responsibility of, the initiating Party.

 

3.3.4       If a Party is joined in a legal proceeding initiated by the other Party under this Article 3 in name only (the “Necessary Party”), and does not elect to join in any other capacity, then the initiating Party will indemnify and hold harmless the Necessary Party from and against all damages, fees, costs and expenses which may be finally assessed against the Necessary Party in such legal proceeding.

 

ARTICLE 4. LIMITED WARRANTY, MERCHANTABILITY

 

Cook Limited Warranty. Cook represents and warrants to Aziyo that it has the right, power and authority to enter into this Agreement. Cook does not warrant the validity of the patents licensed hereunder and makes no representation whatsoever with regard to the scope or commercial potential or profitability or income of or from the patents or that such patents may be exploited by Aziyo or its Affiliates without infringing other patents. COOK MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND WITH RESPECT TO THE PATENTS LICENSED HEREUNDER AND EXPRESSLY DISCLAIMS ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND ANY OTHER WARRANTIES WITH RESPECT TO THE CAPABILITIES, SAFETY, UTILITY, EFFICACY, APPROVABILITY BY REGULATORY AUTHORITIES, TIME AND COST OF DEVELOPMENT, OR COMMERCIAL APPLICATION OF LICENSED PATENTS.

 

 

4.2       Aziyo Warranty. Aziyo represents and warrants that it has the right and authority to enter into this Agreement.

 

4.3       Survival. The foregoing representations and warranties shall survive the execution and delivery of this Agreement and the closing of the Sale Transaction.

 

ARTICLE 5. INDEMNIFICATION/EFFORTS

 

5.1       Aziyo Indemnity. Aziyo shall indemnify and hold harmless Cook and its officers, directors, employees and agents from and against all claims, demands, liabilities, damages and expenses (including reasonable attorneys’ fees) arising from or related to Aziyo’s exercise of the License.

 

5.2       Aziyo shall use commercially reasonable efforts to promote, solicit, and expand the sale of the Specific Licensed Products in the Aziyo Fields of Use in the Territory.

 

ARTICLE 6. TERM AND TERMINATION

 

6.1       Term. Unless sooner terminated as otherwise provided in this Agreement, the term of this Agreement shall commence on the date of the closing of the Sale Transaction (the “Effective Date”) and shall continue until the date of expiration of the last to expire of the Licensed Patents, including any renewals or extensions thereof. The Parties agree that if the Sale Transaction has not occurred on or before June 15, 2017, this Agreement shall be null and void.

 

6.2       Termination for Breach. Either Party may terminate this Agreement, by written notice to the other Party, for any material breach of this Agreement by the other Party, if such breach is not cured within thirty (30) days after the breaching Party receives written notice of such breach from the non-breaching Party.

 

6.3       This Agreement will terminate automatically, without any further action taken, upon any reversal, nullification, or cancellation of the Sale Transaction or any other event relating to the Sale Transaction by which Aziyo no longer possesses the rights transferred from CorMatrix to Aziyo pursuant to the Sale Transaction.

 

6.4       Survival. The provisions of Articles 4 and 5 of this Agreement shall remain in full force and effect notwithstanding the termination of this Agreement.

 

ARTICLE 7. MANUFACTURE OF SIS MATERIALS

 

CorMatrix and Cook are parties to an Amended and Restated SIS Material Supply Agreement, of even date herewith, whereby Cook is designated as the exclusive supplier of SIS to CorMatrix (the “Supply Agreement”).  The parties are entering into an SIS Material Supply Agreement, on an even date herewith, in which Cook is designated as the exclusive supplier of SIS to Aziyo for the Specific Licensed Products and agrees that Aziyo shall have the right under the circumstances set forth therein to sell Specific Licensed Products including SIS Material manufactured by it and to pay to Cook a royalty of three percent (3%) of Net Sales of Specific Licensed Products sold by Aziyo that include SIS material manufactured by Aziyo under the conditions specified therein and that fall within the scope of at least one Valid Enforceable Claim of a Cook Patent.

 

 

“Net Sales” as used in this Article 7 means gross sales on the initial sale, rent, lease or otherwise making available to third parties (that is, arms-length sales to other than Affiliates) of the Specific Licensed Products specified in paragraphs 8.1 and 8.2 above (“the specified Licensed Products”), less the following, to the extent the same are credited or deducted from the sales: returns, refunds, replacement or credits allowed to purchasers for return of products or as reimbursement for damaged products, freight, postage, insurance, and other shipping charges, sales and use taxes, customs duties, and any other governmental tax or charge (except income taxes) imposed on or at the time of the production, importation, use, or sale of the specified Specific Licensed Products, including any value added taxes (VAT), as adjusted for rebates and refunds. In the case of a specified product sold in combination with one or more other products (collectively, a “Combination Product”), Net Sales shall exclude the Proportionate Value (as defined below) of all other products included in the Combination Product. “Proportionate Value,” for purposes of this paragraph, shall mean fair market value, as determined by the commercial sales price of the other product(s) if sold separately, or, if not sold separately, the fair market value of such other product(s) reasonably determined by the seller with notice of such fair market value to be given to the other party; taking into account that the sales price of the Combination Product may be less than the sum of the value of all of the component products in which case the value of each component product shall be proportionately reduced. No deductions shall be made for sales representations commissions, whether they be with independent agencies or regularly employed by the seller and on its payroll.

 

ARTICLE 8. ASSIGNMENT

 

Neither party shall grant, transfer, convey, or otherwise assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other party, which consent shall not be unreasonably withheld except that either party may, without the consent of the other, assign this Agreement to an Affiliate or a successor in interest or transferee of all or substantially all of the portion of the assets to which this Agreement relates and (ii) Aziyo may, without the consent of Cook, grant a security interest in its rights and interests hereunder or make a collateral assignment thereof in connection with any bank or other institutional financing.

 

ARTICLE 9. NOTICES

 

All notices and other communications shall be hand delivered, sent by private overnight delivery service, or sent by registered or certified U.S. mail, postage prepaid, return receipt requested, and addressed to the party to receive such notice or other communication at the address given below, or such other address as may hereafter be designated by notice in writing:

 

 

	If to Cook, at:	Cook Biotech Incorporated
		1425 Innovation Place
		West Lafayette, IN 47906
		Attn: President
	If to Aziyo, at:	Aziyo Med, LLC
		12510 Prosperity Drive, Suite 370
		Silver Spring, MD 20904
		Attn: [XXX]
		Email: [XXX]
	With a copy to:	Winston & Strawn LLP
		200 Park Avenue
		New York, NY 10166
		Attn: [XXX]
		Email: [XXX]

 

Such notices or other communications shall be effective upon receipt by an employee, agent or representative of the receiving party authorized to receive notices or other communications sent or delivered in the manner set forth above.

 

ARTICLE 10. MISCELLANEOUS

 

10.1       Legal Compliance. The parties shall comply with all laws and regulations relating to the manufacture, processing, producing, use, selling, or distributing of Specific Licensed Products. Neither party shall take any action which would cause the other party to violate any laws or regulations or to breech any written agreement with a third party.

 

10.2 No Other Licenses. Only the licenses granted pursuant to the express terms of this Agreement shall be of any legal force and effect as between Cook and Aziyo. No license rights are created by implication or estoppel. In addition, nothing contained in this Agreement shall be construed as requiring Cook or Aziyo to file or maintain any patent application, to secure any patent or to maintain any patent in force, or as requiring Cook or Aziyo to bring or prosecute actions or suits against third parties for infringement, or as conferring any right to use, in advertising, publicity or otherwise, any name, trade name or trademark, or any contraction, abbreviation, or simulation thereof.

 

10.3       Entire Agreement. This Agreement constitutes the entire agreement between Cook and Aziyo with respect to the subject matter hereof and shall not be modified, amended or terminated except as herein provided or except by another agreement in writing executed by the parties hereto.

 

10.4       Severability. All rights and restrictions contained herein may be exercised and shall be applicable and binding only to the extent that they do not violate any applicable laws and are intended to be limited to the extent necessary so that they will not render this Agreement illegal, invalid or unenforceable. If any provision or portion of any provision of this Agreement not essential to the commercial purpose of this Agreement shall be held to be illegal, invalid or unenforceable by a court of competent jurisdiction, it is the intention of the parties that the remaining provisions or portions thereof shall constitute their agreement with respect to the subject matter hereof, and all such remaining provisions or portions thereof shall remain in full force and effect. To the extent legally permissible, any illegal, invalid or unenforceable provision of this Agreement shall be replaced by a valid provision which will implement the commercial purpose of the illegal, invalid or unenforceable provision. In the event that any provision essential to the commercial purpose of this Agreement is held to be illegal, invalid or unenforceable and cannot be replaced by a valid provision which will implement the commercial purpose of this Agreement, this Agreement and the rights granted herein shall terminate.

 

 

10.5       Force Majeure. Any delays in, or failure of, performance of any party to this Agreement shall not constitute default hereunder, or give rise to any claim for damages, if and to the extent caused by occurrences beyond the control of the party affected, including, but not limited to, acts of God, strikes or other work stoppages; civil disturbances, fires, floods, explosions, riots, war, rebellion, sabotage, acts of governmental authority or failure of governmental authority to issue licenses or approvals which may be required.

 

10.6       Amendment of the CorMatrix Agreement; No Assumption by Aziyo of CorMatrix Liabilities. Cook hereby consents and agrees to the assignment by CorMatrix of all of its right, title and interest under the CorMatrix Agreement to the Specific Licensed Products and the Patent Rights relating to such Products, and an amendment of the CorMatrix Agreement is being executed, on an even date herewith, to terminate the rights of CorMatrix thereunder with respect to the Specific Licensed Products and Patent Rights at the Effective Date. Cook acknowledges that Aziyo is not assuming any of the liabilities or other obligations of CorMatrix under the CorMatrix Agreement, all of which shall be retained by CorMatrix.

 

(signature page follows)

 

 

IN WITNESS WHEREOF, Cook and Aziyo have caused this License Agreement to be signed by their duly authorized representatives, under seal, to be effective on the Effective Date.

 

Cook:			Aziyo:
COOK BIOTECH INCORPORATED			AZIYO MED, LLC
By:	/s/ Umesh Patel		By:	/s/ Jeffrey D. Hamet
Name:	Umesh Patel		Name:	Jeffrey D. Hamet
Title:	President		Title:	VP, Finance and Treasurer
CorMatrix hereby consents and agrees to the foregoing.
CORMATRIX CARDIOVASCULAR, INC.
By:	/s/ John C. Thomas
Name:	John C. Thomas
Title:	CFO

 

 

EXHIBIT A

 

Cook Patents and Patent Applications

 

 

EXHIBIT B

 

SPECIFIC LICENSED PRODUCTS

 

Products/Applications	Reference to Cross License Agreement	Relevant Fields of Use from Cross License Agreement
CorMatrix® ECM® for Pericardial Closure	Paragraph 1.3 of Article 1	SIS for the repair of the pericardial sac
CorMatrix® ECM® for Cardiac Tissue Repair	Paragraph 1.3 of Article 1	SIS for repair of myocardial tissue
CorMatrix® ECM® for Carotid Repair	Amendment 1 Paragraph 1	SIS to repair Carotid Arteries
CorMatrix® ECM® for Vascular Repair	Amendment 5 Paragraph 1	Co-Exclusive Vascular Patch using SIS to repair the wall of peripheral veins and arteries
CorMatrix® TYKE® Patch, Pledget and Intracardiac or TYKE® Patch, Pledget and Intracardiac	Paragraph 1.3 of Article 1	SIS for repair of myocardial tissue
CorMatrix® CanGaroo®  ECM® Envelope or CanGaroo® ECM® Envelope	Amendment 3 Paragraph 1	SIS pouch devices into which implantable cardiac pacemaker or defibrillator devices are inserted

 

 

 

 

 

 

 

 

 

Exhibit 10.17

 

DECEMBER 2017 AMENDMENT TO LICENSE AGREEMENT

 

This is an amendment (this “Amendment”), effective as of December 21^st, 2017, to that certain LICENSE AGREEMENT (the “License Agreement”) dated May 31, 2017, by and between COOK BIOTECH INCORPORATED, an Indiana corporation with its principal office at 1425 Innovation Place, West Lafayette, Indiana 47906 (“Cook”), and AZIYO MED, LLC, a Delaware limited liability company with its principal office at 12510 Prosperity Drive, Suite 370, Silver Spring, Maryland 20904 (“Aziyo”).

 

WHEREAS, Cook and Aziyo entered into the License Agreement, by which Cook granted to Aziyo a license relating to certain defined Specified Licensed Products in certain defined Aziyo Fields of Use;

 

WHEREAS, Aziyo desires to add to the defined Aziyo Fields of Use certain fields relating to SIS pouch devices into which certain implantable electronic medical devices are to be inserted at the point of care for subcutaneous implantation in human patients;

 

WHEREAS, Cook is willing to grant to Aziyo additions to the defined Aziyo Fields of Use, on the terms and conditions herein;

 

NOW, THEREFORE, Cook and Aziyo agree as follows:

 

1.

In Article 1 of the License Agreement, the definition of “Aziyo Fields of Use” is removed and replaced in its entirety with the following:

 

“Aziyo Fields of Use” means:

 

(a)       the use of SIS for the repair of myocardial tissue, and for the repair of the pericardial sac. By way of clarification, the Aziyo Fields of Use do include placing the SIS patch material directly into or onto myocardial tissue but do not include the use of SIS for the repair or replacement of the coronary arteries, or for epicardial infarct repair;

 

(b)       the use of SIS for all Atrial Septal Defect (ASD) and Ventricular Septal Defect (VSD) repair, except for the transvascular approach to ASD and VSD repair;

 

(c)       the use of SIS to repair carotid arteries in an open surgery but not the use of SIS in conjunction with a stent or other frame; and for clarity, “open surgery” for purposes of this subparagraph (c) does not include (i) any form of percutaneous access (using a cut down or not) to or through a carotid artery using SIS, including but not limited to any vascular patching via percutaneous delivery (e.g. as in the repair of punctures created by percutaneous access devices), (ii) any form of indirect access to the carotid artery through a vascular vessel using SIS, or (iii) any form of access to or through a carotid artery over or through a device using SIS (e.g. transcatheter access);

 

 

(d)       the use of SIS to patch repair the wall of peripheral veins and arteries, other than carotid arteries, using a sheet form patch product in open surgery and where a surface of the implanted patch forms part of the blood contacting lumen of the vein or artery, but not including the use of SIS in conjunction is with a stent or other frame; and for clarity, (i) “open surgery” for purposes of this subparagraph (d) does not include (a) any form of percutaneous access (using a cut-down or not) to or through a vein or artery using SIS, including but not limited to any vascular patching via percutaneous delivery (e.g. as in the repair of punctures created by percutaneous access devices), (b) any form of indirect access to the vein or artery through a vascular vessel using SIS, or (c) any form of access to or through a vein or artery over or through a device using SIS (e.g. transcatheter access), and (ii) patch repair shall be limited to patch repair as specified above only and does not include the creation or use of a vessel or conduit made out of SIS and does not include any use of SIS to replace or repair any valve;

 

(e)       SIS pouch devices into which implantable cardiac pacemaker or defibrillator devices are to be inserted at the point of care for subcutaneous implantation in human patients;

 

(f)       SIS pouch devices into which implantable electronic cardiac stimulation devices, other than cardiac pacemaker or defibrillator devices, are to be inserted at the point of care for subcutaneous implantation in human patients (hereafter the “Other ECSD SubField”); and

 

(g)       SIS pouch devices into which implantable electronic neurostimulation devices for deep brain stimulation, spinal nerve and sacral nerve stimulation to relieve chronic pain, and nerve stimulation to help control bladder, digestive, abdomen, and bowel movements, are to be inserted at the point of care for subcutaneous implantation in human patients (hereafter the “ENSD SubField”).”.

 

2.

The following paragraphs are added at the end of Article 5:

 

5.3.       Minimum Requirements for SIS Pouch Devices. If, during the term of this Agreement, Aziyo fails in any calendar year to order and pay Cook Biotech for a minimum of five hundred thousand dollars ($500,000.00) of SIS Material pursuant to the Supply Agreement for use in SIS pouch devices SubFields emcompassed in 1 (e) through (g) as demonstrated by corporate records of Aziyo, Cook may, in its sole discretion, terminate the license to SIS pouch devices for the Other ECSD SubField and the ENSD SubField or convert such licenses to non-exclusive licenses unless Aziyo remits to Cook a non-refundable, non-creditable payment equal to any shortfall in purchasing such minimum amount of SIS Material pursuant to this Agreement within 45 days after such calendar year end.

 

5.4.       Diligence for SIS Pouch Devices. If, within eighteen (18) months after execution of this Amendment, Aziyo has not commenced commercial sales of SIS pouch devices in the Other ECSD SubField under a U.S. regulatory approval for the Other ECSD SubField, Cook may, in its sole discretion, terminate the licenses to SIS pouch devices in the Other ECSD SubField under this Agreement or convert such license to a non-exclusive license. If, within eighteen (18) months after execution of this Amendment, Aziyo has not commenced commercial sales of SIS pouch devices in the ENSD SubField under a U.S. regulatory approval for the ENSD SubField, Cook may, in its sole discretion, terminate the license to SIS pouch devices in the ENSD SubField under this Agreement or convert such license to a non-exclusive license.

 

 

5.6.       Regulatory/Pouches in the Other ECSD SubField. Aziyo shall obtain and be responsible for the costs associated with obtaining regulatory approval of the SIS pouch devices for the Other ECSD SubField. Aziyo shall also be responsible for pre-clinical development, pre-clinical studies and post-market clinical studies as may be required by regulatory bodies for regulatory approval.

 

5.7.       Regulatory/Pouches in the ENSD SubField. Aziyo shall obtain and be responsible for the costs associated with obtaining regulatory approval of the SIS pouch devices for the ENSD SubField. Aziyo shall also be responsible for pre-clinical development, pre-clinical studies and post-market clinical studies as may be required by regulatory bodies for regulatory approval.

 

5.8.       License Fee Payments. Aziyo shall make the following License Fee Payments to Cook, on or before the specified Payment Due Date. These License Fee Payments shall be nonrefundable and noncreditable by Aziyo against any other amounts due under this Agreement:

 

License Fee Payment	Payment Due Date
$200,000	October 20, 2018
$100,000	October 20, 2019
$100,000	October 20, 2020
$100,000	October 20, 2021
$100,000	October 20, 2022
$100,000	October 20, 2023
$100,000	October 20, 2024
$100,000	October 20, 2025
$100,000	October 20, 2026

 

5.9       Acceleration of License Fee Payments. If, as and to the extent permitted by the License Agreement, Aziyo consummates a Change in Control (as defined below), then Aziyo shall pay to Cook the total of all License Fee Payments under Section 5.8 that have not yet been paid within fifteen (15) days after the consummation of such Change in Control. “Change in Control” shall mean the acquisition by any individual, entity or group of beneficial ownership of 50% or more of the then outstanding shares of voting capital stock of Aziyo solely in exchange for cash or other liquid asset consideration, payable by such individual, entity or group to the holders of such outstanding shares of voting capital stock. For avoidance of doubt, the Parties acknowledge that the terms of this Amendment, including but not limited to this Section 5.9, shall be binding upon any permitted assignee or successor in interest of Aziyo in the License Agreement.

 

 

5.10       Cook Rights Upon Any Nonpayment of License Fee Payments. Upon any failure by Aziyo to make any License Fee Payment when due pursuant to Section 5.8 or Section 5.9, in addition to any and all other equitable or legal remedies that may be available to Cook under the License Agreement, Aziyo agrees that Cook shall be entitled, at Cook’s discretion and election, to terminate the License Agreement in its entirety, to terminate or convert to a non-exclusive license all or any portion of the Aziyo Fields of Use, and/or to an injunction or injunctions to enforce specifically the provisions of Section 5.8 and/or Section 5.9 in any court of the United States or any state having jurisdiction. For clarity, Aziyo acknowledges that all of its payment obligations under the License Agreement, including but not limited to those under Sections 5.8 and 5.9, are material obligations, and that failure to make such payments would constitute a material breach of the License Agreement.

 

Except as amended hereby, the License Agreement is ratified and confirmed in all respects.

 

COOK BIOTECH INCORPORATED			AZIYO MED, LLC
BY:	/s/ Umesh Patel		BY:	/s/ Jeffrey D. Hamet
	Umesh Patel			Jeffrey D. Hamet
TITLE:	President		TITLE:	Vice President of Finance
DATE:	21 Dec 17		DATE:	12/21/17

  

 

Exhibit 10.18

 

May 31, 2017

 

HighCape Partners Management, L.P.

10751 Falls Road

Suite 300

Baltimore, MD 21093

 

Ladies and Gentlemen:

 

As consideration for the transactional and financial advisory services that you are performing, and have performed, for Aziyo Biologics, Inc., a Delaware corporation (the “Company”) in connection with the Company’s acquisition of certain assets of CorMatrix Cardiovascular, Inc. on or about the date hereof and the refinancing of the Company’s senior indebtedness with MidCap Financial Trust in connection with such acquisition, the Company hereby agrees that, contingent upon the consummation of (i) a “Sale Transaction” (as such term is defined under the Company’s Certificate of Incorporation, as amended from time to time) (a “Sale Transaction”) or (ii) an initial underwritten public offering of the Company’s shares of Common Stock on a securities exchange (“IPO”), the Company shall pay you an amount equal to seven hundred fifty thousand dollars ($750,000.00). Such amount is due and payable upon the consummation of a Sale Transaction or an IPO and the Company’s obligations under this letter agreement shall terminate upon the payment of such amount to you upon the earlier of a Sale Transaction and an IPO.

 

This letter agreement may be executed as an original by facsimile or other electronic transmission and in counterparts, each of which shall be deemed an original, but all of which, when taken together, shall constitute one and the same instrument.

 

If the foregoing represents your understanding and agreement, please sign a copy of this letter agreement in the space provided below and return the signed copy to us.

 

	Very truly yours,
	AZIYO BIOLOGICS, INC.
	By:	/s/ Jeffrey D. Hamet
		Name:	Jeffrey D. Hamet
		Title:	Vice President, Finance and Treasurer

 

ACKNOWLEDGED AND AGREED TO:
HIGHCAPE PARTNERS MANAGEMENT, L.P.
By: HighCape Partners Management, LLC, its general partner
By:	/s/ Matt Zuga
	Name:	Matt Zuga
	Title:	Managing Member

 

 

Exhibit 10.19

 

SETTLEMENT AGREEMENT AND GENERAL RELEASE

 

THIS SETTLEMENT AGREEMENT AND GENERAL RELEASE (this "Settlement Agreement'') made and entered into as of April 6, 2018, by and among KeraLink International, formerly named Tissue Banks International, Inc. ("KeraLink"), Aziyo Biologics, Inc. (together with any successor, whether by merger, consolidation, share exchange, other business combination or sale of all or substantially all of the assets (any such transaction, a "Business Combination Transaction") of Aziyo Biologics, Inc. ("Aziyo"), Highcape Partners QP, L.P. ("QP"), Highcape Partners, L.P. ("Highcape") and Highcape Co-Investment Vehicle I, LLC (''Vehicle," and together with QP and Highcape collectively, the "Highcape Entities,'' and each a "Highcape Entity''). Each of KeraLink, Aziyo, and the Highcape Entities is referred to herein as a "Party," and together as the ''Parties."

 

W I T N E S S E T H:

 

A.            On November 4, 2015, pursuant to that certain Contribution Agreement dated August 31, 2015 (the "Contribution Agreement'') by and between Aziyo and KeraLink, KeraLink contributed certain assets to Aziyo in return for 19,499,999 shares of the Series A Preferred Stock, $0.001 par value per share of Aziyo (the "Series A Preferred Stock"), and 6,499,999 shares of the Common Stock, $0.001 par value per share of Aziyo (together with any capital stock, other securities or non-cash consideration of Aziyo or any successor or other person that may be received from time to time by KeraLink, whether by dividend or distribution or in connection with a Business Combination Transaction, in respect of the 6,499,999 shares of Common Stock, $0.001 par value per share, owned by KeraLink on the date of this Settlement Agreement, the "Common Stock");

 

B.            In connection with the transactions performed pursuant to the Contribution Agreement, on November 4, 2015, pursuant to that certain Stock Purchase Agreement dated August 31, 2015, among KeraLink and the Highcape Entities (the "Stock Purchase Agreement''), KeraLink sold 19,500,000 shares of Series A Preferred Stock to the Highcape Entities for $19,500,000;

 

C.            Certain disputes have arisen between KeraLink and Aziyo arising out of the Contribution Agreement, including whether certain representations and warranties made in the Contribution Agreement were true and accurate, and such disputes impact the Highcape Entities as the majority stockholder of Aziyo and relate to matters also covered in the Stock Purchase Agreement (collectively, the "Dispute"); and

 

D.            The Parties hereto desire to settle and compromise all claims that the Aziyo Parties have or could have asserted against the KeraLink Parties, and that the KeraLink Parties have or could have asserted against the Aziyo Parties prior to and including the date hereof, including the facts, actions and omissions underlying the Dispute and any claim arising out of or relating to the Contribution Agreement, the Stock Purchase Agreement and the agreements entered in connection therewith, except for the following: (i) matters in respect of the rights of KeraLink and the Highcape Entities in their capacity as owners of shares of Common Stock and Series A Preferred Stock, respectively; (ii) obligations arising out of Sections 1.8 (last sentence), 1.9 (last sentence), 4.3(b), 4.4, 4.8, 4.9, 4.10, 4.12, 8. l(a)(i) (but only to the extent relating to inaccuracies in respect of the representations and warranties in Section 2.9 of the Contribution Agreement), 8.l(a)(ii) (to the extent the underlying covenant or agreement itself is referenced in this clause (a)(ii)), 8.l(a)(iii), 8.l(a)(v), 10.4 or 10.5 of the Contribution Agreement; (iii) obligations arising out of Section 1.3 of the Stock Purchase Agreement; (iv) matters arising out of the Investor Rights Agreement dated November 4, 2015, among the Parties; and (v) matters arising out of the Right of First Refusal and Co-Sale Agreement dated November 4, 2015, among the Parties (the "ROFR Agreement"), except as any such matter would conflict with anything contained in or required by this Settlement Agreement, including any ''Transfer" of Common Stock deemed to have occurred under the ROFR Agreement by KeraLink entering into and delivering this Settlement Agreement (such matters, collectively, "Surviving Claims").

 

 

NOW, THEREFORE, FOR AND IN CONSIDERATION OF the mutual promises herein contained, and for other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the Parties, each intending to be legally bound, do hereby agree as follows:

 

1.             Initial Payment to Aziyo. Within two business days after this Settlement Agreement is executed by each Party and delivered by Aziyo and each Highcape Entity to KeraLink, and by KeraLink to Aziyo and each Highcape Entity, KeraLink shall cause to be wired to Aziyo the amount of $90,000 in cash and in immediately available funds pursuant to the wiring instructions attached hereto as Exhibit A (which represents a payment of $400,000 in connection with the matters contemplated by this Settlement Agreement, less $310,000 owed by Aziyo to KeraLink as of the date of this Settlement Agreement in connection with the ongoing inter-company account maintained between Aziyo and KeraLink, wherein debits and credits between the entities incurred in the ordinary course of business are recorded and reconciled). The payment contemplated by this Section 1 (the "Initial Payment Obligation") shall be irrevocable and shall not be subject to adjustment, rescission, repayment or refund for any reason, regardless of the amount ultimately paid by KeraLink to Aziyo pursuant to Section 2.

 

2.             Secondary Payment to Aziyo. KeraLink shall cause to be paid to Aziyo the Total Due, in accordance with the terms and provisions in this Section 2, and subject to the limitations and adjustments herein, including in certain circumstances Aziyo's limited recourse against KeraLink regarding such payments, which is more fully described below. For purposes of this Settlement Agreement, the ''Total Due" means the lesser of: (a) $550,000; and (b) the sum of all "Payments" (as such term as defined below). Aziyo acknowledges and agrees that, under certain circumstances, the sum of all payments it receives pursuant to this Section 2 may be less than $550,000 once the Registered Maturity Payment or the Unregistered Maturity Payment (as applicable and each such term as defined below) is made, and in such an event no further payments will be due.

 

(a)          Subject to each sub-section in this Section 2, upon the receipt of cash by KeraLink in connection with a sale, transfer or disposition of any shares of the Common Stock, including in connection with a Business Combination Transaction (each such sale, transfer or disposition, a ''Liquidation Event"), KeraLink shall, after paying or reserving such documented costs and expenses reasonably incurred by KeraLink in connection with such sale, transfer or disposition, including the income and capital gains taxes, if any, owed by KeraLink as a result of such sale, transfer or disposition (collectively, the ''Disposition Costs"), pay to Aziyo in cash and in immediately available funds an amount, not to exceed $550,000 (when all such payments to Aziyo are added together), equal to the difference between the amount of cash actually received for such shares of Common Stock in connection with the Liquidation Event, including any payments from any escrow, holdback or other contingent consideration arrangements (at such time actually received), minus the Disposition Costs for such Liquidation Event ( each a "Liquidation Event Payment"). Each Liquidation Event Payment will be due and payable to Aziyo within three business days after the receipt by KeraLink of such cash in connection with the underlying Liquidation Event. In furtherance of the provisions of this Section 2(a) and the obligations of KeraLink under this Settlement Agreement, KeraLink covenants and agrees that it will not sell, transfer or dispose of any shares of Common Stock in connection with a dividend or other distribution to the stockholders of KeraLink or otherwise sell, transfer or dispose of any shares of Common Stock in a transaction that does not represent an arm's length transaction with an unrelated third party. Further KeraLink covenants and agrees that other than in connection with a Business Combination Transaction, a "Sale Transaction" (as defined in Aziyo's Certificate of Incorporation), an "Approved Sale" (as defined in Aziyo's Investor Rights Agreement dated November 4, 2015) or another transaction in which all of the stockholders of Aziyo are selling or transferring their shares of capital stock of Aziyo or otherwise are legally or contractually obligated to sell, transfer or dispose of their shares of capital stock of Aziyo as part of such transaction, it will not sell, transfer or dispose of any shares of Common Stock for consideration other than cash.

 

 

(b)          Subject to each sub-section in this Section 2, if on the date that is 180 days after the first date on which all of the shares of Common Stock held by KeraLink are: (i) registered for sale on a registration statement filed with and made effective by the U.S. Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act," and such registration statement, the "Registration Statement"); (ii) listed on a United States national securities exchange; and (iii) not subject to any contractual restriction on transfer or sale (for example, a market stand-off agreement), other than customary arrangements for a registered secondary sale of common stock (for example, the obligation to deliver a prospectus in connection with the sale) and other than the obligations under this Settlement Agreement (the "Registered Maturity Trigger Date"), KeraLink has not made aggregate Payments equal to $550,000 nor the Unregistered Maturity Payment, then on the Registered Maturity Trigger Date if it is a business day, or on the next business day if the Registered Maturity Trigger Date is not, KeraLink shall pay to Aziyo an amount (the ''Registered Maturity Payment'') equal to the lesser of: (i) the difference between $550,000 minus the sum of all Payments paid to Aziyo as of such date; and (ii) the Fair Market Value (as defined below) as of the Registered Maturity Trigger Date of all shares of Common Stock then held and owned by KeraLink. Following such Registered Maturity Payment to Aziyo, all obligations and liabilities of KeraLink under this Section 2 shall be deemed fulfilled and KeraLink will have no further obligations or liabilities under this Section 2, including no further obligation to make any Liquidation Event Payment, any Unregistered Maturity Payment or any further Registered Maturity Payment. Further, pursuant to Section 2(e), all or any part of the Registered Maturity Payment may be paid by tendering shares of Common Stock to Aziyo. In furtherance of the provisions of this Section 2(b) and the obligations of KeraLink under this Settlement Agreement, KeraLink agrees to the registration by Aziyo of its shares of Common Stock, at such time as Aziyo may from time to time determine, and agrees to provide such documents and other information that Aziyo in its commercially reasonable discretion deems necessary or advisable in connection with the registration of such shares of Common Stock, and further covenants and agrees to cooperate with Aziyo's commercially reasonable requests and on customary and reasonable terms and conditions in connection with the registration of such shares of Common Stock; provided, however, that, in the event KeraLink materially breaches any of its obligations under this Section 2(b) and does not cure such material breach within 30 days of receipt of written notice of such material breach from Aziyo (the date such notice is delivered to KeraLink, the "Breach Notice Date"), KeraLink shall be obligated to make a Payment to Aziyo in an amount equal to $550,000 minus the sum of all Payments made to Aziyo as of the Breach Notice Date, which payment shall be made to Aziyo within three business days after the Breach Notice Date.

 

 

(c)          Subject to each sub-section in this Section 2, on the date that is one year after the date on which Aziyo first advises KeraLink in writing that the Board of Directors of Aziyo has determined that KeraLink is not an "affiliate" of Aziyo within the meaning of Rule 144 promulgated under the Securities Act (the ''Nonaffiliate Notice," and such date, the "Nonaffiliate Notice Date"), provided that: (i) the shares of Common Stock are registered under the Securities Exchange Act of 1934, as amended, and listed on a United States national securities exchange on the Nonaffiliate Notice Date; (ii) KeraLink has not made aggregate Payments equal to $550,000 as of the one-year anniversary of the Nonaffiliate Notice Date; and (iii) KeraLink has not made the Registered Maturity Payment to Aziyo, then on the one-year anniversary of the Nonaffiliate Notice Date if it is a business day, or on the next business day if the one-year anniversary of the Nonaffiliate Notice Date is not, KeraLink shall pay to Aziyo an amount (the "Unregistered Maturity Payment'') equal to the lesser of: (I) the difference between $550,000 minus the sum of all Payments paid to Aziyo as of such date; and (II) the Fair Market Value as of the Nona:ffiliate Notice Date of all shares of Common Stock then held and owned by KeraLink. Following such Unregistered Maturity Payment to Aziyo, all obligations and liabilities of KeraLink under this Section 2 shall be deemed fulfilled and KeraLink will have no further obligations or liabilities under this Section 2, including no further obligation to make any Liquidation Event Payment, any further Unregistered Maturity Payment or any Registered Maturity Payment.

 

(d)          Notwithstanding anything to the contrary herein, under no circumstances will KeraLink be required under or pursuant to this Section 2, or arising out of this Section 2, to pay Aziyo any further amounts, when the sum of all Liquidation Event Payments, the Registered Maturity Payment or the Unregistered Maturity Payment, as the case may be, and any other payment of any amount due under this Section 2, including a prepayment of any amount due (each a "Payment," and collectively, the "Payments") is equal to $550,000. If a Payment is due and the full amount of such Payment would cause KeraLink to have paid, or Aziyo to have received, more than $550,000 in the aggregate under this Section 2, then such Payment shall be reduced to such amount that when taken together with all other Payments, is equal to (but not greater than) $550,000. If for any reason Aziyo receives an aggregate of Payments in excess of $550,000, Aziyo shall, within 5 business days, reimburse and pay such excess amount back to KeraLink, it being understood and agreed for this purpose that any Payments under this Section 2 made by the delivery of shares of Common Stock shall be valued at the Fair Market Value on the applicable valuation date as specified in this Section 2 and, to the extent any such excess payment was made by KeraLink with shares of Common Stock, at its option Aziyo may satisfy its obligations under this Section 2(d) by delivering shares of Common Stock with a Fair Market Value equal to such excess, as of the date such shares originally were delivered by KeraLink to Aziyo.

 

 

(e)          KeraLink has the right to prepay all or any part of the Total Due still owing at any time or from time to time, without premium or penalty. KeraLink also has the right to pay any or all of the Total Due (other than amounts due pursuant to Section 2(a)) still owing at any time or from time to time, through the tender by KeraLink for forfeiture and cancellation of such number of shares of Common Stock held by KeraLink equal to the amount of the payment divided by the Fair Market Value as of the date of tender of a share of Common Stock. Any such payment of cash or Common Stock shall be considered a ''Payment" as defined in Section 2(d).

 

(f)          Aziyo shall have limited recourse against KeraLink regarding the obligations and liabilities of KeraLink set forth in this Section 2. Aziyo acknowledges and agrees that Aziyo's sole recourse for KeraLink's failure to make any Payment when due and payable under this Section 2 is against the Common Stock; provided, however, that, if KeraLink sells, transfers or disposes of such shares of Common Stock in violation of this Settlement Agreement, Aziyo shall be entitled to recover from KeraLink the Fair Market Value of such shares of Common Stock up to but not exceeding the Total Due, less any amount received by Aziyo on account of its lien on, or the enforcement of its rights and remedies against, the Collateral.

 

(g)          For purposes of this Settlement Agreement, the "Fair Market Value" of a share of Common Stock means the following net of Disposition Costs, as of any particular date: (i) the sales price of such share of Common Stock in a Liquidation Event occurring on such day; (ii) the volume weighted average of the closing sales prices of the Common Stock for such day on all domestic securities exchanges on which the Common Stock may at the time be listed; (iii) if there have been no sales of the Common Stock on any such exchange on any such day, the average of the highest bid and lowest asked prices for the Common Stock on all such exchanges at the end of such day; (iv) if on any such day the Common Stock is not listed on a U.S. securities exchange, the closing sales price of the Common Stock as quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association for such day; or (v) if there have been no sales of the Common Stock on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association on such day, the average of the highest bid and lowest asked prices for the Common Stock quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association at the end of such day; in each case, averaged over 10 consecutive business days ending on the business day immediately prior to the day as of which "Fair Market Value" is being determined; provided, that if the Common Stock is listed on any U.S. securities exchange, the term ''business day'' as used in this sentence means business days on which such exchange is open for trading. If at any time the Common Stock is not listed on any U.S. securities exchange or quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association, the "Fair Market Value" of a share of Common Stock shall be the fair market value per share as determined jointly by KeraLink and Aziyo provided, that if KeraLink and Aziyo are unable to agree on the fair market value per share of the Common Stock within 15 days, such fair market value shall be determined by a nationally recognized investment banking, accounting or valuation firm jointly selected by KeraLink and Aziyo based upon its determination of the value of all outstanding shares of Aziyo as a whole and without any minority or other discount.

 

 

(h)          (1)          As security for the prompt payment and performance of the obligations of KeraLink to Aziyo under this Settlement Agreement, including the payment to Aziyo of the Total Due under this Section 2 and the Initial Payment Obligation under Section 1, KeraLink hereby grants, pledges and assigns to Aziyo a continuing lien on, and security interest in, upon and to, all right, title and interest in and to the 6,499,999 shares of Common Stock of Aziyo, $0.001 par value per share, owned by KeraLink on the date of this Settlement Agreement (the "Initial Pledged Shares") (together with any capital stock, other securities or non-cash consideration of Aziyo, any successor or other person that may be received from time to time by KeraLink:, whether by dividend or distribution or in connection with a Business Combination Transaction, in respect of the Initial Pledged Shares, any and all substitutions, additions or replacements thereof; and any and all proceeds thereof) (collectively, the "Collateral"). This Settlement Agreement shall constitute a security agreement as that term is used in the Uniform Commercial Code, and in furtherance of the foregoing, KeraLink hereby agrees (w)(I) on the date hereof, to deliver to Aziyo all certificate(s) representing the Initial Pledged Shares (together with blank stock powers duly executed by KeraLink), and (II) promptly upon receipt, to deliver to Aziyo any additional certificates or instruments constituting Collateral acquired hereafter by KeraLink (together with blank stock powers duly executed by KeraLink or other appropriate instruments of assignment), (x) that Aziyo may attach an allonge to such certificate(s) and/or instruments that contains a restrictive legend to reflect the security interest in the Collateral (but shall not mark such certificate(s) and/or instrument(s) themselves), (y) that Aziyo may file against KeraLink a financing statement to perfect the security interest in the Collateral and (z) that Aziyo shall be entitled to retain possession of such certificates(s) and/or instruments received in respect of the Collateral until such time as the Initial Payment Obligation under Section 1 and all Payments to be made by KeraLink under this Section 2 have been paid or satisfied in full.

 

(2)        In the event KeraLink is required to make a Registered Maturity Payment under Section 2(b) or an Unregistered Maturity Payment under Section 2(c) and KeraLink elects, pursuant to and in accordance with Section 2(e), to satisfy such payment by the delivery of shares of Common Stock, rather than a cash payment, the delivery of such shares of Common Stock to Aziyo shall be in full satisfaction of KeraLink's obligations in respect of such Registered Maturity Payment or Unregistered Maturity Payment, as applicable, in which event Aziyo shall not have any right or obligation under Article 9 of the Uniform Commercial Code or any other laws or regulations to sell or offer for sale any further shares of Common Stock.

 

(3)        Aziyo shall have no duty with respect to any part or all of the Collateral of any nature or kind other than the duty to use reasonable care in the safe custody of any tangible items of the Collateral in its possession.

 

(4)        KeraLink (x) represents and warrants that it has good title to the Collateral, free from all liens, mortgages, pledges, security interests, and other encumbrances except the lien in favor of Aziyo created hereunder and (y) agrees to keep the Collateral free from all liens, mortgages, pledges, security interests, and other encumbrances except the lien in favor of Aziyo created hereunder.

 

(5)        Upon any failure by KeraLink to satisfy the Initial Payment Obligation under Section 1 or to make any Payment to Aziyo required under Section 2, following any notice, grace or cure period provided therein, Aziyo shall provide written notice to KeraLink of its failure to make such Payment and may include in such notice a demand for payment. KeraLink shall have 10 days following the receipt of such notice to cure such breach. If such Payment is not remitted to Aziyo by the conclusion of such period or any extensions agreed to in writing by Aziyo in its sole discretion, then Aziyo shall have, in addition to any other rights and remedies given by law or the rights hereunder, all of the rights and remedies with respect to the Collateral of a secured party under the Uniform Commercial Code. Any foreclosure of the Collateral under the Uniform Commercial Code shall be conducted in a commercially reasonable manner and KeraLink shall be entitled to any surplus proceeds.

 

 

(6)        If Aziyo has received the amount due under Section 1 and all of the Payments due under this Section 2 to which it is entitled, it shall upon written request from KeraLink (i) release its security interest and lien on the Collateral, (ii) deliver to KeraLink all certificates and/or instruments evidencing the Collateral in its possession, and (iii) terminate any Uniform Commercial Code financing statements of record against KeraLink describing the Collateral and naming Aziyo as secured party. Notwithstanding the foregoing, if KeraLink elects to sell any of the Common Shares in connection with a Liquidation Event, in accordance with Section 2(a), then Aziyo shall at the time of such sale release its lien in the Collateral to be sold in accordance with the payoff letter described below in this clause (6). In connection with such proposed sale, KeraLink shall deliver written notice to Aziyo, which notice shall (x) identify the buyer, (y) identify the Common Stock that KeraLink requests be released from the lien of Aziyo for sale to the buyer, and (z) identify the amount of the Liquidation Event Payment to be paid to Aziyo by KeraLink or the buyer in respect of the purchase price of such Common Stock. Upon KeraLink's written request, Aziyo shall also provide to KeraLink and such buyer a payoff letter in form and substance reasonably satisfactory to Aziyo in which Aziyo agrees upon receipt by Aziyo of the Liquidation Event Payment for such Common Stock (i) to release its lien in the Common Stock proposed to be sold immediately and without further action by any person, (ii) to deliver such Common Stock to KeraLink or such buyer, without any allonge that Aziyo may have attached containing a legend or restriction on such Common Stock, and (iii) to amend any UCC financing statement of record against KeraLink describing the Common Stock and naming Aziyo as secured party to exclude from the collateral description thereof the Common Stock sold to such buyer. In connection with such sale, Aziyo shall arrange for the issuer of the Common Stock to reissue such Common Stock in certificates evidencing smaller share denominations, if applicable under this Settlement Agreement.

 

(i)        Once made by KeraLink, the Payments shall be irrevocable and shall not be subject to adjustment, rescission, repayment or refund for any reason.

 

3.             Release of KeraLink. In exchange for the consideration provided in this Settlement Agreement, including that consideration set forth in Sections 1 and 2, Aziyo and each of the Highcape Entities, on behalf of itself and its respective former, current and future stockholders, officers, directors, managers, employees, agents, contractors, parents, subsidiaries, affiliates, successors and assigns ( collectively, the "Aziyo Parties", and each an "Aziyo Party"), hereby fully and irrevocably releases, waives and forever discharges KeraLink and each of its past and present affiliates and each of their officers, directors, managers, employees, stockholders, members, attorneys, agents, successors, heirs, and assigns (collectively "KeraLink Parties", and each a ''KeraLink Party"), and each of them, from any and all claims, demands, liens, actions, agreements, suits, rights, causes of action, proceedings, obligations, debts, sums of money, accounts, bills, dues, covenants, undertakings, promises, :fiduciary duties, required notices or other informational disclosures, contracts, agreements, charges, complaints, controversies, damages, judgments, debts, costs, attorneys' fees, expenses, damages, judgments, orders, grievances and/or liabilities of whatever kind or nature in law, equity or otherwise, whether now known or suspected, which have existed or may have existed, from the beginning of time, or which do exist or which hereafter can, shall or may exist, whether vested or contingent, accrued or unaccrued ( collectively, "Claims"), which any of the Aziyo Parties had, now has, or may hereafter have against the KeraLink Parties, or any of them, directly or indirectly arising out of, proximately caused by or resulting from, connected with, or based upon or in any manner related to or arising out of, in the past, or at present, (a) any event, fact or circumstance occurring or existing prior to the date of this Settlement Agreement, (b) any act, omission, transaction, or event occurring up to and including the date of this Settlement Agreement, and/or (c) any ''Transfer'' deemed to have occurred under the ROFR Agreement by KeraLink entering into and delivery this Settlement Agreement (collectively, "Aziyo Claims"); provided however, that this release shall not apply to any Claim arising under this Settlement Agreement or to any Surviving Claims, and the foregoing release shall not operate to release any Claim arising under this Settlement Agreement or any of the Surviving Claims. For purposes of clarification, the Aziyo Claims being released above are not limited to Claims arising out of the Dispute, the Contribution Agreement, the Stock Purchase Agreement, all agreements entered into in connection with any of the forgoing, or to any particular incident or subject, and are intended to encompass every possible Claim, including, but not limited to, the Dispute, the Contribution Agreement, the Stock Purchase Agreement and all agreements entered into in connection with any of the forgoing, with the exception of any Claim arising under this Settlement Agreement and the Surviving Claims.

 

 

4.             Release of Aziyo. In exchange for the consideration provided in this Settlement Agreement, including that consideration set forth in Section 3, KeraLink on behalf of itself and each of the other KeraLink Parties hereby fully and irrevocably releases, waives and forever discharges Aziyo Parties, and each of them, from any and all Claims which any of the KeraLink Parties had, now has, or may hereafter have against the Aziyo Parties, or any of them, directly or indirectly arising out of, proximately caused by or resulting from, connected with, or based upon or in any manner related to or arising out of, in the past, or at present, (a) any event, fact or circumstance occurring or existing prior to the date of this Settlement Agreement, (b) any act, omission, transaction, or event occurring up to and including the date of this Settlement Agreement, and/or (c) arising through the date of this Settlement Agreement (collectively, "KeraLink Claims"); provided, however, that this release shall not apply to any Claim arising under this Settlement Agreement or to any Surviving Claims and the foregoing release shall not operate to release any claim arising under this Settlement Agreement or to any Surviving Claims. For purposes of clarification, the KeraLink Claims being released above are not limited to Claims arising out of the Dispute, the Contribution Agreement, the Stock Purchase Agreement, all agreements entered into in connection with any of the forgoing, or to any particular incident or subject, and are intended to encompass every possible Claim, including, but not limited to, the Dispute, the Contribution Agreement, the Stock Purchase Agreement and all agreements entered into in connection with any of the forgoing, with the exception of any Claim arising under this Settlement Agreement and the Surviving Claims.

 

5.             Acknowledgment. Each Party understands that it may later discover Claims or facts that may be different from, or in addition to, those that it or any other Party now knows or believes to exist regarding the subject matter of the releases contained in Section 3 and Section 4, and which, if known at the time of signing this Settlement Agreement, may have materially affected this Settlement Agreement and such Party's decision to enter into it and grant the release contained in Section 3 and Section 4. Nevertheless, the Parties intend to fully, finally and forever settle and release all Claims that now exist, may exist, or previously existed, as set out in the released contained in Section 3 and Section 4, whether known or unknown, foreseen or unforeseen, or suspected or unsuspected, and the releases given herein are and will remain in effect as complete releases, notwithstanding the discovery or existence of such additional or different facts. The Parties hereby waive any right or Claim that might arise as a result of such different or additional Claims or facts. The Parties have been made aware of, and understand, the provisions of California Civil Code Section 1542 ("Section 1542"), which provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR." The Parties expressly, knowingly and intentionally waive any and all rights, benefits and protections of Section 1542 and of any other state or federal statute or common law principle limiting the scope of a general release.

 

 

6.             Non-Assignment; Successor. Each Party represents and warrants that it has not made any actual or purported assignment, transfer or hypothecation of any claims that are being released pursuant to this Settlement Agreement, or any interest in such released claims, or in any of the rights created under this Settlement Agreement, to any person or entity. The provisions of this Settlement Agreement shall be binding upon and inure to the benefit of the Parties and their respective permitted successors and assigns. Neither Party may assign, delegate or otherwise transfer, directly or indirectly, in whole or in part, any of its rights or obligations under this Settlement Agreement without the prior written consent of the other Party; provided, however, that Aziyo may so assign, delegate or otherwise transfer its rights and obligations without the consent of KeraLink to any successor or assignee in connection with a Business Combination Transaction. No assignment, delegation or other transfer of rights under this Settlement Agreement shall relieve the assignor of any obligations under this Settlement Agreement, and any assignment, delegation or transfer in violation of this Section 6 shall be void.

 

7.             Covenant Not-to-Sue. Each Party covenants and agrees not to file or initiate a lawsuit, arbitration, or other legal proceeding against any Party asserting any of the Claims. If any of the Parties breaches this covenant, that Party shall indemnify, defend and hold harmless the other Party from any and all costs incurred by any and all of them, including their reasonable attorneys' fees, in defending against any such lawsuit, arbitration, or other legal proceeding, provided, however, that the foregoing covenant not to sue shall not preclude an action asserting any Claim arising under this Settlement Agreement or any of the Surviving Claims.

 

8.             No Admission of Liability. The Parties hereto have entered into this Settlement Agreement solely for the purpose of settlement and compromise, and none of the Parties admits any liability to any of the other Parties.

 

9.             Authority. The signatories below expressly acknowledge, represent and warrant that they are duly authorized to execute this Settlement Agreement, and acknowledge that they have read this Settlement Agreement and understand all of its terms.

 

10.           Governing Law. This Settlement Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to the conflict of law principles thereof.

 

 

11.           Confidentiality. This Settlement Agreement and its terms are CONFIDENTIAL. The Parties shall not voluntarily disclose this Settlement Agreement or its terms to any third party except: (a) to the Parties' attorneys, accountants, or other professional advisors; (b) to the Parties' managers, officers, directors, or stockholders; (c) in response to judicial or other legal process compelling disclosure; or (d) as otherwise required by any local, state, or Federal law, including applicable securities laws or regulations.

 

12.           Entire Agreement. This Settlement Agreement represents the full and complete understanding of the Parties with respect to the subject matter contained herein and supersedes any and all prior oral or written agreements between the Parties with respect to said subject matter.

 

13.           Counterparts. This Settlement Agreement may be executed in one or more counterparts, each one of which shall be deemed to be an original, but all of which shall constitute but one and the same Settlement Agreement. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a ".pdf" format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or ".pdf" signature page were an original thereof.

 

14.           Taxes. Aziyo will be responsible for paying all state and federal tax obligations arising from payments made to Aziyo as contemplated herein.

 

15.           Review of Agreement. Each Party acknowledges that it has been represented by and/or has had the opportunity to consult with legal counsel of its choice concerning of the meaning and consequences of this Settlement Agreement; has been provided with sufficient time to review carefully the contents of this Settlement Agreement; and that it has carefully read and understands this Settlement Agreement.

 

16.           Construction. As used in this Settlement Agreement, the word ''including'' shall be deemed to be followed by the phrase "without limitation". Unless the context otherwise requires, references in this Settlement Agreement to Sections shall be deemed references to Sections of this Settlement Agreement. Unless the context otherwise requires, the words "hereof," "hereby" and "herein" and words of similar meaning when used in this Settlement Agreement refer to this Settlement Agreement in its entirety and not to any particular Section or provision hereof. Except when used together with the word "either" or otherwise for the purpose of identifying mutually exclusive alternatives, the term "or'' has the inclusive meaning represented by the phrase "and/or".

 

17.           Parties Jointlv Prepared This Settlement Agreement. Each Party has reviewed and had the opportunity to revise this Settlement Agreement. The rule of construction that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Settlement Agreement or of any of its amendments or exhibits.

 

 

18.           Notice. All notices, requests, consents, claims, demands, waivers, and other communications hereunder (each, a ''Notice") shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or email (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient; or (d) on the fourth day after the date mailed, by certified or registered mail (in each case, return receipt requested, postage pre-paid). Notices must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a Notice given in accordance with this Section 18):

 

If to KeraLink:	KeraLink International
	5520 Research Park Dr., Suite 400
	Baltimore, MD 21228
	Email: [XXX]
	Attn: [XXX]

 

If to Aziyo:	Aziyo Biologics, Inc.
	12510 Prosperity Drive, Suite 370
	Silver Spring, MD 20904
	Email: [XXX]
	Attn: [XXX]

 

If to any Highcape Entity:	Highcape Partners, L.P.
	10751 Falls Road, Suite 300
	Lutherville, MD 21093
	Email: [XXX]
	Attn: [XXX]

 

[Signatures begin on following page]

 

 

IN WITNESS WHEREOF, the undersigned have hereunto caused this Settlement Agreement to be executed by their duly authorized officials, all as of the day and year first above written.

 

KeraLink International			Highcape Partners QP, L.P.
By:	/s/ Douglas J. Furlong		By:	/s/ Matthew Zuga
Name:	Douglas J. Furlong		Name:	Matthew Zuga
Title:	President and Chief Executive Officer		Title:	Partner
Aziyo Biologics, Inc			Highcape Partners, L.P.
By:	/s/ Jeffrey Hamet		By:	/s/ Matthew Zuga
Name:	Jeffrey Hamet		Name:	Matthew Zuga
Title:	VP, Finance		Title:	Partner
			Highcape Co-Investment Vehicle I, LLC
			By:	/s/ Matthew Zuga
			Name:	Matthew Zuga
			Title:	Managing Member

 

 

EXHIBIT A

 

Wiring Instructions for Aziyo:

 

Account Name: Aziyo Biologics, Inc.

Account Number: [XXX]

SWIFT: [XXX]

Routing: [XXX]

Bank Name: Silicon Valley Bank

 

 

 

Exhibit 21.1

 

SUBSIDIARIES OF AZIYO BIOLOGICS, INC.

 

Legal Name of Subsidiary	Jurisdiction of Organization
Aziyo Med, LLC	Delaware

 

 

 

Exhibit 23.1

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the use in this Registration Statement on Form S-1 of Aziyo Biologics, Inc. of our report dated April 17, 2020 relating to the financial statements of Aziyo Biologics, Inc., which appears in this Registration Statement. We also consent to the reference to us under the heading “Experts” in such Registration Statement.

 

/s/ PricewaterhouseCoopers LLP
Baltimore, Maryland
September 14, 2020